Aurelia Butler

By Jason Hovet(Reuters) -Czech headline inflation soared to 16% in May, above expectations, to hit a nearly 30-year high, statistics office data showed on Friday.The data – above the central bank’s forecast of 14.9% – added to bets the Czech National Bank would deliver another hefty interest rate hike when the board meets under its current composition for a final time this month.Markets are now pricing more than a 100-basis-point rate hike to take the base rate well above 6% on June 22, before three of seven members’ terms end.”After this figure, I believe the bank will go for a big hike, not just a 75 basis point move already indicated. The question is how much more,” Pavel Sobisek, chief economist with UniCredit in Prague, said.The country’s president named three new members to the central bank board this week, easing market worries about a sharp dovish swing in the board.Czech central banker Ales Michl, who has opposed the 550 basis points in rate hikes delivered in the last year, will take over as governor from July and has sought rate stability.Central banks around central and eastern Europe have already sharply raised rates in the last year to combat surging inflation, as tight labour markets bolster consumer demand and allow companies to pass on rising costs.Czech inflation has been stronger than in some peers such as Hungary and Poland, where price caps or other anti-inflation measures have eased some of the burden of record commodity prices.Data on Friday, however, also showed Romania’s headline inflation reached 14.5%, providing more evidence interest rates there will rise more.In Romania, the central bank said in May it would not allow the interest rate differential to its regional peers to widen further and raised its benchmark interest rate by a bigger-than-expected 75 basis points to 3.75%, its sixth consecutive hike.”After the (National Bank of Poland) hiked its key rate by 75 bps (this week), we expect the (National Bank of Romania) to match it at the next rate setting meeting on July 6,” Erste Group Bank said. More

Wall Street’s S&P 500 and Nasdaq stock indices recorded their worst week since January as fresh evidence of red-hot inflation and expectations of an aggressive central bank response led to big losses on Thursday and Friday. The broad-based S&P 500 fell 5.1 per cent this week, while the tech-heavy Nasdaq Composite, which is stacked with interest rate-sensitive growth stocks, dropped 5.6 per cent. Friday’s losses for the S&P and Nasdaq were 2.9 per cent and 3.5 per cent, respectively. The US government reported on Friday that consumer prices had risen at an annual pace of 8.6 per cent in May, above April’s 8.3 per cent reading and exceeding economists’ forecasts as prices for food, energy and shelter all increased. The persistent evidence of inflation drove fears that the Federal Reserve will be forced to raise interest rates strongly and steadily in order to slow down economic growth. On Thursday, markets were rattled after the European Central Bank spelt out its own plans for tightening monetary policy.The ECB, which has long been one of the world’s most accommodative central banks, signalled that it may lift its main deposit rate above zero in September, which would be its first departure from negative interest rates in eight years. It also said that it would end net purchases of member states’ debt, sparking fears about financial stress for the bloc’s weaker economies.As Wall Street equities fell on Friday, the yield on the two-year Treasury note, which moves with interest rate expectations, rose above 3 per cent. The last time the two-year note surpassed this psychologically significant level was in 2008. Meanwhile, the yield on the five-year Treasury surpassed the yield on the 30-year bond, an indication the market believes that the Fed’s campaign of raising rates could tip the US economy into recession. “I don’t see inflation subsiding at all. It is going to be very, very tough for the numbers to actually dissipate in the future . . . I think by the autumn we’re going to be dealing with a much slower economy,” said Tom di Galoma, managing director at Seaport Global Holdings.“Markets are trying to get ahead of more Fed tightening — that’s what’s going on with the equity market,” he said. The Fed is widely expected to raise its main interest rate by a further 0.5 percentage points at its policy meeting next week. At the central bank’s May meeting, chair Jay Powell had set the stage for half-point rises in both June and July, but some questions remained about whether the Fed would continue at that pace at its meeting in September. The futures market now expects the Fed’s benchmark interest rate to be 3.2 per cent by year end, implying half-point increases at the Fed’s next four meetings — June, July, September and November — plus a quarter-point increase in December. With the prospect of a much tighter monetary policy, the dollar index, which measures the US currency against a basket of six rivals, rose to its highest level since mid-May as investors sought out haven assets. Earlier in the day Europe’s regional Stoxx 600 share index dropped 2.7 per cent, also hit by worries about the US outlook along with the effects of eurozone interest rate rises. “The message for the markets is that the priority now is quashing inflation, it’s not about growth,” said Paul O’Connor, head of the UK-based multi-asset team at Janus Henderson. Germany’s 10-year government bond, which serves as a benchmark for borrowing rates in the region, rose 0.09 percentage points to 1.51 per cent, its highest level since 2014. Italy’s 10-year bond yield rose by 0.16 percentage points to 3.75 per cent, more than triple its level at the start of the year.In Asia, Hong Kong’s Hang Seng index traded flat and Tokyo’s Nikkei 225 fell 1.5 per cent. Mainland China’s CSI 300 rose 1.5 per cent. More

