Economy

Britons struggling to keep up with the rising cost of living are unlikely to abstain from a glass of wine on the couch in the evening, according to the head of Australia’s largest listed wine producer.Tim Ford, chief executive of Treasury Wines Estates, which owns brands including Penfolds, Wolf Blass and Lindeman’s, said rising global inflation and higher household expenses were putting pressure on the lower end of the wine market.But in UK, where inflation has climbed to a 40-year high of 10.1 per cent, Ford said there was no sign that consumers were cutting back on wine spending. “We haven’t seen that shift in the UK. The £6-£8 a bottle price point continues to be pretty strong,” he said.Ford predicted that at-home consumption of lower-end wine would prove resilient. “That pandemic trend has really stuck,” he said, referring to how people started drinking more at home after pubs and bars were closed because of lockdowns. Phillip Kimber, a consumer analyst with E&P Financial Group, said that during the pandemic and the 2008 financial crisis, in many markets, including the UK, consumption of alcohol at home increased. “Supermarket sales went crazy,” he said.However, Kimber warned that the company was not recession-proof, as higher-margin wines sold in bars and restaurants were less in demand. “In an acute recession, the corporate credit card gets reined in and spending on premium wines gets hit,” he said.Ford said that Treasury Wine Estates would not raise the prices of cheaper brands as the market could not absorb the higher cost, though the winemaker has raised prices for some of its popular luxury and premium brands. “These are not just lazy price rises. We can only do it where demand exists,” he said. TWE suffered a devastating blow when China introduced punitive tariffs on the Australian wine industry in November 2020. China was its most lucrative market at the time, and the company was forced to restructure and cut costs to deal with the impact of the tariffs.

TWE’s full-year results for the year ending June 2022 showed pre-tax profit increasing just over 4 per cent to A$372.9mn ($259mn). The business grew in the second half as its plan to target the US, UK and non-Chinese Asian markets including Thailand, Malaysia and Singapore took hold. “It has been an exciting year, geopolitics aside,” said Ford. TWE has maintained a presence in China and will introduce a Chinese version of Penfolds next month. Shares in TWE rose 4 per cent following the results. More

Ghana’s central bank has raised interest rates by 300 basis points to 22 per cent, its largest increase since 2002, as it seeks to tame soaring inflation and a fast-depreciating local currency.The rise was announced late on Wednesday after an emergency meeting of the bank’s monetary policy committee. The committee, which usually meets every two months, convened to address the “strong underlying inflationary pressures”, it said in a statement.The move comes after the central bank unexpectedly held interest rates last month. The bank has bumped benchmark rates by 850 basis points since November, having previously held them at 13.5 per cent since 2015.Central banks across emerging markets are making big rate rises to tackle falls in their currencies against the dollar, which has risen in value on the back of the US Federal Reserve’s interest rate increases. Many commodities are priced in dollars on global markets, exacerbating the impact of soaring prices for food and energy on countries that have seen their currencies depreciate sharply. The National Bank of Hungary raised one of its main interest rates by 200 basis points last month to tackle the forint’s fall. The South African Reserve Bank made its biggest rate rise for almost 20 years in July, increasing borrowing costs by 75 basis points to 5.5 per cent. Some emerging market central banks, such as those in Brazil and Mexico, started raising rates last year in anticipation of monetary tightening by the Fed. Those moves had, according to Agustín Carstens, general manager of the Bank for International Settlements, the so-called central bankers’ bank, helped to prevent attacks on their currencies and temper price pressures. Economies in Africa had only begun to recover from the shock of Covid-19 when Russia’s invasion of Ukraine jeopardised their progress, according to the IMF’s most recent growth forecast for sub-Saharan Africa. Growth is expected to weaken in the region this year. “Surging oil and food prices are straining the external and fiscal balances of commodity-importing countries and have increased food security concerns in the region,” the IMF said.Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank, said in a note that the Ghanaian move was “fully justified” as it was clear that inflation in Ghana was unlikely to slow soon.Inflation in Ghana rose in July for the 11th consecutive month to 31.7 per cent, its highest level since November 2003. Food inflation stands at 32.3 per cent. According to the Ghana Statistical Service, the primary drivers of inflation last month were transport, housing and fuel costs.Core inflation, which excludes energy and utility costs, increased to 30.2 per cent, up from 28.4 per cent in June. The central bank’s inflation target is between 6 and 10 per cent.The cedi, Ghana’s currency, has lost more than 25 per cent of its value year on year and is the world’s second-worst performing currency behind the Sri Lankan rupee in 2022. The three main credit agencies have downgraded Ghana’s bonds to junk status.The country’s central bank, in its statement, said it would begin buying foreign exchange from mining and oil companies to shore up its reserves.Ghana’s finance ministry recently began discussions with the IMF to secure a $3bn facility. It is a political blow for President Nana-Akufo Addo and his ruling New Patriotic party. He had earlier in the year resisted calls from the opposition to seek help from the Washington-based lender. “A higher policy rate alone may not be sufficient to stabilise the currency in the very near term, but it will at least provide reassurance on the seriousness of Ghana’s negotiations with the IMF,” said Khan of Standard Chartered.The committee also increased the primary reserve requirement of local banks from 12 to 15 per cent to be phased in over three months from September 1.Elsewhere in the region, inflation in Nigeria has hit a 17-year high of almost 20 per cent, driven by energy, transport and food costs. More

