Aurelia Butler

NEW YORK (Reuters) – Bond traders expect the gyrations convulsing U.S. Treasuries to continue in the second half of 2022 as investors challenge the Federal Reserve’s projections for how far it will tighten monetary policy to quell the worst inflation in decades.At issue is the expected high-water mark for the Fed’s rate hiking cycle. That number has fluctuated over the last several weeks, ramping up Treasury market volatility to its highest level in more than two years as investors shift back and forth between bets on surging inflation and an economic downturn caused by the Fed’s aggressive monetary policy. The latest twist: While the Fed’s projections show rates peaking in late 2023, investors are increasingly betting that policymakers will stop tightening early next year before easing monetary policy in the face of a looming economic slowdown.That has helped send Treasury yields, which move inversely to prices, lower over the last week, lending support to a rally in U.S. stocks that saw the S&P 500 rise 4.5% from its lows. Benchmark 10-year Treasury yields reached a high of about 3.5% earlier this month and now stand at around 3.1%.With markets still parsing how much the Fed’s 150 basis points of already-delivered rate hikes have impacted consumer prices, investors see few signs that the swings in Treasuries will subside anytime soon, adding more risk to a year that has already seen U.S. government bonds notch the worst start in their history. The ICE (NYSE:ICE) BofAML MOVE Index, which measures expectations of bond market volatility, recently hit its highest levels since March 2020.“Volatility and inflation are linked tightly together right now,” said Pramod Atluri, Fixed Income Portfolio Manager at Capital Group.”No one really knows how far demand has to fall in order to bring inflation back down to comfortable levels. This makes predicting the Fed’s response really tricky,” he said.SHIFTING EXPECTATIONSThe Fed, criticized for moving too slow to address burgeoning inflation, has hurried to ramp up its monetary policy response, delivering a jumbo, 75-basis point rate increase earlier in June and ramping up expectations of more big moves to come. Fed Chairman Jerome Powell on Wednesday reiterated the central bank’s commitment to fighting inflation, acknowledging the risk of slowing the economy more than needed. The Fed’s so-called dot-plot, which shows policymakers’ projections for where rates are headed, shows a median interest rate of about 3.8% next year, decreasing to around 3.4% in 2024. But concerns over a looming recession have grown and investors increasingly believe the Fed will be forced to pull back from tightening monetary policy much sooner as growth starts to slow. Money markets now reflect expectations of rates topping out at nearly 3.6% by next March, compared to an expected level of about 4% in that time frame earlier this month.”Unlike the Fed, which is pricing in the peak at the end of 2023, the market is pricing in a peak in and around the end of 2022 or early 2023,” said Eric Theoret, global macro strategist at Manulife Investment Management.“So the market is pricing in a turn in the Fed much sooner than the Fed has priced (it) in.”How soon that high-water mark could come will likely depend on economic data, which has lately shown a mixed picture. While the latest consumer price reading showed inflation accelerated last months to its highest level in more than 40 years, some expectations of future economic growth have wobbled.Meanwhile, the spread between three-month Treasury bills and 10-year notes, on Wednesday was at its narrowest this year, a signal some investors believe indicates worries over future economic weakness.Some investors see a parallel with 2021, when growing inflation began worrying markets even as the Fed insisted rising prices were a transitory phenomenon.”U.S. government bonds are well ahead of the Fed in internalizing the growing risk of a recession,” wrote Mohamed El Erian, chief economic adviser at Allianz (ETR:ALVG) and chair of Gramercy Fund Management in a tweet https://mobile.twitter.com/elerianm/status/1540284900301049858 last week. One risk to investors’ outlook is that factors outside of the Fed’s control, such as persistently high oil prices, keep inflation elevated and force policymakers to continue hiking rates even as growth totters, potentially leading to more losses in stocks and bonds.”I think that inflation is going to be a lot stickier than people fear,” said Julian Brigden, co-founder and president of Macro Intelligence 2 Partners, a global macroeconomic research firm. More

