Aurelia Butler

Insured losses from natural catastrophes have increased 250% in the last 30 years, with perils such as wildfires and storms, seen as particularly impacted by climate change, causing an even faster rise in insured losses, the report said.Insurers’ main catastrophe risk in the past was typically from hurricanes in U.S. states such as Florida and Texas, Seth Rachlin, global insurance industry leader at Capgemini, told Reuters.”We’ve seen with the flooding in Europe and wildfires in Australia, wildfires in California, it’s becoming a broader geographic issue, affecting a broader percentage of the earth.” Germany and other parts of Europe were hit by flooding in July 2021, while heavy rains deluged Australia’s east coast earlier this year.European insurers are leading the way in embedding environmental, social and governance issues in insurance underwriting and investment and in focusing on risk prevention, Rachlin said.More than 30% of insurers globally restrict investment in unsustainable companies, and more than 20% restrict insurance cover to unsustainable companies, the report said.Seventy-four percent of the insurers interviewed felt that climate change made it hard to insure some areas.Regions such as California have seen insurers pull out due the number and severity of wildfires.Seventy-one percent of insurance customers said the offer of discounts would make them highly likely to cut the exposure of their property or other assets to natural catastrophe risk.More than 4,900 insurance customers were polled in 16 countries in Jan and Feb 2022 for the report. The report was also based on interviews with more than 270 senior insurance executives in 27 markets. More

Walmart shares suffered the biggest one-day drop since the eve of the Black Monday stock market crash after the company, cut its earnings guidance following a quarter in which it was wrongfooted by the rapid pace of inflation in the US.The share price reaction, a particularly severe one by the standards of typically less volatile consumer staple stocks, came after the company revealed profits in its latest quarter had taken an “unexpected” hit owing to higher wages, a jump in fuel costs and softness in general merchandise sales at its US businesses.As the world’s largest retailer, and long-regarded as a bellwether of the American consumer, Walmart’s commentary comes at a time when investors are scrambling to measure the impact of inflation, rising interest rates and supply chain snarls on the US economy.“US inflation being this high and moving so quickly, both in food and general merchandise, is unusual,” said chief executive Doug McMillon. “We knew that we were up against stimulus dollars from last year, but the rate of inflation in food pulled more dollars away from [general merchandise] than we expected as customers needed to pay for the inflation in food.”The company expects the higher staffing costs, affected by the winter wave of the coronavirus pandemic, to be isolated to the first quarter. McMillon said a “timing issue” with fuel costs, which accelerated in the quarter “faster than we were able to pass them through” and were $160mn higher in the US than the company had forecast, should be resolved by the end of the first half.Issues around US inflation — at its highest level in 40 years and which the Biden administration has dubbed its “top economic priority” — are more likely to persist.Walmart executives acknowledged more customers had switched towards cheaper private-label items, particularly in groceries, and away from branded goods. McMillon said inflation in food was running at a double-digit pace and he was “concerned that inflation may continue to increase”.Helped by higher prices for some of its items and consumer demand that remains robust overall, Walmart said it expected net sales for its 2023 fiscal year to increase 4 per cent in constant-currency terms, up from the 3 per cent forecast it provided in February. However, full-year earnings per share would now be down 1 per cent because of the unexpected costs that emerged in the first quarter, it said, having previously guided to a mid-single digit increase.In the current quarter, Walmart said operating income and earnings per share would each be “flat to up slightly”, having previously forecast an increase in the low to mid-single digits.The cuts to guidance caught investors off guard, given that Walmart had indicated three months ago it was continuing to navigate cost pressures and supply chain challenges. Shares closed 11.4 per cent lower, handing the stock its biggest one-day drop since October 16 1987 — the session before the Black Monday crash — and its second-largest decline in the past 40 years.Do-it-yourself retailer Home Depot was better able to cushion the blow from price pressures. Earlier on Tuesday, the company lifted its 2022 outlook after defying forecasts for a quarterly earnings decline. The company has encountered rising prices in many of its core commodity categories, such as lumber and copper, but chief executive Ted Decker said it was not entirely clear how inflation would affect consumer behaviour in the future.“Inflation is definitely higher than we thought,” Decker said on an earnings call. “But our customers are resilient. We are not seeing the sensitivity to that level of inflation that we would have initially expected.”Data on Tuesday suggested US consumers have continued to spend at a robust pace despite rampant inflation. Retail sales, which include spending on food and fuel, rose 0.9 per cent in April, according to the US Census Bureau, matching economists’ forecasts, while March’s increase was revised higher to 1.4 per cent.The retail control group, which excludes building materials, motor vehicle parts and petrol station sales, rose 1 per cent, surpassing economists’ expectations for a 0.5 per cent increase. This was a slight moderation from March’s upwardly revised 1.1 per cent increase, after previously reporting a 0.1 per cent decline.Walmart’s $141.6bn in first-quarter revenue cruised past Wall Street’s forecast for almost $139bn. Reported net income of $2.05bn in the first three months of this year was down from $2.73bn a year ago. More

