Economy

Investing.com — Russian President Vladimir Putin signals no let up in the war in Ukraine in a major speech. Walmart and Home Depot shed more light on the health of the U.S. consumer at the end of last year, while stock futures continue to reel from last week’s stronger-than-expected economic data. Europe’s economy is feeling the benefits of a sharp drop in energy prices at the end of last year. Here’s what you need to know in financial markets on Tuesday, February 21st.1. Putin speech points to war dragging onA day after U.S. President Joe Biden’s surprise trip to Kyiv, Vladimir Putin prepared Russia for a long war in Ukraine in a keynote speech that cast the conflict as an existential struggle against the West.Putin’s speech gave no hint of any change in policy, nor of any immediate economic or political constraints on Russia’s ability to pursue a war that has been the dominant issue in geopolitics for a year. It repeated largely familiar grievances that Russia hadn’t started the war, and is struggling against a western plot to destroy it.Elsewhere, China said it would present proposals for peace talks between the two sides by the end of the week, and criticized the West for “fuelling” the war with its repeated packages of military aid to Ukraine.This week will see the anniversary of Russia’s invasion, the third time Putin has ordered Russian troops into a neighbor’s territory since 2008.2. Walmart, Home Depot earningsWalmart (NYSE:WMT) and Home Depot (NYSE:HD) report quarterly earnings, in what is likely to be seen as a litmus test for the health of the retail sector.Analysts expect Walmart’s earnings to be largely unchanged from a year ago, despite a 4% rise in revenue. The retail giant is expected to have absorbed more of the rise in operating costs at the end of the year as consumer incomes weakened.Home Depot’s adjusted earnings per share came in slightly ahead of expectations, but revenue was lower than street forecasts and the group’s outlook for the year ahead was worryingly weak. The stock fell nearly 4% in premarket trading.3. Stocks set to fall as rate fears persistU.S. stock futures fell in premarket trading as equity markets prepared to reopen after the long holiday weekend.Fears of higher interest rates appeared again to be the dominant worry, with bond yields still rising all along the yield curve in the wake of stronger-than-expected inflation and retail sales data last week.By 06:20 ET (11:20 GMT), Dow Jones futures were down 274 points, or 0.8%, at a three-week low, while S&P 500 futures were down 0.8%, and Nasdaq 100 futures were down 0.9%.In addition to Walmart and Home Depot, Medtronic (NYSE:MDT), Ingersoll Rand (NYSE:IR), Molson Coors (NYSE:TAP), Huntsman (NYSE:HUN), and Teck Resources (NYSE:TECK) all report quarterly earnings before the open, while Public Storage (NYSE:PSA), Palo Alto Networks (NASDAQ:PANW), Coinbase (NASDAQ:COIN), Caesars (NASDAQ:CZR), Diamondback (NASDAQ:FANG), and others report after the close.4. Europe returns to growth, maybeBusiness surveys in Europe suggested that the euro zone and U.K. economies are growing again, thanks to the sharp drop in energy prices at the end of last year. The pound rose over half a percent against the dollar but the euro slipped.Preliminary estimates of the composite purchasing managers indices were both above expectations and above the 50 line that typically denotes economic expansion. In addition, the German ZEW index of economic sentiment rose for a fifth month to its highest level in a year.Analysts warned, however, that the figures excluded retail sales and construction – two sectors especially exposed to higher borrowing costs and falling real incomes.5. Oil still adriftCrude oil prices continued to struggle for direction, amid reports that suggest Russian oil continues to find its way to market easily enough despite western sanctions.Global Witness reported on Monday that Shell (LON:SHEL) and Vitol – neither of which commented on the story – have sharply increased imports of fuel into Europe from Turkish refineries that have in turn increased their offtake of Russian crude.By 06:35 ET, U.S. crude futures were up 1.1% at $77.42 a barrel, while Brent was down 0.1% at $84.00 a barrel.The release of the American Petroleum Institute and U.S. government oil inventory estimates for last week are both delayed by one day owing to the public holiday on Monday. More

