Economy

“In view of the changed situation, I’m open to prioritising the available funds,” Lindner told the Frankfurter Allgemeine Sonntagszeitung newspaper.The minister who leads the pro-business Free Democrats (FDP) added that what is needed are “investments in infrastructure, energy and competitiveness, but not more state consumption and postponed reforms”.In an unprecedented move to prevent economic fragmentation due to the pandemic, EU countries agreed in 2020 to jointly borrow 800 billion euros ($878 billion) to spend on rebuilding their economies to be greener and more digitised.The EU will discuss in a few weeks whether it needs to jointly borrow more money in response to the challenges created by Russia’s invasion of Ukraine, European Economic Commissioner Paolo Gentiloni said on Tuesday. L5N2VP2ZB]France is leading calls for new EU debt, while Germany, the Netherlands, Austria and other countries oppose such new borrowing now, arguing that the economic impact of the war in Ukraine is still unclear and that only 74 billion euros of the fund has been disbursed so far.($1 = 0.9107 euros) More

“Next Tuesday they will start their mission in Lebanon,” he told reporters on the sidelines of the Doha Forum in Qatar.”Hopefully … by the end of two weeks we will see the light,” Mikati said.The Lebanese pound has lost more than 90% of its value since 2019, when the financial system collapsed, plunging the majority of Lebanese into poverty, according to UN agencies.Reforms demanded by donors to provide assistance to Lebanon include steps to tackle widespread corruption, tax dodging and government deficits – the root causes of the meltdown.”We don’t have an option, it is an obligatory path to negotiate with the IMF and to achieve an agreement,” he added. More

The trade balance – chronically negative in import-reliant Turkey – will get some relief from foreigners, including Russians buying real estate, the Wall Street bank said.But “these inflows will fall short of financing the growing current account deficit, and both (official foreign currency) reserves and the Turkish Lira will come under pressure,” it said.High commodity prices would make “the adjustment of Turkey’s current account more difficult rather than easier,” it added. “We now forecast the Turkish current account deficit at 4.0% (previously 2.5%) of GDP in 2022,” and it could be more “should the authorities once again resist a slowdown in domestic demand and push for growth,” Goldman said. Turkey imports virtually all its oil and gas needs and has seen costs soar as Russia’s invasion of Ukraine prompted sanctions that sent commodity prices soaring. It also relies heavily on Russia and Ukraine for grain imports. That has jeopardised the unorthodox economic programme adopted by President Tayyip Erdogan that is based on low interest rates, higher production and exports to achieve a current account surplus. Erdogan said this week it would be ambitious to expect a serious rise in tourism this year, in a nod to the impact of the war.The central bank’s rate cuts to 14% have left real rates deeply negative given that inflation has soared to 54%. Inflation is expected to hover above 60% for much of the year. “At this point, we do not expect them to hike the official policy rate,” Goldman said. But the bank “will eventually need to respond, and will possibly do so through new instruments, macroprudential measures, tightening through other channels or other heterodox measures.” More

