<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FACTBOX-What-is-Europes-landmark-AI-legislation-820x547.jpg" alt="" class="wp-image-489000" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FACTBOX-What-is-Europes-landmark-AI-legislation-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FACTBOX-What-is-Europes-landmark-AI-legislation-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FACTBOX-What-is-Europes-landmark-AI-legislation-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FACTBOX-What-is-Europes-landmark-AI-legislation-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FACTBOX-What-is-Europes-landmark-AI-legislation-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FACTBOX-What-is-Europes-landmark-AI-legislation-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: AI (Artificial Intelligence) letters and robot hand miniature in this illustration taken, June 23, 2023. REUTERS/Dado Ruvic/Illustration/File Photo</figcaption></figure>



BRUSSELS, May 21 (Reuters)&nbsp;&#8211;&nbsp;European Union policymakers on Tuesday&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N3HO1UO&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">endorsed</a>&nbsp;the world&#8217;s first comprehensive set of rules regulating the use of artificial intelligence (AI) in tools such as ChatGPT and in biometric surveillance that will likely come into force next month.



Here are the key points of the&nbsp;AI&nbsp;Act:



HIGH-RISK SYSTEMS



So-called high-risk&nbsp;AI&nbsp;systems &#8211; those deemed to have significant potential to harm health, safety, fundamental rights, the environment, democracy, elections and the rule of law &#8211; will have to comply with a set of requirements, such as undergoing a fundamental rights impact assessment, and obligations to gain access to the EU market.



AI&nbsp;systems considered to pose limited risks would be subject to very light transparency obligations, such as disclosure labels declaring that the content was&nbsp;AI-generated to allow users to decide on how to use it.



USE OF AI IN LAW ENFORCEMENT



The use of real-time remote biometric identification systems in public spaces by law enforcement will only be allowed to help identify victims of kidnapping, human trafficking, sexual exploitation, and to prevent a specific and present terrorist threat.



They will also be permitted in efforts to track down people suspected of terrorism offences, trafficking, sexual exploitation, murder, kidnapping, rape, armed robbery, participation in a criminal organisation and environmental crime.



GENERAL PURPOSE AI SYSTEMS (GPAI) AND FOUNDATION MODELS



GPAI&nbsp;and foundation models will be subject to lighter transparency requirements such as drawing up technical documentation, complying with EU copyright law and disseminating detailed summaries about the content used for algorithm training.



Foundation models classed as posing a systemic risk and high-impact GPAI&nbsp;will have to conduct model evaluations, assess and mitigate risks, conduct adversarial testing, report to the European Commission on serious incidents, ensure cybersecurity and report on their energy efficiency.



Until harmonised EU standards are published, GPAIs with systemic risks may rely on codes of practice to comply with the regulation.



PROHIBITED AI



The regulation bars the following:



&#8211; Biometric categorisation systems that use sensitive characteristics such as political, religious, philosophical beliefs, sexual orientation, race.



&#8211; Untargeted scraping of facial images from the internet or CCTV footage to create facial recognition databases;



&#8211; Emotion recognition in the workplace and educational institutions.



&#8211; Social scoring based on social behaviour or personal characteristics.



&#8211;&nbsp;AI&nbsp;systems that manipulate human behaviour to circumvent their free will.



&#8211;&nbsp;AI&nbsp;used to exploit the vulnerabilities of people due to their age, disability, social or economic situation.



WHO ENFORCES THE AI ACT



An&nbsp;AI&nbsp;Office within the European Commission will enforce the rules while an&nbsp;AI&nbsp;Board with EU representatives will assist the Commission and EU countries in applying the new legislation.



SANCTIONS FOR VIOLATIONS



Depending on the infringement and the size of the company involved, fines will start from 7.5 million euros ($8 million) or 1.5 % of global annual turnover, rising to up to 35 million euros or 7% of global turnover.



(Reporting by Foo Yun Chee, Editing by Helen Popper and Ed Osmond)

FILE PHOTO: Illustration shows AI (Artificial Intelligence) letters and robot hand miniature

What is Europe’s landmark AI legislation?

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="429" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/AI-summit-secures-safety-commitments-from-16-companies-820x429.jpg" alt="" class="wp-image-488997" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/AI-summit-secures-safety-commitments-from-16-companies-820x429.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/AI-summit-secures-safety-commitments-from-16-companies-300x157.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/AI-summit-secures-safety-commitments-from-16-companies-160x84.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/AI-summit-secures-safety-commitments-from-16-companies-768x402.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/AI-summit-secures-safety-commitments-from-16-companies-1536x804.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/AI-summit-secures-safety-commitments-from-16-companies.jpg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Britain&#8217;s Prime Minister Rishi Sunak speaks during the closing press conference on the second day of the UK Artificial Intelligence (AI) Safety Summit at Bletchley Park, near Milton Keynes, Britain November 2, 2023. Justin Tallis/Pool via REUTERS/File Photo</figcaption></figure>



SEOUL, May 21 (Reuters)&nbsp;&#8211;&nbsp;Sixteen companies involved in&nbsp;AI&nbsp;including Alphabet&#8217;s Google&nbsp;GOOGL.O, Meta&nbsp;META.O, Microsoft&nbsp;MSFT.O&nbsp;and OpenAI, as well as companies from China, South Korea and the United Arab Emirates have committed to safe development of the technology.



The announcement unveiled in a UK government statement on Tuesday came as South Korea and Britain host a global&nbsp;AI&nbsp;summit in Seoul at a time when the breakneck pace of&nbsp;AI&nbsp;innovation leaves governments scrambling to keep up.



The agreement is a step up from the number of&nbsp;<a href="https://www.gov.uk/government/news/world-leaders-top-ai-companies-set-out-plan-for-safety-testing-of-frontier-as-first-global-ai-safety-summit-concludes" target="_blank" rel="noreferrer noopener">commitments</a>at&nbsp;the first global&nbsp;AI&nbsp;summit held six months ago,&nbsp;the statement said.



Zhipu.ai,&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AP:4295882451&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">backed by</a>&nbsp;Chinese tech giants Alibaba&nbsp;9988.HK, Tencent&nbsp;0700.HK, Meituan&nbsp;3690.HK&nbsp;and Xiaomi&nbsp;1810.HK, as well as UAE&#8217;s Technology Innovation Institute were among the 16 companies pledging to publish safety frameworks on how they will measure risks of frontier&nbsp;AI&nbsp;models.



The firms, also including Amazon&nbsp;AMZN.O, IBM&nbsp;IBM.N&nbsp;and Samsung Electronics&nbsp;005930.KS, voluntarily committed to not develop or deploy&nbsp;AI&nbsp;models if the risks cannot be sufficiently mitigated, and to ensure governance and transparency on approaches to&nbsp;AI&nbsp;safety, the statement said.



&#8220;It&#8217;s vital to get international agreement on the &#8216;red lines&#8217; where&nbsp;AI&nbsp;development would become unacceptably dangerous to public safety,&#8221; said Beth Barnes, founder at METR, a non-profit for&nbsp;AI&nbsp;model safety.



The artificial intelligence (AI) summit in Seoul this week&nbsp;aims to build on a broad agreement at the first summit&nbsp;held in the United Kingdom to better address a wider array of&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N3HN0YN&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">risks</a>.



At the November summit, Tesla&#8217;s Elon Musk and OpenAI&nbsp;CEO Sam Altman mingled with some of their fiercest critics, while China co-signed the &#8220;<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;ved=2ahUKEwjqhuz975qGAxVXklYBHVHUApwQFnoECAYQAQ&amp;url=https%3A%2F%2Fwww.gov.uk%2Fgovernment%2Fpublications%2Fai-safety-summit-2023-the-bletchley-declaration%2Fthe-bletchley-declaration-by-countries-attending-the-ai-safety-summit-1-2-november-2023&amp;usg=AOvVaw3ArAa5McYZwdnAzGZ3BhKc&amp;opi=89978449">Bletchley Declaration</a>&#8221; on collectively managing&nbsp;AI&nbsp;risks alongside the United States and others.