(Reuters) – When plaintiffs lawyers in a derivative suit against Pinterest (NYSE:PINS) Inc board members asked for approval of their $5.4 million fee request last April, they told the judge they deserved twice their lodestar bills because they’d obtained significant corporate governance reforms that would make the company more diverse and inclusive, enhancing its long-term value for shareholders.In an order issued on Thursday, U.S. District Judge William Alsup of San Francisco told the firms to prove it.Alsup granted final approval to the settlement, in which Pinterest has agreed to commit $50 million to several diversity initiatives that vest the board with ultimate responsibility for both improving Pinterest’s corporate culture and assuring that the online image sharing service offers users more diverse responses to their search queries. The judge awarded Cohen Milstein Sellers & Toll, Renne Public Law Group, Bottini & Bottini, and Weiss Law $2.5 million in fees – about $200,000 less than their lodestar billings and less than half of what they requested.But that award may go up if plaintiffs’ lawyers can show Alsup over the next two years that Pinterest is living up to the settlement agreement and that the reforms shareholders obtained in the derivative deal have resulted in an actual benefit to the company.To that end, the approval order requires Cohen Milstein and the other firms to appoint lawyers “to enforce the settlement terms and police the corporation.” Alsup directed shareholders to file biannual reports documenting “how much progress has actually been made (or not made)” in attaining the goals laid out in the settlement agreement. If he likes what he sees over those two years, Alsup said, he will grant more fees to shareholder counsel.I reached out to both plaintiffs’ lawyer Julie Reiser of Cohen Milstein and Pinterest counsel Boris Feldman of Freshfields Bruckhaus Deringer but neither offered comment on the extremely unusual approval order – the first, as far as I know, in which a judge has partially conditioned fees in a derivative case on the success of corporate governance reforms. (Feldman said the same thing at a May 26 final approval hearing https://tmsnrt.rs/3xNQVBL, telling Alsup that he was not aware of any other derivative case in which the fee award was “contingent on future events.”)Alsup has been leery of the value of the Pinterest governance reforms since shareholder lawyers first asked for preliminary approval of the settlement – billed as the first derivative deal to require a corporate board to oversee audits of the company’s diversity and inclusion efforts — last November. My Reuters colleague Jody Godoy covered the preliminary approval hearing Alsup oversaw last January, in which the judge said shareholder lawyers too often tout “cosmetic improvements” and then ride “into the sunset” without assuring that they’ve achieved any real change.Alsup was particularly concerned in this case because Pinterest’s board had already adopted several policies intended to improve corporate culture before shareholders settled the derivative suit. The board brought in Wilmer Cutler Pickering Hale and Dorr to conduct an internal investigation in 2020, after high-ranking women at the company stepped forward with allegations of pervasive race and gender discrimination. Following a six-month probe, the company said it would (among other things) revamp training, set new diversity goals and partner with the NAACP to create an inclusion advisory council.Shareholder lawyers persuaded the judge to grant preliminary approval in February, arguing that their proposed settlement added considerably to the board’s own initiatives by, for instance, requiring the company to invest $50 million in diversity programs and imposing oversight responsibility on the board itself. Plaintiffs lawyers sounded similar themes in April, when they moved for a $5.4 million fee award. That amount, they said, was only 10.75% of the $50 million Pinterest had pledged to spend on corporate governance.At the final approval hearing last month, the judge made it clear that he would base fees on lodestar billings, not the $50 million budgeted for reforms.“There’s no money changing hands here,” he told Reiser of Cohen Milstein. “That’s what concerns me. And they say they will allocate, in the future $50 million, over 10 years. We have no way of knowing whether that’s going to happen.”Pinterest lawyer Feldman told Alsup that the company considered the shareholders’ fee request reasonable. Feldman also pushed back when the judge floated the idea of a 10-year monitoring program that would allow him to keep tabs on the company’s compliance.That would be “inappropriate,” Feldman said. “You shouldn’t retain 10 years of jurisdiction over a consensual settlement between private parties with no — no one died here. No towns were burnt down,” he continued. “The court, respectfully, should not be our corporate overseer for the next 10 years.”Alsup said at the conclusion of the May 26 hearing that he still had doubts about approving the settlement without a mechanism for him to evaluate the benefits of the governance reforms. “The easy thing to do would be to rubber-stamp this,” he said. “ (But) I’ve seen too many derivative cases, and I know the abuse.” He advised the two sides to add a monitoring component to the settlement.In a post-hearing brief, plaintiffs lawyers said they’d reached a deal with Pinterest to allow them to police the settlement for two years, with regular reports to the judge on the company’s progress.Alsup groused in the final approval order that the settlement gave Pinterest 10 years to invest $50 million in diversity programs, so the two-year monitoring feature would leave the company “unpoliced” for eight years. He nonetheless approved the settlement.Alsup is, by his own admission at the May 26 approval hearing, more of a stickler on shareholder settlements than most judges. It will be interesting to see if any other courts follow his lead on requiring proof that corporate reforms have accomplished something before rewarding plaintiffs lawyers for obtaining them. More

