Economy

Global food prices have struck a new high, soaring at the fastest monthly rate in 14 years after the war in Ukraine hit the supply of grains and vegetable oils, in a shift likely to do the greatest harm in poorer countries around the world.March’s food price index from the UN Food and Agricultural Organization rose to its third record high in a row, jumping by 34 per cent from the same time last year, after the war shut down supply lines from Ukraine and Russia. The index was 12.6 per cent higher than in February, a rise that the organisation described as a “giant leap” .Many poorer countries are already struggling from the impact of Covid-19, and several in the Middle East and north Africa rely on both Ukraine and Russia for their grain and vegetable oils. Food inflation has helped to spur protests in a number of countries, including Sri Lanka, where the issue has helped to create a severe economic and political crisis.“The ongoing conflict in Ukraine is heightening concerns about the impact on food security worldwide,” said Beth Bechdol, deputy director-general of the FAO. “We are witnessing food price increases across the board.”The World Bank has already warned that higher food prices could cause lasting damage to low and middle-income countries and could contribute to pushing millions of people into poverty.Russia and Ukraine are important exporters of grains and sunflower oil, accounting for about 30 per cent of global wheat trade. Russia has continued shipping wheat since it invaded its neighbour in February, but sanctions have complicated payments, leading to supply uncertainties.

Food price inflation had already taken root before the war started, after poor harvests last year on the back of bad weather and a sharp rebound in post-pandemic lockdown demand. But according to the FAO, nearly 50 countries depend on Russia and Ukraine for at least 30 per cent of their wheat imports.In 2021, 36 out of 55 countries with food crises depended on Ukrainian and Russian exports for more than 10 per cent of their total wheat imports, including 21 countries with a major food crisis.The fastest increases in March’s index were in vegetable oil prices, which went up by 23.2 per cent month on month, to a record high.“International sunflower seed oil quotations increased substantially in March, fuelled by reduced export supplies amid the ongoing conflict in the Black Sea region,” the FAO said.Cereal prices rose 17.1 per cent month on month, also to a record high. More

The central bank cut its key interest rate to 17% from 20% in a surprise move ahead of a regular board meeting scheduled for April 29, and said it was open to possible further cuts at upcoming meetings.The rouble quickly returned to gains after easing slightly following the move, which partially reversed the emergency rate hike that the central bank delivered in late February after Russia had started what it calls “a special military operation” in Ukraine on Feb. 24.By 1116 GMT, the rouble gained 1.8% to 74.42 against the dollar, inching closer to its strongest level since Feb. 11 of 74.2625 hit on Thursday.Against the euro, the rouble rallied by nearly 3% to 79.10 after briefly touching the 79 mark for first time since late June 2020.Yields on 10-year OFZ treasury bonds, which move inversely to their prices, fell to 10.93% from 11.62% seen before the rate move.The surprise rate decision followed comments by Finance Minister Anton Siluanov who said this week his ministry was working with the central bank on measures to make the rouble exchange rate more predictable and less volatile.”If the experience of the 2014/15 rouble crisis is any guide, a large interest rate cut (like that seen today) is likely to be followed by much more gradual easing as the CBR targets a large positive real interest rate to bring inflation back down to its target,” Capital Economics said in a note.LockoInvest firm said it has revised its year-end rate forecast to 11-12% from not more than 15%.VOLATILE ROUBLEMoves in the rouble remain jittery and trading volumes on the Moscow Exchange are below average, but the rouble has fully recovered to levels seen before Russian troops entered Ukraine.The rouble is supported by Russia’s strong current account surplus amid high commodity prices as well as Russia’s capital controls, said Olga Belenkaya, head of macro research at Finam brokerage.The rouble has recently been steered by mandatory conversion of dollar and euro revenues by export-focused companies, while demand for forex is limited by a ban on buying cash dollars and euros as well as by a 12% commission on buying forex online or