Business

(Reuters) – New Zealand’s Fonterra said on Thursday it expects to pay a higher price to farmers for milk supply next year due to a jump in dairy demand and a strong U.S. dollar.

The dairy firm expects to pay between NZ$8.75 and NZ$10.25 per kilogram of milk solid (kgMS) in the 2022-2023 financial year, up from a prior forecast of NZ$8.25 to NZ$9.75 per kgMS.

(Reporting by Roushni Nair in Bengluru; Editing by Aditya Soni)

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By Steve Scherer

OTTAWA (Reuters) -The G7 is likely to discuss the fate of a Russian turbine blocked in Canada and blamed for reducing gas supplies to Germany, though the bloc may not reach a solution by the end of the meeting, Canada’s Natural Resources Minister said on Wednesday.

“If you talk to the Germans, they are very, very concerned about” a decline in gas supplies allegedly caused by the missing turbine, Jonathan Wilkinson told Reuters. “I’m sure it’ll come up at least in the corridors of the G7 … I wouldn’t hold my breath that we’re going to find a resolution before the end.”

The leaders of G7 industrialized countries, which include Canada and Germany, are meeting in Bavaria from Sunday through Tuesday.

Russia’s state-controlled Gazprom has cut the capacity along the Nord Stream 1 pipeline to just 40% of usual levels in recent days, citing the delayed return of equipment being serviced by Germany’s Siemens Energy in Canada.

Moscow said on Thursday more delays in repairs could lead to suspending all flows, putting a brake on Europe’s race to refill its gas inventories.

Canada, alongside its Western allies, has issued sweeping sanctions on Russia since it invaded Ukraine in February. Russia calls the war a “special military operation.”

“We are trying to be sensitive to the concerns that Germany and others are expressing and trying to find a resolution that will allow us to ensure that we’re respecting the intent of the sanctions, but also ensuring we’re not penalizing our allies,” Wilkinson said, speaking on his way to Question Period in parliament.

In March, the European Union laid out plans to cut its reliance on Russian gas by two-thirds this year and eventually phase it out completely. Moscow has warned that Western sanctions on Russian oil – an idea supported by the United States and already done by Canada – could prompt it to close a major gas pipeline to Europe.

European leaders such as German Chancellor Olaf Scholz have questioned whether the cut in flows is politically motivated rather than a technical issue.

Wilkinson said he did not know for sure if the turbines were the reason for the current reduction in gas supplies, but said the issue should be resolved anyway.

“The reason why these turbines are refurbished here is that they do need to be refurbished. And so at some point, it will have an impact,” he said.

(Reporting by Steve Scherer in OttawaEditing by Nick Zieminski and Matthew Lewis)

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By Caroline Valetkevitch

NEW YORK (Reuters) – Major U.S. stock indexes ended down slightly Wednesday, losing early gains tied to remarks by Federal Reserve Chair Jerome Powell that the U.S. central bank is “strongly committed” to bringing down inflation, while sharply lower oil prices weighed on energy shares.

The S&P 500 energy sector was down 4.2%.

The dollar fell alongside U.S. Treasury yields on fears the U.S. economy could slip into recession after Powell, in testimony to the U.S. Senate Banking Committee, said higher rates are painful but are the means the U.S. central bank has to slow inflation.

“Like all Fed commentary, there are positives and negatives, but the overall message is the Fed is not backing away from rate hikes,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

The Fed recently raised its benchmark overnight interest rate by three-quarters of a percentage point – its biggest hike since 1994.

The Dow Jones Industrial Average fell 47.12 points, or 0.15%, to 30,483.13, the S&P 500 lost 4.9 points, or 0.13%, to 3,759.89 and the Nasdaq Composite dropped 16.22 points, or 0.15%, to 11,053.08.

The pan-European STOXX 600 index lost 0.70% and MSCI’s gauge of stocks across the globe shed 0.49%.

Investors are continuing to assess how worried they need to be about central banks potentially pushing the world economy into recession as they attempt to curb inflation with interest rate increases.

Graphic: Inflation palpitations- https://fingfx.thomsonreuters.com/gfx/mkt/mopanrqrbva/Pasted%20image%201655895473770.png

Minutes from the Bank of Japan’s April policy meeting released Wednesday showed the central bank’s concerns over the impact the plummeting currency could have on the country’s business environment.

