Economy

(Reuters) – Palladium rose 11% on Friday on renewed supply concerns after trading in the metal from Russian refineries was suspended in London over Moscow’s invasion of Ukraine. Palladium, used by automakers in catalytic converters to curb emissions, rose 7.8% to hit its highest since March 25 following the announcement by the London Platinum and Palladium Market, a trade association that accredits refineries. (Full Story) “Around 40% of primary palladium supply stems from Russia, for the remainder of the year around 1.8 million ounces of primary production may be at risk … the suspension could exacerbate the undersupply,” said Standard Chartered (OTC:SCBFF) analyst Suki Cooper. Palladium XPD= rose to $2,408.50 as of 1:54 p.m. ET (1754 GMT), en route to its first weekly gain in five. The metal surged to an all-time high of $3,440.76 on March 7 on concerns over supply from top producer Russia. “Ultimately, the market is worried that we’re going to have an even more scarce market than before,” said Bart Melek, head of commodity strategies at TD Securities. Spot gold XAU= rose 0.5% to $1,941.94 per ounce and was up 0.9% for the week, while U.S. gold futures GCv1 rose 0.4% to $1,945.6. (Full Story) Gold’s rise came despite solid gains in the U.S. dollar, a rival safe-haven asset. A stronger dollar generally erodes gold’s appeal for overseas buyers. USD/ US/ (Full Story) The uncertainty over what the Federal Reserve is going to do after raising rates is driving flows into gold, said Edward Moya, senior market analyst at OANDA. Fears of a recession, growth concerns along with inflationary pressures are also causing people to hedge through gold, Moya added. While gold is considered a refuge asset during global conflicts and rising inflation, higher U.S. interest rates increase the opportunity cost of holding the non-yielding bullion. Silver XAG= rose 0.9% to $24.78 per ounce, up 0.6% for the week, while platinum XPT= gained 1.4% to $975.91 but was down for a fifth consecutive week. More

Human rights activists and others urged the Biden administration to cast a wide net to stop imports of products made with forced labor in Xinjiang.WASHINGTON — Human rights activists, labor leaders and others urged the Biden administration on Friday to put its weight behind a coming ban on products made with forced labor in the Xinjiang region of China, saying slavery and coercion taint company supply chains that run through the region and China more broadly.The law, the Uyghur Forced Labor Prevention Act, was signed by President Biden in December and is set to go into effect in June. It bans all goods made in Xinjiang or with ties to certain entities or programs that are under sanctions and transfer minority workers to job sites, unless the importer can demonstrate to the U.S. government that its supply chains are free of forced labor.It remains to be seen how stringently the law is applied, and if it ends up affecting a handful of companies or far more. A broad interpretation of the law could cast scrutiny on many products that the United States imports from China, which is home to more than a quarter of the world’s manufacturing. That could lead to more detentions of goods at the U.S. border, most likely delaying product deliveries and further fueling inflation.The law requires that a task force of Biden administration officials produce several lists of entities and products of concern in the coming months. It is unclear how many organizations the government will name, but trade experts said many businesses that relied on Chinese factories might realize that at least some part or raw material in their supply chains could be traced to Xinjiang.“I believe there are hundreds, perhaps thousands, of companies that fit the categories” of the law, John M. Foote, a partner in the international trade practice at Kelley Drye & Warren, said in an interview.The State Department estimates that the Chinese government has detained more than one million people in Xinjiang in the last five years — Uyghurs, Kazakhs, Hui and other groups — under the guise of combating terrorism.China denounces these claims as “the lie of the century.” But human rights groups, former detainees, participating companies and the Chinese government itself provide ample documentation showing that some minorities are forced or coerced into working in fields, factories and mines, in an attempt to subdue the population and bring about economic growth that the Chinese government sees as key to stability.Rushan Abbas, the founder and executive director of the nonprofit Campaign for Uyghurs, who has written about the detention of her sister in Xinjiang, said at a virtual hearing convened by the task force on Friday that forced labor had become a “profitable venture” for the Chinese Communist Party, and was meant to reduce the overall population in Xinjiang’s villages and towns.