Aurelia Butler

(Reuters) -Slovak state gas importer SPP has paid a bill for Russian natural gas in euros and has also opened a rouble account with Gazprombank, the company said on Friday, in effect accepting a payment scheme demanded by Moscow.The European Union’s executive told member states this week they can keep buying Russian gas without breaching sanctions imposed on Russia over its invasion of Ukraine.Payments for Russian gas have become an issue since Moscow demanded that foreign buyers start paying in roubles, and Russia cut supplies to Poland and Bulgaria for refusing to do so. Russia is set to cut off supply to Finland on Saturday, Finnish gas wholesaler Gasum said.”We have paid in euros our commitment toward Gazprom (MCX:GAZP),” Prokypcak said in an interview on Slovak public television RTVS, which said that the payment was made on May 17, meeting a May 20 deadline.”It is in euros also because the bill itself was issued in euros by Gazprom. Following that, the money was sent to a Gazprom account and I have confirmation that the payment has been received,” Prokypcak said.”Monetary conversion is underway that will be concluded by handing roubles to Gazprom, and following that, natural gas supplies continue,” he added.While the European Commission advised companies against opening rouble bank accounts at Gazprombank, as requested by the Kremlin, it has not explicitly said doing so would breach sanctions in its formal written guidance.”The foreign exchange conversion is outside any control of SPP, for us really the important moment of fulfilling our commitment is the euro payment,” Prokypcak said.A spokesman for SPP later clarified to Reuters that the company paid in euros but the payment was converted to its rouble account before continuing to Gazprom.”(A rouble account) is needed because Gazprom will not accept payment in euros, so from one (account) to another of ours, euros must be converted to roubles, that is the eating cake and having it; we say we paid in euros and the Russians will say we paid in roubles,” Ondrej Sebesta said.Asked if SPP was using the payment scheme demanded by Russia, he said: “Yes, same as everyone else.”Gazprom did not immediately reply to a request for a comment. Russian Deputy Prime Minister Alexander Novak said on Thursday that half of Russian gas producer Gazprom’s 54 clients have opened accounts at Gazprombank.SPP is the main Slovak gas importer, supplying customers with 36 TWh last year, accounting for around 60% of the domestic market. It takes the vast majority of its gas supply from Russia. More

LONDON (Reuters) – British retail sales jumped unexpectedly in April as shoppers loaded up on alcohol and tobacco, likely a blip in an otherwise bleak trend that has driven consumer confidence to all-time lows amid a worsening cost-of-living crunch.Retail sales volumes rose 1.4% month on month after a 1.2% drop in March, the Office for National Statistics said. Economists polled by Reuters had expected a 0.2% monthly fall.The wider picture remains disconcerting. Retail sales in the three months to April fell 0.3%, after a 0.7% drop in March. Compared with a year ago, sales volumes were 4.9% lower, marking the biggest annual drop since January 2021. Earlier on Friday, Britain’s longest-running gauge of consumer confidence, the GfK survey, fell to its lowest since records began in 1974.(Graphic: UK consumer confidence falls to lowest since records began in 1974, https://fingfx.thomsonreuters.com/gfx/polling/zdvxowrllpx/Pasted%20image%201653038809537.png) British consumers were hit last month by a double whammy of surging household energy costs and higher taxes, and data published this week showed inflation hit a 40-year high of 9.0%.The Bank of England thinks inflation will climb above 10% later this year.”So far, the conflicting signals coming from the data are consistent with our call that the UK will stagnate in Q2,” said economists from Berenberg Bank.Sterling was little changed against the dollar after the data.The ONS said food store sales rose by 2.9% in April, largely driven by strong sales of alcohol, tobacco and ‘sweet treats’.This was “possibly due to people staying in more to save money,” ONS statistician Heather Bovill said. Online clothes sales also did well as people got ready for summer holidays and weddings, she added.Leading supermarket groups including Tesco (OTC:TSCDY) and Sainsbury’s have warned of lower profits this year and Premier Foods, the maker of Mr Kipling cakes and OXO stock cubes, said it would raise prices of its products.”Overall (the data) will still leave the BoE in the same bind, behind the curve on inflation, but fretting over a potentially sharp slowdown, above all in consumer spending,” said Marc Ostwald, chief economist at brokerage ADM Investor Services. More

LONDON (Reuters) – Former Bank of England Governor Mervyn King said on Friday that central banks including the BoE are to blame for the current surge in inflation to its highest in 40 years, after doing too much quantitative easing during the pandemic.King headed Britain’s central bank from 2003 to 2013, and oversaw the start of its QE programme in March 2009 during the global financial crisis.But in more recent years he has criticised the scale of central bank asset purchases, which were funded by newly-created money.”When you get an intellectual mistake in policy, and you allow inflation to rise, if you’re then hit by bad luck – which is what happened in the 1970s and is happening now – it becomes a very unpleasant outcome,” he said in remarks to Sky News.British consumer price inflation was at its 2% target as recently as July, but hit a 40-year high of 9.0% in April, and inflation in the United States rose to its highest since 1981 at 8.5% in March.While central banks point to supply-chain difficulties and a surge in energy prices, worsened by Russia’s invasion of Ukraine in February, critics say inflation is also evidence of too much monetary and fiscal stimulus during the COVID-19 pandemic.A leading contender to head Canada’s Conservatives, Pierre Poilievre, has threatened to sack the Bank of Canada’s governor if he wins a national election in 2025.Some lawmakers from British Prime Minister Boris Johnson’s government – under growing pressure over the cost of living – have also raised doubts about the BoE’s leadership.King, who is now an independent member of Britain’s upper house of parliament, and sits on its economic affairs committee, said there had been “a failure of the economics profession”.Few economists have pointed to central bank money-printing as being a major cause of the current inflation surge.King also warned BoE interest rates might need to rise well above the 2% level which some economists see as a peak.”It takes tough action. And it’s not a pleasant period through which we’re going to have to go,” he said. More

