Economy

On Sept. 21, President Vladimir Putin ordered Russia’s first wartime mobilisation since World War Two as he sought to call up 300,000 people. Hundreds of thousands of people left Russia after the Kremlin announced what it called a “partial mobilisation”.”People … tend to withdraw cash funds in a situation of stress or uncertainty, as it was, for example, at the beginning of the year, but then they usually return the money to the banks,” the central bank’s report said. Alexander Danilov, head of banking regulation and analysis at the central bank, told a briefing on Thursday that the outflow did not pose a threat to the banking sector’s liquidity, as it was offset by an inflow of corporate funds totalling 900 billion roubles coming chiefly from energy sector companies. Yet demand for real estate is falling amid the rising uncertainty, Danilov said, and the central bank now sees mortgage lending growing 15-18% this year, less than was previously expected. This week, the central bank said that Russia’s partial mobilisation was having a negative impact on consumer and business confidence, adding the resulting labour force contraction could hold back economic activity in coming months. ($1 = 61.3500 roubles) More

MADRID (Reuters) -Spanish lenders are open to extending loan repayments for up to five years for vulnerable households that experience a rise of at least 30% in variable mortgage costs, a draft of the proposal seen by Reuters on Thursday showed.Three sources with knowledge of the matter had told Reuters on Wednesday some details of the plan, which is part of a wider set of measures aimed at helping struggling families cope with higher interest rates and rising cost of living that banks are discussing with the government.The loans which qualify in the plan have to account for at least 40% of the family’s income, once taking into account the rise in interest rates, the proposal showed.Economy Minister Nadia Calvino said she welcomed the banks’ initiative “to minimize the negative impact and alleviate the situation and finances of families in our country in a context of intense monetary policy change”. Banks would not have to automatically set aside provisions as a consequence of the loan extensions, according to the draft.”Households earning not more than 24,300 euros a year would be eligible to extend the lifespan of mortgage repayments,” one of the sources said on Wednesday.It was not clear how many may apply for such a measures but Patricia Suarez, the head of the consumer association Asufin, told Reuters that few people will qualify at that income threshold.The proposal put forward by banking associations to the Spanish government would be applied to variable rate mortgages signed from January 2012 onwards to finance first-home purchases, the draft showed.Once the extension of the mortgage term to final maturity has been agreed, the outstanding loan would continue to be repaid in new instalments, according to the draft.The loan would also continue to accrue interest at the appropriate rate.The instalments resulting from loan renewals would not be lower than the ones existing prior to the revision of the variable interest rate and the repayment period may not exceed 40 years from the date the loan was initially granted.”As it stands with this proposal, you may even end up paying more interest in the long term”, Suarez said.The measures, which would be introduced in an amended industry-wide code of good practice, would also allow for lower costs arising from notary and registry fees and mortgage renewals. More

The Bank of England’s deputy governor for monetary policy has cast doubt on financial market projections that UK interest rates need to rise to more than 5 per cent to bring down inflation. Speaking to an audience at Imperial College, London, on Thursday Ben Broadbent revealed tentative internal BoE modelling that suggested interest rates needed to rise from the current 2.25 per cent rate by much less than predicted by markets. His words rapidly lowered financial market expectations of the peak interest rate by 0.2 percentage points. That will be helpful for the government, since it will help reduce the projected costs of servicing public debt in the coming medium term fiscal plan, due to be announced on October 31. Lower market rates would also bring down mortgage costs, now averaging more than 6 per cent for a two-year fixed deal, according to research this week from Moneyfacts, a financial information company.Broadbent stressed that the UK had to accept it was poorer following the sharp increase in energy prices over the past year and that efforts to offset this — whether through government support, battles for higher wages or price increases to protect profit margins — would all be inflationary and force the BoE to raise rates further. But he expressed some doubt over the futures market, which predicted the central bank would need to raise the official interest rate to a peak of 5.25 per cent by next May. After he spoke this fell to 5 per cent.“Whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen,” Broadbent said.The deputy governor’s remarks are unusual because the central bank rarely comments directly on whether financial markets are correctly interpreting its internal thinking. In this speech, however, Broadbent went even further and published internal BoE modelling of the “optimal” interest rate response to reduce inflation from 10.1 per cent in September to its 2 per cent target. It looked at the rate rises required to offset the inflationary effects of the government’s energy price guarantee and sterling’s recent depreciation. The calculations showed that since the BoE’s August forecasts, these government measures — excluding the unfunded tax cuts in the “mini” Budget — would require additional interest rate rises peaking at 0.75 percentage points. Broadbent compared that increase with the market’s expected increase of 2.25 percentage points. While acknowledging everyone should take this comparison with a “heavy dose of salt”, and that the market had also moved in response to inflationary wage and price data, the deputy governor used the example to question whether market predictions were too high. “The graph does serve to illustrate quite how significant the moves in markets have been in the past couple of months or so,” he said, adding that raising rates to over 5 per cent would imply a large contraction in the UK economy. That would be more than the BoE thinks is necessary to bring inflation down to its 2 per cent target. However, Broadbent stressed that no one in the UK could avoid the pain of higher oil and, particularly, gas prices. “Import prices have risen significantly compared with the price of UK output. This has unavoidably depressed real incomes,” he said. Finally, he warned that if people and companies tried to resist the consequences of soaring energy costs, no one would be better off because inflation would stay high for longer and interest rates would have to rise further. “It’s understandable that employees and firms should want compensation for these losses, by raising wages and domestic prices,” Broadbent said. “Unfortunately, and at least collectively, these efforts will not make us better off. The effect is to raise domestic inflation with no ultimate impact on average real incomes.”Additional reporting by Tommy Stubbington More

LONDON (Reuters) – Insurance for humanitarian workers, journalists, engineers and others heading to Ukraine is now more expensive and harder to organise than during the Iraq war.While initially nervous about providing cover in the immediate aftermath of Russia’s February invasion of Ukraine, which Moscow refers to a “special military operation”, a few more insurers have become willing to do so in recent months, industry sources say, although it is costly.”The rates in Ukraine are currently higher than previously experienced in Iraq and Afghanistan…Principally, it’s a more active war zone rather than an insurgency situation,” said Alexis Fehler, accident and health underwriter at Lloyd’s of London-backed insurer OneAdvent.”Instability caused by Ukrainian gains and the subsequent retaliatory actions of the Russian forces will have a further dramatic impact on costs,” he added.Another Lloyd’s of London-backed insurer, Battleface, charges an average of 3,500 euros ($3,429) a week for a combination of 250,000 euros personal accident cover and 250,000 euros medical cover for Ukraine, said senior underwriter Roger Perry, although accident cover alone can cost up to 4,375 euros a week for higher-risk parts of the country. “Our underwriters charge in 7-day tranches…because everything changes so quickly,” he said, adding that “the further east you go, it does get higher”.Nonetheless, Battleface excludes the Donbas – two eastern Ukrainian provinces that Russia has unilaterally declared part of its territory – and the Odesa region in the south, although it can make exceptions, particularly for short periods such as one day. During the 2003 Iraq war, Lloyd’s of London and other insurers carried out daily reviews of the premiums charged to cover journalists operating in the Gulf given fears reporters could be used as human shields or executed, according to media reports at the time.A third insurance source who declined to be named said the daily insurance cost of sending a journalist to the riskiest parts of Ukraine could be 5-10% of the amount covered, meaning an organisation could bust through the total value of an individual’s cover after 10 days, an untenable situation for most.A typical policy covers accidental death and dismemberment, emergency evacuation, repatriation and out of country medical benefits.Organisations have been sending more media and medical