Aurelia Butler

Ukraine’s government could receive the funds almost immediately after the board approves the loan, which may be delayed until Monday, one of the sources told Reuters.The disbursement, arranged with unusual speed for the development lender, would provide Ukraine with desperately needed cash to bolster its defense against a Russian invasion that has killed thousands and unleashed bombardments of urban centers and Europe’s largest nuclear power plant. More

Adding to worries in early Asian trade was news Ukraine’s Zaporizhzhia nuclear power plant, the largest of its kind in Europe, was on fire early on Friday after an attack by Russian troops. Reuters could not immediately verify the information, including the potential seriousness of any fire.That sent the euro down a further 0.48% to $1.1009 its lowest since May 2020. It has lost 1.84% this week, which would be the euro’s worst week since June 2021. The dollar in turn slipped 0.15% on the safe haven yen on Friday morning, following reports of the fire, though with gains elsewhere, the dollar index, which measures the currency against six peers rose 0.3% Russian forces were continuing to surround and attack Ukrainian cities, on the eighth day of their invasion, including Mariupol, the main port in the east which has been under heavy bombardment. “This war will be devastating for Ukraine. As for Russia, the short and longer-term implications will definitely hurt the economy. But EU countries will also be among those which will be hit the most by these sanctions,” said analysts at ING. They said the effects of surging energy and gas prices could undermine the industrial and private consumption rebound that had been expected following the easing of COVID-19 restrictions, and was also likely to slow European Central Bank policy normalisation. “At next week’s ECB meeting, any hints of rate hikes are out of the question,” they said. In contrast, the U.S. Federal Reserve is all but certain hike interest rates at its March 15-16 meeting for the first time since the pandemic. Fed chair Jerome Powell, overnight repeated his comments from Wednesday that he would back an initial quarter percentage point increase in the Fed’s benchmark rate. Elsewhere, sterling was on the back foot at $1.3326, while the Australian dollar edged off its four month top on news of the fire. Higher commodity prices resulting from the war have caused the Aussie to climb steadily in recent weeks. More

(Reuters) – Russia’s invasion of Ukraine adds uncertainty to the U.S. economic outlook and may boost near-term inflation, but household savings and strong economic growth should help limit the damage, New York Federal Reserve Bank President John Williams said on Thursday.Higher oil prices stemming from the crisis may act like a “tax” on American consumers that limits spending, but savings accumulated during the pandemic may help offset higher costs, Williams said. “The economy is coming into this with a lot of forward momentum,” Williams said during a virtual event organized by the Council for Economic Education. “It’s definitely not a stagflation issue.” Fed officials say they plan to start raising interest rates when they meet on March 15-16, a key step in their efforts to battle inflation at 40-year highs. Williams said he expects inflation to come down later this year, but remain “well above” the central bank’s 2% target. Inflation should moderate as the Fed raises interest rates, fiscal policy fades, and supply shortages are resolved. But he stressed the Fed’s ability to respond if inflation remains higher than expected at the end of this year and beyond.”We have the ability to adjust interest rates higher if inflation ends up being much more persistent or staying much higher than we expect or want,” Williams said. More

SEOUL (Reuters) – South Korea’s consumer inflation hovered near a decade high in February and stood above the central bank’s 2% target for an 11th month, adding pressure on policymakers to raise interest rates amid surging oil prices due to the Russia-Ukraine crisis.The consumer price index (CPI) for February rose 3.7% from a year earlier, government data showed on Friday, exceeding a 3.5% gain tipped in a Reuters survey and a notch below the decade high of 3.8% marked in November. It rose 3.6% in January.The breakdown of data showed the cost of petroleum surged 19.4%, while that of housing rentals and outdoor dining increased 2.1% and 6.2%, respectively, year on year.”Price instability will likely continue on persistent rise in energy prices and industrial goods,” said Park Sang-hyun, an economist at Hi Investment & Securities.”Future development of the Ukraine crisis and its impact on oil prices will play a major role in inflation,” he said.Core inflation, which excludes volatile food and energy costs, jumped 2.9% from a year earlier, the fastest since June 2009, in a sign that surging prices of fuel and other raw materials have fed through to higher costs for goods and services.That puts the Bank of Korea’s (BOK) monetary policy board under pressure to raise the base rate further in coming months, following the back-to-back rate hikes in November and January. The BOK held the base rate at 1.25% at its February meeting.In late February, the BOK also sharply increased its inflation forecast for this year to 3.1% from 2.0%. It sees next year inflation at 2.0%.Separately on Friday, Finance Minister Hong Nam-ki said the country will extend the 20% tax cut in oil products by three months to minimise the impact of surging energy prices, pushed up by the Russia-Ukraine crisis.”Korea’s government reduced the fuel tax last year to ease price pressure, however, its impact was offset by a faster increase in oil prices. CPI would have been much higher in the absence of price controls, in our view,” Park Chong-hoon, economist at Standard Chartered (OTC:SCBFF) Bank Korea, said. More