through a bank.Given the latest rouble firming, some recovery in demand for FX is possible even despite the commission, Otkritie bank said in a note.The rouble will lean towards firming without action from the central bank and could enter the 70-75 range to the dollar during the day, Promsvyazbank analysts said in a note.On the stock market, the dollar-denominated RTS index rose 0.7% to 1,099.5 points. The rouble-based MOEX Russian index fell 1.4% to 2,598.0 points.Shares in oil firm Bashneft underperformed the market, losing 4% on the day, while shares in its rival Lukoil were down 1.4%. Oil stocks took a hit after the U.S. Congress voted to impose further economic pain on Russia over its actions in Ukraine, passing one measure to remove its “most favoured nation” trade status and another to ban oil imports. More

MUMBAI (Reuters) -The Reserve Bank of India said on Friday it is starting to move away from its ultra-loose monetary policy even as it kept its key lending rate at a record low, as its priorities shifted to fighting surging inflation in the wake of the Russia-Ukraine war.In a surprise move, the central bank said it would restore its liquidity adjustment facility corridor to pre-crisis levels, which was seen as a first step to moving away from emergency measures embraced during the COVID-19 pandemic.Analysts and traders are now broadly expecting the RBI to change its ‘accomodative’ stance to neutral at its next policy meeting in June, with interest rate increases starting sooner rather than later.But with global growth risks also rising, RBI Governor Shaktikanta Das sought to reassure financial markets that the process of returning policy settings to more normal levels would be gradual. “The conflict in Europe has the potential to derail the global economy caught in the crosscurrent of multiple headwinds. Our approach needs to be cautious, but proactive in mitigating the adverse impact on India’s growth and inflation,” Das said after the policy decision. The RBI’s monetary policy committee held the lending rate, or the repo rate, at 4%. The reverse repo rate, or the key borrowing rate, was also kept unchanged at 3.35%.However, the central bank said it would restore the width of the liquidity adjustment facility corridor to 50 basis points.RBI said the floor of the corridor would be the standing deposit facility rate, which was set at 3.75%, and the marginal standing facility rate at 4.25% will be the upper bound with the repo rate in between the two.”This raises the probability of rate hike cycle commencing in August, while not fully precluding the case for a June hike itself along with a stance change if macro realities worsen for the inflation outlook,” said Madhavi Arora, lead economist at Emkay Global.All but six of 50 respondents polled by Reuters between March 29-April 5 had forecast no change in the repo rate on Friday. Thirty-two had expected rates to still be unchanged by end-June.”INFLATION BEFORE GROWTH”Reflecting growing uncertainties, the RBI raised its inflation forecast for the current fiscal year to 5.7%, 120 basis points above its forecast in February, while cutting its economic growth forecast to 7.2% for 2022/23 from 7.8%.”We have now put inflation before growth. So that is the sequence of our priorities – first is inflation followed by growth,” Das said, adding that this was the first time in three years that the RBI was putting inflation in the forefront.Das said RBI will gradually withdraw system liquidity over a multi-year timeframe beginning this year but will do it in a non-disruptive manner. He said economic activity is barely above pre-pandemic levels but continues to steadily recover.Das said the MPC voted unanimously to keep the repo rate unchanged and to retain an ‘accommodative’ monetary policy stance.But he added that the focus is on the withdrawal of accommodation.Inflation has held above the RBI’s 6% upper threshold so far this year, casting doubt on its strategy of keeping rates low to bolster growth even as some other central banks are already raising borrowing costs to tamp down price pressures.India’s 10-year benchmark bond yield jumped 20 basis points on the day to trade at 7.11% by 1040 GMT, while the rupee strengthened to end at 75.8950 against the dollar. The NSE Nifty 50 index closed 0.82% higher while the S&P BSE Sensex rose 0.70%.Das also said the RBI will work to help smooth the implementation of the government’ record $14.31 trillion borrowing programme as and when warranted. The RBI also increased banks’ held-to-maturity limit in debt to 23% from the current 22% until end-March 2023.”Amid inability to explicitly support the government borrowing program, the RBI enhanced the held-to-maturity limit by 100 bps, which could calm the bond markets despite a sharp increase in inflation forecast,” said Garima Kapoor, economist institutional equities at Elara Capital. More

