Economy

TORONTO (Reuters) -Canadian Imperial Bank of Commerce on Thursday said it will expand its U.S. energy investment banking team and announced an increase in wages from July for the majority of its merit-eligible employees, according to separate internal memos seen by Reuters. Canada’s fifth-biggest bank is growing its 100-strong core global energy, infrastructure and transition (EIT) investment banking team with the addition of four directors in the United States. Rutuja Jagtap has joined as executive director in New York from Mizuho , where she covered renewables and energy transition. Neil Davids, David Janashvili and David Yeh are managing directors, the former two joining from BNP Paribas (PA:BNPP) and Canaccord Genuity , also in New York, both with prior energy transition and renewables experience. Yeh, a climate investor and a senior advisor in President Barack Obama’s administration, will be based in CIBC’s new San Francisco office. The expansion comes even as investment banks and other firms in the U.S. slow hiring https://www.businessinsider.com/wall-street-hiring-freeze-layoffs-investment-banks-IPO-stall-2022-5 as concerns about inflation and a tight labour market.Separately, CIBC said it will raise its minimum entry wage to $20 per hour in Canada and in the U.S. in each country’s currency, from $17 currently, and will lift it to $25 by the end of 2025, the memo said. It will also increase base salaries 3% for the lowest six employee levels, it said.”These investments build on the steady, strategic targeted investments we have been making as we continue to ensure we pay competitively… particularly at a time when the cost of living has been increasing,” CEO Victor Dodig said in the memo.CIBC last month missed quarterly profit estimates, in part due to higher expenses driven by spending on strategic initiatives, including in the U.S., and employee compensation, but the bank has said spending is expected to moderate in the second half. More

Boris Johnson has been warned by Tory Eurosceptics that they will vote down his contentious bill to override the Northern Ireland protocol if it is watered down and does not fully “neutralise” the Brexit text.Liz Truss, UK foreign secretary, agreed to toughen up the bill after last- minute representations by the pro-Brexit European Research Group, leading to a fierce cabinet row on Wednesday. The legislation will be published next week. Johnson, backed by senior cabinet minister Michael Gove, criticised Truss for making the changes, arguing that it would raise tensions with Brussels and make a negotiated settlement with the EU impossible.The bill to give ministers the power to override the protocol is being redrafted again, but Tory Eurosceptics fired a warning shot at Johnson, telling him they could vote it down unless it meets their demands.“We want to neutralise the protocol,” said one senior ERG figure, arguing that the text — part of the prime minister’s 2020 Brexit deal with the EU — was causing political instability in the region.The protocol provides for post-Brexit trading arrangements for Northern Ireland, which remains in the EU’s single market for goods to allow free trade to continue across an open border with the Republic of Ireland.But pro-UK unionists in Northern Ireland oppose the protocol because it creates a trade border on the Irish Sea for goods travelling east-west from Great Britain.The Democratic Unionist Party is refusing to rejoin the Northern Ireland executive, with Sinn Féin, the nationalist party, in protest over the protocol. Bernard Jenkin, one ERG member, told the Commons: “If the government brings forward a bill that does not hold out the serious prospect of the restoration of power sharing in Northern Ireland and the restoration of the Good Friday Agreement, I will vote against it.”Truss agreed to tweak the bill to accommodate the ERG’s demands that the European Court of Justice should be stripped of any role in Northern Ireland and for “sunset clauses” to strike out key parts of the protocol within four years.Johnson has ordered Truss to tone down the bill but that raises the nightmare scenario of the legislation being blocked, just a week after 41 per cent of his party’s MPs voted to oust him.

Pro-European Tories, including former prime minister Theresa May, oppose the bill because they believe it could be illegal under international law and will damage Britain’s standing in the world, deepening the rift with the EU.The idea of them joining forces with Eurosceptic Tory MPs, who may conclude the measure is too weak, reinforces fears among some in the cabinet of a political disaster in the making.Ministers on Wednesday queried whether the legislation to rip up Johnson’s own international treaty was legal; others fretted that the DUP had not guaranteed it would rejoin the Stormont executive, even if the bill passed.Sir Keir Starmer, leader of the opposition Labour party, said that with “good faith, statecraft and trust around the negotiating table”, the UK and EU should be able to make technical changes to remove trade friction caused by the protocol.But he said Johnson did not possess the skills to negotiate a deal and accused him of taking “a wrecking ball” to UK-Ireland relations, which are at a very low ebb.Simon Coveney, Ireland’s foreign minister, warned that the “EU position has hardened” over the protocol. “I don’t think there’s a single capital across the EU, or anybody in the European Commission, that believes, at the moment anyway, that the British government is serious about a negotiated solution,” he said. More

