Economy

The world’s second-biggest economy is at risk of a sharp slowdown as COVID-19 restrictions across a large swathe of the country hit consumer spending, the property market remains mired in a downturn and exports look set to slow further. Investments would be brought forward for infrastructure projects that are beneficial to industrial growth and to safeguarding national security, according to the meeting, and transportation, energy and water resources would be among the focus.The government will speed up construction of green and low carbon energy bases, improve the oil and gas pipeline networks, and build a batch of regional and cargo airports, it added.New types of infrastructure including super computing, cloud computing, artificial intelligence platforms and broadband would be also included in the government’s push, according to the meeting. Financing needs for these projects will be met and fiscal spending would be stepped up.Data showed that fixed-asset investment expanded by a better than expected 9.3% in the first quarter from a year earlier, helped by a move to front-load 2022 local government special bonds. More

The risks add to a list that include rising inflation, including for food, which threatens to spark social unrest. “Higher global and domestic financing costs can accelerate capital outflows and represent a challenge for the region, given large public and external financing needs in some countries,” said the IMF in a blog post signed by the director of the Fund’s Western Hemisphere Department, Ilan Goldfajn, assistant director Jorge Roldos and senior economist for the region Santiago Acosta-Ormaechea.Russia’s invasion of Ukraine is impacting Latam through higher inflation, which hurts the poorest the most, the IMF officials wrote.”Policymakers are reacting to this challenge by tightening monetary policy and implementing measures to soften the blow on the most vulnerable and contain the risks of social unrest,” they said.”Governments should provide targeted and temporary support to low-income and vulnerable households while allowing domestic prices to adjust to international prices,” a move they say would contain the cost for the governments while revitalizing production.In an environment of rising interest rates in the developed world, meaning those economies could soon funnel investments that would otherwise flow towards emerging markets in search of higher returns, Latam and the Caribbean will need to ensure the sustainability of public finances to help preserve credibility.Growth however is expected to decelerate after the large increases brought by the activity rebound seen last year.”Growth is returning to its pre-pandemic trend rate as policies shift,” said the IMF, noting that “exports and investment are resuming their role as main growth drivers, but central banks have had to tighten monetary policy to combat an increase in inflation.” More

Latin America can help ease some of the food, metal and energy shortages created by Russia’s war in Ukraine, but the region will only benefit fully if it embraces reforms and promotes social inclusion, a top IMF official said.Russia and Ukraine are among the world’s top grain exporters. Russia is also a key supplier of oil, gas, metals and fertiliser. The war in Ukraine and the sanctions applied by western nations to punish Moscow have led to sharp jumps in global food and fuel prices and sent companies scurrying for alternative sources of supply.“You have a shock where you lack commodities, food commodities and energy and also metals, there is a food security issue and [Latin America] is seen as the one that will help us overcome the problems,” Ilan Goldfajn, director of the fund’s western hemisphere department, told the Financial Times in an interview this week. “You will export food, you do have water, you do have land. If you have fertilisers — and that’s something the countries are working on — then you can expand commodities [output].”Latin America, he added, was “seen by investors as sufficiently far from the centre so that it looks like . . . this region can actually be part of the solution”. This explained why the region’s currencies had been appreciating and stock markets rising this year despite the US starting to raise interest rates — something that would normally weigh on investor sentiment.However, if the region is to take full advantage of the opportunity to supply a greater share of the world’s commodities, its governments need to embrace long-delayed reforms to boost productivity, increase competition, improve education, create a fairer tax system and address deep-seated inequality, Goldfajn said.Low growth continues to blight Latin America. The region bounced back quickly from the coronavirus crisis last year, but its economies are now slowing sharply as central banks raise rates aggressively to contain inflation. Brazil’s central bank has been among the world’s most hawkish, pushing borrowing costs up to 11.75 per cent, nearly six times last year’s level.Despite the risk that higher interest rates will choke off the recovery, Goldfajn said central banks had little choice. “There are actually no options but . . . first and foremost, to take care of stability, which is a necessary condition for growth . . . not to allow inflation just to spiral,” he said, adding that central banks had been “quite successful” in convincing investors and the public they were serious about bringing prices under control. The additional pressure on inflation from Russia’s invasion of Ukraine meant that Latin America’s central banks were re-evaluating whether they needed to raise rates further. “They don’t have the luxury of just waiting and seeing . . . for this shock to go [away] by itself.”