Hops are an essential flavouring ingredient and Russian-owned brewers import 98% of the 7,000–7,500 tonnes they use every year, mainly from Germany, the Czech Republic and the United States. Russia’s domestic brewers could also face higher demand as European rivals Carlsberg (OTC:CABGY) and Heineken (OTC:HEINY) have announced plans to exit the Russian market.Most Russian-owned firms had enough hops to last them a few months, but would run into serious problems in summer if supplies were disrupted, the Russian Union of Brewers said in a letter seen by Kommersant.The union asked the government to support the establishment of local production, although the process is likely to take some time.The Association of Russian Hops Producers estimates that it would need more than 500 million roubles ($6.4 million) in annual state subsidies for 3-5 years to increase production to 1,000 tonnes by 2030, the newspaper said.($1 = 78.0330 roubles) More

Two central banks in countries at opposite ends of the Pacific Ocean meet on Wednesday and could deliver the first half-point interest rate rises in any developed nation this cycle.The U.S. Fed, expected to follow suit in May, gets March inflation data, while the ECB on Thursday will face pressure from its hawkish factions to start tightening policy. And Europe has woken to the risk of a French election upset.Here’s your week ahead in markets from Tom Westbrook in Singapore, Ira Iosebashvili and David Henry in New York; Sujata Rao and Dhara Ranasinghe in London.1/MADAME LA PRESIDENTE? Far-right French politician Marine Le Pen, who sowed panic in the run up to 2017 presidential elections, is enjoying a resurgence in the opinion polls and markets are running scared.With the first round of voting in presidential elections scheduled for Sunday, Le Pen is closing the gap on incumbent Emmanuel Macron.Macron is still expected to win the presidency, but the possibility of an upset has sunk in. A Le Pen win would hamper European cohesion, while her big-spending, tax-cutting agenda would blow out France’s spending bill.The premium investors demand to hold French debt versus Germany has risen, while shares in companies targeted by Le Pen for nationalisation have fallen. Unlike in 2017, Le Pen does not advocate ditching the euro. But a strong showing on Sunday will herald market turbulence before the April 24 decider — and possibly after. Graphic:french german bond yield spread- https://fingfx.thomsonreuters.com/gfx/mkt/byvrjbdnmve/france1.JPG 2/HAWKS OVER FRANKFURTWith euro area inflation running at 7.5%, the European Central Bank’s meeting on Thursday will see the hawks out in force. They have become increasingly vocal, while markets are now gunning for a July rate rise, having ramped up their bets since the March meeting. ECB chief economist Philip Lane warns against reacting to short-term, energy-driven price surges. And the Ukraine war is taking a toll on the economy and consumer confidence.The ECB knows well the price of making a policy mistake. It has raised rates in the past, only to make a speedy U-turn. Yet inflation shows no signs of peaking, let alone returning to the 2% target. The hawks’ clamour may get louder. Graphic:Money markets bet ECB will raise rates fast – https://graphics.reuters.com/EUROPE-MARKETS/gdpzybkonvw/chart.png3/BIG GUNS, BIGGER RATE HIKES    Canada and New Zealand appear poised for their biggest interest rate hikes in 20 years, underscoring the worldwide scramble to contain inflation.      Both banks meet on Wednesday. Swaps price a 90%-plus chance of a 50 basis-point hike from the Reserve Bank of New Zealand and a better-than-80% likelihood of the Bank of Canada does the same. With Canadian inflation seen above target until 2024, another 50 bps move may come in June. New Zealand delivered a 25 bps hike in February — its third — and flagged the possibility of bigger rises ahead. These would be the most drastic G10 hikes this cycle. Until May, when the Federal Reserve is tipped to lift rates 50 bps. Graphic: New Zealand and Canada cenbanks poised to go large- https://fingfx.thomsonreuters.com/gfx/mkt/akvezjrmnpr/Pasted%20image%201649304952217.png 4/PRICE WARMinutes from the Fed’s March policy meeting showed meatier rate hikes and an aggressive balance sheet runoff are likely in coming months as the central bank battles inflation. .All that puts a spotlight on