In a note dated late Monday, the brokerage said in addition to an increase of 50 basis points in March and 25 basis points in May, it was estimating a 25 basis-point hike in June. Goldman’s change in expectations comes after hawkish commentary from ECB board member Isabel Schnabel and French central bank chief Francois Villeroy de Galhau, two influential policymakers from the 26-member Governing Council on Friday.Markets currently see ECB rates peaking at around 3.7% by the end of summer. More

MIAMI (Reuters) – As developers seek to build up Miami’s skyline, long-time resident Ishmael Bermudez is digging in – literally.The artist and amateur archeologist lives in a single-family home in Brickell, a rare property in Miami’s financial district. Bermudez, alongside community groups and professional archeologists, is pushing for more preservation in Miami as new developments unearth historical relics.”It’s up to us, the people, to make sure that this don’t get destroyed,” said Bermudez. Developers cannot “come here and intimidate us with their money – they have to work with us,” he said.Bermudez’s home in Brickell, just south of downtown Miami, is painted with a multicolored seascape of fish and underwater plants. Tropical birds sing in his garden, an uncommon sound in the fast-growing neighborhood dominated by the floor-to-ceiling glass of high-rise developments.After excavating under his home, Bermudez discovered fossils – and even human remains, which were given to local authorities.Earlier this month, community members called for building work to be postponed at 444 Brickell Avenue so that archeologists could preserve prehistoric artifacts found there, including bones, pottery and tools.Related Group, the real estate developer, did not respond to requests for comment. The City of Miami’s Historic and Environmental Preservation Board did not respond to a request for comment. Modern-day Brickell, which sits near the mouth of the Miami River, was once the site of a vibrant settlement called Tequesta, according to William Pestle, an archeology professor at the University of Miami. Spanish explorers encountered Tequesta in the 16th century, yet its history is not widely known.”Something old by Miami standards is from the 1970s or the 1960s – you don’t see the history of the city presented” as it is in Boston, New York or Philadelphia, Pestle said. “As a consequence of that, we come to think that there is no history.” More