Here is a breakdown of what we know so far as Western sanctions grip Russia’s economy in response to its invasion of Ukraine.: STOCKS AND BONDS – ESTIMATED $60 BLN FROM MUTUAL FUNDS AND ETF Overseas investors in Russia have tens of billions invested in the country’s stocks and bonds, according to Morningstar data. U.S. asset managers like Capital Group, Black rock and Vanguard disclosed large exposures, according to the most recent portfolio information available to the research firm.Disclosures cover a period starting September 2021 through to Feb. 25 this year. They total over $60 billion when considering the top 100 open-end funds and exchange-traded funds worldwide in terms of estimated U.S. dollar exposure to Russian securities, according to Morningstar data.Of these, some of the biggest were Capital Group Companies Inc, one of the world’s largest investment management companies, Vanguard and PIMCO and BlackRock (NYSE:BLK).DEBT SECURITIES – $79 BLN JPM analysts said in a research note that foreigners own around $79 billion of Russia’s debt securities, including local currency Offs, sovereign hard currency euro bonds and corporate hard currency eurobonds. BANKS – AROUND $78 BLN EXPOSURE DISCLOSED Bank of International Settlements data https://stats.bis.org/statx/srs/table/B4?c=RU&p= show that foreign banks have exposure to the tune of $120 billion to Russia. In Europe, Italian and French banks have the largest Russian exposure, representing just over $25 billion each at the end of September, the data says. The exposure of U.S. banks totals $14.7 billion, according to BIS data.Of those that have announced exposure: Raiffeisen Bank International RBIV.VI overall Russian exposure totalled 22.85 billion euros ($25 billion), more than half relating to the corporate private sector, it said in its 2021 results presentation.Societe Generale (OTC:SCGLY), which controls Russian bank Rosbank, had 18.6 billion euros ($20.5 billion) of overall exposure to Russia at the end of last year – or 1.7% of the group total.Unicredit (MI:CRDI) UniCredit’s overall exposure to Russia totalled 14.2 billion euros ($15.7 billion) as of mid-2021. That includes 8 billion euros in loans extended by its Russian arm.Intesa Sanpaolo (OTC:ISNPY) ISP.MI Italy’s biggest bank, loan exposure to Russia was 5.57 billion euros ($6 billion) at the end of 2021, or 1.1% of the total.Of the U.S. banks, Citi announced total exposure of nearly $10 billion.As a comparison, Goldman Sachs Group Inc (NYSE:GS) GS.N reported in a filing last month $293 million in net exposure to Russia, as well as a total of $414 million of market exposure as of December 2021.EXXON MOBIL – $4 BLN EXPOSURE Exxon Mobil (NYSE:XOM) on Tuesday said it would exit Russia oil and gas operations that it has valued at more than $4 billion and halt new investment as a result of Moscow’s invasion of Ukraine.BP (NYSE:BP) – $25 BLN EXPOSUREBP announced it was abandoning its stake in Russian oil giant Rosneft. Rosneft accounts for around half of BP’s oil and gas reserves and a third of its production and divesting the 19.75% stake will result in charges of up to $25 billion, the British company said.SHELL – $3 BLN EXPOSUREShell (LON:RDSa) will exit all its Russian operations. Shell said the decision to exit Russian joint ventures will lead to impairments. Shell had around $3 billion in non-current assets in these ventures in Russia at the end of 2021, it said.NORWAY’S SWF – $3 BLN EXPOSURE Norway’s sovereign wealth fund, the world’s largest, has written off the value off the roughly $3 billion in assets it held in Russia. The fund held investments in Russia worth some 27 billion crowns ($3.0 billion) at the end of 2021, equivalent to 0.2% of its total value, but now likely worth 2.5 billion crowns. The fund’s Russian assets consisted of shares in 51 companies at the end of 2021. The most valuable stakes were in gas producer Gazprom (MCX:GAZP), bank Sberbank and oil firm Lukoil, which together accounted for two-thirds of the total. “They are pretty much written off,” CEO Nicolai Tangen later told Reuters on Thursday, after Norway’s government told the fund to sell the assets.CALSTRS – $171.5 MLNThe California State Teachers’ Retirement System (CalSTRS), the second-largest U.S. pension fund, said on Wednesday the value of its holding in Russia as of the end of February was $171.5 million.CALPERS – $900 MLN CalPERS, which manages the largest U.S. public pension fund, said late on Thursday that the fund had around $900 million of exposure to Russia, but no Russian debt. More