Wednesday’s inflation data. February’s 7.9% print was the largest annual increase in 40 years. In March, consumer prices grew 8.3% year-on-year, economists polled by Reuters predict, as the Ukraine-Russia war sent commodity prices spiralling higher. And as Americans dig deeper for rent, gasoline and food, wage gains are eroding — inflation adjusted average hourly earnings fell 2.6% year-on-year in February. A chunky inflation print will bolster the case for more dramatic policy tightening. Graphic: FED AND STOCKS-https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoqxkavr/Pasted%20image%201649296859647.png 5/BANKS TO THE TESTAs rising bond yields, labour shortages and sky-high commodity prices buffet stock markets, first-quarter U.S. earnings will give investors a chance to gauge balance sheet resilience, cost pressures on companies and share buyback plans.Overall, S&P 500 earnings growth is expected at 6.8% in the Jan-March quarter, versus the 53% bounceback seen a year ago from COVID-time doldrums, according to Refinitiv IBES. Big banks kick off the season with JPMorgan (NYSE:JPM) reporting on Wednesday, followed a day later by Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS). Bank shares have fared badly this year, with 11% losses, versus the S&P 500’s 6% The six biggest lenders are projected to show a 35% decline in net income versus a year earlier. Investment bank revenues may have declined, especially after the Russian invasion of Ukraine, while some banks must make provisions for Russia-linked losses.Finally, watch whether banks may curb share buybacks after seeing excess capital dented by Q1 losses on their bond holdings. [L2N2W31XD] Graphic:S&P 500 earnings growth- https://graphics.reuters.com/USA-STOCKS/RESULTS/akvezjybjpr/chart.png More

MELBOURNE (Reuters) – Australian gas producer Woodside (OTC:WOPEY) Petroleum Ltd’s agreed merger with BHP Group (NYSE:BHP)’s petroleum arm is in the best interest of its shareholders, an independent expert said, valuing the combined group at around $40 billion.Global miner BHP agreed to hive off its petroleum business to Woodside last year in a nil-premium deal that will give BHP shareholders a 48% stake in the combined group and turn Woodside into a top 10 global independent oil and gas producer.Accounting firm KPMG assessed the value of the combined group at between $37.2 billion and $42.3 billion, equating to a per share valuation of A$26.25 to A$29.81, which was equal to or more than its estimate of Woodside’s current per share value. “Based on these measures, the proposed transaction is, in our opinion, fair to Woodside shareholders,” KPMG said in a report commissioned by Woodside and released to its shareholders on Friday ahead of a vote on the deal on May 19. Woodside’s board unanimously recommended that the company’s shareholders vote in favour of the merger. Its shares fell 1.5% to A$32.40 after the report was released, compared with a 0.5% gain in the broader market. KPMG’s valuation of the combined group was below an estimates by UBS and Credit Suisse (SIX:CSGN), at about A$34.60 a share and A$33 a share respectively, based on the banks’ current oil price outlooks.The independent expert assumed a Brent oil price of $100 a barrel for 2022, falling gradually to $70 a barrel in 2026. Credit Suisse analyst Saul Kavonic said KPMG’s report did not shine as much light on BHP’s growth prospects as hoped, including significantly underestimating the potential value of its Calypso gas find in Trinidad.He also said the cashflow profile showed little increase in free cash flow despite Woodside’s Scarborough gas project coming online in 2026, which he said “may flag risk of decline elsewhere, including at Pluto/Sangomar/North West Shelf”.KPMG highlighted the strength of the combined balance sheet, with BHP assets being handed over debt-free, which would lower the combined group’s gearing to around 8%, compared with Woodside’s target gearing of 15% to 35%.”BHP Petroleum’s asset base provides Woodside with immediate access to significant development and growth opportunities, within a time frame that is unlikely to otherwise have been available to Woodside as a standalone entity,” KPMG said.In a separate announcement, BHP said based on Woodside’s share price of $25.55 on April 6, the implied value of BHP Petroleum is $23.4 billion.Woodside said on Friday it expects to achieve its target of more than $400 million in cost savings from combining the two groups by early 2024, including cutting executive jobs and other staff, but said carrying out the changes would require one-off costs of up to $600 million in the first two years.The independent expert’s report confirmed that Woodside will be inheriting about $3.9 billion in oil and gas closure and rehabilitation liabilities from BHP. More

Barring a last-minute rebound, global stock markets will end this week lower — for European stocks that’s the first weekly drop in four — with investors getting nervous about the speed at which central banks will tackle inflation.While government bond yields have been marching higher throughout March and April, stocks have been shrugging off tightening fears and rising rapidly. The tone of the Federal Reserve meeting minutes this week, in which 50 basis point hikes and a big $95 billion a month shrinkage in the balance sheet appear likely, seemed to shake investors out of their calm state of mind.The European Central Bank followed with a more aggressive tone than expected in their own minutes.This week’s rise in government bond yields — up more than 20 basis points for 10-year U.S. Treasuries — was punchy but in line with the recent dramatic price action. But stocks dropped as investors focused on the likelihood that central banks will be hiking aggressively to tame inflation just as the war in Ukraine knocks global economic confidence. Warning signals for a potential recession in the euro zone and even the United States are flashing red.Overnight there was some respite with Wall Street making a late recovery, and European markets have opened slightly higher.The other big story for markets in the euro zone this week is Sunday’s first-round French election, where incumbent President Emmanuel Macron looks set for the fight of his life.The tight French presidential race is adding to nerves and has sparked a selloff in French government bonds this week.It has been a quiet week for corporate news with little in the way of earnings.Graphic: FED AND STOCKS- https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoqxkavr/Pasted%20image%201649296859647.pngKey developments that should provide more direction to markets on Friday: – Shanghai widens COVID testing as other Chinese cities impose curbs- Japan’s Feb current account swings back to surplus from big deficit- German Chancellor Olaf Scholz travels to London to meet British Prime Minister Boris Johnson- Reserve Bank of Australia Financial Stability Review – Russian Q4 GDP- ECB’s Executive Board Fabio Panetta; Bank of Spain’s governor Pablo Hernández de Cos; board member Isabel Schnabel More

(Reuters) – Jarindr Thitadilaka says he made as much as $2,000 a month last year from his collection of digital pets, which he would breed and send into battle to win cryptocurrencies.The 28-year-old from Bangkok was playing Axie Infinity, one of a new breed of blockchain-based online games, dubbed “play-to-earn”, which blend entertainment with financial speculation.These games can make for lucrative businesses amid the hype around NFTs and virtual worlds, attracting millions of players plus billions of dollars from investors who see the games as a way to introduce more people to cryptocurrency.In Axie Infinity, users buy virtual blob-like creatures with varying attributes as NFTs, or non-fungible tokens – digital assets whose owner is recorded on the blockchain – for anything from tens of dollars to hundreds of thousands.Players can then use the pets to earn money by winning battles, as well as creating new pets, whose value depends on their rarity. The assets can be traded with other players on the platform, which says it has about 1.5 million daily users.”It’s not just a game any more. It’s more like an ecosystem,” said Thitadilaka. “You can even call it a country, right?” The dangers of this speculative ecosystem, and the largely unregulated crypto gaming industry, were brought into sudden focus last week when Axie Infinity was hit by a $615 million heist. Hackers targeted a part of the system used to transfer cryptocurrency in and out of the game.Axie Infinity’s Vietnam-based owner, Sky Mavis, said it would reimburse the lost money through a combination of its own balance sheet funds and $150 million raised by investors including cryptocurrency exchange Binance and venture capital firm a16z.Sky Mavis’ co-founder Aleksander Larsen told Reuters that if he could do things differently, he would have focused more on security when growing the game, which was launched in 2018.”We were running 100 miles per hour, basically, to even get to this point,” he said. “The trade-offs we made maybe weren’t the ideal ones.”The hack, one of the biggest crypto heists ever, shone a light on play-to-earn games, a young world largely unknown outside crypto and gaming circles, that’s