“The pervasiveness of the issue cannot be understated,” she said, adding that forced labor was made possible by “the complicity of industry.”Gulzira Auelkhan, an ethnic Kazakh who fled Xinjiang for Texas, said in the hearing that she had been imprisoned for 11 months in Xinjiang alongside ethnic Kazakhs and Uyghurs who were subject to torture and forced sterilization. She also spent two and a half months working in a textile factory making school uniforms for children and gloves, which her supervisors said were destined for the United States, Europe and Kazakhstan, she said through a translator.It is already illegal to import goods made with slave labor. But for products that touch on Xinjiang, the law will shift the burden of proof to companies, requiring them to provide evidence that their supply chains are free of forced labor before they are allowed to bring the goods into the country.Supply chains for solar products, textiles and tomatoes have already received much scrutiny, and companies in those sectors have been working for months to eliminate any exposure to forced labor. By some estimates, Xinjiang is the source of one-fifth of the world’s cotton and 45 percent of its polysilicon, a key material for solar panels.But Xinjiang is also a major provider of other products and raw materials, including coal, petroleum, gold and electronics, and other companies could face a reckoning as the law goes into effect.In the hearing on Friday, researchers and human rights activists presented allegations of links to forced labor programs for Chinese manufacturers of gloves, aluminum, car batteries, hot sauce and other goods.Horizon Advisory, a consultancy in Washington, claimed in a recent report based on open-source documents that the Chinese aluminum sector had numerous “indicators of forced labor,” like ties to labor transfer programs and the Xinjiang Production and Construction Corps, which has been a target of U.S. government sanctions for its role in Xinjiang abuses.Xinjiang accounts for about 9 percent of the global production of aluminum, which is used to produce electronics, automobiles, planes and packaging in other parts of China.The State Department estimates that China has detained more than one million people in Xinjiang in the last five years. The Urumqi No. 3 Detention Center has room for at least 10,000 people. Mark Schiefelbein/Associated Press“China is an industrial hub for the world,” Emily de La Bruyère, a co-founder of Horizon Advisory, said at the hearing.The Latest on China: Key Things to KnowCard 1 of 4Marriages and divorces. More

MEXICO CITY (Reuters) – Central banks from Brazil to Chile may be forced to dole out more monetary “medicine” than expected as inflation in the region continue to surge, defying sharp interest rate hikes and spurring discontent over rising food and fuel prices.Brazil’s monthly inflation has surged beyond forecasts to the highest in 28 years. Chile went one better with the biggest jump since 1993, Mexico has posted a 21-year-high annual figure and Peru the highest in a quarter of a century. That, analysts say, will push central banks towards hiking rates faster than planned, a reflection of how tough it has become to bring down inflation, with soaring commodities costs and the war in Ukraine heating up prices globally.”The inflation reality is asking for more monetary medication,” said Alfredo Coutino, director Latin America at Moody’s (NYSE:MCO) Analytics.Policymakers had signaled slower rises ahead after steep hikes earlier in the year. Chile has raised its benchmark rate 650 basis points since the middle of last year. Brazil has hiked the rate to 11.75% from a record-low 2% last March.That’s failed so far to rein in prices, with annual inflation also surging, pushed up by grocery prices and fuel costs, a volatile mix which is stirring angry protests in Peru and forcing political leaders to take evasive action. (Graphic: Latin America inflation – https://graphics.reuters.com/LATAM-INFLATION/zjvqkdlmnvx/chart.png) TIGHTENING CYCLEWilliam Jackson, chief emerging markets economist at Capital Economics, said that higher-than-expected inflation rates backed the view that regional central banks will need to raise interest rates by more than expected.”It reinforces our view that the tightening cycle will go further than the path implied by the central bank’s latest guidance and the analyst consensus,” he wrote in a note.After the latest inflation data, Brazilian interest rate futures rose across the board and economists flagged that next month’s widely expected interest rate increase may not be the last of the cycle, as the bank had previously suggested.In Argentina, where annual inflation is running above 50% and is expected to keep rising, the central bank is now likely to lift the interest rate again in April, a source at the entity told Reuters, after three straight hikes this year.”There should be a new upward adjustment this month,” the person with direct knowledge of discussions said, adding though that the hike would likely be capped at 150 basis points to avoid stymieing economic growth. (Graphic: Argentina: rates vs inflation – https://graphics.reuters.com/ARGENTINA-ECONOMY/zgpomndbrpd/chart.png) ‘INFLATION IS BACK’The headache for policymakers in Latin America, a major global producer of commodities from copper to corn, comes as global supply crunches heat up prices worldwide.Almost 60% of developed economies now have year-on-year inflation above 5%, the largest share since the late 1980s, while it is over 7% in more than half of the developing world.That’s rattling governments from Sri Lanka to Peru, which has been gripped by angry protests in recent weeks against soaring fuel and food prices. The central bank has responded by hiking the interest rate to the highest since 2009. (Graphic: Peru interest rate – https://graphics.reuters.com/PERU-ECONOMY/klvykjoabvg/chart.png) And in region’s second largest economy, Mexican consumer prices rose in March at a pace not seen since 2001, with economists now expecting more interest rate hikes ahead.Still, the fight to bring down prices may be a long one.The head of the Bank for International Settlements Agustin Carstens warned earlier this week the world is facing a new era of higher inflation and interest rates as deteriorating ties between the West, Russia and China and COVID after-effects drive globalisation into reverse.”Inflation is back,” said the BIS central bank umbrella group. (Graphic: Chile inflation: 30-year high – https://graphics.reuters.com/CHILE-INFLATION/byvrjbabove/chart.png) More

“Due to the logistical difficulties, vehicle exports and parts supply to Russia have been suspended since March,” Mitsubishi said in a statement.Japan has joined the United States and other allies in slapping additional sanctions on Russia, including freezing assets of the country’s leaders and three financial institutions, to punish Russia for what Moscow calls “a special military operation” in Ukraine that started on Feb. 24.Stellantis, the world’s fourth largest automaker, said in late March it would have to close the Kaluga plant shortly as it was running out of parts.It was not immediately clear whether Stellantis had halted its operations too in Kaluga.The company, which had earlier suspended all exports of cars to Russia as well as all imports from Russia, was not immediately available for comment on Friday.Stellantis has also said it was moving its current production to western Europe and freezing plans for more investments in Russia, while keeping van production in Kaluga just for the local market.New car sales in Russia fell 62.9% year-on-year in March, contracting for a ninth straight month, as the industry encountered an acute shortage and soaring prices caused by a sharp rouble drop and disrupted logistics. More

Ukraine’s corn exports will drop by another 4.5 million tons to 23 million tons and wheat exports by 1 million tons, according to the U.S. Department of Agriculture’s closely watched World Agricultural Supply and Demand Estimates, or WASDE. World wheat stockpiles were revised down to 278.4 million tons, less than expected by a Bloomberg survey.Russia’s war in Ukraine is upending trade flows out of the critical Black Sea breadbasket region, prompting warnings of food shortages as crucial supplies of wheat, corn and cooking oils are at risk. Food prices are surging at the fastest clip ever and worsening world hunger. “There’s an increased possibility of the conflict getting out of hand again. Peace is not coming any time soon,” said Jack Scoville, analyst at Price Futures Group Inc. in Chicago.Grain and oilseed futures have jumped to near record highs and also caused a spike in prices of farm necessities like fertilizer and fuel. Big growing regions like the U.S. and Brazil are under pressure to produce ample crops, though weather woes and inflation in both countries are clouding the season’s outlook. Most-active corn futures in Chicago rose 1.5% to $7.6175 a bushel as of 11:44 a.m. local time. Benchmark wheat was up 2.7% to $10.5325, and soybeans also rose.Sidelined SuppliesTo see how significantly the war is upending crop flows from Ukraine, its corn stockpiles tell the story. The war has left the country saddled with huge amounts of grain that it’s largely unable to move. With its ports shut, Ukraine is working to ramp up exports via rail, but the flows remain well below normal seaborne trade.The chaos in the Black Sea so far hasn’t led to a jump in U.S. grain exports, though there were signs of fresh corn demand this week when China scooped up 1.1 million tons, the Asian nation’s biggest such buy in almost a year.Besides the worsening war that’s affecting Black Sea exports, the report was bearish, according to Naomi Blohm, senior market adviser at Total Farm Marketing in Wisconsin, with no changes to U.S. corn reserves, bigger wheat supplies and a smaller-than-expected cut in U.S. soybeans stockpiles.Soy Switch (NYSE:SWCH)Shifts in the soybean markets are also underway. The report raised U.S. exports while lowering shipments out of Brazil, as well as Ukraine and Russia. South American soybean crops are down a combined 33 million tons below initial estimates from November, which marks a record loss for the region after a strong drought caused by La Nina weather patterns. With that cut in production, the smaller South American exports will drive more demand to the U.S. for summer and early fall.Bigger U.S. exports will likely to shrink end-season U.S. soybean stockpiles by 8.8%, the largest decline in the month of April since 2012. It’s an unusual move because supplies in America are typically well known at this time of year.(Adds details about shifts in soybean markets in final three paragraphs.)©2022 Bloomberg L.P. More

