Economy

Nigeria was long under international pressure to end fuel subsidies that allowed its citizens to pay some of the cheapest petrol prices in the world. But an economic crisis triggered after its new president finally did so has led to questions about how it was handled.Before the west African country went to the polls last year, the IMF recommended that Nigeria’s government “permanently remove fuel subsidies through the introduction of a market-based pricing mechanism”.Bola Tinubu, who won the highly contested vote and became president in May, removed them on his first day in office to general surprise but plaudits from the international community. The World Bank called it “the first step towards restoring macroeconomic stability and creating more fiscal space”.The move was part of the president’s attempt to embrace economic orthodoxy that also included ending a currency peg maintained by the former central bank governor. But nine months after the subsidies were cut, many are questioning the wisdom of abruptly eliminating the subsidies without a shock-absorbing plan and how Tinubu’s government has implemented its post-subsidy strategy. Bola Tinubu, who became president in May, removed fuel subsidies on his first day in office More

NDP leader Jagmeet Singh told a Canadian public broadcaster on Friday that the two parties had now reached a deal on “pharmacare” which a Reuters’ government source confirmed. “It is very, very important to invest in supporting Canadians and to do so in a fiscally responsible way,” said Freeland, the report added. The Globe and Mail previously reported that the pharmacare plan would cost more than C$1 billion ($740.41 million) a year once it was implemented, citing sources familiar with the matter.Freeland’s spokesperson did not immediately respond to a Reuters’ request for comment.A government source said on Friday that terms of an agreement had been reached with the NDP and that details would be made public next week.In late 2021, the left-leaning NDP agreed to back Canadian Prime Minister Justin Trudeau’s minority Liberals in return for legislation to set up a nationwide system to help people pay for medication.NDP leader Singh had in recent weeks complained the Liberals were dragging their feet and mused about withdrawing his automatic support for Trudeau.The pharmacare agreement would suggest the chances of Trudeau staying in office until an election next year appear more certain.($1 = 1.3506 Canadian dollars) More

SYDNEY (Reuters) – Asian shares were taking a breather near seven-month highs on Monday as investors awaited inflation data from the United States, Japan and Europe that will help refine expectations for future rate moves.The Federal Reserve’s favoured measure of inflation – the core personal consumption expenditures (PCE) price index – is due on Thursday and forecasts are for a rise of 0.4%.It was not long ago investors were hoping for just a 0.2% increase but high readings on consumer and producer prices suggest the risk is for a result as high as 0.5%.Markets have already pushed out the likely timing of a first Fed easing from May to June, which is currently priced at around a 70% probability. Futures imply a little more than three quarter-point cuts this year, compared to five at the start of the month. There are at least 10 Fed speakers on the docket this week, and are likely to repeat their mantra of staying cautious on rates. The ISM manufacturing survey is due on Friday, as are PMIs for China. Despite the hawkish shift, Wall Street still managed to make new highs helped by huge gains for AI diva Nvidia (NASDAQ:NVDA), which added $277 billion in market value last week.”This may be a catalyst not only for the Street to get materially more bullish on U.S. Equities but also to see a further decoupling of stocks and yields since the Mag7 are proving to deliver on earnings expectations irrespective of the interest rate environment,” wrote analysts at JPMorgan in a note.Early Monday, S&P 500 futures and Nasdaq futures were both trading 0.1% lower.MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed, having climbed 1.7% last week to seven-month highs. The gains were thanks in large part to a rally in Chinese stocks, which have jumped almost 10% in as many sessions on hopes for more aggressive stimulus.Japan’s Nikkei rose 0.5%, having climbed 1.6% last week to clear its previous record high as bulls look to test the 40,000 barrier.INFLATION, ALL THE TIME Figures on Japanese consumer prices are due out on Tuesday and are forecast to show core inflation slowed to 1.8% in January, the lowest since March 2022.A soft result would add to the case against a tightening from the Bank of Japan, though policy makers seem to be counting on rising wages to justify putting an end to negative rates in either March or April.Figures on inflation in the European Union are due on Friday, with the core again seen slowing to the lowest since early 2022 at 2.9% and bringing nearer the day when the European Central Bank might ease policy. Markets are almost fully priced for a first cut in June, with April seen as a 36% chance.The head of the ECB Christine Lagarde speaks later on Monday, as does the chief economist of the Bank of England.Incidentally, the Reserve Bank of New Zealand (RBNZ) holds its first policy meeting of the year on Wednesday and there is some chance it might actually hike rates given stubborn inflation, even though the country likely slipped into recession in the fourth quarter.The shift in Fed pricing saw Treasury yields hit a three month high last week, though bonds did managed to rally on Friday. The market faces a tough test later in the session when Treasury sells $127 billion of two- and five-year notes, with another $42 billion in seven-year paper due on Tuesday. [US/]There is also a risk some U.S. government agencies could be shut down if Congress cannot agree on a borrowing extension by Friday. In currency markets, higher bond yields globally have been a burden for the yen which hit multi-month lows on the euro, and a nine-year trough on the Australian and New Zealand dollars.Early Monday, the euro sat at 162.80 yen, just off its peak of 163.45, while the dollar held at 150.50 yen and just short of its top of 150.88. [USD/]The single currency was steady at $1.0820, having briefly been as high as $1.0889 last week.In commodity markets, gold was a fraction softer at $2,034 an ounce, having rallied 1.4% last week.Oil prices have drifted lower as concerns about demand, particularly from China, have outweighed risks to supply from the Middle East. [O/R]Brent dipped 11 cents to $81.51 a barrel, while U.S. crude fell 3 cents to $76.46 per barrel. More

