Business

(Reuters) – The first shipments of infant formula from Europe to address a critical shortage in the United States should begin arriving this weekend, President Joe Biden said on Friday amid criticism of his administration’s handling of the issue.

Biden said on Twitter the initial military cargo plane flights under “Operation Fly Formula” meant that “up to 1.5 million bottles of safe Nestlé infant formula will be coming to U.S. shelves as soon as possible.”

A Feb. 17 recall by top baby formula maker Abbott Laboratories during an investigation by the Food and Drug Administration has created one of the most urgent food shortages in recent history for U.S. families.

Biden this week said he was invoking the Defense Production Act to increase supplies.

“The Secretary of Defense ordered today the first flights supporting Operation Fly Formula. Due to the urgency of the situation, these flights will comprise U.S. military aircraft and will depart Ramstein Air Base in Germany this weekend,” White House Communications Director Kate Berner said on Twitter.

“The flights will transport 132 pallets of Nestlé Health Science Alfamino Infant and Alfamino Junior formula to Indianapolis, IN. These formulas have been prioritized because they serve a critical medical purpose and are in short supply in the US because of the plant closure,” Berner wrote.

Aptamil maker Danone SA has stepped up shipments of infant formula from Europe to address a shortage in the United States, according to U.S customs data and an analysis of ocean cargo data by shipping consultancy Ocean Audit for Reuters.

(Reporting by Dan Whitcomb; Editing by William Mallard)

source

KOENIGSWINTER, Germany (AP) — The Group of Seven leading economies are set to agree on more than $18 billion in aid for Ukrainian defense efforts as meetings of finance ministers close Friday, Germany’s finance minister told Bloomberg Television.

“I think it’s a very good signal that the G-7 nations are standing shoulder to shoulder with Ukraine because they are not only defending themselves, they are defending our values,” German Finance Minister Christian Lindner said in an interview with Bloomberg.

A representative from the U.S. Treasury Department declined to verify the amount allocated, and a spokesman from the German finance ministry declined to comment to The Associated Press.

U.S. Treasury Secretary Janet Yellen and other leaders spoke this week about the need for allies to put together enough additional aid to help Ukraine “get through” the Russian invasion.

“All of us pledged to do what’s necessary to fill the gap,” Yellen said Thursday as the ministers finished their first of two days of talks. “We’re going to put together the resources that they need.”

The G-7 finance ministers also have grappled with deepening inflation, food security concerns and the immediate effects of Russia’s war in Ukraine during their talks.

Lindner, the meeting’s host, told reporters ahead of the meeting that Ukraine will likely need “a number of double-digit billion euros” over the coming months.

As the finance ministers were meeting in Germany, the U.S. overwhelmingly approved its own $40 billion infusion of military and economic aid for Ukraine and its allies. The legislation was backed by every voting Democrat and most Republicans.

source

By Simon Jessop and Ross Kerber

LONDON/BOSTON (Reuters) – Elon Musk’s rejection of environmental, social and corporate governance (ESG) scores as a “scam” highlights how Wall Street’s hottest investment trend that encompasses some $35 trillion in assets means different things to different people.

The chief executive of Tesla Inc lashed out on Wednesday against S&P Global Inc after the electric car maker was dropped from its flagship ESG index while it added some companies whose activities are harmful to the environment, such as oil and gas producers.

Musk took to Twitter to express his frustration with the move “despite Tesla doing more for the environment than any company ever!” He added that ESG “has been weaponized by phoney social justice warriors.”

S&P Dow Jones Indices senior director Margaret Dorn told Reuters that Tesla had been excluded from the index because its score declined slightly just as the scores of other automakers had improved. Tesla was not excluded because S&P executives decided to kick the company out of the index over a particular issue, she added.

While Tesla’s cars contribute to lower carbon emissions, its ESG score had “fallen behind” in other aspects, such as poor working conditions at its U.S. Fremont factory, claims of racial discrimination and its handling of a U.S. government probe into multiple deaths and injuries linked to its autopilot technology.

Sustainable investing – taking into account ESG factors in portfolio selection – has exploded in recent years, reaching $35.3 trillion by the start of 2020, according to the Global Sustainable Investment Alliance.

Half a dozen investment managers interviewed by Reuters said Musk’s spat with S&P illustrates how confusion still reigns over how many investors and executives view the industry.

Some, like Musk, believe the ratings should reward companies that do the most for the planet and society. Others, including firms like S&P that produce the scores, say they are meant to show how much risk a company’s stock faces from ESG factors.

