Aurelia Butler

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 RENEWABLESNorway 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) More

Remember Goldilocks? We are unlikely to be hearing much about that fairy tale character in the near future. For Jay Powell, the US Federal Reserve chair, the odds are that the American economy will either run too hot or too cold, or go from one to the other. Unlike in the 1990s, or indeed for most of the last generation, it would be rash to bet on a soft landing for the US economy. The era of easy money was also one of relatively easy central banking. That job is getting much tougher. Goldilocks has left the building. Some of the Fed’s woes are self-created. Its chief sin has been wishful thinking — a trait that was also shared by the markets. The Fed has not yet explained why it got inflation so wrong in the last year. For most of 2021, the Fed insisted higher inflation was “transitory” even as evidence accumulated that it was not. Then in November the Fed switched to admitting the problem was stickier than it thought. But it did not act as though it meant it. It took another four months to end its monthly injection of $40bn into a housing market that was already booming. Even after proclaiming a turn in the interest rate cycle, the Fed signalled the shift would be modest. Its first interest rate increase of 25 basis points came in March — months after inflation began to overshoot its 2 per cent target. Real monetary conditions have in fact got easier since then. Inflation has risen by more than the Fed funds rate, which makes America’s real interest rate even more negative than it was before. It is as though Powell, reappointed Fed chair, cannot bring himself to let go of Goldilocks’ hand. It is hard to blame him. For decades, the markets have thrived on the one-way bet that when conditions got rough the Fed would prop up asset prices with steep rate cuts and quantitative easing. It thus always made sense for investors to “buy on the dip”. Even when the Fed complained that it was the only game in town — in frustration with the fiscal gridlock that disabled Washington for most of the years after the financial crisis — it carried on playing. Not to have done so would have been far worse for everybody. But the super-rich have been the overwhelming beneficiaries, which has not been healthy for democracy. On the one occasion the Fed did try to alter the rules, it was quickly whipped into line. Ben Bernanke’s attempt to end quantitative easing in 2013 was shut down by the market’s “taper tantrum”. The pandemic returned the Fed to the 2008 mindset of “whatever it takes” — only this time with the fortunes of the non-rich explicitly in mind. A few months after Covid-19 struck, the Fed replaced its strict 2 per cent inflation target with far more fungible language. Almost everybody, not just the Fed, converted to the view that the US economy could be run far hotter than theory dictated for the sake of full employment. That stance has now sadly been discredited. Inflation, it turns out, is still a death eater of income gains. In addition to fast wage growth, China’s addiction to “zero Covid” lockdowns and the war in Ukraine are likely to sustain inflation across a broad range of products for months. Though the Fed can do nothing to ease global supply chain problems, the risk is that it will have to overcompensate for its failure to tackle inflation sooner. On Wednesday, Powell is likely to announce the first 50 basis-point increase in years. That is already priced in. But with headline inflation at 8.6 per cent, a doubling of the Fed funds rate to 1 per cent is hardly disinflationary. This underlines two growing threats to the Fed. The first is that it might be forced to induce a US recession with far higher interest rate increases than it now anticipates. The Fed’s last dot plot predicts a 1.9 per cent rate by the end of this year. Last week Deutsche Bank predicted the Fed would have to lift that rate to 5 or 6 per cent to tame inflation. For similar reasons, Morgan Stanley warned that the US was entering a bear market. Both views are a minority. But consensus forecasts, including the Fed’s, have been so badly off that it would be unwise to take the majority literally. The middle class wage renaissance may turn out to be fleeting. The second worry is about the harm to the Fed’s credibility. Powell did not acknowledge that inflation was non-transitory until after President Joe Biden reappointed him. Doubtless this was a coincidence. Either way, the institution that was until recently seen as Washington’s most effective may be forced to relearn the lessons of the 1970s and early 1980s — even if today’s woes are not as great. Credibility is bought at great expense over a period of years. Alas, it can also be risked with remarkable ease. [email protected] More