As Britain’s household energy bills continue to soar, mother-of-three Leah Shields faces an excruciating choice. She has to decide whether she can afford to go outside.“I’m disabled and I use a power chair when I go out of the house,” said the 38-year-old former hairdresser, who no longer works due to multiple health conditions, including osteoporosis. “Some days I’m having to sit and think: well, we need the electricity because we have two small children. When it comes to powering my power chair, I have to decide if it’s worth charging it, or do I save the electricity for my kids so it doesn’t go off.”Leah’s is one of 4.5mn households in the UK with a prepayment meter, meaning she has to pay in advance for any energy she consumes, as well as paying a higher unit price. If she can’t afford to top up, it literally means lights out. Plus, in her case, being confined to the house.

Leah Shields powers up her wheelchair © Ian Forsyth/FT

The cost of electricity and gas will jump again in October with the next energy price cap increase coinciding with peak winter usage, meaning it will cost the average prepayment customer more than £350 a month to heat and power their homes.Energy bosses have predicted that by this autumn, as many as four in 10 households could be in fuel poverty, spending more than 10 per cent of their disposable income on energy bills. Leah and her family, who live in Darlington, in the north east of England, use Bread and Butter Thing, a local food charity, to top up their store cupboards. But when it comes to energy, they have to choose. Leah has had no gas, which runs her heating, for three weeks, prioritising electricity instead. She had, until recently, been putting £20 on to the meter every Monday. “Now it’s at least £40 a week and we top it up on Monday and Thursday or Friday. We did try to pay quarterly and it was just a no go. The bills would come in and we’d have difficulty paying it back off.”For those on low incomes, soaring energy bills either mean extreme energy rationing or living for extended periods of time without gas or electricity.Before the energy crisis, Citizens Advice estimated 400,000 people in the UK were regularly “self disconnecting” — the industry term for living without energy — a figure it accepted would be significantly higher today. During the past year, the charity’s helpline has recorded a 684 per cent increase in calls from people who cannot afford to top up their prepayment meters. Currently it is taking 45 such calls a day.Fay Atkinson, 46, is one of those getting help from the CAB. Living in draughty social housing in the town of Clayton-le-Moors, in the north west of England, she confines herself to one room as far as she can and tries to stop up the gaps under the doors with tea towels.“I’m living hand to mouth,” she said. “£5 on the meter would last me two and a half days, now it’s lasting me a day. I live in one room and only turn the lights on if I’ve got to go to the bathroom or if I have to go downstairs — the only light I’m getting otherwise is off the TV. If it weren’t for food banks I’d be starving.”Like Leah, Fay’s health — she had three heart attacks in her late 30s — means she struggles to work. When she does, she earns minimum wage. “So even if I were working I’d still be scraping the bottom of the barrel.”She said she was “on the brink” of becoming homeless because she can’t afford to pay her rent, adding wryly: “Although I guess gas and electricity wouldn’t be a problem any more.” Of the thousands of people like Fay who approach the CAB for help each year, only 9 per cent said they would contact their supplier if they ran out of credit.“It’s a very private thing to admit you’re struggling and need help,” said Matthew Cole, head of the Fuel Bank Foundation, a charity providing emergency credit and support for people who run out of power. “We’re like a food bank, but for energy.”Matthew Cole: ‘Nearly two-thirds of the people we’re helping are in work’ © Anna Gordon/FTFuel Bank is on course to help a record 210,000 people this financial year; the limit of the charity’s current funding levels. Yet Cole estimated that for every person accessing help in the form of top-up vouchers, four more are in need of it. “Nearly two-thirds of the people we’re helping are in work,” he said, adding that pensioners make up a large part of the third not working. “In a good month they’ll get to the 25th before they run out, in a bad month it will be the 18th. What scares me is that it’s normalising being in poverty.” Operating from 500 centres across the UK, Fuel Bank referrals come via the charity’s 175 partners, which include debt charities, local councils and food banks, where anyone asking for a “cold pack” — food that does not need to be cooked — is the trigger. Cole is aware of one food bank in Birkenhead where this applied to 90 per cent of users. Fuel Bank payment vouchers © Anna Gordon/FTMany low-income households have been switched on to prepayment meters by their supplier as a debt management tool, so self-disconnection “becomes the customer’s problem, not the energy company’s problem”, said Andy Shaw, a debt advice policy officer with StepChange. Encountering families living without power is not uncommon in debt advice, but he added: “It’s having these conversations in the summer that’s really unusual.” Charities said the families they are helping are among the least likely to have received the £150 council tax rebate that the government had promised earlier this year would arrive in April, as so few of them pay via direct debit. Instead, they must wait until their local council designs a way for them to apply for the cash, which could mean waiting till September. Cole welcomed the government’s £15bn aid package announced last month but feared it would will not be enough for the poorest. “People will die of the cold this winter” was his stark assessment.“Most kids are praying for a white Christmas because they want to play in the snow. You won’t get that with a family in fuel poverty — they’ll be praying for a mild winter.” More