In the gas crisis there has been one bright spot. Norway — democratic, friendly, reliable Norway — has stepped up to help keep the lights on in Europe, maximising production even at the expense of its own oil output to try and replace every molecule it can of Russian supply.But as the price of gas has continued to soar, more than doubling since Russia started openly choking exports in June, there are quiet rumblings in the industry. They suggest that it is time to ask Norway to do more, even something that might once have seemed unthinkable: Norway should agree to cut the price at which it sells its gas.Before the howls of protest from Oslo and complaints from free-market purists, it is worth saying this is nowhere near a formal proposal. But that these views are even being aired privately by hardened oil and gas executives outside Norway suggests they are worth exploring.The argument is as follows: Europe, whether it wants to admit it or not, is embroiled in an economic war as a result of Russia’s invasion of Ukraine.The greatest threat to Europe’s support for Kyiv, well understood by Vladimir Putin, is that the energy crisis becomes an economic crisis and western voters turn inward. Gas prices are no longer just high but rapidly becoming economic weapons.However nice the gas windfall Norway is reaping seems today — and at the equivalent of almost $400 a barrel of oil it is mind-bogglingly huge — it is not in the country’s strategic interests to see its neighbours fall into a deep recession or to have an emboldened Russia pushing up against the EU’s borders.The hard numbers are enlightening. The vast majority of gas Norway supplies goes by pipeline to Europe, making up about a quarter of the continent’s supplies. For the UK, they account for an even higher 40 per cent of supplies.The Norwegian government forecast in May that its revenues from oil and gas would already approach €100bn this year. In a country of 5.4mn people that is about €18,000 per person, or more than total UK government public spending per capita in 2020/21. Gas prices have doubled since then and now trade at more than ten times the level they averaged over the previous decade. Norway clearly has significant fiscal headroom. Revenues from oil and gas were less than €30bn last year.If Oslo was to agree to cap the price at something like the equivalent of $150-$200 a barrel of oil — more than Norway earned on average in the first half of this year, when state-backed energy champion Equinor enjoyed record profits — that would still be painful but manageable for European economies.Long-term investors in the country’s energy sector, including the government, would still be rewarded. Aslak Berg, an economist who has worked for the Norwegian government and the European Free Trade Association, said that while any reduction in the price might be politically difficult to swallow, Oslo had an interest in contributing to a stable European economy and to supporting Ukraine.“An option that could make sense for both parties is to commit to long-term contracts at prices significantly lower than today’s spot price, but well above the historical average,” he said.Such a solution would not be a panacea. European gas market prices would probably remain high in order to attract the necessary cargoes of liquefied natural gas away from Asia. There are risks to interfering with normal market signals. But it would, almost undoubtedly, help to bring down the bill for bailing out households and industry this winter around Europe.Norway is also more exposed to swings in the global economy — in large part driven by volatile energy prices this year — than might be immediately apparent. Its $1.2tn sovereign wealth fund, which invests the proceeds from decades of oil and gas production, lost 14.4 per cent, or $174bn, in the first half of this year — more than the government stands to make from record oil and gas prices.Norway is also aware of the threat to long-term gas demand from this crisis. Its desire to build a future energy economy based on renewables like offshore wind and ‘blue’ hydrogen relies on close co-operation with its neighbours too. High-level executives in Norway speak candidly of the dangers of being seen to pursue a “Norway first” approach.It is crucial for Europe to avoid falling into the resource nationalism trap, which would play into the hands of Putin. No one should suggest that Norway be treated as a profiteer or its contribution to European energy security forgotten. But it is worth at least debating if anything can be done to bring down prices.Turning up the taps to full capacity is already appreciated. Doing it at a price that helps soothe the pain for European economies might be in Norway’s interests [email protected]: @oilsheppard More