British Prime Minister Rishi Sunak and South Korean President Yoon Suk Yeol will oversee a virtual summit later on Tuesday, followed by a ministerial session on Wednesday.



This week&#8217;s summit will address &#8220;building&#8230; on the commitment from the companies, also looking at how the (AI&nbsp;safety) institutes will work together,&#8221; Britain&#8217;s Technology Secretary Michelle Donelan told Reuters on Tuesday.



Since November, discussion on&nbsp;AI&nbsp;regulation has shifted from longer-term doomsday scenarios to &#8220;practical concerns&#8221; such as how to use&nbsp;AI&nbsp;in areas like medicine or finance, said&nbsp;Aidan Gomez, co-founder of large language model firm Cohere.



Industry participants wanted&nbsp;AI&nbsp;regulation that will give clarity and security on where the companies should invest, while avoiding entrenching big tech, Gomez said.



With countries such as the UK and U.S. establishing state-backed&nbsp;AI&nbsp;Safety Institutes for evaluating&nbsp;AI&nbsp;models and others expected to follow suit,&nbsp;AI&nbsp;firms are also concerned about the interoperability between jurisdictions, analysts said.



Representatives of the Group of Seven (G7) major democracies are expected to take part in the virtual summit, while Singapore and Australia were also invited, a South Korean presidential official said.



China will not participate in the virtual summit but is expected to attend Wednesday&#8217;s in-person ministerial session, the official said.



South Korea&#8217;s foreign ministry said Musk, former CEO of Google Eric Schmidt, Samsung Electronics&#8217; Chairman Jay Y. Lee and other&nbsp;AI&nbsp;industry leaders will participate in the summit.



(Reporting by Joyce Lee; Editing by Ed Davies and Christian Schmollnger)

AI-summit-secures-safety-commitments-from-16-companies

AI summit secures safety commitments from 16 companies

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107335423-1700186666155-gettyimages-647053464-_jcg2290-820x461.jpeg" alt="" class="wp-image-429142" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107335423-1700186666155-gettyimages-647053464-_jcg2290-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107335423-1700186666155-gettyimages-647053464-_jcg2290-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107335423-1700186666155-gettyimages-647053464-_jcg2290-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107335423-1700186666155-gettyimages-647053464-_jcg2290-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107335423-1700186666155-gettyimages-647053464-_jcg2290-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/11/107335423-1700186666155-gettyimages-647053464-_jcg2290.jpeg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">BARCELONA, SPAIN &#8211; MARCH 01: A view of the MasterCard company logo on their stand during the Mobile World Congress on March 1, 2017 in Barcelona, Spain. (Photo by Joan Cros Garcia/Corbis via Getty Images)
Joan Cros Garcia &#8211; Corbis | Corbis News | Getty Images</figcaption></figure>



LONDON, May 21 (Reuters)&nbsp;&#8211;&nbsp;There is little evidence that big hikes in fees by&nbsp;Visa&nbsp;and&nbsp;Mastercard&nbsp;on retailers who use their cards have also led to major improvement in service, Britain&#8217;s Payment Systems Regulator said in provisional findings on Tuesday, flagging concerns competition was not working.



Visa and&nbsp;Mastercard&nbsp;have long dominated the market for payment cards, triggering calls from UK lawmakers for closer scrutiny from the PSR, which launched an investigation.



&#8220;The PSR found that over the past five years, and after taking account of volume changes,&nbsp;Mastercard&nbsp;and&nbsp;Visa&nbsp;have increased their scheme and processing fees by more than 30% in real terms. There is little evidence that the quality of service has improved at the same rate,&#8221; the PSR said in a statement.



The PSR&#8217;s 158-page&nbsp;<a href="https://www.psr.org.uk/media/pcvem3uq/interim-report-market-review-of-scheme-and-processing-fees-may-2024-publication.pdf" target="_blank" rel="noreferrer noopener">interim report</a>said estimates that the fee increases have added more than 250 million pounds to costs for UK businesses.



UK businesses have little choice but to pay these increased costs as&nbsp;Mastercard&nbsp;and&nbsp;Visa&nbsp;cards account for 95% of transactions using UK-issued cards, the PSR said.



&#8220;We disagree with the findings of the PSR&#8217;s interim review. The payments industry has never been more competitive, which is reflected in the wide choice of payment options available to British consumers and businesses,&#8221;&nbsp;Mastercard&nbsp;said in a statement.



Visa&nbsp;was not immediately available to comment.



The PSR said it has proposed &#8220;remedies&#8221;, for public consultation, that include improved transparency for users, and obligations on&nbsp;Mastercard&nbsp;and&nbsp;Visa&nbsp;to explain, consult on and/or document the reasons for price changes.



It said it has also proposed greater reporting of financial information to the PSR on an on-going basis to improve scrutiny of&nbsp;Mastercard&nbsp;and&nbsp;Visa&#8217;s UK operations going forward.



The public consultation is open until July 30, and a final report on card schemes and processing fees is due in the final quarter of the year.



&#8220;If the final report upholds the provisional finding that the market is not working well, the PSR will consult on the implementation of any remedies,&#8221; the watchdog said.



(Reporting by Huw Jones, editing by Sinead Cruise)

107335423-1700186666155-gettyimages-647053464-_jcg2290

Britain seeks to rein in Mastercard and Visa fees on retailers

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="519" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/BHP-shares-hit-3-month-high-as-deadline-for-formal-Anglo-bid-looms-820x519.jpg" alt="" class="wp-image-488951" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/BHP-shares-hit-3-month-high-as-deadline-for-formal-Anglo-bid-looms-820x519.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/BHP-shares-hit-3-month-high-as-deadline-for-formal-Anglo-bid-looms-300x190.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/BHP-shares-hit-3-month-high-as-deadline-for-formal-Anglo-bid-looms-142x90.jpg 142w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/BHP-shares-hit-3-month-high-as-deadline-for-formal-Anglo-bid-looms-768x486.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/BHP-shares-hit-3-month-high-as-deadline-for-formal-Anglo-bid-looms-1536x973.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/BHP-shares-hit-3-month-high-as-deadline-for-formal-Anglo-bid-looms-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: A small toy figure and mineral imitation are seen in front of the BHP logo in this illustration taken November 19, 2021. REUTERS/Dado Ruvic/Illustration/File Photo</figcaption></figure>



PERTH, May 21 (Reuters)&nbsp;&#8211;&nbsp;Shares of&nbsp;BHP&nbsp;Group&nbsp;BHP.AX&nbsp;touched a three-month high on Tuesday about 36 hours ahead of a&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N3HI07V&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">deadline</a>&nbsp;to lodge a formal bid for rival miner Anglo American&nbsp;AAL.L, which last week rejected a sweetened $43 billion takeover proposal.



The world&#8217;s largest listed miner&#8217;s shares are benefiting from good news including fresh stimulus for China&#8217;s property sector, copper prices reaching record highs and a growing view that&nbsp;BHP&nbsp;will not make another tilt at Anglo, according to Andy Forster, senior investment officer at Argo Investments, a&nbsp;BHP&nbsp;shareholder.



&#8220;We saw last week that they had a bit of a bounce after rejection by Anglo,&#8221; he said. &#8220;I think they&#8217;re going to stay disciplined. I&#8217;d be surprised if they&#8217;d come back at this late stage given the lukewarm response from Anglo&#8217;s board to the previous offers.&#8221;



Under UK takeover rules,&nbsp;BHP&nbsp;has until 1600 GMT on Wednesday to make a binding bid for Anglo American or it will be forced to walk away for at least six months. If the companies reach an agreement in the meantime, an extension can be granted.



BHP&nbsp;declined to comment on Tuesday. Its shares were up 0.5% to A$45.93 in afternoon trading. Anglo&#8217;s London-listed shares closed 0.1% higher at 26.80 pounds on Monday.