Boris Johnson has admitted the government “can do more” to help families struggling with rising bills, but warned that a big new support package risked driving up inflation and interest rates.The prime minister, speaking two days before a UK-wide round of local elections, said the government had to be “prudent” and that high levels of extra public spending could lead to “an inflationary spiral”.Tory strategists admit that the cost of living is by far the greatest issue for voters ahead of Thursday’s polls and claim the party is on course to lose hundreds of seats.Labour argue that this is expectation management and that actual Tory losses will be on a more modest scale, partly because Labour did well when most of the same council seats were contested in 2018.Johnson, speaking to ITV’s Good Morning Britain for the first time in almost five years, apologised again for breaking the law in the partygate affair. Asked in a robust interview whether he was honest, he replied: “Yes.”The prime minister again rejected calls from Labour and the Liberal Democrats for a windfall tax on North Sea oil and gas companies to help fund more support for low income households.He insisted the government was already doing a “huge amount” to help people with rising energy bills, but he repeated the warning of Rishi Sunak, chancellor, of the dangers of a big new injection of support.“If we have an inflationary spiral of the kind that could be triggered, you will see interest rates going up,” he said. Johnson added that would create “an even bigger problem” and feed through to higher mortgage costs.But he accepted that a £9bn package of support announced by Sunak in his Spring Statement six weeks ago was “not going to be enough immediately to cover everybody’s costs”. More support is expected in the autumn.Labour insists Johnson is out of touch with ordinary voters, and the prime minister was confronted in the interview with the experience of viewers facing severe hardship.Asked about a pensioner called Elsie who travelled on buses all day because she could not afford to heat her house, Johnson replied that as London mayor he introduced “the 24-hour Freedom bus pass”.Meanwhile, Sir Keir Starmer, Labour leader, refused to say whether the Durham Police had made contact again since Tory MPs last week urged the force to take a second look at claims he broke Covid rules last year.Starmer was asked on the BBC’s Radio 4 Today programme whether the force had made contact with either him or his office in recent days.Instead of answering the question, the Labour leader said the Durham Police had already come to the “clear conclusion” months ago that no rules had been broken.“We were working in the office, it was just before elections, we were busy, we paused for food, no party, no rules were broken, that is the long and the short of it,” he said.

Starmer is facing growing questions over an event in Durham in April last year at which he was photographed through a window drinking beer.At the time indoor socialising was banned. The Labour leader has said that he was working that day at Durham Miners Hall as part of a campaign visit and stopped for food before resuming his work.A Labour official said: “I would just refer you to Durham Police’s statement that they haven’t reopened the investigation so self-evidently they haven’t been in touch.”Starmer said that Labour had the “wind in our sails” ahead of Thursday’s local elections. “We are in a position where we are just ahead in the polls. That is remarkable in two years,” he said.Starmer repeated Labour’s case for a windfall tax on energy companies after BP announced soaring profits for the first quarter on Monday morning. He also supported the Conservative government’s decision to send another £300mn of military equipment to Ukraine. More

SYDNEY (Reuters) – Australia’s central bank on Tuesday raised its cash rate by a surprisingly large 25 basis points to 0.35%, the first hike in over a decade, and flagged more to come as it pulls down the curtain on massive pandemic stimulus.The news was a blow to Prime Minister Scott Morrison as he fights a tough election campaign that, going by opinion polls, could see him turfed out of office on May 21.Wrapping up its May policy meeting, the Reserve Bank of Australia (RBA) said it was the right time to begin withdrawing extraordinary monetary support as inflation had picked up significantly and the economy was near full employment.”The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” said RBA Governor Philip Lowe. “I expect that further increases in interest rates will be necessary over the months ahead.”The size of the move helped lift the local dollar up 1% to $0.7115 as a majority of analysts in a Reuters poll had expected a rise to only 0.25%. [AU/INT]The policy sea change came after consumer price inflation spiked to a 20-year peak of 5.1% in the first quarter, led by costs for petrol, housing, food and education.Core inflation jumped to 3.7% and above the RBA’s target band for the first time since 2010, a radical turnaround from recent years when it consistently undershot.The