“What we need to see is inflation coming down in a clear and convincing way and we’re going to keep pushing until we see that,” Powell said at a Wall Street Journal event. “If we don’t see that, we will have to consider moving more aggressively” to tighten financial conditions.”Achieving price stability, restoring price stability, is an unconditional need. Something we have to do because really the economy doesn’t work for workers or for businesses or for anybody without price stability. It’s the bedrock of the economy really.”Acknowledging the possible “pain” that controlling inflation might cause in terms of slower economic growth or higher unemployment, Powell said there were “pathways” for the pace of price hikes to ease without a full-blown recession.But if inflation does not fall, Powell said the Fed would not flinch from raising rates until it does.”If that involves moving past broadly understood levels of ‘neutral’ we won’t hesitate to do that,” Powell said, referring to the rate at which economic activity is neither stimulated nor constrained. “We will go until we feel we are at a place where we can say ‘yes, financial conditions are at an appropriate place, we see inflation coming down.'”The Fed has raised its benchmark policy rate by three-quarters of a percentage point this year, and is on track to increase it again in half-percentage-point increments at its next two meetings in June and July. Market interest rates on Treasury bonds, 30-year mortgages and other forms of debt have risen much faster in a financial tightening predicated on upcoming Fed actions. What happens next – how much more the central bank hikes rates, and how fast – depends on how the economy and inflation evolve, something Powell said the Fed would evaluate “meeting by meeting, data reading by data reading.”His remarks solidified expectations in rate futures markets that the Fed’s target rate would reach at least 2.75% to 3.00% by the end of this year and perhaps more, steadily rising from the current range between 0.75% and 1%. CME Group’s (NASDAQ:CME) FedWatch tool on Tuesday showed a greater than one-in-four prospect for the policy rate to end the year at between 3.00% and 3.25%, up from about a one-in-10 chance on Monday.’UNTIL SOMETHING BREAKS’Economists meanwhile are divided between those who feel inflation will collapse on its own and let the Fed do less, and those who feel the central bank may need to hike in increments of three-quarters of a percentage point to ever get control of inflation that reminds some of the shocks of the 1970s and early 1980s.Data in recent weeks have been chock with conflicting signals. Retail sales, hiring, and manufacturing output all show an economy that is itself unflinching, so far, in the face of higher borrowing costs.”The economy is strong. Consumer balance sheets are healthy. Businesses are healthy,” Powell said, contending that strength is one reason the Fed can push interest rates higher and slow growth enough to cool inflation without causing the sort of painful contraction the central bank has used in the past to clamp down on prices. At the same time, the war in Ukraine is making food and fuel more expensive around the world, while a new round of coronavirus lockdowns in China threatens to keep prices rising for manufactured goods and industrial inputs.Coupled with still strong consumer demand in the United States, that could force the Fed into even tougher action.The Fed targets an inflation rate of 2% annually, but prices using the central bank’s preferred measure are currently rising at more than three times that level. Inflation that is too fast can distort household and business planning, and, more to the point for the sense of urgency felt by Powell and his Fed colleagues, erode the ability of the central bank to keep it under control.”Once the Fed starts hiking, they continue to hike until something breaks. Now the question becomes is what we should be looking at as a potential break? The equity market? Is it credit? Is it housing? I think that’s going to be this cycle’s big unknown,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York. More