WASHINGTON (Reuters) – A year into the U.S. Federal Reserve’s most aggressive monetary crackdown since the 1980s the strength of the U.S. economy has befuddled policymakers now faced with an unexpected dilemma: Are things too good?    There’s little sign the U.S. job market, currently sporting a more-than-half-century low 3.4% unemployment rate, is weakening. Consumers keep spending, and after seeming to flirt with recession last year the economy continues to grow and the risks of an imminent downturn diminish. Equity markets jumped to start the year.    The problem for the Fed is whether those conditions will allow inflation to slow gradually as policymakers say it must, or whether they will have to make good on a warning that taming inflation will require “pain” in the form of rising joblessness – and jack interest rates high enough that the economy does indeed buckle.     It’s a debate already joined among officials still arguing for more urgent rate increases, those advocating more patience, and those in the middle trying to reconcile sometimes conflicting data in an economy still influenced by the Covid-19 shock.”When you see a very strong economy and a strong labor market you do ask yourself … whether that would put upward pressure on inflation and mean that you need to do more,” Richmond Federal Reserve President Thomas Barkin said Friday.He said he did not ascribe much “signal” to recent outsized data readings like January’s 517,000 new payroll jobs that may have been influenced by one-off seasonal effects. But he also said inflation progress was “slow,” still-present pandemic effects such as large household cash reserves may be undercutting Fed efforts to curb demand and spending, and a tight labor market’s effects on wages and prices is a wild card. Some officials argue low unemployment will mean little to the inflation battle; some argue it is central and needs to rise.’ONGOING INCREASES’Minutes of the Fed’s Jan. 31-Feb. 1 policy meeting will be released Wednesday and are expected to reflect a broad discussion, with some officials still advocating then for aggressive half-point rate increases and others wanting to step more gingerly towards an end to hikes. While the Fed settled for a quarter-percentage-point rise, it also said “ongoing increases” would push the policy rate as high as needed.Asked at a press conference afterward if officials actively discussed the conditions for a pause, Fed Chair Jerome Powell said Wednesday’s minutes would offer “a lot of detail … The sense of the discussion was really talking quite a bit about the path forward.”It’s a path conditioned on economic data that lately has been hard to square, with fears of “stagflation” – stalled growth and persistent inflation – giving way to parsing what for now is a period of disinflationary expansion.Based on recent strong job and retail sales outcomes, an Atlanta Fed GDP tracker put first-quarter growth at a 2.5% annualized pace, well above the economy’s potential. Recent data also showed inflation continuing to slow, though by less than expected.Between that momentum and the still-slowing pace of price hikes, financial markets last week snapped more closely into line with Fed arguments that the battle to tame inflation would take time, yet may be won without a serious economic downturn. For much of the time since the Fed began raising interest rates last March, investors have expected it to stop or even reverse course because of anticipated economic damage.Today’s 4.5%-4.75% policy rate is its highest since the eve of the housing crisis in 2007. With neither the job market cracking nor inflation cratering, investors now seem to be giving the Fed the benefit of the doubt.A recent alignment of market pricing close to the Fed’s most current set of policy projections has been a “welcome” development, St. Louis Fed President James Bullard said this week. After falling from November through January, counter to the Fed’s hope to tighten financial conditions, the yield on the 2-year Treasury note has risen 43 basis points this month, the most since September.The core issue now is whether progress on inflation continues despite the economy’s momentum – and how quickly the Fed will need to see progress before it decides more effort on its part is needed.’NOT TAKEN HOLD’ The easy gains on inflation may have been captured from things like improvements in business supply chains, a drop in global energy prices, and consumption switching from goods towards services – things Fed officials had in mind when they called inflation’s initial outbreak back in 2021 “transitory.”Those have helped pull consumer inflation from a peak of 9.1% in June to 6.4% last month, with some goods prices actually falling now. The Fed’s 2% inflation target is based on another measure last at 5% in December.Upcoming data will show whether inflation can continue to decline alongside economic growth, but Fed officials were already keying on different points of emphasis.”I don’t see that indicating to me that we’re slowing the economy,” Fed Governor Michelle Bowman said of recent data, including strong retail sales and job growth. “The work that we’ve done to this point has not taken hold.”Richmond Fed’s Barkin, by contrast, said he took little “signal” from recent data, anticipating inflation would continue falling.Bullard said he felt businesses would drive “disinflation” by soon competing aggressively for market share, while Barkin said important industries including food, health care and still seemed to have pricing power.Private economists were walking through the same thicket and coming to roughly the same conclusion – more persistent inflation, potentially higher Fed rate increases, but, at least so far, continued growth and a strong labor market.”Activity data has been noisy and we are inclined to downplay some of its recent strength,” Bank of America (NYSE:BAC) economists write, even as they raised their GDP forecast, raised their outlook for the Fed’s policy rate, and pushed expectations of a rate cut into March of 2024.More notable: The Fed will update its own projections next month. 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WASHINGTON (Reuters) – The United States and its allies will impose new sanctions this week to crack down on Russia’s efforts to evade sanctions and export controls aimed at forcing Moscow to end its war in Ukraine, Deputy Treasury Secretary Wally Adeyemo said on Tuesday.Adeyemo said a coalition of more than 30 countries would crack down on Russia’s purchases of dual-use goods like refrigerators to secure semiconductors needed for its military. The sanctions would also seek to do more to stem the transshipment of oil and other restricted goods through bordering countries, although he did not give details.Officials would also warn companies and individuals still doing business with Russia that they faced sanctions if they continued doing so.”The breadth of this coalition is what will enable us to continue to isolate Russia,” Adeyemo will say in a speech to be delivered at the Council on Foreign Relations on Tuesday, ahead of Friday’s one-year anniversary of Russia’s invasion.”We will force those that fail to implement our sanctions and export controls to choose between their economic ties with our coalition of countries – representing more than half of the world’s GDP – or providing material support to Russia, an economy that is becoming more isolated every day.”The goal, Adeyemo said, was to keep raising the cost to Russia of evading sanctions and trying to get around an oil price cap imposed by the Group of Seven rich nations and Australia by creating its own alternative ecosystem to sell oil.Russia had already been forced to divert billions in funds from the war to pay for insurance, shippping and other services, and Washington would seek “additional ways to drive up” those costs, he said, without elaborating. Echoing remarks made in an interview with Reuters last week, Adeyemo said U.S. and allied officials would warn companies and financial institutions in their own countries – and India and China – against evading sanctions imposed on Russia.They were also providing “actionable” intelligence to countries, including several of Russia’s neighbors, to enable them to stamp out sanctions evasion. If they failed to act, he said, “we and our partners are prepared to use the various economic tools at our disposal to act on our own.”U.S. and coalition officials would warn companies and banks in these countries that they faced being cut off from Western markets and financial systems if they did not enforce sanctions.Adeyemo acknowledged that Russia’s economic data appeared better than expected at the start of the war, but said Western sanctions were forcing the Kremlin to use limited resources to prop up its economy.”One year into this conflict, Russia’s economy looks more like Iran and Venezuela’s than a member of the (Group of 20 major economies),” he said in the prepared remarks.Adeyemo said Washington was concerned about deepening ties between Russia and China, but Beijing could not provide Moscow with advanced semiconductors it needed to replace military equipment lost since the start of the war. More