To the sound of cheering, the Razoni slipped its moorings on August 1 with its horn blaring — the first ship to leave the Ukrainian port of Odesa after a blockade of almost six months at the hands of the Russian navy.“These are the sounds of a working port,” said mayor Gennadiy Trukhanov. “It’s difficult for the city to live without these sounds.”Ships were stranded in Odesa and Ukraine’s other Black Sea ports after Russia’s full-scale invasion began in February, caught between the country’s defensive sea mines and the Russian navy. Global food prices leapt as one of the most crucial international supply routes for grain was choked off — and Odesa, Ukraine’s most important port, was deprived of much of its livelihood.“When the port shut down due to the war, it felt like not just the windows were closed, but also the shutters,” said Trukhanov.About 200,000 residents fled the city in the first weeks of the war, many to nearby Moldova or further into Europe. In the following months Russian missiles repeatedly hit targets in Odesa, killing civilians and destroying the runway at the airport. But with the signing of a multilateral humanitarian agreement to free shipping lanes to get food to global markets last month, a tentative optimism has returned.About 30 vessels have traversed the narrow corridor in and out of Odesa since the Black Sea Grain Initiative, brokered by Turkey’s Recep Tayyip Erdoğan, the UN, Russia and Ukraine, was agreed on July 22. On Friday, UN secretary-general António Guterres is visiting Odesa, in a sign of hope that the deal will hold. Ships are now escorted by Ukrainian tugboat captains through a narrow maritime corridor to the edge of the minefield planted by Ukrainian forces before heading to Istanbul to be cleared for their final routes.Signs warn of mines on Odesa beach © Anastasia Vlasova/Getty ImagesThe grain deal has raised hopes that Odesa, established as a freeport by Russia’s Catherine the Great at the end of the 18th century, will survive the war without suffering the destruction of other Ukrainian cities under assault from Russia’s president Vladimir Putin. “The port is the source of Odesa’s wealth, and the reason that Odesa exists,” said Roman Morgenstern, a director at Ukrferry, which had two cargo and passenger ferries that plied the waters between Odesa and Istanbul trapped when the war began. “For us, it was a mortal hit. Hundreds of employees, a big organisation we had built up over 25 years — what should we do in these circumstances?”With the blockade partially lifted and the war’s frontline two hours away, Odesa’s port is preparing for a slow restoration of activities, even though threat remains. Four missiles slammed into the port on July 24, hitting what the Russian foreign ministry described as a Ukrainian military boat. Grain exports have restarted from Odesa © Ministry of Infrastructure of Ukraine/ReutersThe blockade severely hit Ukraine’s economy. The vast majority of the country’s exports by value, including steel, used the port of Odesa and its two smaller neighbours, also blockaded, to reach faraway markets. The port is also critical for Ukraine’s farmers. Until war erupted, it was the centre of a logistics network that took millions of tonnes of grain from its fertile, black soil “breadbasket” to the Black Sea, from where it was exported as far as Africa and south-east Asia. With ports blockaded, grain silos inside the country were full and the local market for food deliveries collapsed, leaving farmers unsure if they would recoup their costs if they planted a crop this autumn.“When the seaports were closed, the price for local production made no sense for the winter planting,” said Taras Kachka, Ukraine’s junior economy minister and chief trade negotiator. A small fraction of Ukraine’s usual exports were transported by road, rail and even along the Danube river but “logistics ate up all the profits”, said Kachka.An estimated 20mn tons of grains remain trapped in inland silos. However, the owner of one trucking company said he had already rerouted some vehicles from overland routes to Poland in the expectation that farmers would start booking deliveries to the port.The grain deal has been described as a humanitarian gesture by Russia, which has promised not to fire upon ships in exchange for joint inspections with Turkish and Ukrainian officials to check for weapons.But the clogged arteries of the crucial logistics network are taking time to clear. Dozens of ships still need to find their way out of port and not all are covered by the grain initiative, which only applies to food and fertiliser.Gaurav Srivastava, chair of trader Harvest Commodities, watched in relief as two of the company’s ships finally left the ports of Odesa and Chornomorsk carrying about 100,000 tonnes of corn. Srivastava said things had been “really tough” psychologically for the crews trapped on board. “Very quickly, this became a humanitarian issue — for the crew, for the farmers, for the world.”Until more trapped vessels leave there will be no space for more ships to dock and pick up grain. And the war still looms over hopes for Odesa’s revival. “I can’t plan even one day in advance,” said mayor Trukhanov. “How can one talk about restoring the city when things are still precarious — we can’t even find enough crews for the ships, even if the port is somewhat open.” Ukrferry’s Morgenstern has been considering an idea to stack bags of grain in the cargo decks and filling trucks with grain and loading them on to the cargo holds. He is not sure if the plan will work, but he is hopeful.“For now, it’s only grain that’s allowed, but if we don’t get our vessels out, we have no market, no ability to make a return on our investments,” he said. “Suddenly, with this deal, it’s like we finally have some air in our lungs.” More