Anglo&#8217;s board has already&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL4N3HG2RJ&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">knocked back</a>&nbsp;two all-share proposals from&nbsp;BHP&nbsp;as inadequate and too difficult to execute and last week unveiled plans for a&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL4N3HH1FT&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">break-up</a>&nbsp;to focus on energy transition metal copper while spinning out or selling its coal, nickel, diamond and platinum businesses.



The copper assets make strategic sense for&nbsp;BHP&nbsp;but the longer the deal takes to close, the more likely it is a competitor lobs a rival bid for some of Anglo&#8217;s assets, according to Hayden Bairstow, an analyst at Australian stockbroker Argonaut.



&#8220;The risk of waiting is that Anglo&#8217;s metallurgical coal assets go to someone else or an interloper like Glencore comes in with a more compelling deal,&#8221; he said.



It would take Anglo a minimum of six to 12 months to run a sales process for the coal assets, according to an Australia-based investment banker who spoke on condition of anonymity.



Bankers are now jostling to get business from potential buyers, the person added.



Jefferies analysts said last week that&nbsp;BHP&nbsp;could be interested in the coal assets if it did not succeed in its bid for Anglo, given it owns nearby mines.



BHP&nbsp;would need to boost its latest offer by about 30% to reflect fair value for Anglo and its key copper assets, JPMorgan analysts said in a note last week.



Both of&nbsp;BHP&#8217;s offers required Anglo divest its platinum and iron ore assets in South Africa, where it employs more than 40,000 people.



BHP&nbsp;has told investors it&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL4N3H90QY&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">will not drop</a>&nbsp;its requirement for Anglo to demerge those businesses as a condition of the deal.



($1 = 0.7869 pounds)



ANALYSIS-BHP&#8217;s options for Anglo American deal narrow as deadline looms&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N3HI07V&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



(Reporting by Melanie Burton in Perth, Lewis Jackson in Sydney and Himanshi Akhand in Bengaluru; Editing by Praveen Menon and Jamie Freed)

FILE PHOTO: BHP shares jump 2.3% after Anglo announces break-up plan

BHP shares hit 3-month high as deadline for formal Anglo bid looms

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="552" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Global-oil-markets-weaken-as-sluggish-demand-leaves-overhang-820x552.jpg" alt="" class="wp-image-488708" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Global-oil-markets-weaken-as-sluggish-demand-leaves-overhang-820x552.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Global-oil-markets-weaken-as-sluggish-demand-leaves-overhang-300x202.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Global-oil-markets-weaken-as-sluggish-demand-leaves-overhang-134x90.jpg 134w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Global-oil-markets-weaken-as-sluggish-demand-leaves-overhang-768x517.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Global-oil-markets-weaken-as-sluggish-demand-leaves-overhang-1536x1033.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Global-oil-markets-weaken-as-sluggish-demand-leaves-overhang-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Miniatures of oil barrels and a rising stock graph are seen in this illustration taken January 15, 2024. REUTERS/Dado Ruvic/Illustration</figcaption></figure>



LONDON, May 20 (Reuters)&nbsp;&#8211;&nbsp;Global physical crude oil markets are weakening because of soft refinery demand and ample supply, traders and analysts told Reuters, in a move that could spell further weakness for benchmark crude futures.



The weakness indicates high interest rates and inflation are depressing consumer and industrial demand, especially in Europe, at a time when supply is rising from non-OPEC producers such as the United States. This could bolster arguments for OPEC+ to maintain production curbs at a June 1 meeting.



Demand from refiners is soft, even though their crude intake capacity has increased with the end of springtime maintenance.



“Rising refinery capacity has not been met by an expected rise in demand,” Saxo Bank analyst Ole Hansen said.



“Consumers are feeling the pressure from high interest rates and inflation, as well as trade wars and a challenging geopolitical environment.”



The weakness is exhibited particularly clearly in the North Sea, which produces crude grades that alongside U.S. WTI Midland crude underpin the Brent futures benchmark and help price two thirds of global oil.



The price differential of North Sea Forties crude&nbsp;BFO-FOT&nbsp;fell on May 14 to a discount of 97 cents to dated Brent, its widest since January 2023, according to data from S&amp;P Global Commodity Insights, known as Platts.



Similarly, Platts on May 13 assessed WTI Midland cargoes pricing in Northwest Europe at dated Brent minus 69 cents, the lowest assessment since WTI joined the North Sea grades that underpin the Brent benchmark last May.



&#8220;It is seemingly a relatively benign period for demand,&#8221; said Sparta Commodities analyst Neil Crosby, who added that ample crude inventories could be delaying buying. &#8220;For now, physical pricing is under pressure.&#8221;



Besides weak refining demand, supply of light, low-sulphur crudes competing with the North Sea such as West Africa or the United States has been&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL5N3GO63V&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">rising globally</a>.



Ample supply is also evident in the structure of short-term Brent swaps &#8211; when crude for prompt delivery trades at a $1.07 per barrel discount to the July contract as opposed a $1.64 premium a month ago.



The current structure is known as contango and indicates abundant prompt supplies and weak demand. The opposite structure is known as backwardation.



WEAKNESS ACROSS THE BOARD



In the United States, physical markets have also softened as U.S. refinery processing rates have stayed below regular seasonal levels despite the end of a maintenance season.



Prices for Louisiana Light Sweet crude&nbsp;WTC-LLS&nbsp;fell to a three-week low of $2.33 per barrel over WTI on May 16, according to LSEG data.



The four-week average for U.S. refinery utilization was at 88.7% for the week ended May 10, down from 91.2% over the same period a year ago, according to the U.S. Energy Information Administration.



At the same time, the four-week averages for both U.S. gasoline and distillate product-supplied, a proxy for demand, were 4-5% below 2023 levels.



Refinery profit margins around the world have weakened partly because of a global&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL4N3H64LF&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">slump in diesel</a>&nbsp;values, a key refined product for the industrial and transport sectors alike.



PVM analyst Tamas Varga said lower margins were a clear sign that refiners were producing too much fuel amid lax consumer and industrial demand.



Lower profit margins have already prompted Asian refiners to&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N3HH07V&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">process less crude</a>&nbsp;oil in May, with others considering more cuts in coming months, further reducing crude demand.



Asia’s oil refining curtailments &#8220;signals a weak oil market,&#8221; said U.S. oil analyst Paul Sankey.



&#8220;The last leg of the refining balance essentially is Asia. It&#8217;s the first thing that shuts down&#8221; when markets are oversupplied, he said, adding that he expects OPEC to roll over its voluntary cuts at the June 1 meeting.



Weaker Asian refining demand has caused a drop-off in Middle East crude prices with Benchmark Dubai touching a near two-month low of $81.24 a barrel on May 8.



It has also left a glut of Nigerian supply, forcing sellers to cut prices for May cargoes to clear an overhang.



Nigerian Qua Iboe&nbsp;BFO-QUA&nbsp;crude fell to $2.10 above dated Brent on May 15, the lowest premium since February according to LSEG data.



An Asian crude buyer, who asked not to be named, said he was holding off purchases of West African and WTI crude until values drop further.



&#8220;They need to find outlets. (There is) too much oil,&#8221; the buyer said.



