Economy

Ukraine has warned that the world faces a critical food shortage unless Russia lifts its Black Sea port blockade, as improvements to other transport options would only enable it to deliver a fraction of its total grain stockpile.Oleksandr Kubrakov, Ukraine’s infrastructure minister, told the Financial Times that “all of our activity won’t cover even 20 per cent of what we could do through the Black Sea ports”. Ukraine and its western allies are searching for ways to get up to 20mn tonnes of grain out of the country and clear storage space for this year’s harvest. The crisis threatens tens of millions of people in countries across the Middle East and Africa that rely on Ukraine’s cereals.Trucks face lengthy delays at the border with Poland and Romania, while moving grain by rail is difficult because trains in the EU and Ukraine run on different gauges of track. Russia has repeatedly bombed the alternative routes, including those leading to Romania by road or rail, where grain is then loaded on barges that sail down the Danube and into the Black Sea.The EU has simplified its procedures and Ukraine is offering additional guarantees to European barges and trucks after most western insurers shied away because of the risk.Despite those efforts, Kubrakov said it would prove insufficient. “Everyone is doing superhuman activity, and the [amount exported] is growing every month . . . in the short term it could go up to 30 per cent [of Ukraine’s Black Sea exporting capacity],” he said.Russia has captured much of Ukraine’s breadbasket in the south and is making progress in the eastern Donbas industrial region, the scene of the fiercest fighting three months into Putin’s invasion of Ukraine.Since late February, Russia has seized between 400,000 and 500,000 tonnes of grain from occupied territories. Some Ukrainian farms have been hit by air strikes and artillery fire. Russian president Vladimir Putin has blamed the food crisis on sanctions against Russian exports and said Moscow would only lift the blockade if the restrictions are lifted. On Friday he said in a state television interview: “The problem of exporting grain from Ukraine does not exist.”Kubrakov warned that Russia’s actions risked creating famine “on a global scale” and Moscow was acting like “total pirates”. “They don’t care about the lives of these people in Africa,” he said. “They’re telling them: ‘We don’t care about you. We are only worried about sanctions against us. Now you are hostages.’”Kubrakov said converting a single railway line to the EU standard would cost $2bn to $3bn, with more investments needed to expand capacity at border crossings.Corn lies in a grain warehouse damaged by Russian tanks in Cherkaska Lozova, Ukraine © John Moore/Getty ImagesKyiv has discussed sending up to 4mn tonnes of grain a month via Belarus, which uses the same railway gauges, and on to a port in Lithuania, according to a government briefing document seen by the FT. But the plan is politically unpalatable because Belarusian leader Alexander Lukashenko let Russia use his country as a staging post for its invasion of Ukraine.Though export capacity via the new routes is rising, EU diplomats estimate that Ukraine can only export about 5mn tonnes of grain by the end of the summer, leaving the rest of the last harvest at risk of rotting and making it more difficult to store this year’s.“There is no quick solution, unfortunately,” Kubrakov said. Expanding storage capacity would also mean investing billions of dollars in grain silos along the new routes, he added.The risk to Ukraine’s cereal crops has awakened traumatic memories of the country’s man-made famine of the 1930s when it was part of the Soviet Union. Peasants had their grain taken from them and were confined to their villages, leading to the deaths of 4mn people in what is known as the Holodomor, or death by starvation.Kubrakov said the consequences of the Black Sea blockade could be even worse. “They did the Holodomor in our country once, yes? Now they have the chance to do a Holodomor on a global scale,” he said.