workers and reconstruction experts to Ukraine, sources said, but insurers and security experts are particularly concerned about the risks to civilians after missiles rained down on Ukrainian cities, including Kyiv, following an attack on the bridge linking Russia to the annexed Crimean peninsula on Oct. 8.”As resources on the Russian side have changed…they’ve started using things like ballistic missiles, old anti-shipping missiles and then adapting them for land attack, these are a lot less accurate,” said James Dennis, regional security coordinator at consultants Healix. The United Nations and other aid organisations in Ukraine said last week that the missile attacks had disrupted their humanitarian work.”As Ukrainian counteroffensives ramp up ahead of anticipated further Russian mobilisation, the situation outside of areas directly affected by conflict will remain volatile,” said Sally Llewellyn, regional security director at consultants International SOS.A shortage of providers is also adding to insurance costs, sources said, pointing in particular to reluctance among some U.S. insurers to offer Ukraine cover.AIG (NYSE:AIG), which declined to comment, was drawing up broad exclusion clauses for Russia and Ukraine, Reuters reported earlier this year.”We do see some willingness by select insurers to consider writing coverage in Ukraine,” said Steven Capace, government contracting practice leader at broker Marsh, though he added: “The recent Russian missile attacks in population centres like Kyiv and Lviv…will likely create new apprehension among insurers.”($1 = 1.0206 euros) More

Stocks turned lower on Thursday as investors grew wary that rising inflation would curb corporate profits, following cautionary comments on demand from electric carmaker Tesla.Futures contracts for the US benchmark S&P 500 and Nasdaq 100 were down 0.2 per cent and 0.5 per cent in pre-market trading, putting further pressure on indices in Europe.The regional Stoxx 600 fell 0.6 per cent, while the FTSE 100 and Germany’s Dax index lost 0.2 per cent and 0.5 per cent respectively. In Asia, Hong Kong’s Hang Seng index slipped 1.8 per cent, falling to its lowest level in more than 13 years, after the city’s leader John Lee unveiled measures to attract international business to Hong Kong but did not scrap inbound travel or social distancing restrictions.Discussing the company’s third-quarter earnings, Elon Musk, Tesla’s chief executive, said demand was high. However, he warned that deflationary forces in the economy were gathering strength, with China and Europe experiencing “a recession of sorts”. Shares in Tesla, one of the world’s biggest companies by market capitalisation, fell 5.8 per cent in pre-market trading. The declines in Europe and Asia came after declines in the previous session for US stocks, as bellwether consumer companies reported on the effects of inflation in third-quarter earnings on Wednesday.Investors have been watching corporate earnings season closely for signs that inflation is hitting business activity and consumer confidence. On Wednesday, consumer goods groups Nestlé and Procter & Gamble reported falling sales volumes, and Nestlé chief executive Mark Schneider warned of higher prices.Central banks, including the US Federal Reserve, have raised interest rates aggressively to tame rising prices this year. The speed and size of the rises have sparked concerns that central banks will push the global economy into an economic downturn.“The honeymoon rally of the last few days petered out yesterday . . . as investors turned their focus back to central banks and how fast they’ll hike rates,” wrote Jim Reid, a strategist at Deutsche Bank.Investors will look for further clues on the health of the US economy when groups including American Airlines and cigarette maker Philip Morris International report on Thursday.In currency markets, the yen briefly traded above ¥150 against the dollar, a fresh 32-year low.The Bank of Japan’s ultra-loose approach to monetary policy and the contrasting interest rate rises from other global central banks has led the Japanese currency to fall more than 20 per cent this year. The dollar slipped 0.1 per cent against a basket of six peers, with the pound down 0.2 per cent against the greenback.Elsewhere, UK government bonds recovered from earlier losses on Thursday, with the yield on the 10-year gilt slipping 0.02 percentage points to 3.85 per cent as the price of the asset rose. Thirty-year gilt yields also fell 0.09 percentage points to 3.90 per cent, having also fallen in the previous session after the Bank of England decided to exclude longer dated debt when it begins bond sales next month. More