Smaller energy suppliers have warned it is “too late” to come up with new schemes to help British households cope with an expected 82 per cent surge in energy costs from October, and instead urged the government to focus on expanding existing support programmes.The two candidates in the race to become the UK’s next prime minister, Liz Truss and Rishi Sunak, have come under increasing pressure to produce detailed plans to reduce bills, which are predicted to soar by more than £1,600 to £3,582 a year on October 1 for a typical household. Consumer charity Citizens Advice warned on Wednesday that one in four people would not be able to pay for their energy from October. Ofgem, the regulator, will announce the new price cap, which dictates bills for the vast majority of households, on August 26.Earlier this week, the opposition Labour party proposed freezing the cap at the existing level of £1,971 for six months. The big energy companies have called for a similar freeze financed by a government-backed loan scheme that suppliers could tap to suppress bills for two years. But three smaller suppliers, accounting for more than 1mn customers, have told the FT that the main proposals risked unintended consequences and would be difficult to implement before the October rise in bills. Any big policy decisions have been put on hold until the new prime minister is announced on September 5.“It’s too late now to do anything else . . . you are either going to need to use the benefits system or the existing mechanism [that will offer] rebates through your energy bill,” said Nigel Pocklington, chief executive of Good Energy, which has 277,000 customers, referring to the Energy Bills Support scheme announced by Sunak when he was chancellor in May.The EBS, which offers a £400 non-repayable discount to all households from October, was part of a wider £15bn energy relief package that has additional targeted support for the vulnerable.Truss and Sunak have acknowledged more help would be needed this winter for vulnerable households. Sunak has also pledged to scrap VAT on domestic bills and promised in the Times last week that he would use existing mechanisms.Truss, who has said she would temporarily scrap some green levies on bills, has yet to detail how she would provide further help beyond committing to an emergency Budget in September. Bill Bullen, chief executive of Utilita, Britain’s ninth-biggest supplier with more than 800,000 customers, warned it was “very late in the day to introduce a new mechanism unless people are prepared to get extraordinarily busy in September”. He also warned that the loan scheme proposal could cost his company millions of pounds in interest payments. “Even if the government is guaranteeing it so the interest rate is relatively low, it’s still a huge amount of money,” he said. “The default option really is we carry on with this EBS scheme and we make those numbers much bigger.”Green Energy UK founder Doug Stewart said: “We are running out of time because winter is fast approaching and we don’t know what we are doing.”The companies urged ministers to reconsider the price cap in the medium term. “It is an idea that has completely run its course,” said Pocklington.