UN secretary-general António Guterres is leading an effort to unblock the Black Sea ports and secure guarantees from Russia not to attack commercial shipping.Russian foreign minister Sergei Lavrov said this week that Putin and Turkish president Recep Tayyip Erdoğan had agreed to help de-mine Ukrainian ports, which Kyiv has blocked to guard against a coastal assault.But Ukraine says Russia has fired on several cargo vessels and mined the sea route blocking their safe passage through the Black Sea, making any potential agreement contingent on third-party guarantees for the ships’ safety.Kubrakov said the negotiations were Russia’s “last chance to avoid essentially being guilty for the deaths of millions of people on several continents”. More

A revived “Go To Travel” campaign would likely serve as a core measure to stimulate consumer demand, the business daily reported, without citing sources. Japan is set to ease border controls to let foreign tourists in from July 10 as coronavirus infections ease.The government will decide on the campaign soon, the Nikkei said, without specifying time.Officials at the Japan Tourism Agency could not immediately be reached for comment outside business hours.The campaign, rolled out in July 2020 just as COVID was gaining strength, subsidised half of the travel expense, up to 20,000 yen ($150) a night, for each traveller.The programme helped boost tourism but was shelved five months later as the pandemic surged.($1 = 130.8600 yen) More

The Labor Department reported 390,000 new jobs in May, as policymakers try to ease inflation without inducing a recession.American employers extended an impressive run of hiring in May, even as policymakers took steps to cool the economy in an effort to ease high inflation.The Labor Department reported Friday that employers added 390,000 jobs, the 17th straight monthly gain. The unemployment rate was 3.6 percent for the third straight month, a touch away from a half-century low.At the same time, the labor force grew by 330,000 people, and the share of adults employed or looking for work continued to edge closer to prepandemic levels.The data signaled that the Federal Reserve’s initial moves to dial back its monetary support for the economy were — at least so far — not constraining business activity so much that hiring was feeling a pinch.After the strong rebound from the depths of the coronavirus lockdowns — all but 800,000 of the 22 million jobs that were lost have been recovered — the Fed has shifted its emphasis from maximum employment to its other mandate: price stability. The challenge is to apply its primary tool, a steady series of interest-rate increases, without inflicting a recession.“I think we’re on sort of what looks like a glide path right now, and that’s good — nothing’s broken,” said Guy Berger, the principal economist at the career-focused social network LinkedIn. “But keep fast-forwarding it a year and the question marks are still big.”The closely watched indicators include the impact on wages, which have been increasing at a pace not seen in decades, though not enough to keep up with inflation over the past year. The Fed is worried that rising labor costs will be passed along to consumers.Wages kept rising across industries.Percent change in average hourly earnings for nonmanagers since January 2019

Data is seasonally adjusted. Not adjusted for inflation.Source: Bureau of Labor StatisticsBy The New York TimesOn that score, the Labor Department report showed little change in trajectory. Average hourly earnings rose 0.3 percent from the previous month, the same pace as in April, and were 5.2 percent higher than a year earlier, compared with a 5.5 percent year-over-year increase in April.“It’s moderating, but it’s not moderating to a level, I think, where it’s consistent with the Fed’s inflation goals,” said Michael Feroli, chief U.S. economist at J.P. Morgan, said of wage growth. He said the Fed would probably want wages to cool toward an annualized 3.5 percent pace, at the higher end, a rate that officials view as aligned with 2 percent inflation.The State of Jobs in the United StatesJob gains continue to maintain their impressive run, even as government policymakers took steps to cool the economy and ease inflation.May Jobs Report: U.S. employers added 390,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the fifth month of 2022.Vacancies: Employers had 11.4 million vacancies in April down from a revised total of nearly 11.9 million the previous month, which was a record.Opportunities for Teenagers: Jobs for high school and college students are expected to be plentiful this summer, and a large market means better pay.Higher Interest Rates: Spurred by red-hot inflation, the Federal Reserve has begun raising interest rates. What does that mean for the job market?President Biden gave a nuanced celebration of the jobs data in remarks on Friday, emphasizing recent gains while arguing that a slowdown would be welcome, allowing inflation to ease.“The point is this: We’ve laid an economic foundation that’s historically strong,” Mr. Biden said. “Now we’re moving forward to a new moment, where we can build on that foundation, build a future of stable, steady growth so that we can bring down inflation without sacrificing all of the historic gains that we have made.”Stocks declined on Friday and bond yields rose as investors evidently read the report as reinforcing the Fed’s muscular efforts, which risk denting economic growth. “The better the data, the more difficult that a pause or reduced pace of tightening later this year becomes,” analysts at TD Securities wrote in a research report published after the jobs numbers were released.The continued job gains are among many indications of a vibrant economy. Reports from the nation’s largest banks show checking accounts are still above 2019 levels for nearly all income groups. New bankruptcies and debt-collection proceedings are both at their lowest levels since tracking began in 1999.Yet those encouraging trends have been at odds with the generally sour national mood, dominated by inflation concerns. U.S. consumer sentiment declined in early May to the lowest since 2011, according to the University of Michigan.The unemployment rate stayed flat in May.The share of people who have looked for work in the past four weeks or are temporarily laid off More

