By Jacob Gronholt-Pedersen, Greg Roumeliotis and Marie Mannes

COPENHAGEN/NEW YORK (Reuters) -U.S. asset manager Apollo Global Management Inc plans to apply for approval from Swedish and Danish regulators to take a majority stake in SAS AB as part of the Scandinavian airline’s rescue plan, a source familiar with the matter said.

The news of interest from the U.S. asset manager sent the embattled carrier’s shares up as much as 14% in Wednesday morning trading. At 1011 GMT, they were up 5.9%.

SAS has lost almost 60% of its value since it filed for Chapter 11 bankruptcy protection last July, seeking to slash costs and debt after wage talks with pilots collapsed.

A deal with the U.S. private equity giant, which has also invested in U.S. and Mexican airlines, would be a test of European Union rules, which prevent more than 50% of an airline being held outside the bloc of 27 members.

Given a large part of Apollo’s capital originates from Europe-based investors, the fund is hoping to get approval for a deal, according to the source, who declined to be identified because the matter is confidential.

No final decision has yet been made on a possible investment, according to two sources familiar with the matter. The first source said a deal could be done before the year-end.

Apollo and SAS declined to comment.

Apollo will mainly work with aviation regulators in Sweden and Denmark to secure approval, the first source said.

The European Commission would also be involved, but the national regulators would be responsible for giving the go-ahead for a change of ownership.

The move comes as the airline looks for large investors and seeks to raise equity as part of its Chapter 11 bankruptcy plan.

It has also secured a $700 million debtor-in-possession (DIP) loan from Apollo to fund it through process. The U.S. company could become a major shareholder in SAS by converting that loan to equity at the end of the process.

The airline has struggled to compete in Europe’s fragmented aviation sector, like other national carriers such as Italy’s ITA Airways and Portugal’s TAP, which are to be bought by larger groups to revive their balance sheets.

GOVERNMENT SUPPORT

Any deal would likely need support from Sweden and Denmark, which each own about 22% of SAS. The remainder is controlled by private shareholders.

Denmark’s finance ministry told Reuters it was looking for one or more shareholders to take a majority stake in SAS. Any bailout would require the airline to maintain Copenhagen as a key passenger hub, it said.

Sweden has said it won’t inject more cash in SAS.

The sources said SAS would maintain its Scandinavian identity, playing down speculation it could get a new hub or be transformed into a low-cost carrier under a new owner.

This wouldn’t be Apollo’s first foray into the airline industry.

In 2018, it invested in Sun Country Airlines in an effort to help turn it around, helping it go public in 2021.

The company also became the largest shareholder in Mexican airline Aeromexico in 2020 following Chapter 11 bankruptcy proceedings. Those experiences show it can approach long-term investments flexibly, the two sources said.

(Reporting by Jacob Gronholt-Pedersen in Copenhagen, Greg Roumeliotis in New York and Marie Mannes in Stockholm; Writing by Josephine Mason; Editing by Louise Heavens, Bernadette Baum and Mark Potter)

By Choonsik Yoo and Jihoon Lee

INCHEON, South Korea (Reuters) – Inflation is cooling rapidly in countries including Indonesia but policymakers should consider diverse factors driving the price changes after rapid rises last year, the country’s finance minister told Reuters on Wednesday.

Minister Sri Mulyani Indrawati also said in an interview that Southeast Asia’s largest economy was on a strong recovery path as the boost from China’s reopening and robust domestic sectors offset downside factors relating to the advanced economies.

Indonesia’s central bank kept its benchmark interest rates unchanged last month for a third straight meeting as inflation eased, joining a growing number of its global peers which had jacked up rates last year to cool surging prices.

But policymakers remain wary that price pressures could remain persistent — both Australia and Malaysia surprised markets with unexpected rate hikes this week.    

“We should look at especially what contributed to this headline inflation as compared to the core inflation because, especially for the monetary authority side, they are looking at both sides,” Indrawati said.

Indonesia’s consumer inflation eased to 4.33% on an annual basis in April from 4.97% in March, approaching the 2%-4% policy target band set for the country’s central bank.