Larger energy companies have insisted the new prime minister must examine all options. “Lots of ideas have been put forward and a robust review of all these options is needed,” said EDF Energy, the fourth-biggest supplier in Britain.In response, Truss’s campaign team said tax cuts and supply-side reform was the “most effective way” of dealing with the cost of living. Sunak’s team said Truss’s plan was “rapidly falling apart” and would be “far too late”.The rising cost of the energy crisis was underlined by National Grid when it warned that the costs of keeping up to three of the UK’s coal-fired power stations open this winter could be as high as £420mn The government ordered the plants, which were due to close in September, to be put on standby as part of emergency measures for the colder months in case of a Europe-wide gas shortage.Additional reporting by Jasmine Cameron-Chileshe and Sebastian Payne More

The US and Taiwan agreed on Wednesday to begin formal trade and investment talks as relations between Washington and Beijing have grown increasingly strained.The discussions stem from a joint initiative announced in June and are expected to begin in the early autumn. They are aimed at deepening economic engagement in agriculture, digital trade, climate and other areas.The announcement came amid heightened tensions following a flurry of Chinese military manoeuvres in response to House Speaker Nancy Pelosi’s recent visit to Taiwan.The Biden administration said late on Wednesday that the sides had reached “consensus on the negotiating mandate”. The initiative will “deepen our trade and investment relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for our workers and businesses”, deputy US trade representative Sarah Bianchi said.She said Taipei and Washington aimed to “pursue an ambitious schedule” for the discussions.The US announced the “US-Taiwan Initiative on 21st-century Trade” just days after it unveiled the regional Indo-Pacific Economic Framework that excluded Taiwan, partly because some south-east Asian nations involved were concerned about antagonising China, which claims sovereignty over the country.

Wednesday’s announcement falls short of Taiwan’s hopes for a bilateral free trade deal. Taiwanese officials have said the talks are important to keep trade ties open, and it still hopes it can negotiate such a deal in the future.The talks are likely to further inflame tensions with China, which opposes US efforts to deepen ties with Taiwan and accuses Washington of moving away from its “one China” policy, under which Washington recognises Beijing as the sole government of China while only acknowledging Beijing’s position that Taiwan is part of China.China has stepped up efforts to isolate Taiwan after Pelosi’s visit and another this week by a second congressional delegation, raising concerns it is trying to impose a new status quo, dissuading foreign politicians from engaging with Taipei.Taiwan is the ninth-largest US trading partner, according to 2020 data from the US trade representative office. It is one of the world’s largest suppliers of semiconductors and other electronic components.

Video: Will China and the US go to war over Taiwan? More

Higher derivatives volumes for equities, currencies and commodities helped offset a weaker showing from cash equities and treasuries.SGX’s revenue from fixed income, currencies and commodities (FICC) increased 19% to S$252.7 million ($182.92 million), and contributed to nearly 23% of total revenues. It said total revenue increased 4% to a record S$1.10 billion.”Our FICC business remains a key growth engine and is expected to deliver mid-teens percentage revenue growth in the medium term,” said Chief Executive Loh Boon Chye.The company’s adjusted net profit attributable for the 12 months ended June 30 rose to S$456 million, from S$447 million last year. SGX, which benefits heavily from its favorable location as a gateway for regional trades, said that with increasing risks in the global economy, portfolio risk management activity is expected to rise in tandem. SGX Group maintains its medium-term revenue growth expectation of a high single-digit percentage range, it said. The company’s capital expenditure for fiscal 2023 is expected to rise to between S$70 million and S$75 million, and is likely to remain at similar levels in the medium term.It also proposed a final quarterly dividend of 8.0 Singapore cents per share, in-line with a year ago.In a separate announcement, SGX said Koh Boon Hwee will replace Kwa Chong Seng as the board’s chairman.($1 = 1.3814 Singapore dollars) More