North Sea crude under pressure&nbsp;<a href="https://reut.rs/3K8XjbS" target="_blank" rel="noreferrer noopener">https://reut.rs/3K8XjbS</a>



North Sea crude under pressure&nbsp;<a href="https://reut.rs/4boYcZY" target="_blank" rel="noreferrer noopener">https://reut.rs/4boYcZY</a>



(Reporting by Robert Harvey and Natalie Grover, additional reporting by Gary McWilliams and Liz Hampton in Houston, and Florence Tan in Singapore; Editing by Alex Lawler, Dmitry Zhdannikov and Susan Fenton)

Illustration shows miniatures of oil barrels and rising stock graph

Global oil markets weaken as sluggish demand leaves overhang

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GettyImages-2153163436-820x547.jpg" alt="" class="wp-image-488604" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GettyImages-2153163436-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GettyImages-2153163436-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GettyImages-2153163436-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GettyImages-2153163436-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GettyImages-2153163436-1536x1025.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GettyImages-2153163436-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">JABRAYAIL, AZERBAIJAN &#8211; MAY 19: (EDITOR’S NOTE: This Handout image was provided by a third-party organization and may not adhere to Getty Images’ editorial policy.) In this handout image supplied by the Office of the President of the Islamic Republic of Iran, Iranian President Ebrahim Raisi Meets with Azerbaijani President Ilham Aliyev as they inaugurate the Qiz Qalasi Dam, constructed on the Aras River on the joint borders between Iran and Azerbaijan, after which his helicopter has reportedly crashed near the city of Jolfa, on the border with Azerbaijan on May 19, 2024 in Jabrayil, Azerbaijan. (Photo by Office of the President of the Islamic Republic of Iran via Getty Images)</figcaption></figure>



Iranian President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian died in a helicopter crash, state media reported Monday.



“All the passengers of the helicopter carrying the Iranian president and foreign minister were martyred,” semi-official news agency Mehr News had reported earlier.



Raisi was returning after inaugurating a dam on Iran’s common border with the Azerbaijan Republic, when his helicopter crashed upon landing in northern Iran’s Varzaqan region on Sunday evening local time, according to state news agency IRNA.



Besides the president and the foreign minister, nine people died in the crash, including Governor of East Azarbaijan Malek Rahmati, semi-official Tasnim News Agency reported.



The president’s convoy included three helicopters, two of which landed safely, according to Tasnim.



Communication with Raisi’s chopper was cut off about half an hour into the flight, Iran’s Vice President for Executive Affairs Mohsen Mansouri said. Raisi was travelling to Tabriz city to launch an oil project.



Inclement weather conditions and difficult terrain had hampered search and rescue operations, Iran’s Revolutionary Guards Corps’ chief Pirhossein Koulivand, reportedly said.



Drone footage published on state media FARS News Agency showed the chopper’s wreckage on a steep hillside.



Indian Prime Minister Narendra Modi expressed condolences on social media platform X, saying Raisi’s “contribution to strengthening India-Iran bilateral relationship will always be remembered.”



Venezuela’s president Nicolás Maduro called Raisi an “extraordinary leader.”



Former Iranian foreign minister Javad Zarif also condoled the death of the president and others in the crash.



“The consequences of this are probably going to be rather contained,” Ali Ahmadi, executive fellow at the Geneva Center for Security Policy, told CNBC’s “Street Signs Asia.”



President Raisi was a fairly marginal figure in national security decision, said Ahmadi, adding that Iranian foreign policy is principally governed by the Office of the Supreme Leader and the Iranian military.



Raisi, 63, a hardline, conservative politician was elected president in 2021 after failing to get into the office in 2017. He was seen as a contender to succeed supreme leader Ayatollah Khamenei.



As president, he cracked down on dissent at home.

Helicopter Carrying Iran President Reportedly Crashes Near Azerbaijan

Iran’s President Raisi and Foreign Minister Amirabdollahian killed in helicopter crash, state media says

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-820x461.jpeg" alt="" class="wp-image-487683" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Foreign trade containers are being stacked at the container yard of Qingdao Port in Qingdao, China, on May 14, 2024.  Nurphoto | Nurphoto | Getty Images</figcaption></figure>



China remains a “critical supplier” to the world and efforts for a full decoupling remain “difficult, if not impossible,” a trade report by Allianz Trade said.



Despite talk of decoupling and derisking from China, European companies remain bullish about prospects in the country — with nearly 40% of companies in Germany and Spain and more than 30% of firms in France expecting their supply chain footprint n the country to increase.



That’s according to the report which showed that only 27% of companies surveyed in the U.S. were planning to expand in China.



“European companies are clearly less worried than U.S. firms,” the report, led by Allianz Trade’s Head of Economic Research Ana Boata said.



The Allianz Trade survey polled more than 3,000 companies in China, France, Germany, Italy, Poland, Spain, the UK and the U.S. were surveyed about their outlook for global trade in 2024.&nbsp;



More than one-third of respondents plan to increase their China footprint, while only 11% said they would decrease it, the trade survey showed.&nbsp;



“China remains the world’s critical supplier, from which a full decoupling seems difficult, if not impossible,” the Allianz Trade report said. 



Meanwhile in China, companies there are growing more optimistic about exporting to other countries.



Over one in ten exporters in China — the second-largest exporter of goods to the U.S. after Mexico —projected a greater than 10% increase in exports.&nbsp;



This is higher than other countries which mostly expected a 2% to 5% increase in exports, data from the report showed.



“Chinese exporters are more optimistic than [other countries] in the survey,” said Francoise Huang, senior economist for Asia Pacific at Allianz Trade.&nbsp;



“Last year was a bad year for overall exports, we had a global trade recession. So that’s why we think respondents in our survey are particularly optimistic,” Huang told CNBC’s “Squawk Box Asia” on Thursday.



<h2 class="wp-block-heading" id="h-diversification-is-inevitable"><a></a>Diversification is inevitable</h2>



Although companies might not completely decouple supply chains from China, diversification is still on the cards.



“Companies that are looking at diversifying their supply chains are looking at the rest of Asia Pacific, with a good focus on ASEAN,” Huang told CNBC, referring to the 10-member Southeast Asian trade bloc.



The report showed that exporters may be more optimistic in 2024 but have also become more concerned about the geopolitical landscape, as well as risks related to shortages of inputs and labor and financing.



About 73% of those surveyed said risks related to politics and protectionism were their top concern. Exporters are still worried about supply chain disruptions, with “31% of respondents placing transport risks among their top three risks and 28% included the risk of input shortages,” the report said.



About 48% of U.S. exporters that manufacture in China or have suppliers there say they would consider countries in Asia-Pacific and Latin America in their diversification efforts.



“Relocating within the same region and nearshoring seem to be the preferred trends,” the report said, adding that only 5% of respondents think reshoring trends will reverse in the next two years, while almost 30% expect it to increase.&nbsp;



The Russia-Ukraine war continues to be the largest geopolitical risk companies expect to hinder supply chains, while trade wars between the U.S. and China is the biggest threat to firms with long supply chains and more than 50% of foreign production.&nbsp;

107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6

China is a ‘critical’ global supplier, full decoupling may be impossible, survey shows

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="536" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GSOSOM4DZFNTPBYDV4RS2U7HM4-820x536.jpg" alt="" class="wp-image-487632" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GSOSOM4DZFNTPBYDV4RS2U7HM4-820x536.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GSOSOM4DZFNTPBYDV4RS2U7HM4-300x196.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GSOSOM4DZFNTPBYDV4RS2U7HM4-138x90.jpg 138w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GSOSOM4DZFNTPBYDV4RS2U7HM4-768x502.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GSOSOM4DZFNTPBYDV4RS2U7HM4-1536x1004.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/GSOSOM4DZFNTPBYDV4RS2U7HM4-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A worker&#8217;s uniform displays company branding at a Sainsbury&#8217;s store in London, Britain October 11, 2016. REUTERS/Neil Hall/File Photo</figcaption></figure>



LONDON, May 17 (Reuters)&nbsp;&#8211;&nbsp;Britain&#8217;s Sainsbury&#8217;s&nbsp;SBRY.L&nbsp;said on Friday it has agreed a five-year strategic partnership with Microsoft&nbsp;MSFT.O&nbsp;that will use the technology company&#8217;s artificial intelligence capabilities and the supermarket group&#8217;s rich data.



Seeking revenue gains and cost savings, more retailers are using generative AI to boost personalised shopping experiences for consumers and make staff working practices more efficient.