Cleveland Fed President Loretta Mester said Friday that she doesn’t see enough evidence that inflation has peaked and is on board with supporting multiple interest rate increases.
Mester also doesn’t expect the central bank to pause after the summer, though she said the magnitude of the moves could be reduced if inflation falls.
“I don’t want to declare victory on inflation before I see really compelling evidence that our actions are beginning to do the work,” Mester said in a live interview on CNBC’s “The Exchange.”

Cleveland Federal Reserve President Loretta Mester said Friday that she doesn’t see ample evidence that inflation has peaked and thus is on board with supporting a series of aggressive interest rate increases.
“I think the Fed has shown that we’re in the process of recalibrating our policy to get inflation back down to our 2% goal. That’s the job before us,” Mester said in a live interview on CNBC’s “The Exchange.”

“I don’t want to declare victory on inflation before I see really compelling evidence that our actions are beginning to do the work in bringing down demand in better balance with aggregate supply,” she added.
Mester spoke the same day the Bureau of Labor Statistics reported that nonfarm payrolls rose by 390,000 in May, and, importantly, that average hourly earnings had increased 0.3% from a month ago, a bit lower than the Dow Jones estimate.
While other recent data points have shown that at least the rate of inflation increases has diminished, the policymaker said she will need to see multiple months of that trend before she’ll feel comfortable.
“It’s too soon to say that that’s going to change our outlook or my outlook on policy,” Mester said. “The No. 1 problem in the economy remains very, very high inflation, well above acceptable levels, and that’s got to be our focus going forward.”
Recent statements from the rate-setting Federal Open Market Committee indicate that 50 basis point — or half-point — rate increases are likely at the June and July meetings. Officials are then likely to evaluate the progress that the policy tightening and other factors have had on the inflation picture. A basis point equals 0.01%.

But Mester said any type of pause in rate hikes is unlikely, though the magnitude of the increases could be reduced.
“I’m going to come into the September meeting, if I don’t see compelling evidence [that inflation is cooling], I could easily be at 50 basis points in that meeting as well,” she said. “There’s no reason we have to make the decision today. But my starting point will be do we need to do another 50 or not, have I seen compelling evidence that inflation is on the downward trajectory. Then maybe we can go 25. I’m not in that camp that we think we stop in September.”
Mester’s comments were similar to statements Thursday from Fed Vice Chair Lael Brainard, who told CNBC that “it’s very hard to see the case” for pausing rate hikes in September. She also stressed that quashing inflation, which is running near 40-year highs, is the Fed’s top priority.