JERUSALEM (Reuters) -Unilever on Wednesday sold its Ben & Jerry’s ice cream business in Israel to its local licensee for an undisclosed sum, aiming to smooth over a potentially damaging diplomatic row over the company’s political stance.The deal comes after the U.S. ice cream brand announced last year it would stop marketing products in the Israeli-occupied Palestinian territories, saying that selling there was “inconsistent” with its values. Under the new arrangement Ben & Jerry’s ice cream will be available to all consumers in Israel and the occupied West Bank. The episode highlighted the challenges facing consumer brands taking a stand on Israel’s military occupation of the Palestinians, such as San Francisco-based Airbnb, which in 2019 reversed its decision to delist Israeli settlements.The international boycott, divestment and sanctions (BDS) movement seeks to pressure Israel to abide by international law in its treatment of the Palestinians. Israel says such boycotts are discriminatory and anti-Semitic.On Wednesday, Israel’s foreign ministry called the Ben & Jerry’s deal “a huge victory.””We will fight delegitimization and the BDS campaign in every arena, whether in the public square, in the economic sphere or in the moral realm,” Israel’s Foreign Minister Yair Lapid said in a statement.Last year, Israel condemned the sales boycott as “morally wrong” and said Unilever (NYSE:UL) would face “severe consequences.” The consumer goods giant defended Ben & Jerry’s autonomy, but said it was “fully committed” to Israel and would find a solution by the end of this year.[L1N2UL25W]Unilever had said previously it did not support the BDS movement, and reiterated that stance in a statement on Wednesday.The new owner is the brand’s long-time Israeli ice cream licensee Avi Zinger, owner of American Quality Products. Zinger had sued Ben & Jerry’s after its decision in the West Bank, saying the company illegally severed their 34-year relationship.”The new arrangement means Ben & Jerry’s will be sold under its Hebrew and Arabic names throughout Israel and the West Bank under the full ownership of its current licensee,” Unilever said.A representative for the Vermont-based Ben & Jerry’s said the company does not agree with Unilever’s announcement and will no longer profit from Ben & Jerry’s in Israel.”We continue to believe it is inconsistent with Ben & Jerry’s values for our ice cream to be sold in the Occupied Palestinian Territory,” the representative told Reuters.REACTIONSPension officials in at least six U.S. states had restricted or sold Unilever stock or bonds to protest the Ben & Jerry’s decision, among them New York State Comptroller Thomas DiNapoli, Texas State Comptroller Glenn Hegar, and Arizona Treasurer Kimberly Yee. [L1N2RP1ZE] Representatives for all three told Reuters on Wednesday they would review Unilever’s move. Billionaire activist investor Nelson Peltz, who is joining the board of Unilever next month, was involved in the discussions to bring about the resolution, said Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center, a human rights organization that supported the deal. Peltz is the chairman of the center’s board of governors.Peltz met with Unilever CEO Alan Jope in September before Trian Partners, the investment fund Peltz runs, bought any shares, to discuss the situation, a person familiar with the matter said. Trian Partners commended the new arrangement in a statement, saying that “respect and tolerance have prevailed.” Ben & Jerry’s and its independent board maintained the right to decide on its social mission when it was bought by Unilever in 2000. But Unilever said it “reserved primary responsibility for financial and operational decisions and therefore has the right to enter this arrangement.”Israel captured the West Bank, part of the territory Palestinians want for an independent state, in a 1967 Middle East war. Most countries consider Israeli settlements on Palestinian land to be illegal. Israel disputes this.”The return of Ben and Jerry’s to Israeli settlements, which were built on Palestinian land, exposes it to international legal accountability and its name will be on the United Nations blacklist of companies operating in settlements,” The Palestine Liberation Organization’s Wasel Abu Yussef told Reuters.Omar Shakir, Israel and Palestine Director at Human Rights Watch, said the deal sought to undermine the “principled decision” to stop selling the ice cream in Israeli settlements.”What comes next may look and taste similar, but, without Ben & Jerry’s recognized social justice values, it’s just a pint of ice cream,” he said in a statement.Ben & Jerry’s Jewish founders, Ben Cohen and Jerry Greenfield, no longer manage the brand but are well known for their commitment to social justice. The company has recently expressed strong support for the Black Lives Matter movement, LGBTQ+ rights and electoral campaign finance reform. More

The rules, opposed by major U.S. exchange Coinbase (NASDAQ:COIN) Global Inc , would also require crypto firms to report suspicious transactions to regulators to help crack down on dirty money, the European Parliament and Council said in a statement on Wednesday.Coinbase did not immediately respond to a request for comment.Regulation of the $2.1 trillion crypto sector remains patchy across the world.Once written, the rules require approval by several bodies to take effect. The oversight would ensure that crypto assets can be traced in the same way as traditional money transfers, the statement added.”The new rules will enable law enforcement officials to be able to link certain transfers to criminal activities and identify the real person behind those transactions,” said Ernest Urtasun, a Spanish Green Party lawmaker, who helped to steer the measure through the European parliament. In a letter seen by Reuters sent to 27 EU finance ministers on April 13, crypto businesses asked policymakers to ensure their regulations did not go beyond existing rules under the global Financial Action Task Force (FATF), which sets standards for combating money laundering.On Wednesday, the European Parliament and Council said the proposed rules would also cover ‘unhosted’ crypto wallets, held by individuals and not managed by a licensed crypto exchange, for transactions exceeding 1,000 euros ($1,044.20) with service providers.($1 = 0.9577 euros) More

