• Energy Minister, Stuart Young, is hopeful that the acquisition of Trinity Exploration and Production Plc by Canadian oil and gas company Touchstone Exploration Inc. will increase exploration and hydrocarbon production in Trinidad and Tobago.
• Young expressed his anticipation for the successful completion of the acquisition, emphasising that Trinidad and Tobago remains welcoming to international investment in the industry.
• On May 1, Touchstone announced that it had reached an agreement with Trinity on the terms of an all-share acquisition.
• Last Thursday, May 9, Young and permanent secretary Penelope Bradshaw-Niles met with executives of Trinity Exploration and Production at the energy ministry's headquarters located at the International Waterfront in Port of Spain.
• 'At the meeting, the Trinity Exploration and Production Plc executives provided an update to the energy minister on the finalisation of the company's agreement to its 'all-share acquisition' by Touchstone.
• The acquisition will allow for increased investments in Trinidad and Tobago from the combined company's cash flow into its increased production base. Additionally, post-acquisition, the existing Trinity Exploration shareholders, will own approximately 20% of the Canadian firm's shares, as each 'Trinity' share will be converted to 1.5. Touchstone shares, it stated.

 (Source: Trinidad Express Newspaper)

• The US embassy in Guyana announced on May 9 that military exercises would be held in the South American country and that US military planes would fly over Georgetown and the region on Thursday. According to the text, the embassy’s objective is to maintain its commitment to the “US-Guiana bilateral defence and security partnership.”
• The note also states that the United States is working on “deterring aggression, defeating threats, responding rapidly to crises, and working with allies and partner nations to strengthen the region’s capacity to ensure a safe, free, and prosperous Western Hemisphere.”
• A US military officer also visited Guyana recently and on May 9^th, the embassy said that US Southern Command’s Director of Strategy, Policy and Plans, Julie Nethercot, was in Guyana from May 6 to 8 to oversee “strategic planning, policy development and coordination of security cooperation for Latin America and the Caribbean.”
• The Venezuelan government responded in social media posts, in which ministers called the measure a “threat to regional peace”. Venezuelan Foreign Minister, Yván Gil, responded to the statement with a social media post saying the measure is “further proof of the provocations” that the Southern Command is waging against the Venezuelan government from a “war machine” against the country and linked the exercises to ExxonMobil’s activities in Guyana.
• In March, ExxonMobil discovered the Bluefin oil well, located in the Stabroek block, exactly off the coast of Essequibo.
• Minister Gil also asserted that ExxonMobil has taken over Guyana and now intends to destabilise the region by threatening the Peace Zone agreed between Guyana and Venezuela. For him, the Guyanese government is violating the so-called “Argyle Accords”, which provided for the non-use of force and the continuation of dialogue to resolve the Essequibo dispute.
• Venezuelan Defense Minister Vladimir Padrino López also commented that the measure “threatens regional peace” and that he rejects “forcefully” the “provocations of the Southern Command” and said that Guyana has assumed the role of a “new US colony”. “Our Aerospace Defense system remains activated against any attempt to violate Venezuelan geographic space, including the territory of Essequibo. Alert!” concluded the minister.
• Diplomatic tension between Guyana and Venezuela remains high over the disputed territory of Essequibo. In March 2024, Venezuela’s President Nicolás Maduro passed a law declaring the border region of Essequibo, which belongs to Guyana, a Venezuelan federal state.

(Source: Peoples Dispatch)