BERLIN (Reuters) – Germany must end its expansionary fiscal policy or risk fuelling inflation, German Finance Minister Christian Lindner told Reuters in an interview. “Rising interest rates are already a signal for the government to see that it can’t continue like this,” Lindner said. Lindner said Germany was monitoring inflation developments closely and had already introduced a raft of measures to curb inflation.Among those are electricity and gas price brakes that come with savings incentives, as well as a tax-free inflation premium that allows employers to compensate for higher inflation without raising salaries, “making a potential wage-price spiral less likely,” he said.The International Monetary Fund (IMF) recently warned that second round effects could lead to higher inflation again following some easing, and urged central banks to act decisively to tame inflation to avoid such a scenario. Lindner said that IMF warnings had to be taken seriously. “I am sure that the European Central Bank is also following the situation closely,” he said. More

Jeremy Hunt has received an unexpected £30bn windfall in the public finances ahead of his March Budget, giving the chancellor scope to provide extra support for energy bills, keep fuel taxes down and potentially solve public sector strikes.In figures that surprised economists and the Treasury, the Office for National Statistics said the public sector registered a £5.4bn surplus in January, far better than the £7.8bn deficit expected by economists polled by Reuters.In the financial year to January, the public sector borrowed £116.9bn, a figure £30.6bn less than forecast in November by the Office for Budget Responsibility, the UK official watchdog. With much of that windfall coming from higher than expected tax receipts, it is likely to feed through into better public finance forecasts in future years. Ruth Gregory, deputy chief UK economist at Capital Economics, said the figures suggest that Hunt “will have some wriggle room in the Budget to fund near-term tax cuts and/or spending rises”.Samuel Tombs, economist at Pantheon Macroeconomics, agreed that Hunt was “in a comfortable position” ahead of the Budget on March 15.Although public borrowing is still on track to be higher in 2022-23 than last financial year, the £7bn increase in the deficit so far with only two months to go is far below the £44bn increase the OBR forecast for the full financial year in November. The improvements have come largely from stronger than expected tax receipts. Self-assessed income tax receipts were £21.9bn last month, which was the highest January figure since monthly records began in April 1999 and one-third higher than in January 2022.Receipts from value added tax were also up from last year. More money came in for the government from the pay as you earn income tax, reflecting the resilience of the labour market. The energy profits levy also provided an additional boost, pushing the central government’s current receipts to £107.8bn, an increase of £12.6bn, or 13.6 per cent compared with January 2022.