The closely watched gap between two-year and 10-year yields, whose inversion has preceded past recessions, turned negative last week, fueling a debate on whether the signal presages a downturn this time around. “We do not see a recession occurring in the near-term,” said Gargi Chaudhuri, head of iShares Investment Strategy, Americas, at BlackRock.“While we are hesitant to say that this time is different, we note that many factors now differ from previous yield curve inversions,” she wrote.Longer-dated yields had been pushed artificially low by investors such as pension funds with improved funding status, contributing to the curve inversion, she said.Inversions of key parts of the Treasury yield curve – which occur when yields on shorter-term Treasuries exceed those for longer-dated government bonds and signal economic worries – have concerned investors in recent weeks, as the Federal Reserve grows more aggressive in its fight to slow the economy and tackle inflation.Analysts have said the central bank’s unprecedented bond purchases, as well as excess savings after the coronavirus crisis, are holding longer-dated yields lower than they would otherwise be. The 2s/10s yield curve has been steepening this week, with the 10-year yield standing 18.8 basis points higher than the yield of two-year notes on Friday.BlackRock’s Chaudhuri said more hawkish signals by the central bank – increasingly determined to tighten financial conditions through rate hikes and balance-sheet reduction to fight inflation – have contributed to the curve steepening. “We still see room for longer end interest rates to move modestly higher from here”, she said. More

When old rules of global commerce no longer seem to apply, masters of esoteric data — ocean shipping container times, anyone? — are thrust into the limelight.“Ship Happens: The Miniseries” is a podcast that would not exist if not for the pandemic, which prompted consumers to begin ordering couches and computer screens so voraciously that the world’s factories and ports could not keep up.But as furniture delays and car shortages began to dominate the headlines last year, Eytan Buchman and his colleagues at Freightos, a global shipping platform, saw an opportunity.“You never really pay attention to something until it’s broken,” said Mr. Buchman, chief marketing officer at the company. “Part of it was giddiness that, hey, people care.”Freightos, which started its podcast about supply chains in November, is among a spate of data providers whose wonks and once esoteric offerings have been catapulted into the spotlight by a pandemic that has rewritten the rules of global commerce and economics.Not that Mr. Buchman was happy that everything felt broken. But he saw that Freightos could help. He and his colleagues had a wealth of shipping data and expertise at their disposal, and they began to think of ways to share it with the world, producing an index of ocean container travel times, releasing the audio program and ramping up media appearances.What could have been a short moment of prominence has lasted well into 2022. Nothing — not shipping routes, not consumer spending, not the labor market and definitely not inflation — seems to be behaving the way it did before the coronavirus struck in early 2020.Inflation is running at its fastest rate in 40 years, and data next week is likely to show that prices climbed more than 8 percent over the year through March. Supply chains remain roiled, employers are desperate to fill open jobs, and Americans have surprised economists by spending right through the rapid price increases and rampant uncertainty.Researchers and policymakers are flying blind, and both they and ordinary people are turning to experts like Mr. Buchman as they try to sketch out a new map of a changed economic landscape. “A very select circle of enlightened individuals found supply chains interesting before, but it was not a widely shared passion,” said Phil Levy, chief economist at Flexport, a freight forwarding and customs brokerage company — displaying the sort of supply chain deadpan that bigger audiences, relatively speaking, are now enjoying.According to a profile kept by Bloomberg, Mr. Levy has racked up 26 unique media mentions so far this year, after 26 in all of 2021 and 15 in 2020. Suddenly, every economist and economics writer seems to be a trade analyst, trying to suss out what might happen to supplies and prices.