RIO DE JANEIRO/SAO PAULO (Reuters) -Brazil’s government on Thursday night moved forward with its bid to privatize Eletrobras, Latin America’s largest utility, as the share offering through which its stake in the company is set to be diluted was priced.Centrais Eletricas Brasileiras SA, as the utility is formally known, said in the early hours of Friday that the offering was priced at 42.00 reais per share, with a total 29.29 billion reais ($5.97 billion) being raised.The total announced by the firm included only a primary offering of new shares issued by the company and a smaller secondary offering of shares held by the state development bank.If a greenshoe option aimed at price stabilization is fully exercised, the offering increases by 15% and the total amount goes up to 33.68 billion reais ($6.87 billion).According to sources, demand for the deal was strong and allowed the additional allotment to be sold, making it the world’s second-largest share offering this year.Reuters had reported the pricing late on Thursday, citing two sources with knowledge of the matter.Privatizing the utility was seen as crucial for President Jair Bolsonaro, who has so far delivered few of the state asset sales he pledged before taking office in 2019.Bolsonaro, a self-proclaimed free-market advocate, is set to face former President Luiz Inacio Lula da Silva – an avowed opponent of privatizations – in the first round of the presidential election on Oct. 2. A source said the demand for the deal, Brazil’s largest share offering in 12 years, was above $14 billion, with investors including pension funds, state investors, long-only portfolios, hedge funds and retail investors.”The high demand for the follow-on offering is yet another positive step in the company’s privatization process,” said Rodrigo Crespi, an analyst at Guide Investimentos.The 42-real pricing represented a 1.17% discount to the closing price of shares in Eletrobras on Thursday.On Friday, preferred shares in Eletrobras were down 5.7% at 40.06 reais, making the utility one of the top losers on Brazil’s Bovespa stock index, which fell 1.3%.”There is no panic, just a speculative move,” said Sidney Lima, an analyst at Top Gain, noting that a number of investors who bought shares of Eletrobras recently were now selling positions after the pricing was set.The government’s stake in the utility is set to drop from 72% to around 45%.Unlike some other big state asset sales, no single investor, foreign or domestic, was able to take control of the company through the process, which set a voting right ceiling of 10% on individual stakes. Eletrobras is yet to confirm its new shareholder structure.($1 = 4.9043 reais) More