Business

By Tommy Wilkes

LONDON (Reuters) – Stocks fell heavily again on Monday and the dollar rocketed to a new two-decade high as worries about higher interest rates and a tightened lockdown in Shanghai deepened investors’ fears that the global economy is rapidly heading for a slowdown.

After a bruising session on Friday in which U.S. stocks sold off sharply as another rise in long-dated U.S. Treasury yields unnerved investors, markets were set for a rocky start to the week, with most indexes in the red.

Central banks in the United States, Britain and Australia all raised interest rates last week, and investors are bracing for more tightening as policymakers try to get on top of soaring inflation.

“We see recession risk over the next 12 to 18 months to be as high as about 30%,” said Dan Ivascyn, group chief investment officer at bond giant PIMCO.

“One of the key reasons for that is the Fed and other central banks appear dead set on getting inflation under control.”

There was plenty more for investors to worry about on Monday aside from tightening financial conditions.

There appeared to be no let-up in China’s zero-COVID policy, with Shanghai tightening the city-wide lockdown for 25 million residents.

Speculation that Russian President Vladimir Putin might declare war on Ukraine in order to call up reserves during his speech at “Victory Day” celebrations also hurt market sentiment. Putin has so far characterised Russia’s actions in Ukraine as a “special military operation”, not a war.

Wall Street futures headed sharply lower with the S&P 500 futures down 2% and Nasdaq futures 2.5%. The S&P 500 and Nasdaq on Friday posted their fifth straight week of declines — their longest losing streak in a decade.

The Euro STOXX weakened 2%. Germany’s DAX lost 1.6% and Britain’s FTSE 100 1.78%.

MSCI’s main emerging market stocks index fell 1.2% to its lowest level since July 2020.

The MSCI World Index dropped 0.7%, leaving it not far from the 17-month intraday low reached on Friday.

(Graphic- World equities: https://fingfx.thomsonreuters.com/gfx/mkt/znvnemgrrpl/world%20equities.JPG)

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4% and Japan’s Nikkei 2.53%. Chinese blue chips eased 0.8%, while in offshore markets the yuan fell to as low as 6.7759 per dollar, its weakest since October 2020.

The big data event of the week is the U.S. consumer price report due on Wednesday, when only a slight easing in inflation is forecast, and certainly nothing to prevent the Federal Reserve from hiking by at least 50 basis points in June.

U.S. 10-year bond yields on Monday reached a new 3-1/2 year high of 3.203%.

DOLLAR DOMINANCE

With investors juggling so many worries, one place they are looking for safety is in the dollar.

The dollar index, which measures the greenback against a basket of currencies, rose as much as 0.4% to 104.19, the latest in a string of 20-year highs.

“Risk appetite is fragile and yield spreads continue to suggest further upside on the Dollar Index,” said Sean Callow, a senior FX strategist at Westpac.

“We look for ongoing demand for DXY (the dollar index) on dips, with 104 already being probed and still potential for a run towards 107 multi-week.”

The soaring dollar is hammering other currencies. The euro briefly dropped back below $1.05 while the Japanese yen fell to its weakest since 2002.

Expectations that the Fed will move more aggressively in raising interest rates are supporting the dollar, as is a sense among investors that the U.S. economy will hold up better than a euro zone hit by the fallout from the war in Ukraine.

But rates are also rising in the euro zone. On Monday, Germany’s 10-year bond yield hit a new highest level since 2014, buoyed by hawkish policymaker Robert Holzmann saying on Saturday that the European Central Bank should raise rates three times this year to combat inflation.

The diary is full of Fed speakers this week, giving them plenty of opportunity to keep up the hawkish chorus.

Oil prices initially see-sawed after the Group of Seven nations committed to banning or phasing out imports of Russian oil over time, before falling.

Brent dropped 2.15% at $109.97 by 1115 GMT, while U.S. crude dropped 2.39% to $107.15. [O/R]

Spot gold prices lost 1.24% to $1,859 an ounce, having struggled recently to gain traction as a safe haven. [GOL/]

(Reporting by Tommy Wilkes; Additional reporting by Wayne Cole in Sydney; Editing by Bradley Perrett and Chizu Nomiyama)

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By Helen Reid and Clara Denina

JOHANNESBURG (Reuters) – The need to secure new sources of metals for the energy transition amid sanctions on top producer Russia has increased the Africa risk appetite for major miners, who have few alternatives to the resource-rich continent.