She was speaking on the sidelines of the Asian Development Bank’s (ADB) annual meeting in South Korean city of Incheon.

On the issue of Indonesia’s much delayed plan to introduce a carbon tax, Indrawati refused to say how close a decision on the new timing is, while emphasising that more time is needed for smooth communication between diverse stakeholders.

Indonesia has delayed its plan to introduce the carbon tax from July last year, citing then adverse global economic conditions and the need for the authorities to prepare for its implementation.

“If the recovery is becoming more robust and stronger, then we will make the decision regarding the right timing to introduce this new instrument on climate change that is the carbon tax,” she said, without giving a clear time frame.

She added both the ADB and the China-backed Asia Infrastructure Investment Bank (AIIB) could play a role of complementing each other’s operations in helping the development of the region, instead of “a division of labour”.

(Reporting by Choonsik Yoo and Jihoon Lee; Editing by Kim Coghill)

By Giulio Piovaccari and Gilles Guillaume

MILAN (Reuters) -Stellantis said on Wednesday improvements in chip supply and price rises boosted its revenues in the first quarter, but was cautious on the outlook for the rest of the year as its vehicle inventories were growing.

CFO Richard Palmer, who will leave the world’s third-largest carmaker by sales at the end of June to be replaced by Natalie Knight, said the company expected mid-single digit growth for the market this year.

“It is a bit early to change any of our full-year forecasts,” he said. “Clearly the macro situation is still complex.”

Stellantis shares were down 1.8% by 1030 GMT, placing it among the worst performers of Italy’s blue-chip companies.

Total inventories at Stellantis rose to around 1.3 million units at the end of March, as logistic problems that hit Europe in particular last year were still being resolved by the owner of brands including Fiat, Peugeot, Jeep and Dodge.

“In Europe … we have some challenges transforming company’s stock into dealer stock and therefore getting orders fulfilled with customers, which is still a challenge for our market share,” Palmer said.

Banca Akros analyst Gabriele Gambarova said average selling prices for Stellantis vehicles in North America fell 0.7% in the first quarter, the first year-on-year decline in 10 years, adding this “can pose some doubt on the sustainability of margins in this important area”.

Analysts at RBC said Stellantis inventory levels were higher compared with peers in North America, the group’s largest market.

In the first quarter, Stellantis’ net revenue rose 14% to 47.2 billion euros ($52 billion) on higher shipments, lifted by an improvement in semiconductor supply, and an ability to raise prices to buyers.

Consolidated shipments were up 7% to around 1.48 million units.

Stellantis confirmed its forecast for a double-digit margin on adjusted operating profit and for positive cash generation this year.

($1 = 0.9074 euros)

(Reporting by Giulio Piovaccari and Gilles Guillaume; Editing Federico Maccioni, Alexander Smith and Barbara Lewis)

A look at the day ahead in U.S. and global markets from Mike Dolan

Markets finally worked out May might be a bit bumpy after all.

Another echo of March’s bank stock stress on Tuesday along with the alarming prospect of the U.S. government running out of cash in less than a month was enough to finally jolt markets out of a recent slumber.

And that reassessment of risk and implied volatility frame Wednesday’s pivotal Federal Reserve policy decision – potentially its last interest rate rise of a brutal year-long tightening campaign.

While there was some minor repricing of Fed probabilities in the futures market, the latest bout of bank stock nerves is unlikely to change the Fed’s course on its own.

Another quarter-point rate rise on Wednesday is still the best guess and the Fed is most likely to reiterate a wait-and-see stance on what happens after that – without committing either way on this week’s move being the final hike.

The bar is still high to justify futures market pricing of almost 75 basis points of cuts between today’s hike and the end of the year.

Another one-day wobble in regional bank stocks probably isn’t enough to square that circle – even though the regional KBW bank stock index saw its biggest daily drop on Tuesday since the height of the March banking stress as First Republic at the weekend became the latest lender to be wound down, and eventually sold to JPMorgan.

Pressure from government probably won’t go down well among Fed policymakers. A White House economist on Tuesday said Fed rate hikes were having a negative impact on the banking sector.