Sainsbury&#8217;s, Britain&#8217;s second-largest grocer after Tesco&nbsp;TSCO.L, said it would use AI to create a more interactive shopping experience for online shoppers, while also improving search functions.



In stores, staff would have real-time data and insights for key processes, such as shelf replenishment.



Time to market for new services and product innovations would also be reduced, Sainsbury&#8217;s said.



No financial details of the partnership were disclosed.



Sainsbury&#8217;s in February updated the market on its strategy, setting a new cost-savings target of 1 billion pounds ($1.3 billion) over three years and pledging to boost returns for shareholders.



Last month, it forecast up to 10% growth in profit in the current financial year that began on March 3, confident it can continue to win more customers from rivals.



($1 = 0.7895 pounds)



(Reporting by James Davey; Editing by Jamie Freed)

A worker’s uniform displays company branding at a Sainsbury’s store in London

British grocer Sainsbury’s partners with Microsoft to use AI for data insights

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-820x461.jpeg" alt="" class="wp-image-487616" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Narendra Modi, India’s prime minister, center, during a campaign rally in Agra, Uttar Pradesh, India, on Thursday, April 25, 2024. Modi doubled down on his attacks against the main opposition party by using language critics say sows division between the country’s Hindu majority and Muslim minority. Photographer: Prakash Singh/Bloomberg via Getty Images Bloomberg | Bloomberg | Getty Images</figcaption></figure>



A decade into power, India’s Prime Minister Narendra Modi appears set to secure a rare third term, with the general elections now underway.



Under his rule, India’s economic growth has been robust and its geopolitical standing in the world has risen.



Yet, the country has also witnessed signs of democratic backsliding which has become apparent during his leadership, observers and critics say.



“Modi has projected himself in the mould of an East Asia strongman,” Asim Ali, an independent political researcher in New Delhi, told CNBC.



He has also been called “the high priest of India — that he is above all politics,” Ali added. “This is very worrying as mixing religious nationalism with economic development” has been a “central feature” of his government.  



In its latest 2024 report, the Sweden-based V-Dem Institute said a third Modi term could worsen the political situation “given the already substantial democratic decline under Modi’s leadership and the enduring crackdown on minority rights and civil society.”



The U.S. research group Freedom House said Indian elections will be taking place in a media landscape characterized by increasing “legal attacks on critical journalists” and news outlets.



There is no question the “space for democracy between elections has shrunk” under Modi, Milan Vaishnav, South Asia director at the Carnegie Endowment for International Peace, told CNBC.



“Today, the liberal character of India’s democracy is less apparent,” he added, with “rising majoritarianism, weakening checks on executive authority and a growing intolerance for dissent.”



Last year, the government slammed a BBC documentary — which questioned Modi’s alleged role during the 2002 deadly Gujarat riots — and blocked social media platforms from sharing any clips of it.



Many Indian mainstream media, especially the Hindi-speaking outlets, have been “co-opted” to spread propaganda to deliver “the government message,” according to Ali.



India shuts down the internet more than any other country, with authorities frequently using such tactics to stem political protests and suppress criticism, rights groups say.



In a recent Newsweek interview, Modi addressed the issues and called India the “mother of democracy.”



“Our media plays an important role in this regard,” he said, dismissing claims of “diminishing media freedom” in India as “dubious.”



The prime minister’s office and the ruling Bharatiya Janata Party did not respond to CNBC’s request for comment.



<h2 class="wp-block-heading" id="h-opposition-witch-hunt"><a></a>Opposition ‘witch hunt’</h2>



Ahead of the elections, India’s main opposition — the National Congress party — accused the Modi government of freezing its bank accounts.



“This is a criminal action on the Congress party done by the prime minister and the home minister,” said Congress leader Rahul Gandhi in a fiery attack.



“It is being orchestrated to cripple us before the elections,” he claimed, adding the people were being “robbed of their constitution and democratic structure.”



The Modi administration rejected the opposition’s allegations.



Previous governments have also pursued “a witch hunt against opposition politicians,” said Chietigj Bajpaee, a senior research fellow for South Asia at&nbsp;Chatham House.&nbsp; &nbsp;



But the scale of “actions by the Modi government is what makes it more alarming,” since it has “employed key levers of power” to intimidate opponents, he added.



India’s Supreme Court recently granted an interim bail to jailed Delhi chief minister Arvind Kejriwal, a vocal political rival of Modi, who was arrested in March under a bribery case. The arrest raised eyebrows as he was the leader of India’s Aam Aadmi Party, a key player in a larger opposition alliance.



The timing was “unusual” as it came just before the elections, said Bajpaee. It appears the government doesn’t “want to leave any stone unturned” in its stated target of securing 400 seats in the Lok Sabha or lower house of parliament, he added.



<h2 class="wp-block-heading"><a></a>‘Pro-Hindu party’</h2>



In the last decade, Modi’s BJP has become emboldened in pushing its Hindu nationalist ideology, say analysts. The aim was to consolidate its support among the Hindus, who make up 80% of the country’s 1.4 billion population.



“The BJP is an avowedly pro-Hindu party,” said Vaishnav. Since coming to power in 2014, but especially post-2019, it has “sought to use law, regulation, and even civil society to promote its agenda,” he added.



In January, Modi inaugurated a controversial temple in the city of Ayodhya — at the site where an ancient mosque was demolished by a Hindu mob — fulfilling a decades-long campaign promise.



“The temple issue would matter in the Hindi-speaking belt, especially to energize the Hindu base,” said Ali, adding the government has also used “anti-Muslim” rhetoric during the election campaign.



Modi was accused of hate speech recently after he reportedly called Muslims “infiltrators” at a rally, seen as undermining India’s secular constitution.



The Modi government’s “talk of establishing a ‘Hindu Rashtra’ or Hindu nation does indicate ambitions to demolish the divide between state and religion,” noted Bajpaee, warning this could “erode India’s secular credentials.”



<h2 class="wp-block-heading"><a></a>Cult-like status?</h2>



Yet, public backlash against Modi’s hardline rule has been limited. His charisma and persona have made him incredibly popular both at home and abroad.



“There’s no one in the opposition to match that kind of popularity,” said Ronojoy Sen, senior research fellow at the Institute of South Asian Studies, in a recent CNBC interview.



Political watchers argue Modi benefitted from a cult-like status created around him — backed by the ruling party’s formidable election machinery — to build a direct connection between him and voters.



For those unhappy with the country’s direction “to vote out the BJP means they have to get rid of Modi,” said Neelanjan Sircar, a senior fellow at the Centre for Policy Research in New Delhi. That becomes “hard to do if voters identify with him.”



His populist appeal has endured despite India’s entrenched economic problems such as rising youth unemployment and growing wealth inequality.



A<a href="https://www.thehindu.com/elections/lok-sabha/pre-poll-study-2024-method-note/article68051262.ece" target="_blank" rel="noreferrer noopener"> </a>CSDS-Lokniti pre-poll survey showed Modi was way ahead in popularity with 48% of the respondents picking him as their choice for prime minister compared with his opposition rivals.



India’s economic progress was not “obviously, worse before Modi came to the scene,” noted Sircar. “During Manmohan Singh’s time, India was also growing very fast,” he added, referring to the economic reforms under the former prime minister in the 1990s.



“What has changed is the way in which everything is branded in Modi’s image.”



Even the BJP’s manifesto is called “Modi Ki Guarantee” — or Modi’s guarantee, Sircar pointed out, adding that the entire political system “is geared towards positive attribution to the top.”



<h2 class="wp-block-heading"><a></a>‘Big changes’</h2>



With election results due in early June, it has been widely expected the prime minister and the BJP will cruise to victory for a third term, given India’s feeble opposition.



A reelected Modi government will be “more forceful” in pushing ahead with “politically sensitive economic reforms and its more divisive identity-driven agenda,” said Bajpaee, from Chatham House.



In a recent Interview, Modi exuded confidence and said he wanted to make India “the third economic superpower,” outlining his bold vision.