Huw Pill, the Bank of England’s chief economist, said on Friday it was “crucial” to prevent the UK from drifting deeper into “inflationary psychology”, in an indication he supports further interest rate rises. With inflation reaching a 40-year high in April, Pill said that prices rising at more than four times the central bank’s 2 per cent target made for “obviously a very uncomfortable situation” and pledged to bring inflation down. But he added that the BoE was still grappling with the difficult question of how much inflation would fall on its own, since household finances are being hit hard by the cost of living crisis. Among the key factors determining how much interest rates would have to rise, Pill said, were whether companies felt they could raise prices without much consequence and whether people thought they could demand higher wages without a fear of losing their jobs. “The UK labour market is tight, wages are growing at stronger rates than would normally be deemed consistent with the inflation target, and business confidence is resilient, in part in anticipation of being able to re-establish profit margins. In short, inflationary momentum in the UK is currently strong,” Pill said.He added that this momentum behind rapid price rises was increased by Brexit reducing the supply of workers, a retreat of globalisation and lasting effects of Covid-19, which caused almost 500,000 people to leave the UK labour market. “Avoiding any drift towards the embedding of such ‘inflationary psychology’ into the price setting process is crucial,” Pill said.Stronger than expected retail sales figures for April may also increase pressure on the bank to raise interest rates, although details of the data indicate this may have been a one-off.Pill predicted that further interest rate rises would be needed on top of the four already delivered. This would increase rates from the current 1 per cent level and, by discouraging spending, would help bring inflation down. “It is the need for a continuation of this transition in monetary policy that led me to support the 25bp hike in Bank Rate at the May MPC meeting,” Pill said. “And, even after this hike, I still view that necessary transition as incomplete. Further work needs to be done.” Allan Monks, economist at JPMorgan, said Pill’s clear concerns about inflation suggested a majority on the MPC was now “leaning towards a more hawkish interpretation” of the bank’s recent guidance. Monks added: “The risk the MPC will need to hike every meeting this year appears greater than it having to go on hold after August”.Pill is not seen as one of the most aggressive members of the Monetary Policy Committee and voted for a quarter point interest rate increase this month, unlike three of the nine members who favoured a half point increase.

He attributed his caution to the coming “substantial squeeze in UK residents’ real incomes, which will weigh on future demand and employment”.But while Pill said he did not want rapid interest rate rises, he was clear that there would need to be more increases to ensure that high inflation did not come to be seen as normal in the UK. “It is that commitment that has led me to support a tightening of monetary policy since I joined the Committee last September, and to signal today that this tightening still has further to run,” he said.In one of the latest indications of current economic conditions, Friday’s retail figures showed sales in Great Britain rising 1.4 per cent between March and April. This compared with declines the previous two months and economists’ expectations of a 0.2 per cent drop. However, the retail data included an increase in supermarket sales of alcohol — a possible indication that the overall increase was partly due to consumers responding to rising prices by staying in rather than going out to eat and drink. More

The UK is hoping to conclude talks on joining a major Pacific trade bloc by the end of this year, as London pursues new commercial opportunities around the world post-Brexit.Anne-Marie Trevelyan, international trade secretary, told the Financial Times that the UK had already completed the first part of the accession to the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a process she likened to “sitting exams”.Trevelyan added that she was working through the rest of the negotiation. “It’s not unrealistic that we might get there by the end of the year,” she said.“They’re very enthusiastic about our application and everyone’s working really hard to try and . . . plough through the complexity that is trade language and detail to get there. So I’m hopeful that by the end of the year we should see that crystallise.”The CPTPP includes fast-growing Asian economies such as Malaysia and Vietnam along with established Pacific players such as Japan, Australia, Mexico and Canada. The UK opened talks last June and would be the first nation to accede since the bloc was launched in 2018. Trevelyan was speaking as the UK started negotiations with Mexico on an enhanced trade agreement to replace the one carried over from its EU membership days, which is more than 20 years old.“Mexico has a really strong and growing market . . . young population and with a high growth curve overall so we want to be making sure we can . . . harness those relationships and grow them.” Total bilateral trade is currently tiny at about £4.2bn and Mexico is the UK’s 44th largest trading partner. Commerce between the nations is less than 1 per cent of Mexico’s $661bn annual goods trade with the neighbouring US.London hopes a new agreement focused on services and the digital economy will grow trade with Mexico by 30 to 40 per cent in the next few years, Trevelyan added. It is the third set of trade talks launched by the UK this year, after those with India and Canada.Latin American nations complain that Britain has paid them little attention in recent years, despite the region’s wealth of natural resources and human talent. Total trade between the UK and Latin America was £18.1bn in 2021, down 4.5 per cent from a decade earlier, according to official data.Trevelyan said the UK viewed Latin America, which together with the Caribbean has a gross domestic product of $4.7tn, as “integral and important” for trade. She is pursuing talks with Brazil on extending an existing trade partnership and her team is also speaking to Colombia.Mexico was chosen as a priority along with Canada for a new agreement because both nations are CPTPP members. “We want to . . . get those extra layers of potential trade opportunities beyond the CPTPP,” Trevelyan explained. Clean energy and fintech were among the exports that the UK could offer.As foreign secretary, William Hague tried in 2010 to boost trade and investment with Latin America by opening new embassies, appointing a regional trade commissioner and boosting trade visits. A report from the Canning House think-tank concluded 10 years later that “in terms of UK exports to the region, the results have been poor”. The UK accounted for less than 1 per cent of Latin America’s trade by 2018, well behind its main European competitors. More