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Meanwhile, inflation for the month of May was expected to have been at 5.2%, according to the central bank’s monthly Market Expectations Survey (REM).The poll surveyed 41 analysts over several days. The economists consulted also slightly cut their economic growth projection for Argentina in 2022 to 3.3%, a contraction of 0.2 percentage points.Latin America’s third largest economy has been suffering from extreme inflation for years, and has been aggravated by the effects of Russia’s invasion of Ukraine.Argentina has just begun to emerge from a long recession.The economists surveyed also expect the average nominal exchange rate in Argentina to hit 157.97 pesos per dollar in December. More

NEW YORK (Reuters) – A rally that lifted U.S. stocks from the brink of a bear market faces an important test next week, when consumer price data offers insight on how much more the Federal Reserve will need to do in its battle against the worst inflation in decades.Despite a rocky week, the S&P 500 is still up over 5% from last month’s lows, which saw the benchmark index extend its decline to nearly 20% from its all-time high. The index was recently down about 14% from its Jan. 3 record after losing 1% in the past week. More upside could depend on whether investors believe policymakers are making progress against surging prices. Signs that inflation remains strong may bolster the case for even more aggressive monetary tightening, potentially spooking a market already battered by worries that a hawkish Fed could deal a serious blow to U.S. growth.“This market is likely to remain range-bound until we get a meaningful move lower in inflation,” said Mona Mahajan, senior investment strategist at Edward Jones, which currently favors large-cap stocks over small-cap, given the ability for larger companies to absorb higher input and wage costs. “Clearly, the print next week is going to be key.”The consumer price index (CPI) for the 12 months through April rose 8.3%, down from an 8.5% annual rate reported in the prior month, which was the largest year-on-year gain in 40 years. Friday’s inflation report for May is one of the last key pieces of data before the Fed’s June 14-15 meeting, at which the central bank is widely expected to raise rates by another 50 basis points.If inflation is “continuing to be a problem, the Fed may not have the option of coasting later this year,” said Paul Nolte, portfolio manager at Kingsview Investment Management, adding, “The higher the interest rates, the more the struggle for the market.”Nolte has lightened positions in equities broadly in the portfolios he manages, especially in growth stocks, and raised cash levels, pointing to factors such as still-lofty stock valuations.INVESTORS WEIGH DATA The CPI report comes as investors gauge how the 75 basis points of monetary tightening already delivered by the Fed this year is affecting growth. Employment data released Friday showed that U.S. employers hired more workers than expected in May and maintained a strong pace of wage increases, signs of strength that could keep the Fed on an aggressive monetary policy tightening path.Meanwhile, gloomy views from several top business leaders, including JPMorgan Chase (NYSE:JPM)’s Jamie Dimon and Tesla (NASDAQ:TSLA)’s Elon Musk, have weighed on hopes that the central bank can cool inflation without hurting the economy. Musk said in an email to executives that he has a “super bad feeling” about the economy and needs to cut about 10% of jobs at the electric carmaker, Reuters reported Friday. [L1N2XQ0PI]Investors’ view of inflation is critical to how they value equities, as higher prices have typically spurred the Fed to raise interest rates, with higher bond yields in turn reducing the value of future corporate profits. Rising prices also raise costs for businesses and consumers.The S&P 500 trades at around 18.7 times its trailing 12 month earnings, a rich valuation compared to other inflationary periods that suggests investors believe the current level of price increases may not last, according to Jeff Buchbinder, equity strategist at LPL Financial (NASDAQ:LPLA). LPL believes inflation will eventually fall this year and that companies have solid earnings momentum. The firm’s year-end target on the S&P 500 is between 4,800-4,900, which at the low end stood about 16% above the index’s level as of Friday afternoon.Others have been less optimistic. Morgan Stanley (NYSE:MS) strategists earlier this week called the latest rebound just a “bear market rally,” and, citing negative trends for earnings and economic indicators, projected the S&P 500 would drop to around 3,400 by mid-August.“There is consensus agreement that we have likely seen the high prints or the peak inflation numbers in the rear-view mirror,” said Art Hogan, chief market strategist at National Securities. “If that proves to not be true … that is going to tip over the apple cart for markets.” More