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“Normally, when one does forecasting, you look at past experiences,” Mr. Levy said. “That changed with the pandemic.”The revolution started in the toilet paper aisle. At the onset of the pandemic, consumers abruptly started to shop differently. Nobody needed coffee to go or manicures; everyone wanted new home-office furniture.As the government sent out repeated stimulus checks and offered more generous unemployment insurance and families spent more time at home, Americans spent the money on goods rather than the services that consumed a big chunk of their budgets before the pandemic. Even as the aid has faded and business has returned to something approaching normal, demand for things has remained unusually strong.The world’s ships, ports and factories fell behind early in the pandemic, and they have been unable to fully catch up. The situation has only been intensified by unanticipated disruptions like a giant cargo ship’s getting stuck in the Suez Canal. The Ever Given spent six immobile days, drawing global attention to the precariousness of supply chains and ocean commerce — and increasing demand for experts who could explain it.“That was a turning point in freight fame,” Mr. Buchman recalled fondly.For Mr. Levy and his colleagues, the situation was not funny, per se — the blockage was poised to cause problems for customers — but it did spark a flurry of memes in Flexport’s internal Slack messaging channels. (One that sticks in his memory was a photo of the stranded ship superimposed with the words “I told you not to listen to the Waze directions.”)Ever Given stands as a symbol of a larger phenomenon in the pandemic economy: Disruptions keep surfacing, throwing an already struggling system even further out of whack. The mismatch between supply and demand has stoked inflation, which has surprised policymakers both because it has been so rapid and because it has proved long-lasting.And the upheaval extends beyond the world of shipping.Companies cannot find enough workers, in part because the pandemic appears to have accelerated a demographic shift. Baby boomers, who were entering retirement age, left the labor market in large numbers — and it is unclear if they will return. Parents coping with unpredictable child care also left the work force. Employers are grappling with the possibility that workers are in the midst of a “Great Resignation,” possibly encouraged by savings amassed during the pandemic. The labor market shortages have given them a chance to ask for higher pay and better workplace conditions.As the coronavirus era enters its third year, the economic mysteries are many: Will those workers come back? Will America’s appetite for new couches ever be sated? Is there any price that consumers will not pay for cars?Fiona Greig doesn’t know all of the answers. But she has data that might allow her — and others — to come closer than they otherwise would.“I’m now receiving inbound requests from asset managers in Germany, from all walks — our own Federal Reserve Bank, the White House, et cetera,” said Ms. Greig, director of consumer research and co-president at the JPMorgan Chase Institute.The economic data amassed by Fiona Greig at the JPMorgan Chase Institute has become closely watched.Melissa Lyttle for The New York TimesEarly in the pandemic, the institute focused on one metric that was of great interest to a lot of people: what people could spend. The now widely cited graphic uses Chase data to show how much cash households in different income bands have in their checking accounts in near real time, and policymakers and Wall Street econometricians alike have been using it to gauge the spending power of different groups of consumers.Inflation F.A.Q.Card 1 of 6What is inflation? More

The FT this week ran a brace of big reads on the sanctions slapped on Russia, how they happened and what the longer-term impact will be. It’s an important subject, and both pieces are worth reading at leisure. (Editor: that means after you’ve finished with this one.)However, FT Alphaville had some follow-up thoughts on the subject, after having spoken to many experts in the field (two current and one former FT Alphavillain were involved). Our biggest takeaway? People seem very relaxed about threats to the dollar.This might, in time, prove to have been overly sanguine, but we broadly share that assessment. China is the main contender, but until Beijing opens its capital account fully it cannot be a realistic challenger. And even when it does, who will the world realistically trust the most, the US or China? Even countries that regularly clash with Washington will not feel much safer with the renminbi, given that China has shown even more willingness to economically sanction countries that don’t toe the line on issues like Taiwan. For example, India might not like the dollar’s hegemony, but that it would plough meaningful amounts of its foreign reserves into the renminbi seems preposterous, even if China allowed it to.The reality is