The Japanese yen strengthened 0.27% versus the greenback at 136.24 per dollar.

In Treasuries, benchmark 10-year notes rose in price to yield 3.156%, from 3.305% late on Tuesday.

U.S. crude fell $3.33 to settle at $106.19 a barrel while Brent dropped $2.91 to settle at $111.74.

U.S. President Joe Biden called on Congress to pass a three-month suspension of the federal gasoline tax to help combat record pump prices.

Spot gold added 0.3% to $1,838.03 an ounce.

(Reporting by Caroline Valetkevitch; Additional reporting by Marc Jones in London, Sam Byford in Tokyo, Shadia Nasralla in Bengaluru and Stephen Culp in New York; Editing by William Maclean, Will Dunham and Deepa Babington)

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MOSCOW (Reuters) – The rouble jumped on Wednesday to its strongest mark in seven years against the dollar and euro, supported by capital controls, a favourable upcoming tax period and Russia’s trade surplus.

At 0734 GMT, the rouble was 1.4% stronger against the dollar at 53.07, earlier strengthening to 52.80, its strongest mark since June 2015.

It had gained 1.6% to trade at 55.36 against the euro, its strongest point since May 2015.

The rouble, which has become the world’s best-performing currency this year, is driven by Russia’s high proceeds from commodity exports, a sharp drop in imports and a ban on households withdrawing foreign currency savings.

Top policymakers used Russia’s annual economic forum in St Petersburg last week to highlight the rouble’s recent strength. There are concerns this could weigh on the economy as it tips into recession amid harsh sanctions over what Moscow calls a “special military operation” in Ukraine.

The rouble is also buttressed by companies that need to pay taxes early next week. For export-focused firms that means converting dollar and euro revenue into roubles.

“Factors such as a strong balance of trade and the tax period are currently working in favour of the rouble,” said Otkritie Research. “That is, there are no reasons for the rouble to weaken.”

Russian stock indexes were mixed, hampered in part by oil prices, which dropped sharply to a more than one-month low.

Brent crude oil, a global benchmark for Russia’s main export, was down 4.4% at $109.6 a barrel.

Promsvyazbank also said the strong rouble was hampering growth of commodity companies, putting pressure on the overall stock market.

The dollar-denominated RTS index was up 0.8% to 1,390.4 points, earlier clipping a four-month high, but the rouble-based MOEX Russian index was 0.5% lower at 2,347.6 points.

(Reporting by Reuters; Editing by Tomasz Janowski)

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By Alexander Cornwell and Tim Hepher

DOHA (Reuters) – Two high-tech Airbus A350 jets sit idle with their windows taped and engines covered in a floodlit hangar in the Gulf, hobbled by an international legal dispute between European industrial giant Airbus and Qatar’s national carrier.

From a distance, the planes might seem like any other long-haul jetliners crowding the busy Doha hub. But a rare on-site visit by Reuters journalists showed what appeared to be evidence of damage to the surface of parts of the wings, tail and hull.

The two planes, worth around $300 million combined according to analysts, are among 23 grounded A350s at the centre of a $1 billion London court battle over whether the damage represents a potential safety risk, something Airbus strongly denies.

The planes were grounded by Qatar’s regulator after premature paint erosion exposed damage to a metallic sub-layer that provides protection to the fuselage from lightning strikes.

Other airlines continue to fly the A350 after European regulators declared the aircraft safe.

Reuters journalists were granted rare first-hand access after requesting the visit on the sidelines of an airline industry meeting in the Qatari capital, Doha, this week.

Sporadic surface flaws on the A350s viewed by Reuters included an elongated stretch of blistered and cracked or missing paint along the roof or crown of the jets.

In some areas including on the curved wingtips, the protective lightning mesh that sits between the hull and the paint appeared exposed and corroded.

In other parts it appeared to be missing, leaving areas of the composite hull exposed.

The paint on the tail of one of the A350s emblazoned with Qatar Airways’ maroon Arabian Oryx emblem was pockmarked by cracked and missing paint that exposed the layer beneath.