Companies and investors are considering projects they may have previously overlooked, while governments are also looking to Africa, anxious to ensure their countries can procure enough metals to feed an accelerating net-zero push.

This year’s Investing in African Mining Indaba conference, which runs May 9-12 in Cape Town, will see the highest-ranking U.S. government official in years attending, organisers say, as well as representatives from the Japan Oil, Gas and Metals Corporation (JOGMEC), in a sign of rich countries’ rising concern about securing supply.

“The reality is that the resources the world wants are typically located in difficult places,” said Steven Fox, executive chairman of New York-based political risk consultancy Veracity Worldwide.

The U.S. administration wants to position itself as a strong supporter of battery metals projects in sub-Saharan Africa, he said.

“While Africa presents its challenges, those challenges are no more difficult than the corresponding set of challenges in Canada. It may be easier to actually bring a project to fruition in Africa, than in a place like Canada or the U.S.,” he added.

The United States has voiced support for new domestic mines, but projects have stalled. Rio Tinto’s Resolution copper project, for example, was halted over Native American claims on the land, and conservation issues.

Certainly, the risks of mining in sub-Saharan Africa remain high. The acute security challenge facing mines in the gold-rich Sahel region was highlighted last month when Russia’s Nordgold abandoned its Taparko gold mine in Burkina Faso over an increasing threat from militants.

And even in the continent’s most industrialised economy, South Africa, deteriorating rail infrastructure is forcing some coal producers to resort to trucking their product to ports.

Yet with Russia’s 7% of global nickel supply, 10% of the world’s platinum, and 25-30% of the world’s palladium off the table, Africa’s rich deposits of those metals start looking a lot more attractive.

“As a mining company, there aren’t many opportunities and if you are going to grow, you’re going to have to look at riskier countries,” said George Cheveley, portfolio manager at Ninety One.

“Clearly, after Russia-Ukraine people are more sensitive to geopolitical risk and you cannot predict which projects are going to work out and which are not,” he added.

Kabanga Nickel, a project in Tanzania, secured funding from global miner BHP in January, and CEO Chris Showalter said it is seeing increased demand from potential offtakers.

Western sanctions on Russia over its invasion of Ukraine are forcing metals supply chains to reconfigure along geopolitical lines, Showalter said.

“Not everyone’s going to be able to get clean battery metals from a friendly jurisdiction, so I think some difficult decisions will have to be made, and it is going to force people to make some new decisions about where they want to source.”

(Reporting by Helen Reid in Johannesburg and Clara Denina in London; Editing by Amran Abocar and Susan Fenton)

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(Reuters) – London’s West End focused commercial landlords Capital & Counties Properties Plc and Shaftesbury Plc are in advanced talks about a 3.5 billion pound ($4.32 billion) merger, Sky News reported on Saturday.

The companies are in detailed discussions about an all-share tie-up that could be announced within weeks, the report said.

As of November, Shaftesbury owned about 600 buildings in the heart of London’s West End, which includes Carnaby Street and Chinatown.

In June 2020, Capital & Counties Properties (Capco) bought a 26.3% stake in Shaftesbury from Hong Kong tycoon Samuel Tak Lee for 436 million pounds ($537.85 million).

Shaftesbury and Capco did not immediately respond to a Reuters request for comment.

($1 = 0.8106 pounds)

(Reporting by Shivam Patel in Bengaluru; Editing by Kirsten Donovan)

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BANGKOK (Reuters) – Thailand on Saturday warned against the creation of online content that risked insulting the country’s monarchy, after a video by a social media influencer promoting e-commerce platform Lazada incensed royalists, who said it was mocking the palace.

Thai law prescribes punishments of up to 15 years in jail for each offence if found guilty of defaming, insulting or threatening King Maha Vajiralongkorn and his closest family.

The video, which has since been taken down, was promoting Lazada’s May 5 sale and featured a woman dressed in a traditional Thai costume sitting in a wheelchair and playing the role of an influencer’s mother.

Royalists complained the woman in the wheelchair was a veiled reference to a royal family member. The video did not use the language used by the royal family, nor mention any of its members.

In videos posted on Facebook, the influencer, Aniwat “Nara” Prathumthin, said the clip was a parody of a famous Thai soap opera and told critics the perceived royal insult was “all in your imagination”.