South Korea is using Japan’s playbook to boost the value of its companies, analysts say, as its neighbour’s stock market surges to a record high.Under the “Corporate Value-up Programme”, the government will introduce an index of firms with strong shareholder value, South Korea’s Financial Services Commission (FSC) said.It is also considering tax incentives – such as preferential treatment in tax policies – for companies that enhance their market value and increase shareholder returns, the FSC said.”We expect it could help resolve the problem of ‘Korea Discount'”, once these measures are effective, FSC said in a statement.The ‘Korea discount’ refers to a tendency for South Korean companies to have lower valuations than global peers due to factors such as low dividend payouts, and the dominance of opaque conglomerates known as chaebols. More

TOKYO (Reuters) – Japan’s business-to-business service prices rose 2.1% year-on-year in January, slowing from a 2.4% annual gain in December, central bank data showed on Monday. The Bank of Japan is closely watching service price movements to see whether inflationary pressure is broadening in the economy to warrant phasing out its massive stimulus. More

Biden will meet with top Democrats and Republicans from both the House and Senate on Tuesday, where the president will discuss the “urgency” of passing a government funding bill before midnight on Friday (0500 GMT Saturday). He also plans to discuss a stalled national security bill that provides assistance to Ukraine, Israel and Taiwan.The meeting comes as lawmakers remain at a stalemate to avoid a shutdown. Senate Majority Leader Chuck Schumer, a Democrat, said in a statement Sunday that there still was no deal and called on House Speaker Mike Johnson, a Republican, to “step up” and strike a bipartisan compromise, despite objections from his party’s most conservative lawmakers.Johnson later Sunday posted on X that Republicans were still negotiating in good faith and contended many of the points still up for debate were later demands from Democrats. He said he hoped to reach an outcome “as soon as possible.” Funding is due to run out on March 1 for some federal agencies, including the Department of Transportation, while others like the Defense Department face a March 8 deadline. More

Last week Bank of England Governor Andrew Bailey welcomed what he described as “full employment” – with the official jobless rate at 3.8% – despite the economy entering a shallow recession in the second half of last year.However, the central bank wants to see wage growth slow from rates of more than 6% in order to put downward pressure on inflation, which remains double its target.Falling job vacancies offer a potential sign that employers are finding it easier to recruit than in the immediate aftermath of the COVID-19 pandemic, when the number of vacancies peaked at more than 1.3 million.Adzuna said 867,436 jobs were advertised in Britain in January, based on its analysis of more than 1,000 online sources. This was the lowest number since April 2021 and down from more than 1 million a year earlier.”January 2024 has proven to be one of the most difficult starts to the year for job hunters in recent years with companies continuing to put hiring plans on ice,” Adzuna co-founder Andrew Hunter said.The number of job seekers per advertised vacancy rose to 1.81 from 1.48 a year earlier.However, Hunter said, preliminary data for February suggested the number of vacancies was stabilising.Previous vacancy data from the Office for National Statistics showed an 18% annual fall in job vacancies for the three months to the end of January.Adzuna said the average starting salary – which employers only published for just under half of positions advertised – was 38,168 pounds ($48,450), 3.0% more than a year earlier.($1 = 0.7878 pounds) More