there are many facets that make, support (and break) reserve currency status, and established reserve currencies only fall over a long period of time. As fellow FT Alphavillain Claire Jones wrote Thursday, sterling’s top dog status lasted well into the 1950s, decades after the UK had become a middling power.Like a social network, the advantages of the incumbents are huge. Countries can try to mitigate their vulnerabilities to financial sanctions from Washington, but they cannot eliminate them (especially if Europe and other allies like Japan join in, as they have in the case of Russia). It’s telling that even Barry Eichengreen, the daddy of dollar historians, is more chilled about the greenback dominance than he’s been in the past. Despite Eichengreen publishing a wildly timely paper on the “stealth erosion” of the dollar’s dominance in March, he admitted that he had been surprised by the resiliency of the greenback’s role in the global financial system, with most of its market share losses going to smaller western currencies like the Canadian and Australian dollars, rather than the renminbi. Here’s Eichengreen:I think the Trump years may have changed that conversation a little bit. An erratic US foreign policy, to put it politely, didn’t significantly erode the singular role of the dollar or of US banks. That slightly reassuring experience in combination with the extraordinarily aggressive Russian action produced an outcome which I, for one, did not entirely see coming.We’ve seen the difficulty that China and Russia are having in creating alternatives to the Western monetary and financial system. The fact is that the renminbi has not gained much importance as an international reserve currency, that it doesn’t provide much of a backdoor for countries in Russia’s position. But the euro hasn’t gained ground as an international currency in its first two decades, and the renminbi has barely gained ground. The movement has been into these smaller, high-quality currencies.That is making for a somewhat more diversified international monetary and financial system that we’ve had in the past, but not the one that many of us saw coming. We thought we’d see a tri-polar system dominated by the dollar, the euro and the renminbi. Instead we have seen smaller players gaining the ground that the dollar has lost.In terms of other more far-reaching changes. I still don’t really see it. I think it’s revealing that the payments system for the renminbi that China has developed — the cross-border interbank payments system (Cips) — sends its messages through Swift.However, this raises the most intriguing implication of all: If the backlash is likely to be de minimis, and the impact potentially severe (most countries will be even more vulnerable to sanctions like this than Russia) the temptation to use these tools again is going to be overwhelming. As one veteran investor told us: “It’s a crossing of the Rubicon. The precedence is really important. This puts a lot of countries on notice that the US is willing and able to go after them in an aggressive way . . . Any precedent becomes a tool if it doesn’t blow up in your face.”Just like how cruise missiles and later drones became an easier and cheaper method than sending in the US marines — let alone long-term state-building — financial sanctions might become a tempting weapon to deploy more often, even in cases less clear-cut than Russia’s invasion of Ukraine. Precedents are forged by extreme cases, not humdrum ones.This is what Juan Zarate thinks will happen and he’s no stranger to militarising the world of money. As president George W Bush’s deputy national security adviser, Zarate became one of the key architects of the US government’s far-ranging and often controversial efforts to disrupt terrorist financing networks after 2001. Zarate pointed out to FT Alphaville that the Russian sanctions weren’t some deus ex machina. They were a natural next step in a decades-long period of development, deployment and gradual escalation (some of which he oversaw). Everything aimed against Russia was part of a pre-existing armoury, whether Swift exclusions or central bank reserves being frozen. Only the size of the opponent and the aggressiveness was novel: All these elements are part of a playbook that was already being implemented — but in degrees and with calibration . . . This is as maximalist an approach against a major economy that one can imagine.The gloves are off, in financial and economic terms . . . This is where we’ve been heading for 20 years, in part because of a lack of desire to commit kinetic forces and the search for alternative ways of coercion in statecraft . . . But until now I don’t think that the use of economic and financial predominance as a core tool of statecraft has been embedded in the transatlantic view of the world. (Russia) has galvanised that idea . . . This battlespace is now coming to the fore. Perhaps a new era of financial warfare is about to dawn? Smarter people than us, please share your thoughts below. More