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The region struggled with high inflation in the 1980s and early 1990s but the situation improved after central banks in most of the large economies were granted autonomy. The biggest exception is Argentina, which already had one of the world’s highest inflation rates before the latest shocks. Its latest data show prices are spiralling at 55 per cent a year, which could jeopardise a recent agreement with the IMF to refinance $44bn of loans.Goldfajn said the agreement with Buenos Aires, which was only finalised last month, was now under review to address the new challenges posed by the global shocks “and the objective is to prioritise policies in order to fulfil existing objectives and targets”.The fund is also continuing discussions with El Salvador about a possible loan agreement, but Goldfajn said the country’s adoption last year of bitcoin as legal tender was “an important issue” that “will need to be sorted out before next steps”. The IMF has called on El Salvador to abandon the use of bitcoin as legal tender because of the cryptocurrency’s volatility. The combination of accelerating inflation and higher interest rates means growth in Latin America is now forecast to be just 2.5 per cent this year and next, according to the IMF’s latest projections. This is below every other emerging market region except eastern Europe.The region is one of the world’s most unequal, and protests against inequality and exclusion have swept its countries in recent years. Goldfajn said governments needed to learn to combine effective action to target poverty and inequality with structural reforms. “We need to address social issues,” he said. “So social programmes need to be there to protect the vulnerable. You can do it without giving up on the reforms and increased productivity. I firmly believe that those things are not inconsistent, to be able to attend to the demands for social opportunity and social justice, gender equality, cleaner energy and at the same time address the reforms we are talking about.” More

The price of groceries in the UK has risen by 5.9 per cent in the past year, exacerbating a wider cost of living crisis for households reeling from soaring energy bills — and increasing the political pressure on Boris Johnson.Market researcher Kantar said on Tuesday that the rise in prices was equivalent to £271 a year for the average household, the biggest increase since December 2011.The group said customers were increasingly turning towards discounters such as Aldi and Lidl to try to make their budgets go further. “We are seeing a clear flight to value as shoppers watch their pennies,” said Fraser McKevitt, head of retail at Kantar.Johnson’s position as prime minister is already vulnerable because of the partygate scandal, which has seen him fined for attending an illegal party in Downing Street during a Covid-19 lockdown.But the cost of living crisis poses a potentially more serious challenge to his administration in the coming months, with no end in sight to the pressure on household finances.The price cap on most consumers’ energy bills rose by 54 per cent to nearly £2,000 in April and is expected to rise again in the autumn because Russia’s invasion of Ukraine has pushed wholesale gas prices even higher.Although Rishi Sunak, chancellor, has announced a £9bn package to help households with this month’s price rise, a large part of this involves loans rather than grants. Sunak has indicated that he may need to give further help in the summer, depending on market movements in the coming weeks.Johnson on Tuesday chaired a cabinet meeting in which ministers were ordered to come up with “innovative ways to ease pressure on household finances” without running up new costs to the Treasury.The ideas will be discussed at a meeting of the government’s “domestic and economic strategy committee” in a few weeks’ time, the government said. Among the measures will be a commitment to crack down on “unacceptable behaviour” by companies that are considered to be unfairly pushing up bills for households. “Private companies must play their part,” Number 10 said.Downing Street refused to give any examples of concrete measures discussed at Tuesday morning’s cabinet meeting. However, officials have confirmed a report in The Sun that ministers have proposed cutting tariffs on imports of food products and refined oil products.Sunak insisted at the meeting that the new measures could not fuel inflation and therefore had to be funded from existing departmental budgets. Meanwhile, Lisa Nandy, shadow levelling-up secretary, has told Labour leader Sir Keir Starmer at a meeting of the shadow cabinet that he should shift his political attacks more towards the cost of living and away from partygate. One party aide said: “That seems a bit unfair given that we’ve been banging on about rising prices for months on end.”Louise Haigh, shadow transport secretary, said: “It is possible for people to hold two thoughts in their head; the cost of living and anger about a lawbreaking prime minister.”Overall inflation in Britain hit 7 per cent in March, a 30-year high, and is expected to reach 9 per cent later this year.

Kantar said grocery sales had fallen 5.9 per cent by value in the 12 weeks to April 17 as people tightened their belts to deal with rising prices.Aldi has increased sales by 4.2 per cent year on year, with rival Lidl up 4 per cent.With shoppers turning towards discount chains, purchases fell at some of the main supermarket chains. Sales at Sainsbury’s, Asda and Morrisons were down 7.7 per cent, 10.3 per cent and 10.5 per cent respectively. More

