(Reuters) – Bitcoin dropped 6.1% to $18,866.77 at 2004 GMT on Thursday, putting the biggest and best-known cryptocurrency down $1,226.41 from its previous close and down 60.9% from the year’s high of $48,234 on March 28.

Several big players in the cryptocurrency markets have had difficulties, and further declines could force other crypto investors to sell holdings to meet margin calls and cover losses.

Ether, the coin linked to the ethereum blockchain network, dropped 7.5% to $1,016.08 on Thursday, losing $82.38 from its previous close.

Both digital assets have struggled since U.S. based lender Celsius Network this month said it would suspend withdrawals. Bitcoin and ether were further rattled by the apparent insolvency of crypto hedge fund Three Arrows Capital, which a person familiar with the matter told Reuters has entered liquidation.

Many of the industry’s recent problems can be traced back to the spectacular collapse of so-called stablecoin TerraUSD in May, which saw the stablecoin lose almost all its value, along with its paired token.

(Reporting by Mrinmay Dey in Bengaluru and Hannah Lang in Washington; Editing by David Gregorio)

By Howard Schneider and Ann Saphir

WASHINGTON – New U.S. data for May showed little immediate relief from the record pace of inflation pushing the Federal Reserve toward another oversized interest rate increase next month, but it did add to a developing sense that the worst may be over.

Inflation as measured by the personal consumption expenditures price index was 6.3% on an annualized basis in May, the same as in April and still more than triple the U.S. central bank’s formal 2% target – far from the clear evidence of falling inflation that Fed officials say they need before backing off their rate hike plans.

Following the release of the latest inflation data, traders of futures tied to the central bank’s targeted federal funds rate kept bets that it would proceed with another 75-basis-point rate hike next month.

But those same traders also saw an opening for the Fed to slow the pace of rate increases as of November and stop hiking rates altogether in early 2023, as evidence mounts that inflation may have peaked and the economy overall is slowing.

While the headline inflation number showed no decline, a separate measure excluding volatile food and energy costs fell for the third consecutive month and is now at a six-month low of 4.7%.

The measure of so-called “core” inflation is controversial, since it excludes some of the prices that most impact daily life. The Fed’s focus on PCE inflation, as opposed to the separate, and typically higher, consumer price index, is also a matter of debate since it gives less weight to the costs of items like housing which also have been rising fast.

But the decline in core PCE, should it continue, would still carry weight among policymakers as a powerful signal of where prices are heading.

“A combination of slower wage gains, lower margin inflation, and the stronger dollar is beginning to drive a clear slowdown in core inflation,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note, while adding that “it has much further to go” to become convincing for the Fed.

But the seeds of that may be taking root.

Recent data revisions showed less consumer spending at the start of the year than originally estimated, and the data released on Thursday showed that, on an inflation-adjusted basis, both disposable income and consumer spending declined in May.

Buoyant consumer demand, fueled in part by trillions of dollars in pandemic relief payments from the federal government, is considered one factor behind the recent surge in prices. An aim of the Fed in raising interest rates has been to bring that record demand for goods and services more closely into line with what the economy can produce or import.

Michael Pearce, senior U.S. economist at Capital Economics, estimated that U.S. economic growth for the April-June period slipped to an annualized rate of 1%. That is far below U.S. trend growth rates typically estimated to be around 2%, the sort of “output gap” that might relieve the demand-related pressure on prices.

“We expect growth to remain below trend over the second half of the year too,” Pearce wrote.

HIGH BAR

Between those signs of slowing growth and potentially slowing inflation, it’s now a matter of judgment for the Fed about how to weigh the need to follow through on anticipated rate increases against the risk the economy may slow faster than expected or even tip into recession.

At a central banking conference in Portugal this week, Fed Chair Jerome Powell made clear – again – that the bar for the U.S. central bank to slow or halt further rate increases is a high one. Policymakers want to be sure public views about inflation over the long term do not drift higher, a fate they feel they have avoided so far, but also are inclined to reinforce beyond a doubt.

They’ve also watched financial markets take the expected monetary policy tightening to heart, and raise the cost of credit far faster than the Fed itself has acted to lift the short-term federal funds rate. The average contract rate on a 30-year fixed-rate mortgage in the United States, for example, has roughly doubled to 5.70% since last September when the Fed signaled its pivot to tighter credit conditions. The first hike of the Fed’s current tightening cycle did not come until March.

For the Fed, that’s like money in the bank, and won’t be surrendered easily.

“By and large since last fall when we pivoted … markets have been pretty well aligned … with where we are going,” Powell said on Wednesday. “It’s constructive that the market in effect is doing your work for you.”

(Reporting by Howard Schneider; Editing by Paul Simao)

By Lucia Mutikani

WASHINGTON – U.S. consumer spending rose less than expected in May as motor vehicles remained scarce while higher prices forced cutbacks on purchases of other goods, another sign that the rebound in economic growth early in the second quarter was losing steam.