Lazada, the Southeast Asian arm of Alibaba Group Holding, in a statement apologised for the “emotional damage” the video had caused and said it should have been more careful.

Government spokesman Thanakorn Wangboonkongchana said such content risked damaging the reputation of brands.

“Let us warn marketers, influencers and content creators to be careful about presenting content or promotions that reference appearances or individuals of the institution that all Thais worship and love,” Thanakorn said in a statement.

“This is inappropriate, and will not only upset every Thai in the country, but also destroy the image and reputation of the brand. It could also be against the law.”

The incident follows an April Fool’s prank tweeted by a staff member at budget airline Thai Vietjet Air, an offshoot of Vietnam’s Vietjet Aviation JSC, about a new route to Munich that stirred anger among royalists, who said it was a hidden joke about the Thai king spending time in Germany. The airline apologised.

(Reporting by Patpicha Tanakasempipat; Editing by Martin Petty and David Holmes)

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By Rowena Edwards

LONDON (Reuters) -Oil prices climbed for a third straight session on Friday, shrugging off concerns about global economic growth as impending European Union sanctions on Russian oil raised the prospect of tighter supply.

Brent futures rose $1.75, or 1.58%, to $112.65 per barrel by 1159 GMT, while U.S. West Texas Intermediate (WTI) crude climbed $1.57, or 1.45%, to $109.83 a barrel.

Brent and WTI are on track to rise for a second week in a row, buoyed by the EU’s proposal to phase out supplies of Russian crude oil in six months and refined products by the end of 2022. It would also ban all shipping and insurance services for transporting Russian oil.

The EU is tweaking its sanctions plan in a bid to win over reluctant states, three EU sources told Reuters on Friday. [nL2N2WY0F7]

“The looming EU embargo on Russian oil has the makings of an acute supply squeeze. In any case, OPEC+ is in no mood to help out, even as rallying energy prices spur harmful levels of inflation,” PVM analyst Stephen Brennock said.

Ignoring calls from Western nations to hike output more, the Organization of the Petroleum Exporting Countries, Russia and allied producers, a group known as OPEC+, stuck with its plan to raise its June output target by 432,000 barrels per day. nL2N2WX0IO]

However, analysts expect the group’s actual production rise to be much smaller as a result of capacity constraints.

“There is zero chance of certain members filling that quota as production challenges impact Nigeria and other African members,” said Jeffrey Halley, senior market analyst Asia Pacific at OANDA.

A U.S. Senate panel has advanced a bill that could expose OPEC+ to lawsuits for collusion on boosting oil prices.

Investors are also eyeing higher demand from the United States this fall as Washington unveiled plans to buy 60 million barrels of crude for its emergency stockpiles.

Demand concerns on signs of a weakening global economy capped the price rise.

The Bank of England on Thursday warned that Britain risks a double-whammy of a recession and inflation above 10% as it raised interest rates to their highest since 2009, hiking by a quarter of a percentage point to 1%.

And strict COVID-19 curbs in China are creating headwinds in the second quarter for the world’s second-largest economy.

(Additional reporting by Florence Tan in Singapore and Laura Sanicola in New York; editing by Jason Neely)

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(Reuters) -New York Stock Exchange-owner Intercontinental Exchange posted a rise in first-quarter profit on Thursday, driven by higher trading volumes in several asset classes as interest hike expectations and the Ukraine war raised market volatility.

Demand for portfolio protection grew as sky-high inflation, the Russia-Ukraine war and expectations of interest rate hikes roiled markets.

The exchange operator said on Wednesday it planned to acquire Black Knight in a cash-and-stock deal that values the software and data analytics firm at $16 billion, including debt.

Intercontinental Exchange’s first quarter performance follows strong earnings by rivals CBOE Global Markets Inc and CME Group Inc that sailed past Wall Street estimates as elevated volatility drove up transaction volumes of options and futures.

Net income attributable to the company was up nearly 2% at $657 million, or $1.16 per share, for the three months ended March 31 from $646 million, or $1.14 per share, a year earlier.

Excluding one-time items, ICE, which runs futures and equities exchanges as well as clearing houses, data services and a mortgage origination business, earned $1.43 per share, edging past analysts’ mean estimate of $1.42 a share, according to Refinitiv IBES data.

Total revenue, excluding transaction-based expenses, rose nearly 6% to $1.9 billion, as revenue from exchanges business rose 2%, fixed income and data services rose 8.7% while mortgage tech arm fell 13.5%.