Tax revenues “have held up impressively” in the face of weak economic activity, noted Martin Beck, chief economic adviser to the EY Item Club.The fall in wholesale energy prices in recent months should continue to bring down the cost of the Energy Price Guarantee. As interest rates are also expected to fall, borrowing in 2023/24 should significantly undershoot the OBR’s November forecast of £140bn, economists noted.However, even energy costs were lower than expected. The government’s energy price subsidies cost £8.4bn in January, compared with the £9.5bn projected by the OBR.Spending on central government debt interest reached £6.7bn, the highest January figure since monthly records began in April 1997, but lower than forecast by the OBR partly thanks to lower RPI inflation to which many gilts are linked.The improvements will allow Hunt to freeze fuel taxes in his Budget costing £6bn, keep the energy price guarantee at £2,500 rather than the planned rise to £3,000 in April and provide money to ease settlements in public sector pay disputes. The Treasury reacted with caution on Tuesday to the figures. Hunt said: “We are rightly spending billions now to support households and businesses with the impacts of rising prices, but with debt at the highest level since the 1960s, it is vital we stick to our plan to reduce debt over the medium term.” More

China has warned western countries against “adding fuel to the fire” in Ukraine and reiterated calls for peace talks ahead of an expected visit to Moscow by Beijing’s most senior diplomat Wang Yi. The comments, from foreign minister Qin Gang, came as Beijing moved to institutionalise its so-called Global Security Initiative, a proposed alternative international defence framework that observers see as a challenge to the US-led order.“We will continue to push for talks and provide China’s wisdom for [finding] a political solution to the Ukraine crisis,” Qin told a seminar in Beijing on Tuesday. He also warned “relevant countries” against shifting the blame on to China for the war and suggesting “today Ukraine, tomorrow Taiwan” — a reference to concerns that Beijing might invade its smaller neighbour, over which it claims sovereignty. The diplomatic push by China, which has announced that it will release its own peace plan for Ukraine to mark the first anniversary of the conflict on Friday, has been received with deep scepticism in the west.US secretary of state Antony Blinken warned that China was strongly considering supplying Russia with arms after meeting Wang at the Munich Security Conference at the weekend. Beijing countered that Washington was the one fuelling the war by providing Ukraine with weapons.China’s leader Xi Jinping has not called Ukraine’s president Volodymyr Zelenskyy since Russia’s full-scale invasion began, despite speaking to Vladimir Putin multiple times and touting a “no limits” partnership between Moscow and Beijing. Russian state-owned news agency Tass reported that Wang would arrive in Moscow on Tuesday afternoon. Kremlin spokesperson Dmitry Peskov said on Monday that Putin might meet the Chinese diplomat. Drew Thompson, a China expert at the Lee Kuan Yew School of Public Policy at the National University of Singapore, said China’s peace plan would probably aim to maintain the status quo, repeating warnings against the use of nuclear weapons while avoiding admonishing Moscow.“I don’t think it will be particularly impactful but at the same time it’s not going to empower Vladimir Putin,” Thompson said.Beijing also released a paper on the previously announced Global Security Initiative, a forum that analysts believe could be intended to rival the western-led Munich grouping.Beijing “encourages the founding of a global security forum to provide a new platform for governments, international organisations, think-tanks [ . . . ] to participate in global security governance”, it said in a concept paper on the initiative, which Xi launched in April last year. The paper also proposed “holding high-level [meetings] on the Global Security Initiative to strengthen policy communication in the field of security, promote intergovernmental dialogue and co-operation, and further foster synergy in the international community to address security challenges”.Analysts said that while the document mainly rehashed principles that had been part of China’s foreign policy for years, the push for regular conferences and government consultations was a novel development.“It should be like the Munich Security Conference, but that is organised by the west, and China would like to have its own,” said Zhang Guihong, a professor and executive director of the UN Studies Centre at Fudan University in Shanghai.

Zhang added that Beijing was likely to start organising regular meetings of foreign, defence and interior ministers from countries affiliated with the GSI.This would emulate the format of China’s Global Development Initiative — which is intended to help developing countries with poverty alleviation and other issues — and regional groupings created by Beijing such as a co-operation forum with African nations.“Most importantly, this will be with developing countries from our neighbouring region, from Latin America and Africa,” Zhang said. Additional reporting by William Langley in Hong Kong and Maiqi Ding in Beijing More