TOKYO (Reuters) – Japan’s central bank has stumbled into a rare public relations storm that has dragged debate about its ultra-low interest rates out of sterile boardrooms and into tabloid and social media, amid surging household ire over rising living costs.Bank of Japan Governor Haruhiko Kuroda issued an unprecedented public apology and retraction earlier this month after comments that households were more “accepting” of retail price hikes triggered a flurry of angry tweets.Once regarded for its masterful communication of complicated monetary policy to the world’s largest and shrewdest investors, Kuroda’s recent fumble shows the BOJ much less skilled at managing the wider public’s price expectations.That could force the BOJ to rethink the way it communicates policy intentions to a population active on social media and unaccustomed to rising prices after decades of deflation or subdued price growth, three people familiar with the bank’s thinking say.”The fact the governor had to take back his comment shouldn’t be taken lightly,” one of the sources told Reuters. “It’s become harder now to speak about changing public perceptions.”Those concerns come amid broader questions about the credibility of central banks globally, which have drawn public fire recently for underestimating the inflationary hit to consumers and businesses from supply chain disruptions and the Ukraine war.Public anger has been particularly strident in Japan where tabloids and television programmes criticised the 77-year-old Kuroda as someone earning a fat salary and out of touch with the pain households are facing from rising costs. “What’s heightening is not households’ tolerance of price rises, but frustration over Kuroda’s BOJ,” Japanese tabloid Shukan Post wrote in its recent edition.”He’s an elite celebrity who bought a luxury condominium with cash,” wrote a weekly magazine catering to housewives, taking aim at Kuroda’s salary which, at roughly 35 million yen ($258,608), is more than eight times the average Japanese households earned last year.The BOJ told Reuters it would not comment on media reports about the governor’s private affairs.Online, web searches made in Japanese for Kuroda’s name spiked this month to more than double the historical peak hit of April 2013, according to Google (NASDAQ:GOOGL) Trends, bringing unwanted public attention to the central banker whose term as governor ends next year.”He should look at the people shopping. No one is willingly paying higher prices. They’re doing so to survive, while sighing of discontent,” wrote one Twitter (NYSE:TWTR) user.”Needless to say, we have no choice but to buy food and daily necessities even if their prices soar. People are absolutely not accepting price hikes,” wrote another tweet.HECKLED, NOT HAILEDAfter almost a decade leading efforts to shock Japan out of deflation with a wall of money, Kuroda has finally accomplished his mission: he has stopped an economically debilitating rise in the yen and propped up inflation to his 2% target.However, instead of being praised, he has been pilloried.That’s because inflation is rising for the wrong reasons.Consumer inflation exceeded the BOJ’s target for two straight months in May, but mostly due to the soaring cost of fuel and raw material imports rather than strong demand.Unlike in Western economies, rising inflation has yet to spark strong wage growth as the economy’s delay in recovering from the pandemic discourages firms from raising pay.In fact, wages remained flat in Japan in the decade to 2020, contrary to a 13% rise in the United States, OECD data showed.”Japan is inherently a country less tolerant of price hikes, so even a small rise in inflation triggers a big public response,” said Izuru Kato, chief economist at Totan Research.”People want prices to go down, while the BOJ wants to push it up. That gap will make the BOJ’s communication with the public extremely difficult,” said Kato, a veteran BOJ watcher.’UNFIT FOR JOB’Kuroda’s remarks on June 6 were not just an off-the-cuff gaffe, but part of a speech carefully prepared by BOJ staff.Speaking before business executives and market players at a seminar, Kuroda said households’ tolerance for price rises had increased, allowing firms to charge more for goods.”This can be regarded as an important change from the perspective of achieving sustained inflation,” the governor said.BOJ officials say the speech was intended to explain the need for wages to rise more to ensure households can keep paying more. That message was lost when newspaper headlines focused on his comments about households accepting price rises, rather than his arguments for pay hikes.Kuroda was forced to retract his comment and apologise for any misunderstanding, marking an extremely rare reversal for the head of an institution proud of its independence from political meddling.Many in the BOJ, including those at the board, were caught off guard by the reaction and initially struggled to understand why it drew fire on social media, the three sources who spoke to Reuters said.”The BOJ has been saying similar things in the past. But the reaction was big this time partly because inflation was actually perking up and hurting households,” one of the sources said.The BOJ lacks a playbook on how to deal with such cases beyond apologising to politicians and clarifying its intentions at Kuroda’s public appearances, they said.At the BOJ, public relations is handled by staff who rotate positions once every few years, rather than by professionals with experience dealing with media.”I don’t think they thought about the comprehensive impact of the message on the entire audience universe, including how the media would react,” David Wagner, a media specialist with experience with Japanese organisations for two decades, said of Kuroda’s comments.”They have to make sure that their messages are really strategically considered before they release them,” he said. “Not complicated, not rocket science – it’s pretty simple.”A MESSAGING MESSThat communication challenge could become even more critical as the central bank increasingly communicates its view on future price moves and an eventual exit from ultra-loose policy.Public discontent over Kuroda also risks undermining the BOJ’s credibility and leaves it vulnerable to political attack.Opposition parties jumped on Kuroda’s remark as a perfect opportunity to attack the government’s stimulus policies.”It’s a comment insensitive to what people are going through,” Kenta Izumi, head of Japan’s leading opposition, said on Kuroda’s remark, urging the BOJ to end its zero interest-rate policy to stem yen falls that were pushing up import costs.A survey by Kyodo news agency, taken on June 11-13, showed 77.3% of respondents thought Kuroda’s comment was inappropriate, and 58.5% thought he was unfit for the job. Over 70% said they will take into account soaring prices in voting at the election.So far, Prime Minister Fumio Kishida is defending Kuroda and his ultra-loose monetary policy, saying repeatedly that there was no need to change the BOJ’s stimulus policy.But some ruling party lawmakers have not hidden their discomfort over Kuroda’s remark, which came weeks ahead of an upper house election slated for July 10.While a weak opposition means Kishida’s Liberal Democratic Party is expected to stay in power, Kuroda’s remark and public concern over rising inflation may affect the premier’s popularity. That, in turn, could affect Kishida’s choice of next BOJ governor when Kuroda’s term ends in April next year.”Frankly, it doesn’t help for Kuroda to talk about households accepting price rises,” said ruling party lawmaker Shoji Nishida. “It’s particularly so as we’re facing an election.”($1 = 135.3400 yen) More

WASHINGTON (Reuters) – The International Monetary Fund said on Wednesday its management had approved a staff-monitored program for Haiti to establish a track record of policy implementation that could lead to an IMF-supported loan program.The monitoring program, which does not include financial assistance and does not require Executive Board approval, runs through May 31, 2023, the IMF said.The IMF said in a statement that shocks to the Caribbean country, including assassination of its president in 2021, the COVID-19 pandemic, an earthquake and a surge in gang violence have weakened institutional frameworks and the government’s administrative capacity.The monitoring program is aimed at improving governance in Haiti, the poorest country in the Western Hemisphere, and strengthening its public finances and anti-corruption measures, the IMF said.It added fuel subsidies have been absorbing at least one-third of Haiti’s domestic revenues, crowding out spending on investment, health and education. The staff-monitored program (SMP) aims to rectify this and end central bank financing of fiscal deficits that have been fueling inflation. “Satisfactory performance under the SMP could lead to an IMF-supported program under a multi-year arrangement that would require approval of the IMF’s Executive Board,” the IMF said in a statement on the program. More

The world’s top central bankers have warned that the era of low interest rates and moderate inflation has come to an end following the “massive geopolitical shock” from Russia’s invasion of Ukraine and from the coronavirus pandemic. Speaking at the European Central Bank’s annual conference, Christine Lagarde, its president, Jay Powell, chair of the Federal Reserve, and Andrew Bailey, Bank of England governor, called for rapid action to curb inflation. They said failing to raise interest rates quickly enough could allow high inflation to become embedded and ultimately require more drastic action by central banks to bring price growth back to more moderate levels. “The process is highly likely to involve some pain, but the worst pain would be from failing to address this high inflation and allowing it to become persistent,” said Powell. Speaking in Sintra, Portugal, the central bank bosses said the pandemic and the Ukraine war were reversing many of the factors that had spurred more than a decade of ultra-low inflation among most developed economies. They warned that the splintering of the global economy into competing blocs risked fracturing supply chains, reducing productivity, raising costs and reducing growth.Global inflation tracker: See how your country compares on rising pricesDo you think central bankers are taking the right approach to curb inflation? Why or why not? Tell me at [email protected]. Thanks for reading FirstFT Asia. Here’s the rest of today’s news — EmilyThe latest from the war in Ukraine: China: The Biden administration