The Ghanaian cedi plummeted to a new low of 12.3 to the dollar on Wednesday, compared to 10.5 last week, as inflation surges despite repeated rate hikes by the central bank.Ghana’s government is in the process of negotiating a support package with the International Monetary Fund, but some merchants say that help is not coming fast enough. “It’s because of this dollar situation that we closed the shop. Day in day out, the dollar is going up now. It’s too much for us,” said Francis Fynn, 53, who has managed his family’s small stationery store for two decades. Because of the worsening exchange rate, he can’t afford to buy books and paper from his suppliers, he said. “We decided to close the shops, in hopes of sitting down with the government so we can negotiate things.”A government spokesman did not immediately respond to a request for comment. Fynn is a member of the Ghana Union of Traders Association, which called for all its members in Accra to suspend activities from Wednesday to Monday in protest. In one usually crowded street market downtown, about half to two-thirds of shops were closed, while some activity carried on. Bookseller Alfred Kobina Otsiwah, who is not a member of the union, said his business was suffering too but he did not see a strike as the solution. “If we close our shops until Monday, the government isn’t going to just reduce the rate of the dollar because of that. The rate will likely even increase by then. Who loses?” he said, showing his wares on the small nook of a balcony downtown. “Closing the shop, I don’t see it as putting food on my table.” More

Investing.com — Tesla is set to open lower after admitting it probably won’t reach its delivery targets this year. The U.S. will release the Philly Fed manufacturing survey as well as data on jobless claims and existing home sales, while no fewer than three Federal Reserve governors speak in the afternoon. Bond weakness continues to weigh on stocks, despite more decent earnings reports late on Wednesday. The U.K. descends into political farce, taking its bond market with it, and oil pushes higher as U.S. stockpiles record a surprise drop. Here’s what you need to know in financial markets on Thursday, 20th October.1. Tesla set to fall after cutting delivery targetTesla (NASDAQ:TSLA) is set to open down nearly 6% after the electric car maker cut its delivery forecast for the year, unable to shake off the effects of surging input costs and scaling problems at its factories in Texas and Germany.The outlook overshadowed a sharp rebound in profit to $3.2 billion in the third quarter, made possible by the willingness of its customers to absorb those higher costs. It also overshadowed a hint from CEO Elon Musk that the company may buy back up to $10 billion of stock next year.Tesla stock hit a 16-month low last week, due both to broader market weakness and more specific concerns that Musk may be forced to sell more of his holding to finance the acquisition of Twitter (NYSE:TWTR).2. Jobless claims, existing home sales, Philly FedThere’s a barrage of economic data from the U.S. to digest, with weekly jobless claims and the Philadelphia Fed’s business survey at 08:30 ET (12:30 ET), followed by existing home sales numbers for September at 10:00 ET.The Philly Fed will likely be the only one of these capable of generating a surprise. Home sales are already set firmly in a downward trend due to higher selling prices and mortgage costs, while jobless claims have failed to react much to signs of a slowdown in pockets of the economy.A number of Federal Reserve officials will all speak after the data, with Philadelphia’s Patrick Harker at 12:00 ET, followed by Governors Philip Jefferson, Lisa Cook, and Michelle Bowman in the course of the afternoon.3. Stocks set to open lower on bond weakness; PM increases offer for Swedish MatchU.S. stock markets are set to extend Wednesday’s losses at the open, with the fresh selloff in the bond market undoing much of the boost to sentiment from an earnings season that has, so far, turned out better than feared.The yield on the 10-Year benchmark Treasury bond hit its highest since before the 2008 financial crisis on Wednesday and has continued to inch higher overnight, trading up 2 basis points at 4.15%.By 06:15 ET, Dow Jones futures were flat, while S&P 500 futures were down 0.3%, and Nasdaq 100 futures – typically more sensitive to bond market movements – were down 0.6%.Stocks in focus Thursday include AT&T (NYSE:T), after another quarterly gain in mobile subscribers, and Philip Morris (NYSE:PM), which has increased its offer for Swedish Match and bought the U.S. rights for IQOS heated tobacco products from Altria (NYSE:MO). ADRs in European telecom networks companies Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK) have also grabbed headlines for all the wrong reasons, posting weak quarterly updates.4. U.K. political chaos keeps Gilts under pressureThe chaos in U.K. politics continued, pushing the pound and U.K. government bonds lower. The move was amplified by a Bloomberg report suggesting that the cost of indemnifying the Bank of