The Indian leader will “flex his muscles” to enact significant legislation on a strengthened mandate, added Carnegie’s Vaishnav.



“Modi has already prepared the electorate to expect ‘big changes’ once they’re brought back to power,” he added.

107411245-1715050593477-gettyimages-2149526811-INDIA_MODI

Modi’s strongman rule raises questions about India’s ‘democratic decline’ as he seeks a third term

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-820x462.jpeg" alt="" class="wp-image-487293" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Traders work on the floor during morning trading at the New York Stock Exchange on May 14, 2024. Spencer Platt | Getty Images</figcaption></figure>



Traders appear increasingly confident that the U.S. Federal Reserve could start cutting interest rates as early as September, after inflation data cooled more than expected in April.



Some analysts, however, are far from convinced about the prospect of imminent rate reductions.



The consumer price index (CPI), a broad measure of how much goods and services cost at the cash register, increased 0.3% from March, the Labor Department’s Bureau of Labor Statistics reported Wednesday. That was slightly below a Dow Jones estimate of 0.4%.



The softer-than-expected data on Wednesday propelled stocks to fresh record highs and fueled speculation about how soon the Fed could be prepared to begin cutting rates.



Traders are currently pricing in a roughly 70% chance of a U.S. rate cut in September, according to the CME FedWatch Tool. That marks a sharp increase, compared to earlier in the week.



Jerome Schneider, head of short-term portfolio management at PIMCO, said on Thursday that the latest U.S. inflation data confirmed to investors that the potential for a near-term rate hike was now “off the table.”



“I think more contextually, we have to really understand that we have celebrated a lower inflation rate, the market has. But, in context, at PIMCO we’re specifically thinking about the longer-term trajectory of how the Fed is going to react to this data,” Schneider told CNBC’s “Squawk Box Europe.”



“More importantly when you look [at] … what is going on within the segments of CPI and the [Personal Consumption Expenditures Price Index], the more prevalent inflation indicator for the Federal Reserve, it still remains relatively resilient,” Schneider said.



“In fact, to get below a 3% number in those core figures, we’re going to have to see prints over the course of the remainder of the year of 0.2% or lower. Right now, we’re still well above that.”



He added that while the latest inflation data provided some relief, in the context of the Fed quickly getting back closer to its 2% target, “it is probably unlikely at this point in time.”



<h2 class="wp-block-heading" id="h-softer-data"><a></a>Softer data</h2>



Alongside the latest U.S. inflation data, the Commerce Department reported on Wednesday that retail sales were flat on the month, compared with the estimate for a 0.4% increase. The print appeared to show that consumer spending in the world’s largest economy had lost some momentum.



“If you put the inflation data with the retail sales data earlier in the week, where it was a decent miss, and really weakened discretionary areas, and that to me tells us a story about a consumer that under the hood is starting to feel the effects of these higher rates,” Jacob Mitchell, chief investment officer and founder of Antipodes Partners, told CNBC’s “Squawk Box Europe” on Thursday.



“I think probably the market is starting to see softer data coming, which will make the job of the Fed a little bit easier.”



Asked whether the CPI data suggests that the Fed is on course to cut rates in September, Mitchell replied, “Look, I would agree that you didn’t get what you needed on the key components, services and owner’s equivalent rent.”



He added, “And those two elements, look, if we don’t get much weaker goods numbers, then in the second half of the year, you get base effects coming in, so you’re going to see a natural reacceleration in core CPI.”



— CNBC’s Jeff Cox contributed to this report.

107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef

U.S. inflation data fuels bets of Fed rate cuts as early as September — but analysts aren’t convinced

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="720" height="405" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495.jpeg" alt="" class="wp-image-486984" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495.jpeg 720w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495-160x90.jpeg 160w" sizes="auto, (max-width: 720px) 100vw, 720px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



Inflation eased slightly in April, providing at least a bit of relief for consumers while still holding above levels that would suggest a cut in interest rates is imminent.



The consumer price index, a broad measure of how much goods and services cost at the cash register, increased 0.3% from March, the Labor Department’s Bureau of Labor Services reported Wednesday. That was slightly below the Dow Jones estimate for 0.4%.



On a 12-month basis, however, the CPI increased 3.4%, in line with expectations.,



Excluding food and energy, the key core inflation reading came in at 0.3% monthly and 3.6% on an annual basis, both as forecast.



This is breaking news. Please check back for updates.

IMG_4495

U.S consumer prices rose 0.3% in April, less than expectations

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/ENAWVZJZOJJ6ZPFMNTHQI2ILHA-820x547.jpg" alt="" class="wp-image-485033" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/ENAWVZJZOJJ6ZPFMNTHQI2ILHA-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/ENAWVZJZOJJ6ZPFMNTHQI2ILHA-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/ENAWVZJZOJJ6ZPFMNTHQI2ILHA-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/ENAWVZJZOJJ6ZPFMNTHQI2ILHA-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/ENAWVZJZOJJ6ZPFMNTHQI2ILHA-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/ENAWVZJZOJJ6ZPFMNTHQI2ILHA-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., May 8, 2024. REUTERS/Brendan McDermid/File Photo</figcaption></figure>



May 10 (Reuters)&nbsp;&#8211;&nbsp;European shares opened at a record high on Friday, led by energy companies and miners, setting the benchmark index for its biggest weekly gain since late January on growing interest rate cut bets in the region.



The pan-European STOXX 600&nbsp;.STOXX&nbsp;climbed 0.5% in a broad-based rally, eyeing a 2.8% weekly gain.



Earlier this week, the Bank of England hinted at summer rate cuts and Sweden&#8217;s Riksbank delivered its first cut since 2016. Last month, the European Central Bank in its policy meeting signalled a rate cut in June, all underscoring Europe&#8217;s divergence from the U.S. Federal Reserve.



Investors awaited minutes from the ECB&#8217;s last policy meeting later on Friday.



Basic resources .SXPP, up 1.4%, topped sectoral gainers tracking higher metal prices, while energy stocks .SXEP rose 1.1% in line with gains in oil prices.



Iveco Group IVG.MI jumped 4%, after the Italian truck and bus maker reported higher first-quarter operating profit, with margin improving in all business segments.



Zalando ZALG.DE rose 3.8% after Berenberg upgraded the German online retailer to &#8220;Buy&#8221; from &#8220;Hold&#8221;, while Symrise SY1G.DE dropped 1.2% after Berenberg downgraded the German flavour and fragrance maker to &#8220;Hold&#8221; from &#8220;Buy&#8221;.



(Reporting by Ankika Biswas in Bengaluru; Editing by Rashmi Aich)

Traders work on the floor of the NYSE in New York

European shares open at record high on boost from energy stocks, miners

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="542" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FHIKFJVD35PPPPLPAX7WXD3VZU-820x542.jpg" alt="" class="wp-image-485030" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FHIKFJVD35PPPPLPAX7WXD3VZU-820x542.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FHIKFJVD35PPPPLPAX7WXD3VZU-300x198.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FHIKFJVD35PPPPLPAX7WXD3VZU-136x90.jpg 136w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FHIKFJVD35PPPPLPAX7WXD3VZU-768x508.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FHIKFJVD35PPPPLPAX7WXD3VZU-1536x1016.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/FHIKFJVD35PPPPLPAX7WXD3VZU-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: A stacker unloads iron ore onto a pile at a mine located in the Pilbara region of Western Australia December 2, 2013. REUTERS/David Gray/File Photo</figcaption></figure>



SINGAPORE, May 10 (Reuters)&nbsp;&#8211;&nbsp;China&#8217;s iron ore imports are likely to climb to an all-time high this year, helped by shipments from India and Ukraine, as well as resilient demand in the world&#8217;s biggest consumer of the key steelmaking ingredient, analysts and market participants said.