Investing.com – A goldilocks jobs report will be needed to fight off stagflation fears, and keep the Federal Reserve on a cautious rate hike path at a time when the Russia-Ukraine conflict has pushed inflation expectations to record levels.The Labor Department will release its jobs report for February on Friday, with economists estimating that about 400,000 jobs were created last month, with the unemployment rate expected to creep below 4%.The monthly jobs report will arrive at a crucial time. Bets on aggressive Fed rate hikes are on the decline. But the prospect of red-hot inflation running even hotter – in the wake of the Russia-Ukraine conflict that has boosted the price of oil, wheat and precious metals – just as economic growth is expected to slow has many on the lookout for stagflation.The five-year breakeven rate on Treasury inflation protected securities – a closely watched gauge of inflation expectations — jumped to 3.23%, a record high.The jobs report will need to strike the right balance between optimism and pessimism to avoid tipping the scale.“This jobs number tomorrow will have to be a pitch perfect,” John Luke Tyner, portfolio manager at Aptus Capital Advisors, said in an interview with Investing.com on Thursday. “If it’s too hot — 600,000 to 700,000 jobs created, and the unemployment rate falling to 3.7% –  then the market is going to take Powell’s words that a 50 bps is on the table at later meetings and then maybe even price in 100 bps by July.”Federal Reserve Chairman Jerome Powell said earlier this week that he would back a 25-basis points rate hike at the March meeting, but said that increased rate hikes were on the table at subsequent meetings if inflation doesn’t subside as expected.“I could see us in a position where the market then starts to revert back to the pricing of those six or seven hikes this year that were taken away by the Russia-Ukraine conflict,” Tyner added.The market-implied expectations for Fed rate hikes for 2022 dropped 112 basis points, down from as much as 162 basis points last month, Bloomberg reported.Weak jobs data that meaningfully undershoot expectations will flag economic growth concerns and add “to the stagflation fears that I think spooks the market,” the portfolio manager said. More

Russia’s invasion of Ukraine threatens to pile further pressure on chip manufacturing as a squeeze on the supply of rare gases critical to the production process adds to pandemic-related disruptions.Ukraine supplies about 50 per cent of the world’s neon gas, analysts have said, a byproduct of Russia’s steel industry that is purified in the former Soviet republic and is indispensable in chip production.Manufacturers have already been reeling from shortages of components, late deliveries and rising material costs, with companies that rely on chips, such as carmakers, facing production delays as a result. Many companies, including US manufacturers Applied Materials and Intel, have said constraints would persist into 2023. Demand for raw materials is also expected to rise by more than a third in the next four years, as businesses such as the world’s biggest contract chipmaker Taiwan Semiconductor Manufacturing Company increase production, said consultancy Techcet. “We are in great trouble. We have no rare gases to sell,” said Tsuneo Date, who runs Daito Medical Gas, a pressurised gas dealer north of Tokyo.When Russia invaded Crimea in 2014, neon prices shot up by at least 600 per cent. Companies have said they can tap into reserves but the rush to find suppliers that are not in eastern Europe is causing shortages and price hikes, not only of neon but also other industrial gases such as xenon and krypton. Forty per cent of the global supply of krypton comes from Ukraine. The price of the gas, which is used in semiconductor production, rose from ¥200-¥300 ($1.73-$2.59) per litre to nearly ¥1,000 ($8.64) per litre by the end of January, according to Date.He added that prices had been rising before the war because of supply chain disruptions but said “the Russian invasion of Ukraine is making the situation worse” and that he had recently been forced to turn down orders from new customers. Companies along the supply chain developed new technologies, diversified sources of neon gas and beefed up reserves after the Crimea crisis, which provided some breathing room. In 2016, the multinational industrial gas supplier Linde invested $250mn in a neon production facility in Texas as customers sought to diversify supplies.Yoshiki Koizumi, president of trade publication Gas Review, said “the supply of neon, xenon and krypton is definitely getting tighter because chipmakers and trading houses are making more orders in expectation that in the future they won’t be able to get as much as they want”.Ke Kuang-han, a semiconductor analyst at consultancy Techcet, said the reaction has been “immediate”, adding: “I’ve heard spot prices have jumped several-fold.”Pricing for neon is agreed through individual long-term contracts with processors and chipmakers and some gas is also traded on the spot market. Several chipmakers and large gas companies in Japan declined to comment on current spot prices. The mitigating efforts had given companies some capacity to manage the disruption in the short term and they hope the conflict would not be prolonged, he added.Deutsche Bank said in a research note that inventory levels in the industry typically last around three to four weeks.Kim Young-woo, a tech analyst at SK Securities in Seoul, said that while South Korean companies such as Samsung and SK Hynix could find replacements for some gases, “supply shortages could be serious for krypton and neon”.Gas mixtures that include neon are used to power lasers for etching patterns into semiconductors. Shifting away from Ukraine is difficult because it has to be refined to a 99.99 per cent purity, a complex process that only a few companies around the world can do — including some based in the Ukrainian port of Odesa.