SINGAPORE (Reuters) – The dollar was on the front foot on Thursday after minutes from the Federal Reserve’s July meeting pointed to U.S. interest rates staying higher for longer to bring down inflation.The greenback gained most against the Antipodeans, especially the Aussie, which was dragged down as weaker-than-expected wage growth weighed on Australia’s interest rate outlook.The Australian dollar fell 1.2% overnight and on Thursday hovered at $0.6930, just above Wednesday’s one-week low of $0.6912 and the 50-day moving average at $0.6923.Australian labour market data is due at 0130 GMT.The New Zealand dollar also fell, losing nearly 1% to unwind an initial jump after the central bank hiked interest rates and steepened its projected rate-hike track. The greenback rose against the yen and sterling and was steady on the euro.”The bigger picture for the dollar is that it’s in a strong uptrend,” said Matt Simpson, a senior analyst at brokerage City Index in Brisbane, adding it has now paused a weeks-long pullback”In some ways, bulls are looking to step back in and I think the Fed minutes gave them a reason to do so.”The dollar rose 0.6% on the yen overnight and held at 134.90 yen on Thursday. The euro bought $1.0184. The U.S. dollar index was steady at 106.570.Federal Reserve officials saw “little evidence” late last month that U.S. inflation pressures were easing, the minutes showed. The minutes flagged an eventual slowdown in the pace of hikes, but not a switch to cuts in 2023 that traders until recently had priced in to interest-rate futures.”Once a sufficiently restrictive level has been reached, they are going to stick to that level for some time,” Rabobank strategist Philip Marey said in a note to clients. “This clearly stands in contrast to the early Fed pivot that the markets have been pricing in.”Traders see about a 36% chance of a third consecutive 75 basis point Federal Reserve rate hike in September, and expect rates to hit a peak around 3.7% by March, and to hover around there until later in 2023.Sterling also slid overnight after double-digit inflation focused investors’ concerns on recession risk.Britain’s consumer price inflation rose to 10.1% in July, its highest since February 1982, official figures showed and after a brief blip higher sterling fell 0.4% to $1.2050. [GBP/]It also dropped below its 200-day moving average against the euro.”Do we get weaker sterling now, ahead of the inevitable recession? Or will sterling hold around here until rates peak and the economic disaster can dominate,” asked Societe Generale (OTC:SCGLY) strategist Kit Juckes in a note.”I am confident that we will make a new cycle low this year,” he said.========================================================Currency bid prices at 0032 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.0184 $1.0178 +0.06% +0.00% +1.0185 +1.0173 Dollar/Yen 134.8200 134.9950 -0.06% +0.00% +135.1650 +134.9150 Euro/Yen 137.30 137.47 -0.12% +0.00% +137.5700 +137.3000 Dollar/Swiss 0.9505 0.9519 -0.12% +0.00% +0.9517 +0.9508 Sterling/Dollar 1.2052 1.2050 +0.00% +0.00% +1.2054 +1.2043 Dollar/Canadian 1.2920 1.2915 +0.00% +0.00% +1.2920 +1.2914 Aussie/Dollar 0.6937 0.6937 -0.02% +0.00% +0.6939 +0.6929 NZ Dollar/Dollar 0.6283 0.6281 +0.02% +0.00% +0.6284 +0.6275 All spotsTokyo spotsEurope spots Volatilities Tokyo Forex market info from BOJ More