(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Rashmi Aich)

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(Reuters) – Levi Strauss & Co said on Wednesday it will reimburse travel expenses for its full- and part-time employees who need to travel to another state for health care services, including abortions.

The apparel company best known for its jeans is the latest U.S. company to offer the benefit as various states clamp down on access to abortions.

And now, the U.S. Supreme Court looks set to vote to overturn the Roe v. Wade decision that legalized abortion nationwide, according to a leaked initial draft majority opinion published by Politico on Monday.

“Given what is at stake, business leaders need to make their voices heard and act to protect the health and well-being of our employees. That means protecting reproductive rights,” the company said in a statement.

Other companies have pledged to offer similar support to their U.S. employees who need to travel out of states like Texas and Oklahoma that have restricted access to abortion services.

Amazon.com Inc, the second-largest U.S. private employer, on Monday told employees it will pay up to $4,000 in travel expenses yearly for non-life threatening medical treatments, among them elective abortions.

Crowd-sourced review platform Yelp, Inc said it will start in May to cover expenses for its employees and their dependents who need to travel to another state for abortion services.

One of the leading Hollywood talent agencies, UTA, said it would reimburse travel expenses related to receiving women’s reproductive health services that are not accessible in an employee’s state of residence.

“We’re doing this to support the right to choose that has been a bedrock of settled law for almost half a century,” Jeremy Zimmer, UTA’s chief executive, wrote in a staff memo Wednesday that was seen by Reuters.

Citigroup Inc became in March the first major U.S. bank to make a similar commitment.

(Reporting by Doyinsola Oladipo; Dawn Chmielewski in Los Angeles; Editing by Anna Driver, Alexandra Hudson, Kirsten Donovan)

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OSLO (Reuters) – Norway’s Equinor posted record pretax profits for the first quarter on Wednesday as the war in Ukraine triggered an energy supply crunch that sent the price of natural gas soaring to all-time highs.

Adjusted earnings before tax rose to $18 billion in the January-March quarter, up from $5.5 billion a year earlier, beating the $17.1 billion predicted in a poll of 25 analysts compiled by Equinor.

“Continued capital discipline and cost focus enabled us to deliver very strong financial results and cash flow, strengthening the balance sheet,” Chief Executive Anders Opedal said in a statement.

The sale of natural gas is now Equinor’s most profitable business, exceeding traditionally dominant crude oil revenues as Europe scrambles to fill depleted gas storages amid fears the war in Ukraine will lead to cut-off of Russian supplies.

(Reporting by Nerijus Adomaitis, editing by Terje Solsvik)

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By Ann Saphir

WASHINGTON (Reuters) – The Federal Reserve on Wednesday is expected to raise interest rates by half of a percentage point and announce the start of reductions to its $9 trillion balance sheet as U.S. central bankers intensify efforts to bring down high inflation.

Fed policymakers have widely telegraphed a double-barreled decision that would lift the Fed’s short-term target policy rate to a range between 0.75% and 1%, and set in motion a plan to trim its portfolio of Treasuries and mortgage-backed securities (MBS) by as much $95 billion a month.

The policy statement is due to be released at 2 p.m. EDT (1800 GMT) following the end of the Fed’s latest two-day meeting.

Markets have priced in further rate increases through this year and into next, including at least a couple more half-percentage-point hikes, as traders bet the central bank moves much more quickly than it had anticipated it would in March to get borrowing costs up to where they will start actively curbing inflation.

With no fresh Fed economic or policy rate projections due until the central bank’s June meeting, most clues on how far and how fast it is prepared to go will come from Fed Chair Jerome Powell’s news conference, which starts at 2:30 p.m. EDT.

‘SOUND HAWKISH’

The Fed began its current round of policy tightening in mid-March with a quarter-percentage-point rate hike, smaller than many policymakers had wanted given inflation had hit a 40-year high, but calibrated so as not to inject more uncertainty into global markets roiled by Russia’s Feb. 24 invasion of Ukraine.

In the weeks since that decision, inflation has gained new steam as the war pushed up oil and food prices and China’s strict lockdowns to combat the spread of COVID-19 further disrupted supply chains.

Data on the U.S. labor market also suggests increasing labor market tightness, with employment costs surging as businesses struggle to hold onto workers. A record number of job openings may also translate to higher wages that could also feed through to inflation.