What may shift the dial for the Fed is the extent to which the banking troubles are squeezing lending to the wider economy. The Fed’s own quarterly loan officer survey is due next week and policymakers will likely have some idea what that indicates already.

Signs of some loosening of a very tight labor market may also encourage the Fed that its rate hiking job is done after this week. Even though the April employment report is not due until Friday, March numbers released yesterday showed the ratio of job openings to unemployed job seekers fell for the fourth consecutive month and hit the lowest level since October 2021.

Private sector job readings for April are due later today along with service sector surveys for the month.

Another slide in crude oil prices this week to their lowest in more than a month will also foster disinflation hopes. Oil prices have now dropped 6% in just three weeks and the year-on-year recoil is still running at almost 30%.

But perhaps as important on the immediate horizon for markets and the Fed is how the U.S. debt ceiling standoff gets resolved, now that the ‘X date’ when government cash runs out and a possible sovereign debt default looms has been put at June 1.

U.S. President Joe Biden on Monday summoned the four Senate and House of Representatives leaders – two fellow Democrats and two Republicans – to the White House on May 9 to help resolve the issue.

U.S. Treasury bill yields that come due around June continued to gyrate. The yield on the 2-month Treasury bill, which matures on June 27, rose 27 bps to 5.254% on Wednesday.

With the Fed in view alongside the debt ceiling crunch and bank stock retreat, longer-term Treasury bonds rallied. Two-year yields slipped back to 3.92%.

With much of Asia on holiday, European stocks and Wall St futures were higher ahead of the U.S. open.

The VIX index of implied volatility jumped back sharply from 18-month lows on Tuesday, but it remains more than a point below 30-year averages.

As the first-quarter earnings season progresses, estimates of the aggregate annual drop in S&P500 earnings continue to recede to just 1.4% compared to more than 5% a month ago – spurring some to suggest a second straight quarter of contracting earnings could now be avoided.

Elsewhere, there were few signs of March banking stress spilling over to euro zone banks. Shares in Italy’s UniCredit jumped 5% as the lender raised its financial targets for the year after posting stronger-than-expected results.

And Hindenburg Research, the short seller whose reports on companies have erased big chunks of their value, criticized Icahn Enterprises on Tuesday over the reporting of its finances – leading to a 20% drop in the shares of activist investor Carl Icahn’s firm.

Events to watch for on Wednesday:

* U.S. April ADP private sector payrolls report, April ISM service sector survey

* U.S. Federal Reserve’s Federal Open Market Committee policy decision, statement and news conference

* U.S. corp earnings: Kraft Heinz, Marathon Oil, MetLife, Qualcomm, Albemarle, Ingersoll Rand, Estee Lauder, Yum! Brands, CVS Health, Emerson Electric, Mosaic, Congnizant Technology, Atmost Energy, Realty Income, Aquinix, Allstate, ETSY, Eversource Energy etc

Graphic: Fed rates, US regional banks and market volatility – https://fingfx.thomsonreuters.com/gfx/mkt/mypmoqxzjpr/One.PNG

Graphic: U.S. debt default risks creep – https://www.reuters.com/graphics/USA-DEBT/TREASURY/akveqjeokvr/chart_eikon.jpg

Graphic: US job openings – https://www.reuters.com/graphics/USA-STOCKS/zgpobyayevd/jolts.png

Graphic: Recession talk dips on company calls – https://www.reuters.com/graphics/USA-STOCKS/RECSSION/gkvlwqxgapb/chart.png

(By Mike Dolan, editing by Christina Fincher, [email protected]. Twitter: @reutersMikeD)

By Mike Dolan

LONDON (Reuters) -The surging euro may be the European Central Bank’s best friend for a change.

Unlike much of the past 15 years, euro strength is on the ECB’s side as it meets on Thursday. And it is unlikely to restrain the central bank from tightening further.

With so much focus on the dollar’s recoil from last year’s 20-year high, with U.S. interest rates seemingly cresting, it is easy to overlook the mounting independent strength of the euro.

Beyond the euro/dollar pair itself, the ECB’s nominal trade-weighted euro exchange rate – measured against more than 40 of the bloc’s trading partners – has jumped almost 9% since last August, or in just 245 trading days.