Reuters saw small areas of what appeared to be fraying or delaminated carbon threads on the hull and so-called ‘rivet rash’ or lost paint from fastener heads on the main wing areas.

Airbus and Qatar Airways had no immediate comment on Reuters’ findings.

EROSION

Airbus acknowledges quality flaws to the A350s, but denies they pose any safety risk because of the number of backup systems and tolerance built into the design.

Qatar Airways has argued this can’t be known until further analysis, and is refusing to take more of the planes.

Airbus has argued that some paint erosion is a feature of the carbon-composite technology used to build all modern long-haul jets – a necessary trade-off for weight savings.

It says the cracks are caused by the way paint, anti-lightning material called ECF and the composite structure interact. The tail does not all contain the ECF foil, prompting a debate over whether damage there comes from the same problem.

Qatar Airways has questioned Airbus’ explanation, telling a UK court its similar Boeing 787s do not have the same problems.

Amid hundreds of pages of conflicting technical court filings presented by both sides, Reuters has not been able to verify independently the cause of the damage.

Qatar Airways’ Chief Executive Akbar Al Baker and Airbus Chief Executive Guillaume Faury had the opportunity to mingle during the three-day industry gathering in Qatar this week.

Asked whether the relationship had improved after the event, which included the two men seated next to each other over dinner, Al Baker suggested the two sides remain far apart.

“On a personal level I am friends with everyone but when it comes to an issue with my company, then it’s a different story. If things were settled, we would not be still waiting for a trial to happen next year,” he told a news conference.

Faury said this week he was in discussion with the airline and reported “progress in the sense that we are communicating”.

One of the airline industry’s most senior officials voiced concerns after the Doha meeting that the dispute could have a toxic effect on contractual ties across the industry.

“It would be much better if we were dealing with friends that than dealing in the courts,” Willie Walsh, director general of the International Air Transport Association, told reporters.

(Reporting by Alexander Cornwell and Tim Hepher; Editing by Mark Potter and Louise Heavens)

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By Uditha Jayasinghe

COLOMBO (Reuters) – Sri Lanka will call China, India and Japan to a donor conference to drum up more foreign assistance to find a way out of its worsening economic crisis, the prime minister said on Wednesday, amid ongoing talks with the International Monetary Fund (IMF).

The island nation of 22 million people is struggling with its worst financial crisis in seven decades, unable to import essentials including food, fuel and medicines because of a severe shortage of foreign exchange.

The dearth of basic necessities and spiralling inflation has stroked public unrest, pushing Prime Minister Ranil Wickremesinghe’s government to redouble efforts to bring in assistance from the likes of the IMF and friendly countries.

“We need the support of India, Japan and China who have been historic allies. We plan to convene a donor conference with the involvement of these countries to find solutions for Sri Lanka’s crisis,” Wickremesinghe told parliament.

“We will also seek help from the U.S.,” he said.

A high-level delegation from India will arrive on Thursday for talks on additional support from New Delhi, and a team from the U.S. Treasury will visit next week, Wickremesinghe said.

India has so far provided around $3 billion worth of assistance, including a $400 million swap and credit lines totalling $1.5 billion.

China, which has traditionally jostled with New Delhi for influence over the Indian Ocean island, is considering an appeal from Sri Lanka to renegotiate the terms of a yuan-denominated swap worth $1.5 billion to fund essential imports.

IMF TALKS

Negotiations with an IMF team, which arrived in Sri Lanka’s commercial capital Colombo this week, have made progress, with a staff-level agreement with the lender likely by the end of the month, Wickremesinghe said.

“We have discussed multiple points including fiscal policy, debt restructuring and direct cash transfers,” he said.

“Parallel to this we have also started talks on a debt restructuring framework, which we hope will be completed in July.”

Sri Lanka, which suspended payment on $12 billion of foreign debt in April, is seeking around $3 billion from the IMF to put its public finances on track and access bridge financing.

Wickremesinghe said that once an agreement with the IMF was reached, his government would focus on a plan to increase Sri Lanka’s exports and stabilise the economy.

“It is no easy task to revive a country with a completely collapsed economy,” he said, calling for opposition support for his economic recovery plan.