All that is ratcheting up the pressure on the Fed to act more decisively to rein things in.

“Powell will continue to have a strong incentive to sound hawkish,” Piper Sandler economist Roberto Perli said this week. “The Fed’s focus these days is 100% on bringing inflation down, and hawkish expectations help that cause.”

In the run-up to this week’s meeting, Powell has said he wants to get rates “expeditiously” to what Fed policymakers regard as a “neutral” range of 2.25%-2.5%, and then higher if needed.

Most of his colleagues appear to be on board with at least the first part of that plan.

The aim would be to lift borrowing costs high enough and fast enough that households slow spending and businesses pare hiring in response, reducing inflation that is now about three times the Fed’s 2% target.

But the central bank wants to avoid raising rates so high or so fast that it short-circuits the labor market and trips up the economy. The U.S. unemployment rate has only just dropped to 3.6%, near the pre-pandemic level, and any large reversal could be a prelude to a recession.

The Fed has managed “soft landings” infrequently in the past, analysts say, and at this point has allowed inflation to rise so much faster than interest rates that it may have already missed its chance to do so.

A fast trip to neutral https://graphics.reuters.com/USA-ECONOMY/POWELL/zdvxogolapx/chart.png

Fed policy trails inflation by historic margin https://graphics.reuters.com/USA-FED/gdpzynrmnvw/chart.png

And while it is expected to raise rates rather quickly now to compensate, the inflation path will also depend on a number of factors beyond the Fed’s control, including the evolution of the pandemic, the war in Ukraine, and ongoing supply and labor shortages connected to both.

The Fed’s plan to reduce its balance sheet will also be a focus on Wednesday. While the broad outlines were disclosed about three weeks ago in minutes of the Fed’s March meeting, investors expect to learn details of the speed and extent of the plan, including possible MBS sales at some point in the future.

(Reporting by Ann Saphir; Editing by Paul Simao)

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By Gwladys Fouche

OSLO (Reuters) – Norway’s $1.2 trillion sovereign wealth fund is prepared for a rocky ride as it confronts the biggest geopolitical changes in three decades, its chief executive said on Tuesday.

“We probably face the greatest changes for 30 years,” Nicolai Tangen told a Norwegian parliamentary hearing, adding the world’s largest sovereign wealth fund expects “growing frictions between superpowers and a reversal of globalisation”.

Tangen said that the Norwegian fund, which invests all of its assets in foreign stocks, bonds, property and renewable energy projects, has “nowhere to hide” and must manage the risk that comes with exposure to global markets.

“We have a rocky ride ahead,” he said, adding that inflation, already on the rise before the Ukraine conflict, has continued to increase, while interest rates are still very low and share prices remain high.

Of all the risk factors, stagflation was “the worst”, Tangen said, adding it could potentially lead to a 40% fall in the fund and that it was a more likely scenario than six months ago.

“We have a combination of high price rises and lower-than-before economic growth, inflation is going up and growth is on its way down,” Tangen later told Reuters.

“It looks like we are potentially nearer a scenario of (stagflation) than we were earlier.”

Founded in 1996, the fund invests revenue from Norway’s oil and gas sector and holds stakes in 9,300 companies globally, owning 1.3% of all listed stocks.

Assets now correspond to $230,000 for every Norwegian, and the purpose of the fund is to share the proceeds of the country’s oil and gas revenues with future generations.

RUSSIA AND RENEWABLES

Norway ordered the fund to first freeze and then divest its Russian assets, worth some 27 billion crowns ($2.85 billion) and equivalent to 0.2% of its total value at the end of 2021, after Moscow began its “special military operation” in Ukraine.

However, the fund has not yet begun selling, Tangen said, adding that he did not know when this would be possible as the Moscow market was not functioning well with traded volumes not large enough for its needs.

It could not be sure who counterparties were, making it hard to avoid selling to individuals under international sanctions.

Elsewhere, the fund took its first ever direct stake in a renewable energy project, a Dutch wind farm, in April last year, but has not done so since.

Tangen said even though the fund has a mandate from parliament to invest up to 2% of its total value in renewables, it would take some time as competition was fierce and “good prospects (are) hard to find”.

($1 = 9.4587 Norwegian crowns)

(Reporting by Gwladys Fouche; Editing by Terje Solsvik, Louise Heavens and Alexander Smith)

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