red-hot report led markets to narrow the odds on a hike in May, even though many analysts suspected the RBA would rather wait until after the election and to see if wages data due on May 18 would confirm a long-awaited pick up.In a media conference, Lowe insisted the election paid no part in the decision, which was apolitical.MARKETS SEE 0.75% BY JUNEFutures quickly priced for a move to 0.75% in June and a whole string of hikes to around 2.5% by the end of the year, and 3.5% by the middle of 2023.That would be the most aggressive RBA tightening cycle in modern history and a drag on consumer spending power given household debt is at all-time highs.Lowe said it was plausible rates would get to 2.5% over time, though the RBA Board had an open mind on how fast the tightening would be given global uncertainties.The market’s uber-hawkish outlook in part reflects the global rush to tightening, with markets wagering the Federal Reserve alone will hike by 150 basis points by the end of July.The RBA also announced it would let its more than A$350 billion ($249.03 billion) of government bond holdings expire at maturity, rather than actively sell them as some central banks are doing.Rising mortgage rates will only add to surging cost of living pressures that are a headache for the Liberal National coalition government as it campaigns heavily on economic management.An ANZ survey out on Tuesday showed consumer confidence nose-dived 6.0% last week, the sharpest drop since an Omicron wave swept through the eastern seaboard in January.”This is the lowest level for consumer confidence at the start of a tightening cycle since the inflation targeting regime began in the early 1990s,” noted ANZ’s head of Australian economics, David Plank.”This may see the RBA tighten more slowly than the market is pricing.”($1 = 1.4055 Australian dollars) More

Investing.com — The Federal Reserve begins a two-day meeting which is expected to end in half-point rise in U.S. interest rates. Australia’s central bank jumped the gun overnight, with a 25 basis point hike of its own. The Labor Department publishes the monthly Job Openings survey, while there’s another slew of earnings from the likes of Pfizer, DuPont and, after the bell, AMD and Airbnb. Beijing tightens its lockdown and oil prices give up some of Monday’s gains while oil companies take it in turns to release the best earnings in years, at least in underlying terms. Here’s what you need to know in financial markets on Tuesday, 3rd May. 1. RBA jumps the gun as Fed starts two-day huddleThe dollar and U.S. bond yields eased slightly as the market settled down to wait for the outcome of the Federal Reserve’s two-day meeting, which starts later Tuesday.Expectations for a half-point rise in the fed funds target range to 0.75-1.00% are all but universal, which means that the key variable coming out of the meeting will be the unwinding of two years of bond purchases. Various Fed officials have called for an early start to active sales from the Fed’s bond portfolio to keep the yield curve slope positive.It’s a busy week for central banks in the Anglosphere, with the Bank of England expected to give its own signal on quantitative tightening on Thursday. The Reserve Bank of Australia, meanwhile, unexpectedly raised its key rate by 25 basis points overnight, pushing the Australian dollar up 0.7%. The Aussie is still down some 6% in the last month.2. JOLTS survey, factory orders dueThe Labor Department will publish the first of three key labor market indicators due this week at 10 AM, with the monthly Job Openings and Labor Turnover Survey. Recent surveys have shown vacancies trending near record high levels amid widespread complaints of skills shortages by companies. High job turnover is also associated with higher earnings, given that many people take advantage of such shifts to make a step change in their income.Factory orders and durable goods orders excluding defense for March are also due at 10 AM.Data releases from the Eurozone overnight showed producer prices running at a record high of nearly 37% year-on-year in March, while the improvement in the German labor market slowed in April.3. Stocks steady ahead of earnings flood; AMD, Starbucks, and Airbnb to report lateAnother slew of earnings will be released into a still jittery market that only recouped half of its Friday losses on Monday. Stocks are set to open flat to lower later, despite some impressive performances by Monday’s late reporters.NXP (NASDAQ:NXPI), Avis (NASDAQ:CAR), and Clorox (NYSE:CLX) both beat earnings forecasts handsomely, as did pipeline company Williams (NYSE:WMB). Both conspicuously ruled big increases in production in the short term, choosing instead to use their improved cash flow to strengthen their balance sheets.By 6:20 AM ET, Dow Jones futures were down 26 points, or less than 0.1%, while S&P 500 futures were down 0.1%, and Nasdaq 100 futures were down 0.2%.Early reporters on Tuesday include pharma giants Pfizer (NYSE:PFE) and