The commodity-dependent economy is plunging into recession amid double-digit inflation after Russia sent thousands of troops into Ukraine on Feb. 24, triggering sweeping sanctions from the West that isolated the Russian economy and its financial sector.Russia needs a significant increase in “critical imports as well as imports required to modernise the … economy and raise its technological and production independence along with increasing investment in the purchase of necessary foreign assets”, VEB economists said in a report.Russia’s economy minister said last week the main challenges facing the Russian economy were supply chain disruptions and a significant reduction in imports.Russia’s imports could have fallen by 70-80% in April, according to CentroCreditBank’s analyst Evgeny Suvorov.”The scale of Russia’s isolation is shocking. And it could have dire consequences,” Suvorov said.In the report called “the Russian economy in conditions of a hybrid war”, VEB did not specifically mention the Ukrainian conflict, but said Russia needs “mobilisation of freedom and responsibility instead of a mobilisation economy”.Highlighting the need to invest in developing wealth, education, health, science and technology, VEB economists said the economy had “fairly high potential for resilience to short-term and medium-term shocks, but a new long-term policy needs to be built.””Under the conditions of the economic blockade by the West, the task of accumulating state savings, especially in the form of foreign exchange assets, loses its meaning.”Russia’s gold and forex reserves were above $600 billion before Moscow started what it calls “a special military operation” in Ukraine, but Western sanctions have frozen around half of Russia’s state coffers.VEB economists said they expected gross domestic product to shrink 10.2% in 2022 under its base scenario after 4.7% growth in 2021, and inflation to accelerate to 18.7% from 8.4%, projecting the central bank’s key rate at 12% by year-end.Real disposable incomes are projected to fall by 9.2% this year, under VEB’s base scenario.A drop in incomes is a sensitive issue, especially with rising prices hitting living standards. For years, President Vladimir Putin has promised to raise real disposable incomes.If the central bank cuts the key rate to 8% by the end of 2022 from the current 14%, it will lead to an extra increase in lending of 1 trillion roubles ($15 billion), VEB economists said.This would help reduce the contraction in GDP by 0.4 percentage points, they said. ($1 = 64.7520 roubles) More

Jay Powell said the Federal Reserve will continue tightening monetary policy until it sees “clear and convincing” evidence that inflation is coming back down towards the US central bank’s longstanding 2 per cent target.The Fed chair on Tuesday sought to affirm the central bank’s commitment to taming price pressures, saying restoring price stability was essential to the smooth functioning of the economy and vowing to raise interest rates to a level that actively constrains demand if necessary. “What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that,” he said during an interview at a Wall Street Journal event. As part of the Fed’s plans to move monetary policy “expeditiously” to a “neutral” setting that no longer stimulates demand, the Fed has raised interest rates by 0.75 of a percentage point since March from near-zero levels that had been in place for roughly two years. Further 0.5 percentage point rate rises such as the one the central bank implemented earlier this month are likely, with at least two more in the next two months. The Fed may consider a fourth half-point rate rise at its policy meeting in September if inflation does not moderate significantly by then, before dialling back the size of its increases to quarter-point increments. Traders now expect the federal funds rate to reach roughly 2.8 per cent by the end of the year, a sizeable jump from its current level of between 0.75 to 1 per cent. That is also within the 2 to 3 per cent range that Fed officials have previously indicated is considered “neutral” when inflation is at 2 per cent.Powell on Tuesday said the Fed “won’t hesitate at all” to raise rates above neutral if warranted by the data, although he reiterated that officials do not know with “any confidence” where that level is, given the strength of the labour market and the extent to which inflation is above the central bank’s target.He said the Fed would instead look at how financial conditions and the economy are adapting in real time. Powell’s comments come at a sensitive moment for global financial markets, which have gyrated wildly in recent weeks as investors weigh the odds of the US tipping into a recession as the Fed tries to tame high inflation. Powell added that there are “pathways” for the Fed to damp demand and bring down inflation without substantial labour market losses, although he said the unemployment rate may rise “a few ticks” from its very low 3.6 per cent level today.That would constitute a “soft or softish landing”, he said, although he acknowledged significant challenges to achieving that — including the run-up in commodity prices as a result of the war in Ukraine, which he said has “added to the degree of difficulty to what was already a challenging project”. More