This explains why some companies that are major contributors to climate change, such as Exxon Corp, are allowed to stay in an ESG index if they can show they are taking actions to reduce that risk.

“Ultimately ESG is a way of identifying and trying to quantify risk. So it’s basically risk mitigation,” said Chi Chan, portfolio manager at Federated Hermes. “Effectively Musk is conflating ESG with sustainability.”

Mark Tinker, chief investment officer at Toscafund Hong Kong, said Musk “rightly pointed out” that societal and corporate governance considerations are being used “for political driven cancelling” and that a company’s contribution to the environment can also “mean what you want it to.”

“The whole thing is very subjective,” Tinker said.

Tesla did not respond to a request for comment on behalf of the company or Musk.

S&P published the change in its ESG index on April 22. But it was not until May 18, a day after Horn wrote a blog post that explained why Tesla was excluded from the index, that Twitter users started disseminating it, catching Musk’s attention.

Only a tiny fraction of the ESG’s industry’s assets under management – $11.7 billion as of the end of 2020 – are tied to S&P Indexes. S&P’s influential ESG index rival MSCI Inc has so far kept Tesla in its bluechip ESG index.

It was not immediately clear if the exclusion from the S&P ESG index had any impact on Tesla’s shares this week. The stock had already been sliding almost every day since early April, losing close to 40% of its value, amid concerns that China’s COVID-19-related lockdowns will disrupt Tesla’s car production and a potential economic slowdown and raging inflation will dampen demand for its vehicles.

Uncertainty over whether Musk will complete his $44 billion acquisition of Twitter Inc has also weighed on Tesla’s stock.

SCORE BREAKDOWN

S&P declined to provide a breakdown of its ESG score of Tesla, which is compiled based on scores of the company’s various operations and practices.

MSCI also declined to provide a breakdown, but a May 3 copy of its Tesla rating sent to investors and reviewed by Reuters shows how its perceived poor performance on social issues took some of the shine out of the company’s strong green credentials.

Tesla scored 9.1 out of 10 on environmental grounds, against an industry average of 6.5. This made up 30% of its total ESG score. On social issues, however, it ranked 1.4 compared with an average of 3.5, while on governance it scored 5.1 against an average of 3.2.

Andrew Poreda, senior vice president for Sage Advisory Services, an Austin-based investment firm, said as a Tesla investor he understood why the company’s ESG scores were lower than they might have been based solely on the company’s contribution in the fight against climate change.

“You can’t live in a vacuum of just environmental or just social issues, they are all intertwined,” Poreda said.

(Reporting by Simon Jessop in London and Ross Kerber in Boston; Editing by Greg Roumeliotis and Richard Pullin)

source

By Devik Jain and Noel Randewich

(Reuters) – Wall Street ended lower after a volatile session on Thursday, with Cisco Systems slumping after giving a dismal outlook, while investors fretted about inflation and rising interest rates.

Shares of Cisco slumped 13.7% after the networking gear maker lowered its 2022 revenue growth outlook, taking a hit from its Russia exit and component shortages related to COVID-19 lockdowns in China.

Apple and chipmaker Broadcom declined 2.5% and 4.3%, respectively, and weighed on the S&P 500.

“The reality is that inflation is running hot and interest rates are rising,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota. “Until you get that inflation rate to start slowing, we’re going to have increased volatility, and in our view that continues through throughout most of the summer months.”

Twitter climbed 1.2% after Bloomberg reported that company executives told staff that Elon Musk’s $44-billion deal was proceeding as expected and they would not renegotiate the price.

The S&P consumer staples index fell 2% to its lowest level since December as retail firms face the brunt of rising prices hurting the purchasing power of U.S. consumers.

Kohl’s Corp became the latest retailer to flag a hit from four-decades high inflation as the department store chain cut its full-year profit forecast.

Its shares, however, rebounded over 4% after slumping 11% in the previous session due to dismal results from Target Corp.

The S&P 500 is down about 18% from its record close on Jan. 3 as investors adjust to strong inflation, geopolitical uncertainty stemming from the war in Ukraine and tightening financial conditions with the U.S. Federal Reserve raising rates.

A close of 20% or more below its January record high would confirm the S&P 500 has been in a bear market since hitting that peak, according to a widely used definition.

GRAPHIC: S&P 500 bear markets (https://fingfx.thomsonreuters.com/gfx/mkt/egpbkwmlgvq/Pasted%20image%201652990180837.png)

Goldman Sachs strategists predicted a 35% chance of the U.S. economy entering a recession in the next two years, while the Wells Fargo Investment Institute expects a mild U.S. recession at the end of 2022 and early 2023.