Panic buying drove a sales surge at packaged food companies during the early days of the pandemic. Americans sought out comfort in pantry food staples. Demand slowed last year as people returned to the office and restaurants reopened. But the pressures on cash-strapped consumers could now make them trade in their kale salads for SpaghettiOs once again.Investors in turn have regained their appetite for underperforming food stocks. Shares in leading processed foodmakers — Kraft Heinz, Campbell Soup, Kellogg and General Mills — are up between 2.5 per cent and 9 per cent this year. This is no small feat given the S&P 500 is down 14 per cent since the start of 2022. Like other sectors, food companies are grappling with rising prices for everything from transport and packaging to labour and input commodities. Yet, so far at least, they have proved adept at passing the inflationary pressures on to consumers. Campbell Soup, whose portfolio also includes Pepperidge Farm Goldfish crackers and Kettle potato chips, this week reported a 9 per cent rise in organic sales for its fiscal third quarter. The increase was due entirely to price increases rather than underlying volumes. That helped keep gross margins steady and contributed to the 18 per cent jump in net earnings. Cereal maker Kellogg’s delivered a 15 per cent rise in profit last month as it pushed through higher prices and held down costs. Kraft Heinz and General Mills will report their results in the coming weeks.On a forward earnings multiple basis, food stocks have traditionally traded at a discount to the S&P 500. But this valuation gap is closing as investors seek shelter in defensive stocks. This means they are starting to get expensive. Their ability to pass on price rises should not be assumed to hold up indefinitely. But compared with the cost of a night out or the sticker shock at the fresh grocery aisles, consumers will probably be willing to stump up a little for the comfort of familiar brands. More

Jobless claims for the week ended June 4 totaled 229,000, well ahead of the 210,000 Dow Jones estimate.
The four-week moving average for continuing claims, which helps smooth out volatility in the numbers, remained around its lowest level since 1970.

A man walks past a “We’re Hiring” sign posted outside of a restaurant in Arlington, Virginia on June 3, 2022.
Olivier Douliery | AFP | Getty Images

Initial jobless claims spiked to their highest level since mid-January last week despite signs of an otherwise strong employment picture, the Labor Department reported Thursday.
First-time filings for the week ended June 4 totaled 229,000, an increase of 27,000 from the upwardly revised level in the prior period and well ahead of the 210,000 Dow Jones estimate. The period covered includes the Memorial Day holiday; seasonal adjustments normally would lead to a lower number.

The last time initial claims were that high was Jan. 15.
However, continuing claims, which run a week behind the headline number, were unchanged at just over 1.3 million, below the FactSet estimate of 1.35 million.
The four-week moving average for continuing claims, which accounts for volatility in the numbers, declined slightly to 1.32 million, the lowest level since Jan. 10, 1970.
The rise in claims comes less than a week after the Bureau of Labor Statistics reported that nonfarm payrolls increased by 390,000 in May, considerably better than expected.
Companies have continued to hire despite rising worries that the U.S. economy could be headed for a shallow recession as inflation flares and global supply chains remain clogged.
The Federal Reserve is in the early stages of a rate-hiking cycle aimed at bringing down inflation running around 40-year highs. Fed officials are hoping to slow the labor market without causing an uptick in the unemployment rate, which is at 3.6% and near its lowest level since 1969.

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In a speech in the northern town of Blackpool, Johnson said now was not the time to stop supporting Ukraine and even though prices for gas, oil, grain and fertilisers had risen, the West could not force Kyiv to accept peace terms dictated by Russian President Vladimir Putin.”And I know there are some who, they argue, not in this country perhaps but elsewhere, that the price of supporting the Ukrainians is now too high and they should be encouraged to accept whatever terms Putin may ask. I do not believe that option is really open to us,” he said.”Over time I believe the economic consequences of the war in Ukraine will abate.” More