England for losses on its portfolio of Gilts is set to surge as the Bank begins its ‘quantitative tightening’.The 10 year Gilt yield rose above 4% again, before retracing after banks showed only low interest in the Bank’s repo operation, intended as a backstop to fragile market confidence.Late on Wednesday, the government had lost another senior minister, Home Secretary Suella Braverman – an immigration hardliner – resigning in an apparent attempt to force the resignation of Prime Minister Liz Truss, as divisions between Conservative Party lawmakers create an increasing sense of paralysis in the government.5. Oil pushes higher after U.S. stockpiles fallCrude oil prices pushed higher overnight, still supported by the surprise drop in U.S. crude inventories last week that was confirmed on Wednesday by the Energy Information Administration. Doubts about the ability of further releases from the U.S. Strategic Petroleum Reserve to alter underlying market dynamics have also quickly lent support to prices.By 06:35 ET, U.S. crude prices were up 1.9% at $86.12 a barrel, while Brent futures were up 1.5% at $93.81 a barrel.In Europe, the cost of the spiraling energy crisis was again apparent in reports that gas importer Uniper (ETR:UN01) may need another 40 billion euros ($39 billion) in support from the German government, while German producer price inflation hit nearly 50% on the year, mainly due to a 250% increase in gas and electricity prices. More

FRANCE* Workers at TotalEnergies ended their strikes at all but two sites in France on Thursday, and morning staff at the Normandy and Feyzin refineries were the only ones to continue the stoppage, a CGT union representative said.* Strikes have affected work at 20 of France’s 56 nuclear reactors, an FNME-CGT power union representative said on Wednesday, delaying maintenance at many of them ahead of planned talks with operator EDF (EPA:EDF). The union has been staging rolling strikes over wages at some nuclear power plants.* The CGT said it was calling for a strike at luxury goods company L’Oreal to seek higher wages for staff.* Regional train traffic in France was cut by about half on Tuesday as several unions called a nationwide strike. They are seeking to capitalise on anger over decades-high inflation to expand weeks of industrial action at oil refineries to other sectors. There was also some disruption to schools as the strike primarily affected the public sector. * Thousands of people took to the streets of Paris on Sunday to protest against soaring prices.BRITAINBritish railway workers union RMT said on Wednesday it would take strike action against 14 train operating companies in early November after the country’s rail industry body failed to present new offers on pay, jobs and working conditions.* Nearly 2,000 staff at the Atomic Weapons Establishment, which makes and maintains nuclear warheads, will vote on whether to strike after they rejected a 5% pay award, the Prospect union said on Wednesday. It said a ballot for its members at AWE would open on Oct. 24 and run for two weeks. * About 1,000 GXO drivers in Britain will take strike action over five days from the end of the month in a dispute over pay, the Unite union said on Tuesday, warning of disruption to beer deliveries. * Hundreds of workers at the port of Liverpool, one of Britain’s largest container ports, are due to take two more weeks of strike action over pay and jobs from Oct. 24. The Communication and Workers Union, representing 115,000 Royal Mail (LON:IDSI) postal workers, held strikes in September and early October, and have threatened more strikes after months of failed negotiations over pay and operational changes.* More than 300,000 members of Britain’s largest nursing union have begun voting over a strike to demand a pay rise. Junior doctors and ambulance workers also plan to ballot over pay disputes. Rail workers have also walked out over disputes over pay and job security.GERMANY* Pilots at Lufthansa’s Eurowings began a three-day strike over working hours on Monday, their union said, affecting tens of thousands of the budget airline’s passengers. The walkout is due to end at 2159 GMT on Oct. 19.HUNGARY* Thousands of Hungarian students and parents protested on Oct. 14 in the second major rally in two weeks to support teachers who have been fired for joining a strike for higher wages, and more teachers being warned of dismissal.CZECH REPUBLIC* Tens of thousands of Czechs protested in Prague on Sept. 28 against the government’s handling of soaring energy prices and the country’s membership of NATO and the European Union. The demonstration was organised by far-right and fringe groups and parties including the Communists.BELGIUM* Thousands took to the streets in Brussels on Sept. 21 to protest at soaring energy prices and the cost of living. A similar protest in June drew around 70,000 Belgian workers. More