The S&P 500 declined 0.58% to end the session at 3,900.79 points.

The Nasdaq declined 0.26% to 11,388.50 points, while the Dow Jones Industrial Average declined 0.75% to 31,253.13 points.

GRAPHIC: S&P 500’s busiest trades (https://fingfx.thomsonreuters.com/gfx/mkt/akvezranxpr/SPX_by_busiest_trades.png)

Thursday’s mixed performance followed a drop of over 4% in the S&P 500 on Wednesday, the benchmark’s worst one-day loss since June 2020.

The CBOE volatility index, also known as Wall Street’s fear gauge, fell to 29.5 points on Thursday, after hitting its highest level since May 12 earlier in the session.

Canada Goose Holdings Inc jumped almost 10% after it forecast upbeat annual earnings, encouraged by strong demand for its luxury parkas and jackets.

Volume on U.S. exchanges was 12.7 billion shares, compared with a 13.4 billion average over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.15-to-1 ratio; on Nasdaq, a 1.31-to-1 ratio favored advancers.

The S&P 500 posted 1 new 52-week highs and 43 new lows; the Nasdaq Composite recorded 12 new highs and 326 new lows.

(Reporting by Devik Jain and Amruta Khandekar in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Arun Koyyur and Grant McCool)

source

By Sabrina Valle

(Reuters) -Exxon Mobil Corp on Thursday said it signed a deal to sell North Texas natural gas properties to producer BKV Corp for $750 million, as part of a wider move to shed unwanted assets.

Exxon, the top U.S. oil producer, set a goal three years ago to sell by last December $15 billion in assets to pay down debt and focus on lower cost oil production. But it has achieved about half its goal as sales stalled during the pandemic.

This year’s rebound in oil and gas prices has brought renewed interest in its properties, Senior Vice President Neil Chapman told analysts in March.

North Texas assets sales include additional payments based on future gas prices, allowing the company to profit from rising fuel costs. The deal is expected to close by June 30.

“We are focused on delivering the most competitive returns to our shareholders by developing opportunities with the lowest cost of supply,” said Liam Mallon, president of Exxon Mobil Upstream Company.

Denver-based BKV is majority owned by Thai energy firm Banpu PCL and is the largest natural gas producer in the Barnett Shale, an area of north Texas where the first shale wells were successfully drilled.

Exxon is offering assets in Asia, Africa and Europe as it as focuses on Guyana, offshore Brazil and the Permian Basin of West Texas and New Mexico. It is marketing assets in Iraq, Chad, Nigeria, Canada, and in Arkansas and Ohio.

The company, which suffered a historic $22.4 billion loss in 2020, has used this year’s skyhigh oil prices to pay down debt and increase payouts to shareholders.

Exxon said it had removed the Barnett Shale assets operated by its subsidiaries XTO Energy Inc and Barnett Gathering LLC from its development plan in 2020.

Last year, it took in $2.6 billion from asset sales, up from $1 billion in 2020.

(Reporting by Ruhi Soni in Bengaluru; Editing by Maju Samuel, Bernard Orr)

source

By Luc Cohen

NEW YORK (Reuters) – Archegos Capital Management founder Bill Hwang will get a new judge for his U.S. fraud trial, after the judge assigned to the case recused himself on Thursday due to his wife’s ties to banks that could have been caught in the investment firm’s meltdown.

U.S. District Judge Andrew Carter said in a Manhattan federal court hearing that his wife is a lawyer for Bank of New York Mellon and used to work for JPMorgan Chase, and that he would have a conflict of interest if either bank were a victim of the alleged fraud.

Archegos, which had $36 billion in assets, collapsed last year when it was caught short on highly leveraged trades, leaving global banks with $10 billion in losses. Prosecutors say Hwang lied to banks to increase Archegos’ credit lines.

Hwang, who was arrested last month, pleaded not guilty to 11 counts including racketeering, market manipulation and fraud. His lawyer has said the case has “no factual or legal basis.”

Prosecutor Andrew Thomas said at Thursday’s hearing JPMorgan “does figure into the story” but did not say if the bank is considered a victim. Thomas said BNY is “not a lossholder” and does not figure in a “significant way.”

JPMorgan declined to comment. BNY did not immediately respond to a request for comment.

Carter’s decision came amid heightened attention by lawmakers and court reform advocates to judicial recusals due to conflicts. President Joe Biden last week signed into law a bill subjecting federal judges to tougher disclosure requirements for their financial holdings and stock trades.

Lawmakers introduced the legislation last October after the Wall Street Journal reported that more than 130 federal judges failed to recuse themselves from cases involving companies in which they or their family members owned stock.