becoming big business.Players spent $4.9 billion on NFTs in games last year, according to market tracker DappRadar, representing around 3% of the global gaming industry. Although demand has cooled since a peak last November, gaming NFTs have still racked up $484 million in sales so far in 2022.Investor interest in NFT-based games has also ballooned, with projects attracting $4 billion of venture capital funding last year, up from $80,000 in 2020, DappRadar said.”There’s so many users who want to interact with the tech,” said Larsen, adding that Axie Infinity’s revenues exceeded $1.3 billion last year. “It’s like you found a new continent … like finding America all over again.”Graphic: Monthly sales of gaming-related NFTs- https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrqnwqpm/Monthly%20sales%20of%20gaming-related%20NFTs.pngHAVES AND HAVE NOTSAdding layers of complexity, unofficial financial networks have also emerged around these games, as some players leverage their coveted in-game possessions for further gain.Thitadilaka in Thailand decided last July that he wanted make more money than he could by simply playing on his own, so he and his friends decided to form what’s known in gaming lingo as a “guild”. They allowed their NFTs to be used by people who wanted to play Axie Infinity for free, without investing in an asset, and took a cut of any winnings in return.    This model is commonplace across play-to-earn games. Thitadilaka said his guild, GuildFi, grew into a network with 3,000 Axie Infinity players who split their earnings with the asset-owners 50:50.  Thitadilaka now runs GuildFi as a full-time job and the company has raised $146 million from investors.Southeast Asian countries such as Thailand and the Philippines have emerged as some of the hottest global gaming hubs. Teriz Pia, who is 25 and lives in Manila, quit her job as a pre-school teacher last June after her brother founded a play-to-earn gaming guild, Real Deal Guild.Now she says she makes as much as $20,000 a month through her network of more than 300 players across multiple games, plus other crypto assets. For Axie Infinity Pia lets her players keep 70%, while she takes a 30% cut. In another play-to-earn game, Pegaxy, where players buy and trade NFTs of virtual horses to compete in races to win crypto tokens, she splits it 60:40.”I don’t call them workers. I just call them my friends, or my scholars,” she said. “The salary in the Philippines if you’re a teacher … I’m a college graduate, I’m an educator, but it’s not enough. I never imagined that I could earn this kind of money.”But Pia cautioned that it was a dangerous business.”There’s a lot of risk. When I’m investing in a new game … being a member of Real Deal Guild, we have a partnership team, we have researchers, but at the end of the day, it’s still crypto, it’s still a risk.” One of the biggest play-to-earn networks, Yield Guild Games, said it had 10,000 Axie Infinity players as of the fourth quarter of 2021 who kept 70% of their earnings and had received $11.7 million in total.Australian-based Corey Wilton, 25, founded Pegaxy, which he says has about 160,000 daily users. He estimates that 95% of users of play-to-earn games participate as “renters”, generating revenue without owning the assets, while 5% are asset owners. ‘HOW PEOPLE GET HURT’Legal experts warn there is no safety net for players who effectively invest in risky assets, leaving them highly vulnerable should a project fail or the market for the assets dry up. As global regulators seek to get to grips with cryptocurrencies themselves, there is little oversight of NFTs or the relatively niche offshoot of play-to-earn games, which typically use in-game crypto tokens that can then be cashed out into traditional money. “Storing any value in projects like this is risky. The earning in play to earn, blockchain-based games is often through rewards paid in the native token of the project,” said David Lee, cryptocurrency associate at London-based law firm Fladgate.”There are no guaranteed values of either the token or the in-game asset as their value is often determined by supply and demand in the market. This means there can be significant volatility in the price and, if the project becomes less popular or is abandoned, then there is a potential for the assets to become worthless.”Yet advocates of these games say success is built upon a combination of factors such as skill, strategy and luck. “There is definitely money to be made, but there is also money to be lost here,” Pegaxy’s Wilton added. “Play to earn should not be confused with charity, that’s how people get hurt.” More