The scale of that rise matches the trade-weighted euro’s surge as the pandemic unfolded in 2020 and in less time than the 300 days it took back then.

Perhaps as significant is the fact this broadest measure of 20-nation single currency is little more than 1% from record highs hit just before the banking crash of 2008.

And Asia’s trading powerhouses are the soft spots. Japan’s yen has plummeted to its lowest level in 15 years against the euro, South Korea’s won is at its weakest in nine years and even China’s yuan at its lowest in 18 months.

For the past decade, that sort of euro strength would have drawn howls of ECB protest against a deflationary impact via import, energy and commodity prices – aggravating the central bank’s struggle to get inflation up to its 2% target, even with negative interest rates and persistent asset purchase schemes.

Indeed, ECB President Christine Lagarde and chief economist Philip Lane littered speeches with warning shots about an excessive euro strength when the euro last snarled up to this extent in October 2020.

Lagarde’s predecessors Mario Draghi and Jean-Claude Trichet similarly weighed in with verbal intervention to cool periodic 10% surges in the trade-weighted euro over its history.

But this time it really is different.

BRUTAL NO MORE

Since the pandemic ended and after the Ukraine invasion last year, the ECB – much like most other major central banks – has struggled to get record, energy-spurred inflation rates back down from double digits and closer to its 2% target.

Euro strength has built on belated ECB interest rate hikes since July – up some 350 basis points to 3.0% so far and expected to go up at least another 25 bps this week.

And although inflation is falling, the 7% headline rate remains far above its goal. At least one more quarter-point ECB hike is expected by money markets by July after this week’s move – assuming it is not a half-point move this Thursday.

Aside from relative interest rate moves, euro strength this year has also been catalysed by the bloc dodging a long-assumed recession due to rapidly retreating natural gas prices and related trade account boost that left the ECB free to tighten.

What’s more, a preference of global investors for relatively cheap euro zone equities and a greater exposure of the bloc to China’s post-COVID reopening helped the currency. Murmurs of a reshuffling of reserve holdings away from dollars due to geopolitics and the U.S. debt ceiling standoff added something at the margins.

So should euro strength be finally embraced by ECB as way of slaying the inflation beast?

It is unlikely to stand in its way anymore at least.

According to ECB studies, the effect of the exchange rate on consumer prices is hard to disentangle from the overall monetary policy – but it is marginal. Pre-pandemic models suggest a 1% euro index move hits import prices by 0.3% over the following year – but then affect consumer prices by as little as 0.04%.

That suggests the impact of the recent euro surge on its own may be as little as half a percentage point – perhaps a bit more now, given the outsized contribution of the recent dollar-denominated energy price shock.

While that may once have alarmed a central bank battling deflation, it would be positively welcome right now – even if only a modest shaving of a 7% headline inflation rate, forecast to be just below 4% by year-end.

And so if anything, the ECB may want more.

While it needs to be wary of over-tightening – where a brutal exchange rate rise starts to hurt corporate Europe as well as weighing on prices – the ECB will likely lap up record currency strength for now.

The opinions expressed here are those of the author, a columnist for Reuters.

(Writing by Mike DolanEditing by Matthew LewisTwitter: @reutersMikeD.)

By Ali Kucukgocmen and Nevzat Devranoglu

ISTANBUL (Reuters) -Turkish annual inflation slowed to 43.68% in April, official data showed on Wednesday, easing ahead of elections that polls show President Tayyip Erdogan risks losing largely due to a cost-of-living crisis.

Unorthodox rate cuts sought by Erdogan sparked a currency crisis in late 2021, sending inflation to a 24-year peak of 85.51% last year. It fell in December and touched 50.51% by March with a favourable base effect and relatively stable lira.

The consumer price index (CPI) rose 2.39% in April from a month earlier, the Turkish Statistical Institute said. The official numbers were slightly less than predicted, with a median monthly estimate of 2.60% and an annual forecast of 44% in the latest Reuters poll.

The cost of living crisis has eaten away at household savings and also at Erdogan’s popularity ahead of the presidential and parliamentary votes on May 14, seen as the president’s biggest test in his 20-year reign.