Neither prosecutors nor Hwang’s defense objected to Carter’s recusal.

(Reporting by Luc Cohen in New York’ editing by Chizu Nomiyama)

source

By Francesco Canepa

KOENIGSWINTER, Germany (Reuters) – The world’s top central bankers and finance ministers gathering near Germany’s Dragon’s Rock on Thursday have their own beast to slay: stagflation.

The Group of Seven financial leaders are meeting as the war in Ukraine adds fuel to a surge in the cost of raw materials while new pandemic-related restrictions in China have slowed down global trade, raising the spectre of a sustained period of high inflation and economic stagnation.

“We will have to discuss what we can do together in our respective areas of responsibility to avoid stagflation scenarios,” German finance minister Christian Lindner told reporters as leaders arrived for the two-day meeting.

The palatial hotel in Koenignswinter where the event is hosted overlooks the Drachenfels, or Dragon’s Rock, where the hero of the medieval Nibelung legend, Siegfried, is supposed to have slain a dragon that lived in a mountain cave.

Every bit as lethal and intractable as a mythological monster, stagflation had no easy fix: stimulate the economy and prices will run away even faster, close the money taps and you will choke off economic growth.

After underestimating inflation for most of last year, most central bankers from the United States to Europe and Australia were now single-mindedly focused on curbing prices that have been rising at the fastest pace in decades.

The Federal Reserve, the world’s most influential central bank due to the dollar’s dominance on global financial markets, has pledged to raise interest rates as high as needed even if that could end up costing some people their jobs.

Even the European Central Bank, which had until recently all but ruled out rate hikes, was now moving towards the first increase in more than a decade – probably the first of several.

But finance ministers are worried that the economy would deteriorate further as sanctions against Russia make importing raw materials from oil to wheat more expensive – straining household budgets just as borrowing costs also rise.

“The economic outlook globally is challenging, and uncertain, and higher food and energy prices are having stagflationary effects, namely, depressing output and spending and raising inflation all around the world,” U.S. Treasury secretary Janet Yellen said in Bonn on Wednesday.

She has argued that the United States should remove tariffs of up to 25% on some Chinese imports that are not strategic, such as bicycles, lawn mowers and T-shirts – a move that would make them cheaper for U.S. consumers and offering much-needed relief.

Other governments such as Italy’s and Germany’s have cut the tax on fuel while France has capped the price of natural gas and electricity to soften the economic impact of soaring energy costs.

Yellen had previously avoided mentioning “stagflation” – a term associated with 1970s inflation spikes and sluggish growth – when describing the U.S. economy, which has strong momentum from the COVID-19 recovery and strong labour market.

A generation ago, it took Fed’s chair Paul Volcker a brutal series of rate hikes and a recession to break the back of inflation, ushering an era of stable prices and steadier economic growth.

Legendary hero Siegfried was also said to have gained near immortality after bathing in the dragon’s blood.

But an economic bloodbath is what today’s policymakers are still hoping to avoid.

(Additional reporting by Paul Carrel and David Lawder; Editing by Tomasz Janowski)

source

By Hannah Lang

WASHINGTON (Reuters) – The cryptocurrency industry is scrambling to respond to U.S. lawmakers’ concerns about stablecoins following the collapse of TerraUSD, which wiped billions off the cryptocurrency market.

The Blockchain Association and the Chamber of Digital Commerce, which represent some of the most influential crypto companies, say they have been fielding a flurry of questions from Capitol Hill since TerraUSD, known as “UST,” broke its peg last week and crashed 90%.

Stablecoins are cryptocurrencies that try to maintain a constant exchange rate with fiat currencies. The $163 billion space is dominated by tokens that are pegged to the U.S. dollar, like Tether and USD Coin, by holding reserves in traditional dollar assets. Some stablecoins, like UST, however, use a complex algorithmic process to create the peg.

Capitol Hill lawmakers have been quizzing lobbyists on the structure of UST, seeking to determine whether its collapse was preventable and if other stablecoins could suffer the same fate.

Lobbyists are urging lawmakers not to crack down too hard on the gamut of stablecoins.

“The one thing we’ve been cautioning to the Hill is that we don’t want to accidentally throw the baby out with the bathwater, because stablecoins we think are a really critical piece of the crypto ecosystem going forward,” said Kristin Smith, executive director of the Blockchain Association.

As the cryptocurrency market has exploded, reaching $3 trillion in November, the scrutiny of policymakers has increased.