LONDON (Reuters) – As the world’s top global energy trading houses prepare for their biggest annual industry get-together this week in London they face a growing problem, what to do with their cash.Most trading houses, which are privately owned and controlled by their employees, disclose little about their cash position, equity or dividends.But according to more than 10 trading and banking sources and Reuters calculations, Vitol, Trafigura, Mercuria and Gunvor are collectively sitting on billions of dollars, even after paying out record dividends.”We borrow much less from banks and are waiting for good investment opportunities. But those are slim, especially in loss-making green energy,” said an executive at one of the top trading houses, who declined to be named.Trading houses, which already control large areas of global oil, gas and power markets, are finding it difficult to grow, while poor returns in recent years on wind, solar and hydrogen assets have irked some investors. The cash conundrum is likely to be one of the topics on the table as traders gather for receptions and parties in London ballrooms and pubs for International Energy Week.Vitol, the world’s biggest trader, has increased its total equity to $26 billion even after paying $5 billion in record dividends after earning $15 billion in 2022, its non-public balance sheet, which was seen by Reuters, shows.And its equity will probably rise close to $30 billion based on its 2023 results if Vitol sticks to transferring a significant chunk of retained earnings to equity, two banking sources familiar with the company’s performance said.Meanwhile, Mercuria and Gunvor have accumulated around $6 billion each in equity and retained earnings in recent years, sources familiar with their results told Reuters.Equity figures for Vitol, Mercuria and Gunvor have not been previously reported. All three companies declined to comment. Rival Trafigura disclosed in its latest report its equity grew almost 2.5 times to $16.5 billion in the last 4 years.The equity of the big trading houses is still dwarfed by oil majors such as Shell (LON:SHEL) with $188 billion or BP (NYSE:BP) with $85 billion, according to their latest reports.MARGIN CALLSUntil a decade ago, most traders preferred to have few assets, low equity or cash positions and pay out most of their profits in dividends to their employee shareholders.The exception was Glencore (OTC:GLNCY), which began trading as Marc Rich in the 1970s and gradually amassed coal and metals assets. It went public in 2011, raising $11 billion.Total equity is calculated as the difference between assets, including retained earnings, and liabilities and is key to determining how much a company is worth. Trading houses have bought assets over the past decade, from oil refineries to wind farms and metals mines, using profits and money borrowed from banks while keeping their cash reserves low.That changed in 2022 when gas prices soared after Russian gas supplies to Europe dropped as a result of Western sanctions that aimed to punish Moscow for its invasion of Ukraine.Traders often hedge their positions with derivatives, usually borrowing 90% of the money to buy them while using their own cash to cover the remainder. If prices soar, exchanges ask traders to contribute more of their own cash in so-called margin calls.”We all faced margin calls and rushed to borrow from banks. This is when we decided it was prudent to put aside more cash,” a second trading house executive said.SELF-FINANCEDTraders such as Trafigura work with up to 150 banks and have as much as $50 billion of credit lines available.At the peak of the margin call crisis traders used the lines in full and some banks refused to boost lending, while encouraging traders to find alternatives.Most traders decided to retain earnings as equity.”We beefed up our equity and as a result more of our trade became self financed,” a third trading executive said.When traders borrow less, banks earn less in interest and cannot increase their lending to other clients if they keep large credit lines open if these are not used.”Banks didn’t like going above credit limits in 2022. But they equally disliked it when traders barely used the lines in 2023,” said a banker at a top U.S. bank active in the sector.Bank borrowing would rise again once interest rates fall and traders spend more on investments, one of the three trading executives said. But that was not happening yet.”Sometimes traders just borrow money and put it back on a deposit with the same or different bank so it pays interest,” a fourth trading executive said. More