Though the report from the Commerce Department on Thursday suggested inflation had probably peaked, price pressures remained strong enough to keep the Federal Reserve on its aggressive monetary policy tightening path. Nevertheless, Fed officials should welcome cooling demand.

Rising interest rates and tight financial conditions are stoking fears of a recession, but economic data so far point to moderate growth. New claims for unemployment benefits kept grinding lower last week, despite layoffs in technology and housing sectors, other data showed on Thursday.

“The Fed hasn’t won the war on inflation just yet, but there are somewhat encouraging signs that the economy is slowing down,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “Despite recession fears, job layoffs have not quite reached high enough levels to make the call that the economy is headed over the cliff into the depths of recession.”

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, gained 0.2% in May, the smallest rise in five months. Data for April was revised down to show outlays increasing 0.6% instead of 0.9% as previously reported.

There were also downward revisions to data going back to January, showing a softer growth profile for spending this year.

Spending on goods meant to last three years or more declined 3.2%, pulled down by motor vehicles. Purchases of furnishings and durable household equipment also decreased as did recreational goods and vehicles. That partially offset a 0.7% increase in services, which was driven by housing and utilities as well as healthcare and international travel.

Economists polled by Reuters had forecast consumer spending would climb 0.4%. The report joined data on housing starts, building permits and manufacturing production in suggesting that the economy was struggling to gain altitude after gross domestic product dropped at an annualized 1.6% rate in the first quarter.

Stocks on Wall Street were lower. The dollar was steady against a basket of currencies. U.S. Treasury prices rose.

INFLATION PEAKED

The U.S. central bank this month raised its policy rate by three-quarters of a percentage point, its biggest hike since 1994. The Fed has increased its benchmark overnight interest rate by 150 basis points since March.

Inflation maintained its upward trend in May. The personal consumption expenditures (PCE) price index rose 0.6% last month after gaining 0.2% in April. In the 12 months through May, the PCE price index climbed 6.3% after a similar gain in April. It was driven by higher prices for goods and services.

But underlying price pressures are starting to abate. Excluding the volatile food and energy components, the PCE price index rose 0.3% for the fourth straight month.

The so-called core PCE price index advanced 4.7% on a year-on-year basis in May, the smallest increase since last November, after rising 4.9% in April. The PCE price indexes are the Fed’s favored measures for its 2% inflation target.

The PCE price indexes are running lower than the consumer price index, which increased 8.6% year-on-year in May, because they have a smaller weight for the fast rising residential rents. While healthcare has a bigger weighting in the PCE measures, legislated cuts to Medicare payments have pushed down medical services prices. They have also benefited from declining financial services costs amid falling asset prices.

“Data for June and July could also show similarly soft PCE compared to CPI, but we expect the Fed would need to see evidence of slowing inflationary pressure across a range of data before slowing the pace of rate hikes,” said Veronica Clark, an economist at Citigroup in New York.

Consumer spending adjusted for inflation fell 0.4% in May, the first drop since December. That together with strong inventory accumulation in the first quarter, especially at general merchandise stores, poses a downside risk to economic growth in the second quarter. Growth estimates for this quarter range from as low as a 0.3% rate to as high as a 2.9% pace.

But with a tight labor market generating solid wage increases and household savings still ample, moderate nominal spending is expected to prevail, supported by services. That should help to limit job losses.

Wages increased 0.5% in May, contributing to the 0.5% rise in personal income. The saving rate rose to 5.4%, the first increase this year, from 5.2% in April.

A separate report from the Labor Department showed initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 231,000 for the week ended June 25.

“Since providing services accounts for disproportionately more jobs than producing goods, the labor market is holding pretty tight,” said Bill Adams, chief economist at Comerica Bank in Dallas. “This dampens the self-reinforcing passthrough of lower spending to job cuts to lower incomes and even lower spending.”

(Reporting By Lucia Mutikani; Editing by Nick Zieminski and David Gregorio)

(This June 28 story corrects paragraph 5 to say that no injuries were reported after FDA clarifies)

(Reuters) – U.S. health regulators on Tuesday classified the recall of some backup batteries of GE Healthcare’s ventilators, which the company had initiated in mid-April, as the most serious type, saying that their use could lead to injuries or death.

The CARESCAPE R860 ventilator’s backup batteries, including replacement backup batteries, were recalled as they were running out earlier-than-expected, which could cause the device to shut down preventing the patient from receiving breathing support, the U.S. Food and Drug Administration said.

The CARESCAPE R860 ventilators use the main power via a wall plug to operate and the device’s backup battery is meant to keep it running in situations such as patient transport.

GE Healthcare, the medical device making arm of General Electric, had initiated the recall of 4,222 of its ventilator batteries distributed between April 2, 2019, and April 18, 2022. (https://bit.ly/3xYGk5C)

There have been 1,553 complaints and no injuries associated with the use of the device, the FDA said.

On Tuesday, Philips said independent tests on ventilators that the Dutch company recalled last year because of possible health risks showed the problems were almost exclusively caused by unauthorized cleaning products.