Biogen (NASDAQ:BIIB), industry facing bellwethers Rockwell (NYSE:ROK) and DuPont (NYSE:DD), and financial giant S&P Global (NYSE:SPGI) (for the first time after consolidating IHS Markit). AMD (NASDAQ:AMD), Starbucks (NASDAQ:SBUX), and Airbnb (NASDAQ:ABNB) lead the roster of late reporters, along with AIG (NYSE:AIG) and Caesars (NASDAQ:CZR).4. Beijing lockdown tightens; Ma scare hits Alibaba The lockdown in China’s capital is getting gradually tighter. Beijing asked residents not to leave the city unless necessary and delayed the reopening of schools that was due on Thursday after the three-day holiday.The South China Morning Post reported incidents of the authorities in neighboring Hebei province bolting doors to prevent people leaving their homes, in fresh evidence of the human strains caused by the official Zero Covid policy (reaffirmed last week by President Xi Jinping personally).In other Chinese news overnight, Alibaba (NYSE:BABA) shares in Hong Kong slumped 9% on reports that police in Hangzhou, home to the e-commerce giant, had arrested an Internet executive named Ma. The stock rebounded when it transpired that it wasn’t Alibaba founder Jack Ma, but the incident illustrates the fragility of market sentiment.5. Oil gives up gains ahead of API; BP posts big loss on Russia exit but expands buybackCrude oil consolidated after rising on Monday in anticipation of another meeting of largely empty promises by OPEC and its allies to raise output.BP (NYSE:BP) CEO Bernard Looney said he expected the shortfall of Russian crude to double to 2 million barrels a day as a result of the cumulative impact of western sanctions, which are set to be tightened later this week. Those hoping for a big increase in U.S. shale output to compensate were disappointed late on Monday by shale oil producers Diamondback (NASDAQ:FANG) and Devon Energy (NYSE:DVN), which repeated their commitment to balance sheet repair.BP, meanwhile, posted a $25 billon loss on writing down its Russian business, but increased its buyback as underlying cash flow improved sharply.By 6:30 AM ET, U.S. crude futures were down 1.1% at $104.06 a barrel, while Brent was down 1.1% at $106.41 a barrel. The American Petroleum Institute’s weekly inventory data are due at 4:30 PM ET. More

Anti-abortion activists and pro-abortion rights supporters took to the streets of Washington after a leaked draft ruling indicated the US Supreme Court was preparing to overturn the landmark Roe vs Wade ruling that has guaranteed abortion rights across the US for almost five decades.The 98-page draft opinion, dated February 10 and signed by conservative Justice Samuel Alito, relates to the constitutionality of a Mississippi law that bans abortions after 15 weeks. According to a Politico report, Justice Alito was joined by at least four other conservative justices — Clarence Thomas, Amy Coney Barrett, Brett Kavanaugh and Neil Gorsuch — in siding with Mississippi and upholding the ban. It was unclear from the report which side the court’s Chief Justice John Roberts would side with.“It is time to heed the constitution and return the issue of abortion to the people’s elected representatives,” Alito wrote in the draft opinion.The unprecedented leak triggered immediate outrage among Democratic politicians and groups dedicated to the protection of abortion rights in the US. The two top Democrats in Congress — Nancy Pelosi, Speaker of the House, and Senate majority leader Chuck Schumer — expressed fury in a statement while some progressive lawmakers called for quick legislative remedies. Bernie Sanders, the Vermont senator, said it was time to codify the protections of Roe vs Wade into law, while Mondaire Jones, a Democratic representative from the northern suburbs of New York City, said the Supreme Court should bring in new members.If the Roe precedent is thrown out, nearly half of US states would be poised to outlaw abortion thanks to statutes that include so-called trigger laws, which automatically come into force if the decision is overturned, according to the Center for Reproductive Rights.Should Roe vs Wade be overturned? Send your thoughts to [email protected]. Here’s the rest of the day’s news — GordonFive more stories in the news1. Exclusive: Johnson joins bid to win Arm listing for London Boris Johnson has joined a push to convince British chip designer Arm to list in London, as government officials grow concerned over lasting damage if the country’s best-known tech company chooses New York for its IPO. 2. US 10-year Treasury yield reaches 3% The yield on the US 10-year Treasury note touched 3 per cent for the first time since 2018, pushing up the cost of borrowing for homeowners and businesses. Yields have risen this year as the Fed takes action to try to stem US inflation, which hit 8.5 per cent on an annual basis in March — its fastest rate of increase in 40 years.3. Amazon union dealt a setback Amazon workers at a second facility in New York have rejected efforts to form a