TOKYO (Reuters) -Japan has prepared an emergency relief package worth $103 billion to cushion the economic blow from rising raw material costs, and plans further steps later this year to promote long-term reforms, Prime Minister Fumio Kishida said on Tuesday.Kishida is under pressure to ramp up fiscal spending ahead of an upper house election scheduled to take place in July, putting Japan out of sync with many Western economies that are gradually phasing out crisis-mode stimulus measures.The 13.2-trillion-yen ($103 billion) relief package, to be funded mostly by reserves set aside under the current fiscal year’s budget, will consist of steps to deal with the immediate hit from rising prices such as subsidies to gasoline wholesalers and cash payouts to low-income households with children.Of the total, direct government spending will amount to 6.2 trillion yen. The rest consists of non-direct spending measures such as private-sector lending.The government will compile an extra budget and pass it through the current parliament session to replenish reserves and secure funds to deal with any resurgence in COVID-19 infections or prolonged rises in fuel costs, Kishida said.”We must prevent rising fuel and raw material costs from disrupting a recovery in economic and social activity from the pandemic,” Kishida told a news conference.Aside from the relief package, the government will lay out after the upper house election a “comprehensive” package of measures to spear-head change in Japan’s society, Kishida said.The package will include steps to help Japan achieve a carbon-neutral society and measures to promote the administration’s economic policy focusing on wealth re-distribution, Kishida said, without providing details.”We need to act pre-emptively looking at the medium- to long-term horizon,” he said.Analysts expect the government to compile a second extra budget later this year to fund additional spending measures, which could well exceed the size of spending for the relief package announced on Tuesday.”The government will likely compile a second extra budget in autumn or later this year,” said Chotaro Morita, chief bond strategist at SMBC Nikko Securities.Given the ruling Liberal Democratic Party’s (LDP) coalition ally, the Komeito party, has demanded an extra budget of up to 20 trillion yen, the second round of spending could be a little short of 20 trillion yen involving additional debt, he said.That could further strain Japan’s borrowings, the industrial world’s heaviest public debt, at more than twice the size of its $5 trillion economy.($1 = 127.8900 yen) More

Companies on the list released by the interior ministry include the energy giant Gazprom (MCX:GAZP) and the chemicals and fertiliser manufacturer Akron, as well as the coal trading companies SUEK Polska and KTK Polska. Gazprom has a minority stake in EuRoPol Gaz, an entity that owns the Polish section of the Yamal pipeline that carries Russian gas to Europe. Individuals on the list include billionaire Mikhail Fridman, co-founder and largest shareholder of Alfa Bank; aluminium tycoon Oleg Deripaska; and Eugene Kaspersky, founder of Russian cybersecurity company Kaspersky.”This is the first sanctions list … it has 50 items. There are oligarchs and companies that do real business (in Poland),” Interior Minister Mariusz Kaminski told a news conference. “It is likely, almost certain, that this list will be widened.” The sanctions include the freezing of assets and, for the individuals named, a ban on entering Poland. Poland has consistently argued for tougher sanctions against Russia and has previously said it stop importing Russian coal by May and stop using Russian oil by the end of 2022.Russia calls its actions in Ukraine a “special operation” to disarm Ukraine and protect it from fascists. Ukraine and the West says this a false pretext for an unprovoked war of aggression by President Vladimir Putin. More