Underscoring the challenges, the White House has warned semiconductor makers to diversify their supply chains after Russia’s invasion. ASML, a Dutch company that makes machines used to manufacture chips, said it was looking for sources of neon outside of Ukraine. Japanese chipmakers Renesas and Rohm said they either found supplies from other markets, such as China, or had stockpiled inventories of neon.Samsung and SK Hynix, the world’s two largest memory chipmakers, “have plants in China so they will have little trouble getting the gases for chip production there”, Kim said. The companies said the war’s impact on their chip sales would be minimal in the short term.But in a note published shortly before the invasion, analysts at TrendForce warned that even if alternative sources are secured “product certification will take several months or even more than half a year”, causing “scarcity”.They warned that “the automotive industry, which requires large quantities of power management chips and power semiconductors, will face a new wave of material shortages”.Akira Minamikawa of market research firm Omdia said that all products using chips would be affected because only the most cutting-edge semiconductors did not require neon in their production. “It’s not like neon is used in chips for cars but not for smartphones.”

Video: Russia’s invasion of Ukraine: what next? | FT Live

Reporting by Antoni Slodkowski and Eri Sugiura in Tokyo, Song Jung-a and Edward White in Seoul and Eleanor Olcott in London More

BENGALURU/JOHANNESBURG (Reuters) – Currencies are in for a bumpy ride with already heightened volatility expected to increase over the next three months in the wake of Russia’s invasion of Ukraine, according to a Reuters poll of analysts who forecast more pain for the battered rouble.Volatility spiked on Wednesday to levels not seen since the start of the COVID-19 pandemic, according to Deutsche Bank (DE:DBKGn). That trend is expected to continue in the near term, with over 90% of respondents to an additional question in the Feb. 28-March 3 poll of currency strategists expecting volatility to either increase or increase significantly in the coming three months.”It will be a higher volatility period just because the issues under discussion haven’t been under discussion in a generation and in some places in a lifetime,” said Steve Englander, head of G10 FX strategy at Standard Chartered (OTC:SCBFF). Since Russia invaded Ukraine on Feb. 24, money has been siphoned away from riskier assets into safer havens, including the dollar, the Japanese yen and the Swiss franc, as well as currencies linked to commodity markets.While the yen and franc were expected to be in demand in the short term they were forecast to weaken marginally against the greenback over the 12-month horizon as neither currency carries an interest rate edge.The U.S. Federal Reserve is set to begin raising rates at its meeting this month from near-zero, delivering at least 125 basis points of tightening by year-end, according to a separate Reuters poll. [ECILT/US]”The traditional safe havens…are doing OK but not brilliant when under tensions, and underperforming badly when tensions ease because, in a way, they have nothing to offer. They don’t have any rates,” said Englander.INVASION’S WIDER FX IMPLICATIONS UNCLEARMedian forecasts of over 60 respondents showed little change in analysts’ expectations compared with the February poll, suggesting many forecasters have not yet worked out the wider FX market implications of armed conflict in Europe. “We have a very, very wide range of geopolitical outcomes here, which the market is not pricing for correctly,” said Michael Every, global strategist at Rabobank.”The risks in play here in the background transcend anything to do with where the euro/dollar is trading.”So far, analysts expect the euro, which hit a 21-month low on Wednesday, to recoup its 2.5% losses for the year and gain more than 1.0% over the next 12 months.The yen and the franc are also forecast to trade slightly lower in a year, and commodity currencies to outshine them.The Aussie dollar and Kiwi dollar are expected to gain over 2.3% and 6.0%, respectively, and the Canadian dollar over 2.5%.The Russian rouble hit a record low on Thursday, shedding over a third of its value this year, as stinging Western sanctions pummeled Russia’s financial system.Asked how low the rouble would fall to this month, 11 strategists returned a median of 125/$. Forecasts ranged from 120-150/$.Russia’s neighbour Turkey, where President Tayyip Erdogan has been urging the central bank to cut interest rates to fight inflation now running at 54%, has been battered by a currency crisis that saw the lira lose nearly half its value last year.The lira was forecast to plunge another 20% in the next 12 months.(For other stories from the March Reuters foreign exchange poll:) More