placed five Chinese companies on an export blacklist for allegedly supporting Russian military and defence companies.US defences: The US will significantly increase military deployments in Europe in response to Russia’s invasion of Ukraine.Nato: The Biden administration expressed support for Turkey’s purchase of US fighter jets after Ankara dropped a veto to Finland’s and Sweden’s Nato bids.Sanctions: The UK has imposed sanctions on Vladimir Potanin, one of Russia’s richest oligarchs, along with several other individuals.Kremenchuk attack: The shopping centre attack is likely to lead to one of the worst civilian death tolls in a single strike since Russia’s invasion of Ukraine. Five more stories in the news1. Mukesh Ambani prepares to hand Reliance empire to his children Asia’s richest man Mukesh Ambani has begun executing a succession plan for his oil-to-telecoms conglomerate Reliance Industries, with his twin children Akash and Isha to head the telecoms and retail businesses. 2. Hedge fund manager Jim Chanos’s next ‘big short’ The short seller, best-known for predicting the collapse of energy group Enron two decades ago, is raising several hundred-million dollars for a fund that will take short positions in US-listed real estate investment trusts, he told the Financial Times.3. Philippines SEC orders shutdown of Rappler news website The Philippine securities watchdog has ordered the shutdown of Rappler, the media website run by Nobel laureate Maria Ressa, in a move that will mark a further blow to independent journalism in the south-east Asian country.4. Pro-China group attacks US rare earths plant in fake social posts The pro-Chinese government group Dragonbridge impersonated environmental campaigners on social media in an effort to undermine rare earths producers in the US and Canada, according to a cyber security consultancy. Mandiant said the group used Facebook and Twitter to claim a US government-funded rare earths refinery would “expose the area to irreversible environmental damage”.5. Japan, South Korea and US agree to closer co-operation on North Korea Leaders of the three nations met on the sidelines of the Nato summit, agreeing to deepen their joint “extended deterrence” against North Korea following deep concerns over Pyongyang’s missile tests. (Reuters) The day aheadFerdinand “Bongbong” Marcos Jr takes office The son and namesake of the notorious late dictator, takes office as the Philippines’ new president.Economic data Japan will publish its May industrial production data. In the UK, final Q1 GDP figures and a consumer trends report will become public. Walgreens Boots Alliance earnings The pharmacy chain will be in the spotlight when it reports results today, just days after the Walgreens Boots Alliance announced it had abandoned the sale process for the Boots chain in the UK after the upheaval in credit markets resulted in bids that were below its initial expectations.What else we’re reading Ships going dark A new Financial Times investigation tracks vessels exporting food from Crimea, in ways that sidestep international sanctions — and potentially smuggle goods out of Ukraine. The shipments have become even more contentious after Ukrainian authorities claimed Crimean ports were being used to export grain looted from parts of the country occupied by Russian forces.

© Satellite images of ports

Hong Kong elite descends on Tokyo for bargain property buys Property brokerage JP Invest will fly a group of Hong Kong investors to Tokyo in August for the shopping trip of a lifetime. The group will embark on a real estate bargain hunt fuelled by the historic weakness of the yen, the unwavering policies of the Bank of Japan and $440-per-head sushi. China’s Marxism majors prosper amid labour market woes Chinese university graduates are struggling to find work in the country’s worst labour market in years — unless they have degrees in Marxism. The one-time obscure major for students is enjoying a revival under President Xi Jinping, who has urged Chinese Communist party cadres to “remember the original mission”.Armed robbery shocks Tefaf art fair in Maastricht There were shocking scenes at the venerable Tefaf fair in Maastricht as a man with a sledgehammer smashed the glass-lined booth of the ultra-high-end jewellers Symbolic & Chase on Tuesday morning. The offender was in a group of four well-dressed men, at least one of whom was witnessed carrying a gun, who stole unspecified items from the stand.Open trade is at risk We have moved into a third epoch of the postwar global economic order, writes Martin Wolf. The first was in the context of the cold war. The second followed the fall of the Soviet Union. Now, in this era of disorder, we need to shore up the global commons — and less powerful countries must take the initiative.More on trade: None of the advanced economies really has a coherent policy combining trade with geopolitics in the Indo-Pacific, writes Alan Beattie. Premium subscribers can sign up for Alan’s weekly newsletter Trade Secrets. NFTsFrench footballer Kylian Mbappé is following fellow superstars Cristiano Ronaldo and Lionel Messi into the world of non-fungible tokens by becoming an investor in a SoftBank-backed fantasy football platform. Mbappé, 23, will also become a brand ambassador for Sorare, which operates an online game where players can create football teams based on the digital trading cards they own. More