union, dealing a blow to a grassroots labour movement that hoped to capitalise on momentum from its surprise victory at a larger warehouse last month. Employees at a sorting facility in Staten Island voted by 618 to 380 against joining the Amazon Labor Union.4. Germany warns consumers to expect higher costs from Russian oil embargo The warning came as Berlin said it was willing to back an embargo of Russian oil to punish Moscow for its invasion of Ukraine. EU energy ministers met yesterday to discuss an expected sixth package of sanctions against the Kremlin that diplomats say it will include a phased-in oil embargo to take full effect by the end of the year.5. Citi acknowledges trading error There will be some red faces at Citi this morning after the US bank acknowledged an error by one of its traders that led to “a flash crash” in the share prices of many European companies. Nordic stocks were particularly hard hit, with Sweden’s benchmark OMX 30 tumbling as much as 7.9 per cent before recovering most of the losses. The day aheadUS elections: JD Vance, the venture capitalist and author of Hillbilly Elegy, squares off against a clutch of rivals to replace outgoing Ohio senator Rob Portman, a former George W Bush administration official.Go deeper: Vance represents a growing class of Republicans who have unabashedly embraced Trump — and are in many ways beholden to him.Monetary policy The Federal Reserve starts a two-day policy meeting that is expected to result in its first half percentage point rise in interest rates since 2000 and signal more aggressive action to bring decades-high inflation under control. Economic data Figures from the US Bureau of Labor Statistics are expected to show job openings decreased slightly to 11mn in March from 11.26mn the previous month. That data will also report the number of employees who quit their jobs in March.Company earnings The US pharmaceutical company and Covid-19 vaccine maker Pfizer is expected to report first-quarter revenue increased 64 per cent to about $23.9bn, according to analysts polled by Refinitiv. KKR, Starbucks, Lyft, Airbnb, AIG, Advanced Micro Devices, and Match Group also report results.War in Ukraine UK prime minister Boris Johnson will become the first western leader to address lawmakers in the Ukrainian parliament since Russia’s invasion. The UK will commit an additional £300mn of military aid. Separately, Narendra Modi has been invited to attend the G7 leaders’ summit next month in Germany as western powers attempt to woo New Delhi away from its longstanding alliance with Russia.What else we’re readingTriumphalism returns to haunt Xi Jinping China’s leader faces the nightmarish prospect that the months running up to the Communist Party Congress in November will be marred by an economic crunch and social tensions caused by repeated lockdowns, writes Gideon Rachman.EU fires starting gun in fightback against Big Tech The EU’s Digital Services Act is not just more procedural drudgery on the EU’s conveyor belt of words. It is the first comprehensive declaration of a digital future founded on the legitimate authority of democratic rights and the rule of law, argues Shoshana Zuboff, professor emeritus at Harvard Business School.Related: EU regulators have charged Apple with breaking competition law by abusing its dominant position in mobile payments. FT ranking: Africa’s Fastest Growing Companies 2022 The inaugural FT ranking of Africa’s Fastest Growing Companies provides a snapshot of the corporate landscape on a continent where technology, fintech and support-service businesses have had to adapt to a radically altered environment. US-China Tech Race: The great decoupling Some in the US want to see Chinese companies cut off from American investment, while hawkish factions in China have been fighting for a more self-sufficient and nationalistic tech sector. But is decoupling even possible? James Kynge asks in the season finale of our Tech Tonic podcast.Would a Sinn Féin win open door to a united Ireland? Almost a quarter of a century after the 1998 Good Friday Agreement ended the Troubles — three decades of violence in which more than 3,500 people died — polls predict Sinn Féin, the political wing of the paramilitary IRA, will after Thursday’s election become the biggest party in Northern Ireland for the first time.Deconstructing ‘dogfooding’ Executives testing a company’s product or service has been dubbed “dogfooding”: Airbnb co-founder Brian Chesky plans to stay in the company’s properties every few weeks; Lyft boss John Zimmer does a driving shift on New Year’s Eve. Such practices are spreading beyond the tech sector.TravelFloating 500 miles west of Senegal, Santo Antão is Africa’s most western outpost and remains one of the least visited of Cape Verde’s nine inhabited islands. There is no airport and only two main roads. The mountainous isle is heaven for hikers.

A door-to-door salesman treads the mountain path in the valley of Cha de Morte © Mark Rammers More