The UK will harvest less than half of its normal quantity of cucumbers and sweet peppers this year after many glasshouse growers opted not to plant them in the face of surging energy costs and labour shortages, according to the trade group for the main growing region.Lee Stiles, secretary of the Hertfordshire-based Lea Valley Growers Association, which represents businesses that grow three-quarters of the country’s cucumbers and sweet peppers, said about half of the glasshouses were empty this year.The remainder would yield less than usual because of growers cutting down on heating to save costs, he said. It is now too late to plant further crops, meaning the UK will not make up the lost volumes this year, Stiles added, predicting a 50 to 60 per cent drop in yields for cucumbers and sweet peppers nationally in 2022.“The gas price is still quite volatile and trying to get staff this time of year is nearly impossible, so it’s not worth planting, firstly because of the gas [prices] and secondly there is no guarantee they’re going to get the labour,” he said.At the start of 2021 growers were being charged 40p per therm for their natural gas, but prices have since surged as high as £8 in some cases as Russia’s invasion of Ukraine worsened market pressures, he said, adding that aubergine and tomato yields will also be affected.Jack Ward, chief executive of the British Growers Association, said while glasshouse growers were worst hit, labour and cost pressures had resulted in a roughly 20 per cent cut in planting of brassicas such as broccoli and cauliflowers. “The net result of all of this is that we have just shrunk our productive capacity,” Ward said.Until this year the UK was about 20 per cent self-sufficient in cucumbers and peppers, down from 100 per cent in the Victorian era when commercial salad glasshouses were first constructed, said Stiles.UK production mainly takes place in summer, while the country also imports from Spain, Morocco and the Netherlands, especially in winter. These imports are less fresh on arrival because of days spent in transit, while surging energy costs in the Netherlands have also reduced yields.“There will certainly be a shortage of British-grown produce but whether they can make that up with imports I’m not sure,” Stiles said.Growers have used savings to tide them over this year, but there is a risk of long-term shrinkage in the salads sector, which unlike other types of farming does not receive government subsidies, Stiles said.Growers who have pushed ahead with this year’s crop risk making a loss. “They’ve managed to come to some kind of arrangements with their supermarket customers based on the cost of production but the problem is that the input costs keep rising,” he said.The Lea Valley’s 400 acres of glasshouses grow about 80mn cucumbers and 100mn sweet peppers in a typical year, about three-quarters of the UK crop of each, the group said.Labour shortages in harvesting have worsened since Brexit ended free movement from Europe; farmers and growers have called for an annual allocation of 30,000 visas under a seasonal workers’ scheme to be expanded.A majority of last year’s seasonal workers came from Ukraine and the war has prevented many expected workers from arriving this year.The Department for Environment, Food & Rural Affairs said: “It’s crucial we do everything we can to support the farming sector. That’s why we have announced measures to support growers with the availability of fertiliser.” It added that the government had also given “greater certainty in accessing seasonal migrant labour” by extending the seasonal workers’ visa scheme to the end of 2024. More

(Reuters) – Goodwin Procter said Friday that it has hired two private equity partners for its Washington, D.C., and Santa Monica, California, offices.Andrew Kimball joined the firm in the nation’s capital from Kirkland & Ellis. Andrew Cheng, who spent more than 18 years at Gibson Dunn & Crutcher, has joined in Southern California.Cheng represents corporate borrowers, private equity sponsors and lenders for acquisition financings, royalty financings and special-situation financings, the firm said.Kimball’s practice focuses on structuring and negotiating acquisitions and divestitures, minority investments, leveraged buyouts and financial restructurings, it said.Kimball said a number of his private equity clients are focused on health tech and healthcare-adjacent industries. He said the firm’s technology and life sciences capabilities will help serve his clients’ long-term goals.Boston-founded Goodwin, an 1,800-lawyer firm, expanded its private equity practice in April when it opened an 11-attorney office in Munich.Representatives at Gibson Dunn and Kirkland & Ellis did not immediately respond to requests for comment Friday on their lawyers’ departures. Read More:Goodwin courts European private equity work with new Munich office https://www.reuters.com/legal/legalindustry/goodwin-courts-european-private-equity-work-with-new-munich-office-2022-04-13 More