• Corporate price gouging has not been a primary driver of U.S. inflation, according to research published on Monday by economists at the Federal Reserve Bank of San Francisco. While markups for motor vehicles and petroleum products did rise sharply during the 2021-2022 inflation surge, markups across the entire spectrum of U.S. goods and services have been relatively flat during the post-pandemic recovery, the bank's latest Economic Letter showed.
• "As such, rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery," wrote the bank's research chief Sylvain Leduc and colleagues Huiyu Li and Zheng Liu. Inflation by the Fed's targeted measure, the year-over-year change in the personal consumption expenditures (PCE) price index, peaked at 7.1% in June 2022 and has since fallen, registering 2.7% in March.
• S. President Joe Biden has blamed corporate greed for still-elevated prices, accusing companies of boosting profits by shrinking portion sizes, but leaving the selling price unchanged, and by failing to pass on falling costs to consumers. Fed policymakers, and many economists, say the inflation surge can be better explained by the combined effect of supply chain disruptions and a drop in labor supply during the post-pandemic recovery that occurred, just as consumer demand rose.
• They attribute the recent easing in inflation to healing supply chains and a rise in immigration that has added to the supply of workers, along with cooling demand amid higher borrowing costs as the Fed raised its policy rate. Leduc and his colleagues did not refer to Biden or use the colloquial term 'greedflation,' but their work was a clear rebuttal of the theory that corporate profiteering has been the main cause of higher prices. Other economists, using different methodologies, have drawn similar conclusions.
• "Data for the current recovery show that the increase in corporate profits is not particularly pronounced compared with previous recoveries," the San Francisco Fed researchers wrote. "Markups also have not played much of a role in the slowing of inflation since the summer of 2022."

(Source: Reuters)

• Debate among Federal Reserve officials deepened this week over whether U.S. interest rates are high enough, and may be stoked further after a key survey showed a jump in consumers' inflation expectations. "There are ... important upside risks to inflation that are on my mind, and I think there are also uncertainties about how restrictive policy is and whether it's sufficiently restrictive" to return inflation to the U.S. central bank's 2% target, Dallas Fed President Lorie Logan said at a Louisiana Bankers Association conference in New Orleans.
• "I think it's just too early to think about cutting rates. I think I need to see some of these uncertainties resolved … and we need to remain very flexible," Logan said, though she did not directly address whether she feels the Fed may need to again raise its benchmark policy rate from the 5.25%-5.50% range that has been maintained since July.
• In an appearance on CNBC, Minneapolis Fed President Neel Kashkari said he's in a "wait-and-see mode" in regards to what's next for central bank policy and the Fed can stay at current rates "as long as needed" to bring inflation down. However, he added there is a "high" bar to concluding that higher rates are needed to cool inflation. Many U.S. central bank officials, including Fed Chair Jerome Powell, have said they still think further rate hikes will prove unnecessary.
• Data on Friday provided a further jolt in the wrong direction. Year-ahead inflation expectations in the University of Michigan's survey of consumer sentiment rose from 3.2% to 3.5% in May, the highest level since November, and longer-term expectations ticked higher as well.
• While a month's reversal may not be significant, if it continues it would challenge the Fed's current assessment that expectations are "anchored"^[1] - and add to arguments made by Logan and some others that rates may not be high enough to finish the inflation fight.

(Source: Reuters)

^[1] Anchored expectations are considered by Fed officials as an important sign of the central bank's credibility and an aid in bringing inflation back to 2%.

• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, has informed that the current inflation target for the Bank of Jamaica will remain at 4%-6%. He made the announcement to the House of Representatives on Tuesday (May 7).
• The Minister further explained that the process for setting and renewing the target was codified into law via the Bank of Jamaica Amendment Act 2020, which, among other things, formally introduced Jamaica’s inflation-targeting regime.
• Clarke stated that in April 2021, after consultation with the Bank of Jamaica, documents were tabled advising of the renewal of the inflation target of 4%-6%, which was effective for three years.
• “Following consultation with the Governor of the Bank of Jamaica, who is also Chairman of the Monetary Policy Committee, I confirm and have so tabled documents advising that the inflation target for Jamaica, calculated as the 12-month point-to-point percentage change in the consumer price index as measured by STATIN, will remain at 4%-6% for the next three years,” Dr. Clarke said.
• “The midpoint of this range of 5% will be the operational target for the Monetary Policy Committee. This target remains consistent with Jamaica’s economic structure and stage of development,” he added.
• The Minister noted that a lower inflation target would require higher interest rates for longer, which could be detrimental to growth and fiscal dynamics. Furthermore, Dr. Clarke said Jamaica’s recent experience has highlighted that there are constraints to targeting a lower inflation rate at this time.
• “In particular, the frequency of economic shocks, labour market rigidities, low productivity, a weak monetary transmission system and regulated price adjustments, constrain the ability of the Bank of Jamaica to deliver a lower inflation rate than what is currently targeted in the near term,” the Minister said.