With price growth surging last month to a record-high 8.1% and broadening quickly, the ECB is rolling back stimulus measures it has had in place for most of the last decade.It aims to stop rapid price growth from seeping into the broader economy and becoming perpetuated via a hard-to-break wage-price spiral.MARKET REACTION: The euro briefly slipped after the ECB decision before turning higher while money markets ramped up bets of more policy tightening from the central bank by the end of 2022. Benchmark 10-year German bond yields rose to fresh eight-year highs at 1.41%.REACTION:TD SECURITIES:”ECB institutionalized dovishness wins out by essentially saying that it “intends to” hike by 25bp in July. The ECB did throw a bone to the hawks by opening the door to a 50bp hike in September if high inflation is sustained.” ANDREW KENNIGHAM, CHIEF EUROPE ECONOMIST, CAPITAL ECONOMICS:”The failure to provide any new details about a possible backstop QE programme means peripheral bonds will remain vulnerable to a sell-off.””The most significant thing about the statement is what it does not say. There is no new detail whatsoever about the putative “spread-fighting tool” which is intended to prevent peripheral spreads widening too far.””All eyes now turn to the press conference, beginning at 13:30 BST (14.30 CET). We suspect she will be unable to provide more detail about a possible backstop programme which in turn means that investors are likely eventually to test the ECB’s resolve.”BAS VAN GEFFEN, SENIOR MACRO STRATEGIST, RABOBANK:”They did add an explicit caveat that they may consider a bigger hike to be warranted in September, depending on the inflation outlook by then. So basically they are putting more weight on the updated projections in a three months from now.””So in the longer term, that does make it look a bit more hawkish perhaps, which I would say explains that seesaw in market.”HETAL MEHTA, SENIOR EUROPEAN ECONOMIST, LEGAL & GENERAL INVESTMENT MANAGEMENT: “The central bank will hope that it will not need to construct another programme to support Italy. Persistently low yields over the last eight years have allowed the Italian Treasury to refinance existing debt at lower funding costs, significantly reducing its debt servicing costs and making its high debt burden more manageable. Higher ECB interest rates and Italian borrowing costs call into question Italian debt sustainability.”ANNA STUPNYTSKA, GLOBAL ECONOMIST, FIDELITY INTERNATIONAL:”We believe it will be difficult for the ECB to execute a rapid return of policy rates into positive territory given the growth and fragmentation constraints and the tightening path will be less steep and shorter than what is currently implied by market pricing. While a new spread management tool might help prevent spread fragmentation, it will not be a silver bullet as will likely bring a new set of issues for the ECB, including moral hazard.” ROBERT ALSTER, CEO, CLOSE BROTHERS ASSET MANAGEMENT CIO:“Holding rates at minus 0.5% despite record inflation, the ECB looks late to the party compared to the Fed. The ECB does appear to be joining the ‘hike-brigade’ but we do not expect Europe to attempt to overtake the Fed. Rather, the ECB is simply following the US lead, and we do not expect more aggressive tightening whilst the war in Ukraine continues to weight on sentiment.”SAM COOPER, VICE PRESIDENT OF MARKET RISK SOLUTIONS, SILICON VALLEY BANK:“Euro direction will be dictated by the timing and the pace of future interest rate hikes beyond July, in particular any hints that we could observe increases in 0.50% installments rather than 0.25%. Focus will now turn to ECB President Lagarde at the upcoming press conference, any deviation from market expectations could send further shockwaves to the euro and the wider FX market.”ARNE PETIMEZAS, SENIOR ANALYSTS, AFS GROUP, AMSTERDAM:”I think it is pretty weak. I don’t understand why they don’t end negative rates at one go in July. Instead they fix July at 25bps. They also make the same mistake of lowballing inflation in their new forecasts. 50bps in September is thus very likely. The ‘sustained’ and ‘gradual’ language suggest they see more hikes in 2023 than is currently priced in by OIS. It would be better if they acted more forcefully in the near term instead of pushing things out to the future, which as we all know is very uncertain.” More

COLOMBO (Reuters) -Striking power sector workers returned to work in Sri Lanka on Thursday after the president promised to listen to their concerns, ending widespread blackouts and bringing some respite to an economy hit by its biggest crisis in decades.About 900 out of around 1,100 engineers of the state-run Ceylon Electricity Board (CEB) went on strike at midnight, stalling operations at eight hydropower plants and triggering power cuts across the island nation.The CEB Engineers’ Union is opposed to government plans to amend power sector legislation to remove restrictions on competitive bidding for renewable power projects, among other changes.The engineers resumed their duties after receiving an undertaking from President Gotabaya Rajapaksa that their concerns would be taken into consideration in new legislation that was debated in parliament on Thursday, a union leader said.”Situation is largely back to normal. All power plants are functional and the engineers are back at work,” the union’s Joint Secretary Dhammika Wimalaratne told Reuters.Sri Lanka’s 22 million people are already suffering the country’s most serious financial turmoil in seven decades, with severe shortages of fuel, medicines and other essentials amid record inflation and a devaluation of its currency.In response to a request from the government, the United Nations on Thursday said it had launched a plan to provide $47.2 million of assistance between June and September to 1.7 million people worst-hit by the crisis.Overall, the UN estimates that in total nearly 5.7 million people need immediate life-saving assistance.”Multiple factors are impacting Sri Lanka’s food security situation; if we don’t act now, many families will be unable to meet their basic food needs,” UN Resident Coordinator in Sri Lanka Hanaa Singer-Hamdy said in a statement.The country was crippled by long power cuts earlier this year after it was unable to import fuel needed to generate electricity, though the situation has improved as monsoon rains have bolstered hydropower generation.The government, pushing renewable energy as a potential solution for its power woes, says it needs to amend legislation to speed up the approval and implementation of projects.On Thursday, power outages were reported in at least 10 regions, some lasting as long as six hours, Janaka Ratnayake, chairman of the power regulator Public Utilities Commission of Sri Lanka, said. More