(Reporting by Uditha Jayasinghe; Writing by Devjyot Ghoshal; Editing by Clarence Fernandez)

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Stocks are ending higher on Wall Street Tuesday, clawing back some of the ground they lost last week in their worst weekly drop since the beginning of the pandemic.

The S&P 500 rose 2.4%. It’s still 21.5% below the record high it set in January. The tech-heavy Nasdaq climbed 2.5% and the Dow Jones Industrial Average added 2.1%.

Markets will be closely watching congressional testimony this week from Federal Reserve Chair Jerome Powell for more clues about the Fed’s thinking about inflation and future interest rate hikes.

On Tuesday:

The S&P 500 rose 89.95 points, or 2.4%, to 3,764.79.

The Dow Jones Industrial Average rose 641.47 points, or 2.1%, to 30,530.25.

The Nasdaq rose 270.95 points, or 2.5%, to 11,069.30.

The Russell 2000 index of smaller companies rose 28.34 points, or 1.7%, to 1,694.03.

For the year:

The S&P 500 is down 1,001.39 points, or 21%.

The Dow is down 5,808.05 points, or 16%.

The Nasdaq is down 4,575.67 points, or 29.2%.

The Russell 2000 is down 551.28 points, or 24.6%.

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By Lewis Krauskopf, Devik Jain and Anisha Sircar

(Reuters) – Wall Street’s major indexes jumped on Tuesday as investors scooped up shares of megacap growth and energy companies after the stock market swooned last week on worries over a global economic downturn.

All 11 major S&P 500 sectors gained, as stocks rebounded broadly after the benchmark index last week logged its biggest weekly percentage decline since March 2020.

Investors are trying to assess how far stocks can fall as they weigh risks to the economy with the Federal Reserve taking aggressive measures to try to tamp down surging inflation. The S&P 500 earlier this month fell over 20% from its January all-time high, confirming the common definition of a bear market.

“Do I think we have hit bottom? No. I think we are going to see more volatility, I think the bottoming process will likely take some time,” said Kristina Hooper, chief global market strategist at Invesco. “But I do think it is a good sign to see investor interest.”

According to preliminary data, the S&P 500 gained 90.05 points, or 2.45%, to end at 3,764.89 points, while the Nasdaq Composite gained 269.78 points, or 2.50%, to 11,068.13. The Dow Jones Industrial Average rose 654.10 points, or 2.19%, to 30,542.88.

The energy sector, the top-gaining S&P 500 sector this year, surged after tumbling last week.

Megacap stocks Apple Inc, Tesla Inc and Microsoft Corp all rose solidly to give big individual boosts to the S&P 500.

The Fed last week approved its largest interest rate increase in more than a quarter of a century to stem a surge in inflation.

Investors are pivoting to Fed Chair Jerome Powell’s testimony to the U.S. Senate Banking Committee on Wednesday for clues on future interest rate hikes and his latest views on the economy.

Investors are “trying to read the tea leaves to see how aggressive the Fed is going to get,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “That’s a hard question to answer right now because they are going to see what happens to the inflation story.”

Meanwhile, Goldman Sachs now expects a 30% chance of the U.S. economy tipping into recession over the next year, up from its previous forecast of 15%.

Graphic: VIX longterm – https://fingfx.thomsonreuters.com/gfx/mkt/zgpomdnwmpd/Pasted%20image%201655826597289.png

In company news, Kellogg Co shares rose after the breakfast cereal maker said it was splitting into three companies.

Spirit Airlines shares jumped after JetBlue Airways said on Monday it sweetened its bid to convince the ultra-low cost carrier to accept its offer over rival Frontier Airlines’ proposal.

(Reporting by Lewis Krauskopf in New York, Devik Jain and Anisha Sircar in Bengaluru; Editing by Sriraj Kalluvila, Arun Koyyur and Richard Chang)

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NEW YORK (AP) — Stocks that traded heavily or had substantial price changes Tuesday:

Tesla Inc., up $60.83 to $711.11.

CEO Elon Musk reportedly confirmed that the electric vehicle maker will cut its salaried workforce by about 10%.

Kellogg Co., up $1.32 to $68.86.