Some polls show Erdogan trailing his main opponent Kemal Kilicdaroglu.

The base effect that helped lower the annual reading so far this year is expected to wear off in coming months and economists say inflation could rise again. The year-end median estimate was 46.5% in the Reuters poll.

Haluk Burumcekci, of Burumcekci Consulting, predicted that annual inflation could decline until June due to the base effects.

“Annual CPI could decrease to at most around 40% levels in the first half of the year and end up in the range of 50-55% for the year,” he wrote in a note.

Burumcekci also said “there is uncertainty regarding the balance point of exchange rates and interest rates for the second half of the year due to the elections.”

Some economists expect a return to orthodox monetary policy after the election no matter the outcome but Erdogan has recently said interest rates will continue to decline as long as he is in power.

Annually, the biggest increase was seen in the health sector with 66.62%, followed by restaurants and hotels with 66.41% and food and non-alcoholic beverages with 53.92%.

On a monthly basis, communication prices rose 5.93%, restaurant and hotel prices rose 4.24% and food and non-alcoholic beverage prices rose 3.95%

The domestic producer price index was up 0.81% month-on-month in April for an annual rise of 52.11%, the data showed.

(Reporting by Ali Kucukgocmen; Editing by Gareth Jones, Jonathan Spicer, Alexandra Hudson)

By Rozanna Latiff

KUALA LUMPUR (Reuters) -Malaysia’s central bank unexpectedly raised its benchmark interest rate on Wednesday, as it looks to manage persistent inflation amid strong domestic demand.

Bank Negara Malaysia (BNM) lifted its overnight policy rate by 25 basis points to 3%, confounding economists expectations for an extended pause.

Some economists now see the move marking the end of the current tightening cycle as price pressures ease along with slowing global growth that will likely hurt the export-driven economy.

BNM had kept rates unchanged at its two previous meetings this year, as it sought to assess the impact of four consecutive hikes totalling 100 basis points in 2022.

The Southeast Asian economy has bounced back strongly from a pandemic-induced slump, with growth hitting a 22-year high of 8.7% in 2022, but slowing global demand has clouded the outlook for the exporter of oil, commodities and high tech goods.

BNM said in a statement that latest developments point towards further expansion in economic activity in the first quarter of 2023, driven by strong domestic demand, household spending and better labour market conditions.

While inflation was expected to moderate, core inflation would remain at elevated levels amid firm demand conditions, it said.

“With the domestic growth prospects remaining resilient, the MPC judges that it is timely to further normalise the degree of monetary accommodation,” the central bank said, referring to its monetary policy committee.

The Malaysian ringgit was up 0.3% against the U.S. dollar, extending gains after the move.

Wednesday’s hike marks the return of borrowing costs to pre-pandemic levels and comes ahead of planned reforms to Malaysia’s subsidy programme, which could add to inflationary pressure.

The government has said it was looking to do away with broad subsidies that have squeezed government coffers, aiming to target aid towards vulnerable and low-income groups.

BNM said the balance of risk to the inflation outlook was “tilted to the upside and remains highly subject to any changes to domestic policy including on subsidies and price controls, financial market developments, as well as global commodity prices”.

On Tuesday, Australia’s central bank also stunned markets by raising its cash rate 25 bps, citing inflationary pressures.

A Reuters poll of 25 economists had largely expected Bank Negara Malaysia to hold its overnight policy rate at 2.75%, with just four forecasting a rate hike.

The central bank on Wednesday maintained its headline inflation forecast of between 2.8%-3.8% in 2023. Inflation was at 3.3% last year.

Capital Economics and Oxford Economics said BNM was unlikely to hike rates further following Wednesday’s decision, with inflation and growth expected to moderate in the coming months.

Malaysia’s economy was expected to expand 4%-5% this year, BNM has said. Consumer prices in March rose 3.4% from a year earlier, its slowest pace in nine months, data showed.

“With inflation set to fall back further and the economy likely to struggle over the coming months, we expect today’s rate hike to mark an end to the tightening cycle,” Capital Economics said in a note.

(Reporting by Rozanna Latiff; Editing by Jacqueline Wong)