The Amsterdam-based company’s recall was launched amid concerns that a type of foam used in the devices could deteriorate and become toxic.

(Reporting by Bhanvi Satija in Bengaluru; Editing by Shailesh Kuber)

(Reuters) – Shares of Air Canada closed down 6% on Thursday after the carrier trimmed its domestic flight schedule this summer, as North American airlines wrestle with labor shortages, delays and cancellations as travel rebounds.

Canada’s largest carrier said late on Wednesday it would cut its schedule to reduce passenger flows to manageable levels, while Delta Air Lines’ chief executive on Thursday apologized for flight cancellations that have disrupted travel plans.

Persistent staffing shortages, fewer flights and booming demand following a pandemic-induced slump have cast a shadow ahead of the busy U.S. July Fourth holiday weekend.

Airports in Canada and Europe are also wrestling with missing luggage as passengers shared pictures of luggage stranded beside baggage belts on social media.

Analysts and some industry executives don’t see a meaningful improvement in conditions before fall, when travel demand tends to slow down.

“With the changes started yesterday we are reducing our schedule, on average, by 77 round trips (or 154 flights) per day in total for July and August. Prior to this, Air Canada operated on average about 1,000 flights a day,” the airline said.

The Greater Toronto Airports Authority (GTAA), which manages Pearson International Airport, praised Air Canada’s decision to scale back flights.

“In making this announcement, Air Canada is following the example of other major airlines worldwide, who have also recognized the need to adjust schedules,” the GTAA said.

Shares of American Airlines Group Inc, United Airlines Holdings Inc and Delta were down between 1% and 3%, amid a fall in broader U.S. markets on worries that the U.S. Federal Reserve’s determination to tame inflation would hamper global economic growth.

On Monday airlines canceled over 700 flights in the United States, after adverse weather conditions and staffing shortages limited operations.

Air Canada’s smaller privately held rival, WestJet Airlines, said it already planned to operate 25% fewer flights than in the summer of 2019.

(Reporting by Nathan Gomes in Bengaluru and Allison Lampert in Montreal; Editing by Vinay Dwivedi and Jonathan Oatis)

(Reuters) – JetBlue Airways Corp said on Thursday it was extending the expiration date of its cash tender offer for Spirit Airlines Inc to July 29 from June 30, after sweetening its bid for the ultra-low-cost carrier earlier this week.

In the latest offer on June 27, JetBlue included a ticking fee of 10 cents per Spirit share, raising the deal value to $34.15 per share.

Spirit Airlines on Wednesday deferred a shareholder vote on Frontier Group Holdings Inc’s merger offer for the budget carrier until next week.

Frontier also raised its bid for Spirit last week.

Both bidders see Spirit as an opportunity to expand their domestic footprints at a time when the U.S. airline industry is dogged by labor and aircraft shortages. Either of the deals would create the fifth-largest U.S. airline.

(Reporting by Manas Mishra in Bengaluru; Editing by Shounak Dasgupta)

By Foo Yun Chee

BRUSSELS -EU states and lawmakers on Thursday agreed to rules to put a brake on state-backed foreign firms acquiring EU companies with annual turnover of 500 million euros ($520 million), underlining a more protectionist approach against a possible Chinese buying spree.

The European Commission presented proposals for the new takeover rules last year, aiming to stave off what it deems as unfair competition from countries such as China.

The takeover rules will apply to companies getting more than 50 million euros in subsidies.

The EU countries and lawmakers also agreed to prevent foreign subsidised companies from taking part in public tenders above 250 million euros, confirming a Reuters story on Thursday.

Fines up to 10% of a company’s aggregated turnover may be imposed if firms do not notify the EU of their subsidies. The commission will be empowered to investigate subsidies granted up to five years before the rules come into force in mid-2023..

Acquisitions or contract bids made by subsidised foreign firms above those thresholds would trigger an investigation and measures to counter distortive effects. The political agreement came after nearly six hours of negotiations.

“We want to make sure that European companies are not undermined by foreign subsidies,” Commission Vice President Margrethe Vestager said.

The new rules will close the regulatory gap between EU companies subject to strict rules and foreign rivals with looser reins, said lawmaker Christophe Hansen who steered the topic through Parliament.

“Re-establishing fair competition on the EU Single Market is not only important for the companies, but also to shore up support for global trade and open economies,” he said in a statement.

The rules empower the EU executive to start a dialogue with non-EU countries that repeatedly grant distortive subsidies.

Lobbying group BusinessEurope cautioned against unnecessary red tape.

“We now need to make sure that the regulation is implemented in a way that effectively addresses the most distortive foreign subsidies while minimising the administrative burden on companies and public administrations,” BusinessEurope Director General Markus J. Beyrer said in a statement.

($1 = 0.9614 euros)

(Reporting by Foo Yun Chee; Editing by Edmund Blair, Richard Chang and David Gregorio)