In response, the crypto industry has beefed up its presence in Washington, spending $9 million on lobbying in 2021, according to Public Citizen. The Blockchain Association and Chamber of Digital Commerce spent $900,000 and $426,663, respectively, while crypto giants Coinbase Global Inc and Ripple Labs forked out $1.5 million and $1.1 million respectively.

REGULATORY GRAY AREA

The industry’s growing influence will be tested as it tries to contain the fallout from the UST and broader crypto market crash, which shrank from $1.98 trillion to $1.3 trillion in just six weeks due to investor fears over rising interest rates.

There are currently a handful of draft stablecoin bills floating around Congress. While analysts say the chances of Congress passing any of those this year is slim with lawmakers focused on the midterm elections, recent crypto market gyrations have caused many lawmakers to take notice.

“There are a lot of people in Congress that are interested in coming up with a regulatory framework to prevent something like this from happening again,” said Smith.

Cryptocurrencies fall into a regulatory gray area.

President Joe Biden’s administration has largely focused on rules for dollar-backed stablecoins. A November Treasury Department-led report recommended Congress regulate stablecoin issuers like insured depository institutions, but it did not cover algorithmic stablecoins.

Lobbyists have had to quickly change tack and educate lawmakers on the differences, they say.

“All of the recent legislative proposals have been fiat-backed,” said Cody Carbone, policy director at the Chamber of Digital Commerce. “We thought we did pretty well in educating because we stayed within that scope, and now we’re going to have to broaden that.”

While the group’s members do not currently operate algorithmic stablecoins, the chamber is crafting talking points to explain how they work, said Carbone.

Regulators have warned that U.S.-dollar stablecoins could be susceptible to runs if users lose confidence, a fear that appeared to partially play out last week: after UST broke its peg, Tether, the largest stablecoin, briefly broke its peg too.

“This is essentially a call to action, because not all monies are created equal, and what one believes to be stable may actually not be stable,” said Jonathan Dharmapalan, CEO of eCurrency, a digital currency technology provider.

While the Blockchain Association’s Smith agreed legislation was not imminent, the UST problem “certainly heightens that need,” she said.

(Reporting by Hannah Lang in Washington; Editing by Michelle Price and Matthew Lewis)

source

LONDON (Reuters) – Average daily foreign exchange trading volumes in April hit $1.86 trillion, 5% higher than a year earlier as volatility shot higher and investors bought and sold more in spot and forward markets, CLS said on Thursday.

CLS, a major settler of trades in FX markets, said in a statement that turnover was driven by a 14% rise in spot trading and a 27% increase in forwards activity, although swap volumes were flat on 2021 levels.

A series of recent central bank interest rate rises and concern about the economic fallout from the war in Ukraine have pushed FX volatility higher, which typically encourages more trading activity. April volumes were down 12.5% from March levels, however, CLS said.

(Reporting by Tommy Reggiori Wilkes; editing by Dhara Ranasinghe)

source

By Daina Beth Solomon

MEXICO CITY (Reuters) – U.S. labor officials on Wednesday asked Mexico to probe whether workers at a Panasonic auto parts factory were denied labor rights, marking the third U.S. labor complaint under a new trade deal that aims to improve workplace conditions in Mexico.

The request from the U.S. Trade Representative (USTR) comes after a Mexican union last month petitioned the U.S. government to probe Panasonic’s plant in the northern border city of Reynosa, alleging violations of the 2020 United States-Mexico-Canada Agreement (USMCA).

U.S. Trade Representative Katherine Tai said in a letter to Mexico’s Economy Minister Tatiana Clouthier that the agency was concerned workers were being denied rights to free association and collective bargaining at Panasonic Automotive Systems de Mexico.

Panasonic Corp of North America said in a statement it “respects and supports the rights of freedom of association and collective bargaining for our employees” and that it did not believe it denied these rights.

The unit of the Japanese industrial conglomerate said it would “continue to comply with all legal requirements … and cooperate with authorities as requested by the Mexican Government in its review.”

Tai noted that two previous labor complaints, also filed under the USMCA’s “Rapid Response Mechanism” that aims to swiftly resolve disputes, led to benefits for workers.

“When concerns arise, we will work swiftly to stand up for workers on both sides of the border,” Tai said in a statement.

Mexico’s economy and labor ministries did not immediately respond to requests for comment. The Mexican government has 10 days to agree whether to conduct a review.

The Mexican union that requested the inquiry, SNITIS, accused Panasonic of signing a union contract behind workers’ backs and of firing several dozen employees who protested.

(Reporting by Daina Beth Solomon; additional reporting by David Shepardson in Washington; Editing by Chris Reese and David Gregorio)

source