The maker of Frosted Flakes and Eggo waffles is splitting into three companies focused on cereals, snacks and plant-based foods.

Acadia Pharmaceuticals Inc., down $6.50 to $13.01.

An advisory committee for the Food and Drug Administration recommended against approval of the biopharmaceutical company’s Alzheimer’s drug.

Spirit Airlines Inc., up $1.69 to $22.97.

JetBlue raised its buyout offer for the budget airline amid its bidding war with Frontier Airlines.

Lennar Corp., up $1.02 to $65.65.

The homebuilder handily beat Wall Street’s fiscal second-quarter financial forecasts.

ODP Corp., down $4.75 to $30.25.

The owner of Office Depot and OfficeMax won’t divest its consumer businesses.

Chevron Corp., up $6.21 to $154.59.

Energy stocks gained ground along with rising oil prices.

DocuSign Inc., down $1 to $59.55.

The provider of electronic signature technology said CEO Dan Springer resigned.

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By Selena Li

HONG KONG (Reuters) – Stocks rose and the safe-haven dollar edged down on Tuesday as investors paused for breath after a steep selloff, but concerns remain about aggressive central bank interest rate hikes and risks of a global recession.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.3%, edging up from a more than five-week low hit and set for its best day in around two weeks. Japan’s benchmark Nikkei average gained 2.22%.

Gains were broadbased, but Chinese tech names were among the leaders with Hong Kong-listed firms up 1.9%.

European shares were also set to extend the previous day’s gains with EUROSTOXX 50 futures up 0.6% and FTSE futures gaining 0.5%.

U.S. markets, which were closed on Monday for a holiday, looked set for a bigger pop at the open with S&P 500 e-mini share futures 1.63% higher and Nasdaq e-mini share futures advancing 1.76%.

Nonetheless, some investors see the current bounce as short-lived.

“I think the green that we’re seeing this morning is not necessarily a function that people are moving back in towards risk assets,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

“It’s just the normal behavior on the very large selloff to get some reprieve and breathing space come through because fundamentally, nothing has changed on the macro front last week.”

Central banks around the world are looking to raise interest rates aggressively to curb rising inflation, a sentiment underscored on Tuesday by Reserve Bank of Australia (RBA) Governor Philip Lowe, who pointed in a speech to further rate hikes.

“As we chart our way back to 2 to 3% inflation, Australians should be prepared for more interest rate increases,” Lowe warned. “The level of interest rates is still very low for an economy with low unemployment and that is experiencing high inflation.”

Australia’s S&P/ASX 200 index climbed 1.45% and the Aussie dollar was little changed.

Continuing the central bank theme, two Federal Reserve policy makers are due to speak later in the day, as are two speakers from the Bank of England, with traders watching their remarks closely for clues about the interest rate trajectory.

In currency markets, the dollar index, which tracks the greenback against a basket of its peers, edged down a little in line with the improved risk sentiment to 104.37, as the dollar lost a modicum of ground on the euro

“However, the risk rally should prove to be short-lived as major central banks maintained their hawkish tone,” said Ken Cheung, chief Asian FX strategist at Mizuho in a note.

The Japanese yen remained under pressure at 135.1 yen per dollar, not far off a 24-year low of 135.58 yen hit early last week. [FRX/]

In bond markets, the yield on U.S. benchmark 10-year treasury notes was 3.2825%, up from last Friday’s close of 3.2313.

Last week’s peak of 3.495% was the 10-year yield’s highest since 2011 and came the same day the Fed raised interest rates by a massive 75 basis points.

Oil prices swung higher with traders focusing on tight supplies over slowing global economic growth. U.S. crude rose 1.79% to $111.52 per barrel and Brent was at $115.47, up 1.17% on the day.

The United States is in talks with Canada and other allies globally to further restrict Moscow’s energy revenue by imposing a price cap on Russian oil without causing spillover effects to low-income countries, Treasury Secretary Janet Yellen said on Monday.

Spot gold traded nearly flat at $1,838.41 an ounce.

Bitcoin was at $20,629 having failed to break strongly above or below the psychologically significant $20,000 level in recent days.

(Reporting by Selena Li; Editing by Richard Pullin and Sam Holmes)

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