Imports are expected to rise between 15 to 50 million metric tons from last year&#8217;s 1.18 billion tons, according to five analysts on the sidelines of an industry conference in Singapore this week, against earlier expectations of a decline.



China bought 411.82 million tons of iron ore in the first four months of 2024, up 7.2% from last year, even though crude steel output in the first quarter fell 1.9%.



Improved logistics in the Black Sea are driving up supplies from Ukraine after two years, while a rebound in iron ore prices from a near six-month low in late March&nbsp;DCIOcv1&nbsp;is encouraging Indian exporters to ship larger volumes to China, analysts said.



&#8220;Export will be definitely higher this year and so is the volume to China because of easing logistics problem in the Black Sea,&#8221; said a Ukraine-based iron ore miner at the conference, asking not to be named.



China buys the bulk of its iron ore from Australia and Brazil, with India and Ukraine being minor suppliers.



Brazilian mining company Vale VALE3.SA said it expects Chinese imports for 2024 at 1.170 to 1.180 billion tons.



Arrivals from India will rise to 45 million tons this year from 36.52 million tons in 2023, said an east China-based analyst.



China&#8217;s iron ore imports from Ukraine fell to 660,317 tons in 2023 from 17.43 million tons in 2021, customs data showed.



&#8220;Exports of iron ore from India have been rising since prices started recovering,&#8221; said a Mumbai-based bulk shipping broker.



While China&#8217;s steel industry is struggling with declining demand from the beleaguered property sector and awaits measures by Beijing to curb output, iron ore demand is likely to benefit from expected economic recovery in the second half of the year.



Last month, China&#8217;s state planner said it will continue to manage crude steel output in 2024, without giving details.



China&#8217;s economy grew faster than expected in the first quarter, offering relief to officials trying to shore up growth in the face of protracted weakness in the property sector and mounting local government debt.



Around 90% of steel in China is produced from the blast-furnace and basic-oxygen furnace-based process, which requires iron ore, although Beijing aims to increase the share of steel made from electric-arc-furnaces using steel scrap to 15% by 2025.



While Beijing has yet to unveil the exact timing and scale on its steel output curbs this year, analysts said authorities may not enact stringent control measures as its aims to boost economic growth.



&#8220;We believe steel production will be firm in China this year as the effectiveness of (steel output) controls is low because there is less motivation to enforce, and that means resilient ore demand,&#8221; said Tomas Gutierrez, head of data at consultancy Kallanish Commodities.



(Reporting by Amy Lv and Naveen Thukral; Editing by Varun H K)

FILE PHOTO: A stacker unloads iron ore onto a pile at a mine located in the Pilbara region of Western Australia

China’s 2024 iron ore imports seen at record on higher supplies, robust demand

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="575" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-820x575.jpeg" alt="" class="wp-image-485012" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-820x575.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-300x210.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-128x90.jpeg 128w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-768x539.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-1536x1078.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



The U.K. economy has emerged from recession as gross domestic product rose 0.6% in the first quarter, official figures showed Friday, beating expectations.



Economists polled by Reuters had forecast growth of 0.4% on the previous three months of the year.



The U.K. entered a shallow recession in the second half of 2023, as persistent inflation continued to hurt the economy.



Although there is no official definition of a recession, two straight quarters of negative growth is widely considered a technical recession.



The U.K.’s production sector expanded by 0.8% in the period from January to March, while construction fell by 0.9%. On a monthly basis, the economy grew by 0.4% in March, following 0.2% expansion in February.



In output terms, the services sector — crucial to the U.K. economy — grew for the first time since the first quarter in 2023, the Office for National Statistics said. The 0.7% growth was mainly driven by the transport services industry which saw its highest quarterly growth rate since 2020.



U.K. Prime Minister Rishi Sunak, whose Conservative Party recently suffered significant losses at local elections, welcomed the news. “The economy has turned a corner,” he said in a post on social media platform X.



“We know things are still tough for many people, but the plan is working, and we must stick to it,” Sunak added.



Suren Thiru, economics director at ICAEW, a professional group for chartered accountants, struck a more measured tone. He said the positive impact of weaker inflation could be curtailed by a renewed caution to spend amid political uncertainty ahead of general elections expected later this year.



“The UK’s escape from recession is a rather hollow victory because the big picture remains one of an economy struggling with stagnation, as poor productivity and high economic inactivity limits our growth potential,” said Thiru.



The Bank of England’s Monetary Policy Committee on Thursday warned that indicators of persistent inflation “remain elevated,” and voted to keep its main interest rate at 5.25%.



The central bank forecast headline inflation close to 2% in the near-term, but said it expects an increase slightly later in the year as the effects of a sharp fall in energy prices wear off.

107374281-1708014467967-gettyimages-2005544457-75350394

UK economy emerges from recession with 0.6% growth in first quarter

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/03/ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1-820x547.jpg" alt="" class="wp-image-468014" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/03/ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/03/ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/03/ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/03/ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1-768x513.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/03/ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1-1536x1025.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/03/ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo</figcaption></figure>



Oil futures climbed on Monday after Saudi Arabia hiked June crude prices for most regions and as the prospect of a Gaza ceasefire deal appeared slim, renewing fears the Israel-Hamas conflict could still widen in the key oil-producing region.



Brent crude futures were up 77 cents, or 0.9%, to $83.73 a barrel at 1055 GMT, while U.S. West Texas Intermediate crude futures were at $78.98 a barrel, up 87 cents, or 1.1%.



Last week, both futures contracts posted their steepest weekly loss in three months, with Brent falling more than 7% and WTI down 6.8%, as investors weighed weak U.S. jobs data and the possible timing of a Federal Reserve interest rate cut.



The geopolitical risk premium in oil prices also eased as talks for a Gaza ceasefire were underway.



However, prospects for a deal faded as Hamas reiterated its demand for an end to the war in exchange for the freeing of hostages and Israel appeared poised to launch a long-threatened assault in the southern Gaza Strip.



On Monday, Israel’s military called on Palestinian civilians to evacuate Rafah as part of a “limited scope” operation.



“News that Israel wants to go ahead and extend its operation into Rafah risks derailing a potential ceasefire agreement and reigniting Middle Eastern geopolitical tensions which had appeared to be easing,” IG markets analyst Tony Sycamore said.



Also supporting oil was Saudi Arabia’s move to raise the official selling prices (OSPs) for its crude sold to Asia, Northwest Europe and the Mediterranean in June, signaling expectations of strong demand this summer.



In China, the world’s largest crude importer, services activity remained in expansionary territory for the 16th straight month, while growth in new orders accelerated and business sentiment rose solidly, boosting hopes of a sustained economic recovery.

ZO2TST2SFBIXRI7CA7KFKOUIUI-1-1-1

Oil climbs as Gaza tensions rise, Saudi Arabia hikes prices

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="675" height="380" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/1675956289-63dd4efae33c4000193ae0c2copy-1.png" alt="" class="wp-image-483480" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/1675956289-63dd4efae33c4000193ae0c2copy-1.png 675w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/1675956289-63dd4efae33c4000193ae0c2copy-1-300x169.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/1675956289-63dd4efae33c4000193ae0c2copy-1-160x90.png 160w" sizes="auto, (max-width: 675px) 100vw, 675px" /><figcaption class="wp-element-caption">Picture Alliance | Picture Alliance | Getty Images</figcaption></figure>



Gen Z are digital natives and have quickly adopted AI, using it for everything from assignment research to planning holidays.



But, it seems, they’ve been making mistakes along the way.



Shoshana Davis, a Gen Z career expert and founder of the career consultancy Fairy Job Mother, told CNBC Make It in an interview that the generation (generally defined as those born between 1996 and 2012) have become too reliant on AI tools like ChatGPT to generate cover letters and job application answers.



“So I speak to businesses and employers who hire anything from like 10 to 1000s of Gen Z every year,” Davis said. “And one of the main challenges that I’m seeing at the moment is the use of AI, specifically ChatGPT, and it’s not being used in the right way, and it’s not being used effectively.”