Investing.com — It’s perhaps the biggest day of the first quarter earnings season, reaching its climax after the close when Google parent Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) report. Before then, there’ll be updates from a cast of thousands including GE, GM and Pepsi. China’s central bank put a floor under the yuan, and (sort of) stopped the rot in Chinese stock markets, for now at least. The American Petroleum Institute releases weekly crude and product estimates, and Elon Musk’s acquisition of Twitter (NYSE:TWTR) continues to send shockwaves through both markets and Washington. Here’s what you need to know in financial markets on Wednesday, 26th April. 1. Alphabet, Microsoft kick off Big Tech’s 1QBig Tech’s earnings season kicks off (if you exclude Tesla (NASDAQ:TSLA)) with results from Google parent Alphabet and Microsoft after the closing bell.Microsoft is expected to deliver another quarter of steady earnings growth, driven largely by its Cloud-hosting unit Azure. However, the more interesting release is likely to be Alphabet, whose advertising-driven model will be under scrutiny for evidence of impacts from inflation. Alphabet stock has fallen nearly 20% from its peak late last year, despite extraordinarily robust revenue growth.Investors are also likely to scan the company’s comments for any read-across to its YouTube service from Netflix’s problems with market saturation, which may lead to the streaming giant competing with it for advertising.2. PBOC promises more support; yuan stabilizes after FX reserve ratio cutThe Chinese central bank put a floor under the yuan and – up to a point, the local stock market – by saying it was looking at further ways to support the economy. The yuan, which has been falling at its fastest rate since the PBoC’s devaluation in 2015, ticked up against the dollar in response. The dollar fell 0.1% against the offshore yuan after hitting an 18-month high on Monday.The central bank said it will “increase prudent monetary policy support to the real economy, especially for industries and small businesses hit hard by the pandemic,” a reference to the massive demand shock reverberating through Shanghai and other cities due to extensive lockdowns.On Monday, the PBoC had also cut the reserve requirement it imposes on banks’ holdings of foreign currencies, increasing the availability of dollars on the local market.3. Stocks set to open lower as bounce fades; earnings deluge underwayU.S. stocks are set to open lower later, unable to build on Monday’s solid bounce, which was driven by perceptions that the repricing of interest rate expectations had gone far enough.By 6:20 AM ET (1020 GMT), Dow Jones futures were down 109 points, or 0.3%, while S&P 500 futures and Nasdaq 100 futures were down in parallel.It’s a huge day for quarterly earnings, with United Parcel Service (NYSE:UPS) and Pepsico (NASDAQ:PEP) already out with better-than-expected results. General Electric (NYSE:GE), Raytheon (NYSE:RTN), Warner Bros Discovery (NASDAQ:WBD) and DR Horton (NYSE:DHI) are all due before the bell, while Visa (NYSE:V), Mondelez (NASDAQ:MDLZ), General Motors (NYSE:GM), Texas Instruments (NASDAQ:TXN) and Chipotle (NYSE:CMG) will join the tech giants in reporting after the close.The data calendar meanwhile is dominated by durable goods orders, the Conference Board’s consumer confidence survey, new home sales and house prices for March, while a two-year note auction will also provide interest in the debt markets.4. Twitter aftershocksElon Musk’s agreement to buy Twitter continues to reverberate through both financial markets and Washington. The deal has been welcomed by conservative voices, who see the move as a welcome counterbalance to a liberal-dominated media landscape, while others (including the Washington Post, without any identifiable trace of irony) have railed against the purchase of an important mouthpiece by the world’s richest man. WaPo owner Jeff Bezos was not alone in wondering whether Musk would allow unfettered criticism of China, given how much Musk’s Tesla (NASDAQ:TSLA) has at stake there.Twitter founder Jack Dorsey said the move would “take Twitter away from Wall Street” and restore it to its original function.Musk has however leaned heavily on Wall Street to get the money together for his acquisition. Morgan Stanley  has organized some $12.5 billion in financing for the deal, secured against Musk’s holding in Tesla. Twitter stock, meanwhile, is still trading some 4% shy of the $54.20 agreed purchase price.5. Oil consolidates around $100; API estimates dueCrude oil prices consolidated around $100 a barrel overnight, with the market still on tenterhooks with regard to Covid developments in China. Beijing districts have begun a week of mass testing, while Shanghai’s lockdown still continues.By 6:30 AM ET, U.S. crude futures were down 0.2% at $98.39 a barrel, while Brent futures were up 0.1% at $102.25 a barrel, with the return of Libyan production helping to take the edge off prices.The American Petroleum Institute will report its weekly estimate of U.S. crude and fuel stocks at 4:30 PM as usual.   More

TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida on Tuesday urged the central bank to maintain its ultra-loose monetary policy, brushing aside the idea of using interest rate hikes to prevent further declines in the yen.Prospects of widening U.S.-Japan interest rate differentials have pushed the yen down to two-decade lows against the dollar, stoking fear among lawmakers that a weak currency could do more harm than good to the economy by pushing up import costs.With the U.S. Federal Reserve eyeing aggressive interest rate hikes, some market players have speculated that Kishida’s administration may pressure the Bank of Japan (BOJ) to modify its ultra-loose monetary policy to stem further falls in the yen.Kishida said currency levels are the consequence of various factors including economic and monetary policies.”The BOJ is undertaking its current policy to achieve its 2% inflation target,” Kishida told a news conference.”The government hopes the central bank continues with its efforts to achieve the goal,” he said, when asked whether the BOJ should tweak its ultra-loose policy to prevent further declines in the yen.When asked about the yen’s recent weakness, Kishida declined to comment on specific levels but warned about the demerits of sharp currency moves.”As for the weak yen, rapid currency moves are undesirable for many entities,” he said.The BOJ is widely expected to keep its ultra-low interest rate targets unchanged at a two-day policy meeting that ends on Thursday.With inflation at far more modest levels than most Western nations, BOJ Governor Haruhiko Kuroda has stressed the central bank’s resolve to keep monetary policy ultra-loose to support an economy still in the midst of recovering from the COVID-19 pandemic. More