 (Source: JIS)

• Buoyed by robust growth in Net Interest Income (NII), Dolla Financial Service Limited recorded a net profit of $139.99Mn for the quarter that ended March 31, 2024. This represents a 15.9% yoy increase in profitability.
• NII for the quarter was up by 22.3% y-o-y to $304.25Mn. This was driven by an expansion of the company’s loan portfolio, notably Ultra Finance Limited, its subsidiary which targets high net-worth individuals. Additionally, Ultra contributed 37% of the $299.94Mn recorded for consolidated income.
• Operating expenses, including expected credit losses, totaled $151.43Mn, marking a $26.87Mn or 22.3% y-o-y increase due to an increase in the staff capacity to manage the higher business volume, as well as growth in regulatory and professional fees and increased spend to support the company’s intensified marketing efforts.
• Dolla's stock price has increased by 2.2% since the start of the calendar year. The stock closed Thursday’s trading session at $2.77 and trades at a P/B of 6.7x, above the Junior Market Financial Sector Average of 2.8x.
• The company recently announced its plans to close operations in Guyana, just two years after setting up shop due to geopolitical uncertainty. It noted that it would be reallocating its resources to Jamaica, where returns are greater.

 (Sources: JSE & NCBCM Research)

• The government of Barbados is making legislative changes to its corporate tax regime to ensure the sovereign conforms to global standards and can take advantage of increased opportunities for local and international investment.
• Leading off debate in the House of Assembly on Tuesday, May 7, on the Corporation Top-up Tax Bill, 2024 and the Income Tax (Amendment) Bill, 2024, Minister in the Ministry of Finance and Economic Affairs Ryan Straughn said the changes give effect to an earlier decision to move away from the sliding scale for corporate taxes introduced in December 2018 to replace it with a new structure.
• Of note, in 2018, the Barbadian government announced a radical tax change, in response to the OECD’s (Organization for Economic Cooperation and Development) criticism that foreign currency-earning companies were being ring-fenced. The convergence of corporate tax rates ( international companies now classified as regular Barbados businesses) resulted in the creation of a new sliding scale structure that reduced the top-tier corporate tax rate from 30% to 5.5% and the lowest rate down to 1% for taxable incomes greater than $30Mn.
• The new tax structure would include a domestic tax rate of 9% for businesses operating in Barbados and would apply to all except those small operations registered under the Small Business Development Act, which will be taxed at 5.5%. However, for companies that make above a US$850Mn threshold the top-up tax rate will be imposed (up to 15% according to the OECD Pillar II Tax Framework).
• According to Straughn, the government has sought over the last six years to move away from a consistent increase in taxes to a more stable regime that would allow for foreign investment, while encouraging local business development to “unlock opportunities” that would ensure Barbados can recover its economic footing in an inclusive manner, build resilience and achieve climate resilience.
• “The pieces of legislation are aligned with what we are trying to achieve in terms of being able to utilise regulations, which are agreed at a global level, to be able to reposition Barbados for inclusive growth. “…As we seek to do the traditional sources of financing, we must be capable of using the tax system to unlock areas of investment that are strategically aligned with the national objectives, particularly as it relates to building capacity for growth and to allow our citizens to be able to invest to be a part of the recovery,” Straughn said.