Davis explained that “employers are getting hundreds of the exact same cover letters word for word,” or answers to job application questions that are the same, and suspect that ChatGPT use is in play.



In fact, 45% of job seekers have used AI to build, update, or improve their resume, a Canva survey published in January of 5,000 hiring managers and 5,000 job seekers from the U.K., U.S., India, Germany, Spain, France, Mexico and Brazil found.



And it appears that Gen Z is leaning the most on AI, according to a February Grammarly survey of 1,002 knowledge workers and 253 business leaders. It reported that 61% of Gen Z said they can’t imagine doing work tasks without using generative AI ­— the most out of any of the generations.



Davis said that we should definitely “embrace technology and AI” but said copying answers from ChatGPT can hurt your chances of getting a job.



A Resume Genius survey of 625 hiring managers found that over half disliked AI-generated resumes and would consider it a red flag that would make them less likely to hire a candidate.



<h2 class="wp-block-heading" id="h-100-identical-responses">’100 identical responses’</h2>



One of the reasons why copying ChatGPT’s responses is an ineffective way of using AI is that the chatbot does not always provide reliable information.



One initial issue with ChatGPT was that its knowledge base was limited to data released before September 2021 but this was resolved in September 2023, its owner OpenAI announced on X.



“ChatGPT is not connected to the internet, and it can occasionally produce incorrect answers,” it says on the company website. “It has limited knowledge of world and events after 2021 and may also occasionally produce harmful instructions or biased content.”



Davis shared a recent story from an employer she works with who was hiring for a brand marketing position, and asked a question in the job application about candidates’ favorite fitness-related product launches in the past year.



“They said they got about 100 identical responses of ‘my favorite campaign launch was Peloton’ and the employer was like ‘ultimately that was ChatGPT, but then also equally Peloton was released like four or five years ago’,” Davis said. The employer was referring to an ad campaign from Peloton in 2020.



Davis said that young people “need to educate themselves” on how to use ChatGPT properly and not just to copy answers.



<h2 class="wp-block-heading">‘It should be used as a tool, not a replacement’</h2>



There are several uses for AI in the job application process from helping you prep for interviews or researching a company.  



“In my opinion, you can use ChatGPT in the job search process but it should be used as a tool, not a replacement,” Davis warned.



Michelle Reisdorf, district director at recruitment firm Robert Half, shared a similar view with CNBC Make It previously and said that AI is great for “proofreading and enhancing what you’ve already written but it’s not a one-stop shop to generate the perfect resume.”



Reisdorf added: “Recruiters will be able to tell if you’re not including specific details from your past jobs or writing in a personal, human voice.”&nbsp;



Davis said she uses ChatGPT to help her structure documents, brainstorm ideas, and produce drafts but “I never just type in a question and then copy and paste my responses.”

1675956289-63dd4efae33c4000193ae0c2copy-1

‘Exact same cover letters word for word’: Career consultant says Gen Z are misusing AI

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Fed-and-ECB-divergence-on-rate-cuts-could-spell-trouble-for-the-euro-economist-says-820x462.jpeg" alt="" class="wp-image-482533" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Fed-and-ECB-divergence-on-rate-cuts-could-spell-trouble-for-the-euro-economist-says-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Fed-and-ECB-divergence-on-rate-cuts-could-spell-trouble-for-the-euro-economist-says-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Fed-and-ECB-divergence-on-rate-cuts-could-spell-trouble-for-the-euro-economist-says-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Fed-and-ECB-divergence-on-rate-cuts-could-spell-trouble-for-the-euro-economist-says-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/Fed-and-ECB-divergence-on-rate-cuts-could-spell-trouble-for-the-euro-economist-says.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The President of the European Central Bank (ECB) Christine Lagarde gestures as she addresses a press conference following the meeting of the governing council of the ECB in Frankfurt am Main, western Germany, on April 11, 2024. Kirill Kudryavtsev | Afp | Getty Images</figcaption></figure>



The prospect of the European Central Bank diverging from the Federal Reserve on interest rate cuts is likely to be “particularly negative” for the 20-nation euro zone, according to one economist.



The ECB&nbsp;<a href="https://www.cnbc.com/2024/04/19/heres-what-12-ecb-members-said-about-interest-rates-this-week.html">appears on course</a>&nbsp;to cut interest rates in June, barring any major surprises, and&nbsp;<a href="https://www.cnbc.com/2024/04/30/euro-zone-inflation-april-2024-and-first-quarter-gdp.html">recent inflation data</a>&nbsp;has since bolstered the case for an imminent reduction in borrowing costs.



The U.S. central bank, meanwhile,&nbsp;<a href="https://www.cnbc.com/2024/05/01/fed-rate-decision-may-2024-.html">held interest rates steady</a>&nbsp;on Wednesday, with the rate-setting Federal Open Market Committee citing a “lack of further progress” in getting inflation back down to its 2% target.



The Federal Reserve&nbsp;<a href="https://www.cnbc.com/2024/05/01/fed-decision-heres-what-changed-in-the-new-statement.html">said in a statement</a>&nbsp;that it did not expect to reduce rates until it had gained “greater confidence” that inflation was moving sustainably back toward its target level, reiterating language it used after the March and January meetings.



It leaves the ECB firmly on track to cut interest rates before the Fed.



“The problem of cutting rates right now is that the ECB takes for granted the strength of the&nbsp;<a href="https://www.cnbc.com/quotes/EUR=/">euro</a>. And if they start to cut rates ahead of the Federal Reserve, that is basically giving the world a signal that the euro needs to weaken,” Daniel Lacalle, chief economist at Tressis Gestion, told CNBC’s “Street Signs Europe” on Thursday.



“And if the euro weakens, the import bill of the euro zone is going to rise, making it even more difficult for the euro area to grow.”



Lacalle said a June rate cut from the ECB was not going to make German, French or Spanish businesses take more credit “because a small rate cut is not the driver of credit demand.” Credit demand refers to the appetite for business and consumer loans.



He added, “What makes credit demand interesting, or rise, is the fact that there [are] economic and investment opportunities and those are curbed by regulation and the misguided energy policy of the euro area.”



An ECB spokesperson declined to comment when contacted by CNBC.



<h2 class="wp-block-heading" id="h-ecb-heading-toward-a-rate-cut"><a></a>ECB heading toward a rate cut?</h2>



Speaking to CNBC on last month, ECB President Christine Lagarde&nbsp;<a href="https://www.cnbc.com/2024/04/16/lagarde-says-ecb-will-cut-rates-soon-barring-any-major-surprises.html">said</a>&nbsp;the central bank remained on course to cut interest rates in the near term, subject to any additional shocks.



“We just need to build a bit more confidence in this disinflationary process but if it moves according to our expectations, if we don’t have a major shock in development, we are heading towards a moment where we have to moderate the restrictive monetary policy,” Lagarde said on April 16.



Official figures&nbsp;<a href="https://www.cnbc.com/2024/04/30/euro-zone-inflation-april-2024-and-first-quarter-gdp.html">published</a>&nbsp;Tuesday showed that prices in the euro area held steady at 2.4% in April, while the economy returned to growth over the first three months of the year.



Gross domestic product rose by 0.3% over the first quarter, slightly better than consensus economist expectations. GDP for the fourth quarter of 2023 was revised from no growth to a 0.1% contraction, which means that the euro zone was in a technical recession in the second half of last year.



Tressis Gestion’s Lacalle said one prevailing market narrative was that high interest rates in Europe were to blame for sluggish economic growth. “However, the euro zone slowdown has absolutely nothing to do with rate hikes,” he said.



Instead, Lacalle said recent economic weakness across the euro zone should be attributed to the bloc’s energy policy, regulatory measures and farming and agricultural policy.



— CNBC’s Jeff Cox &amp; Jenni Reid contributed to this report.

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‘Exact same cover letters word for word’: Career consultant says Gen Z are misusing AI

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