(Sources: Barbados Today & NCBCM Research)

• Fitch Solutions expects that the Central Bank of Brazil (Banco Central do Brasil - BCB) will cut its policy rate from 10.50% to 9.50% by year-end (9.25% previously forecasted), with economic resilience and uncertainty surrounding the government’s fiscal policy stance set to see the central bank adopt a slightly less hawkish stance.
• The BCB lowered its policy rate by 25bps at its May 8 meeting, having guided back in March that it would move by 50bps. Officials signalled that they would take a meeting-by-meeting approach in the coming months.
• While the external picture has improved somewhat, BCB officials indicated in May’s policy statement that they are not comfortable remaining on autopilot in the current environment and will instead shift to a more data-dependent approach; which has been the stance for most global central banks.
• Consistent with this slightly hawkish shift, the BCB’s committee also revised its end-of-year inflation forecasts modestly from 3.5% at the time of the last meeting to 3.8% (target: 3.00%).
• Risks to Fitch’s forecasts are tilted in favour of a slower pace of loosening in the coming months. In addition to domestic economic factors (eg. the Brazilian government’s moves to use new fiscal rules this year to boost spending), a pick-up in global financial market volatility is another development that could see the BCB take a more cautious approach.

 (Source: Fitch Solutions)

• The Bank of England has sent a new signal that borrowing costs will fall earlier and further across Europe than in the United States, setting markets up for major shifts as investors play a monetary policy divide opening up across the Atlantic.
• Investors see European stocks and debt leading global markets this year as rate cuts boost spending, softer inflation burnishes bonds, and weaker currencies lift exports. Traders stepped up bets for UK easing after the BoE on Thursday held rates at 16-year highs of 5.25% but trimmed inflation forecasts, pushing sterling down and stocks higher.
• That came after Sweden cut rates for the first time since 2016, while Switzerland cut rates in March, and the European Central Bank flagged a June cut. In contrast, the U.S. Federal Reserve is set to keep rates high for longer.
• "This is the European pivot," said Florian Ielpo, head of macro at Switzerland's Lombard Odier Investment Management, who is positive on European and UK stocks. Since 2020, the United States has generated the lion's share of global equity gains.
• Paul Flood, multi-asset portfolio manager at Newton Investment Management, said he was buying UK stocks on valuation grounds and was positive on UK government bonds because there was more potential for BoE rate cuts ahead. "This is the European pivot," said Florian Ielpo, head of macro at Switzerland's Lombard Odier Investment Management, who is positive on European and UK stocks. Since 2020, the United States has generated the lion's share of global equity gains.
• European government bonds could outperform the U.S. but are likely to stay volatile as the inflation path worldwide remains unpredictable, investors and analysts said.
• The BoE, the ECB, and other European central banks might regret sounding too dovish too soon, Lombard Odier's Ielpo said. This statement suggests that central banks might face challenges due to prematurely cutting rates in terms of still unclear inflationary pressures. In the U.S., the Fed sent a strong signal in December that rate cuts were coming but then turned more hawkish after financial conditions became euphoric and inflation stalled above its target.

(Source: Reuters)

• The number of Americans filing new claims for unemployment benefits rose last week to the highest level in more than eight months, offering more evidence that the labour market was steadily cooling.
• "The labour market shows some signs of rebalancing with fewer job openings posted around the country, and now company layoffs are picking up, hinting at caution on the part of companies as they weigh the outlook for the second half of the year," said Christopher Rupkey, chief economist at FWDBONDS.
• Initial claims for state unemployment benefits increased 22,000 to a seasonally adjusted 231,000 for the week ended May 4, the highest level since the end of last August. The increase was the largest in nearly four months. Economists polled by Reuters had forecast 215,000 claims in the latest week. Claims broke above the 194,000-225,000 range, which had prevailed since the start of the year.
• Sentiment surveys, including the Institute for Supply Management and the NFIB, have been flagging a sharp slowdown in the labor market. Companies, however, appear to be cutting back on hiring, while largely holding on to their workers after struggling to find labour during and after the COVID-19 pandemic.
• The labour market is steadily rebalancing in the wake of 525 basis points worth of interest rate hikes from the U.S. central bank since March 2022 to dampen demand in the overall economy.
• The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 17,000 to a seasonally adjusted 1.785 million during the week ending April 27, the claims report showed. "This still very low level of continuing claims is further evidence that the big jump in initial claims in early May is not the start of a persistent rise in laid-off workers but bears close watching," said Stuart Hoffman, senior economic advisor at PNC Financial.

(Source: Reuters)