Big investors are betting that the war in Ukraine will prompt companies to pull production closer to home in a significant reshaping of global supply chains.For decades, broad investment themes have gelled around the idea that cheap offshore manufacturing and slick global supply chains can hold down costs for companies and foster low inflation.But the war, with its impact on commodities supplies on top of revulsion at doing business with Russia, has accelerated a rethink.“The Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades,” Larry Fink, chief executive of BlackRock, the world’s largest asset manager, wrote in his annual letter to shareholders this week. “A large-scale reorientation of supply chains will inherently be inflationary,” he added. Fink is not alone in raising this issue in recent days. Howard Marks, co-founder of distressed debt investor Oaktree Capital Management, also warned in a Financial Times opinion article this week that the pendulum of globalisation is swinging back towards local sourcing. Offshoring “makes countries and companies dependent on their positive relations with foreign nations and the efficiency of our transportation system”, he said. The past three decades marked a period of rampant globalisation as companies slashed costs by moving large parts of their production offshore and using cheap labour. That has helped to keep price pressures low and helped enable central banks to hold down interest rates, boosting investment in risky assets. But this is now creaking.“The Ukraine war is part of a pattern of supply chain disruptions getting more frequent and more severe,” said Dan Swan, co-lead of McKinsey’s operations practice, pointing to the trade war between the US and China, the blockage of the Suez Canal last year, and the coronavirus pandemic. All of these have focused attention on supply chain sovereignty and domestic production facilities. Surging demand for semiconductors during the pandemic exposed how the US and Europe’s share of global semiconductor production had decreased from roughly 80 per cent in 1990 to only 20 per cent in 2020 and has prompted big investments in US semiconductor production.At the same time, the war in Ukraine has highlighted the dangers of Europe’s dependence on Russian energy exports, particularly natural gas. Prices for gas in Europe, used in everything from heavy industry to heating homes, surged to record highs in recent weeks on concerns that Russia could reduce supplies in response to western sanctions. This has ramped up pressure to accelerate investments in renewable energy. Germany on Friday vowed to all but wean itself off Russian gas by mid-2024 and said it aimed to become “virtually independent” of Russian oil by the end of this year. The US has already blocked Russian oil imports, while the UK expects to do so by the end of 2022 — factors that have helped send crude oil prices surging well above $100 a barrel. “The three mega trends that have helped companies to generate tremendous profits over the last 30 years, namely the trend on long-term nominal interest rates, the trend on corporate tax rates and globalisation, are reversing simultaneously,” said Thomas Friedberger, deputy chief executive at Tikehau Capital, a €34.3bn alternatives asset manager.“We need to learn to invest again in an inflationary environment,” he said. “It’s injecting dispersion into asset prices, compressing multiples and putting pressure on corporate profits. It can only be overcome by asset managers positioning themselves to take advantage of these mega trends: energy transition, cyber security and digitalisation. It’s going to be a much trickier environment for investors.” It all also opens up opportunities for fund managers, however. “There will be a lot of opportunities for stock pickers because there will be a lot of fragmentation within sectors,” said Monica Defend, head of the Amundi Institute. She pointed to the energy and defence sectors where there is both a political and economic need to pursue “strategic autonomy”. Virginie Maisonneuve, global CIO equity at Allianz Global Investors, said the shift would drive innovation, for instance in linking renewable energy with artificial intelligence to enhance efficiency. “While on the surface it looks like it’s very inflationary, it’s sector by sector and you have to look at it with the overall costs and the policies that go with them, which will include fiscal policies or special advantageous policies,” she said. The use of AI, for example, could push down costs. Tikehau’s Friedberger said that, ultimately, deglobalisation represented an opportunity to build a more sustainable economic model. “This very globalised economic model where companies and governments and economists were looking for infinite short-term growth at any cost to justify high levels of debt and high levels of valuations doesn’t work,” he said. “It has an impact on climate, on biodiversity, on social inequalities. The fact that those crises force us to try and build a more sustainable economic model is definitely not necessarily bad news for the world.” More

European policymakers are scrambling to balance gas supply and demand. Taking Russian gas out of the equation — if sanctions were brought to bear or so-called self-sanctioning escalates — would leave a 40 per cent shortfall.What should home and business owners do? Switching on substitute sources takes time; you cannot build a fleet of windmills or restock storage overnight. Time to consider rationing.This is not an easy option. Households, consumers of about one-quarter of gas, are voters. In the UK, inflation and strikes are already resurrecting the spectre of the 1970s without adding homework by candlelight into the mix. Industry, emerging from the two-year pandemic, is loath to re-shutter factories.But it is not without precedent. Japan’s civil servants, schools and businesses sweltered with minimal air conditioning in the wake of the Fukushima disaster, which subsequently knocked out nuclear power that then supplied 30 per cent of the country’s energy. Similar measures followed this month’s earthquake.Germany on Friday announced bold plans to wean itself off Russian gas by 2024. Already, curtailing usage is under consideration in Germany, where more than half of gas imports come from Russia. The infrastructure regulator is talking to business about “unavoidable shutdowns” if energy supply shortages occur. Some industrial groups have also been warned by local suppliers that deliveries may be curtailed.Modest steps, taken universally, accrue savings. If all European households were to dial down thermostats by one degree, from a current average of 22 degrees Celsius, that could save 10 billion cubic metres (bcm) a year, reckons the International Energy Agency. Bolder estimates — there is more incentive to pile on the jumpers when bills are going through the roof — could triple this. Those savings range from 5 -15 per cent of the annual exports Russia’s Gazprom had, prewar, planned on exporting to Europe and Turkey.Industry is in a worse bind; closed production lines cost economic growth and jobs. Analysts at UBS, making assumptions on gas usage and reductions, conclude that 3.1 per cent of European economic activity would be affected by rationing; add in supply chains and other factors and that figure could double or treble. Far from a cost-free option, then, but one that European governments cannot afford to dismiss. More

ACAPULCO, Mexico (Reuters) – The Bank of Mexico does not need to strictly track the U.S. Federal Reserve’s expected interest rates hike path and can tighten monetary policy at its own pace as it seeks to curb inflation, the central bank governor told Reuters on Friday.The five board members of Banxico, as the central bank is known, voted unanimously to raise the benchmark interest rate by 50 basis points to 6.5% on Thursday, the seventh hike in a row. It was also the third straight 50-basis point increase.”We are of course concerned first of all about the inflation we are observing,” Victoria Rodriguez, who took the helm at Banxico in January, said in an interview on the sidelines of an annual banking conference in the beach resort of Acapulco.She noted the Fed’s policy trajectory was an “important variable” for Mexico but not the only one and that inflation has been rising for 15 straight months.”It’s not as if beforehand we have decided to match one by one” the Fed’s expected rate hikes, Rodriguez said.Inflation hit 7.29% in the first half of March, slightly lower than the previous two-week period, but more than double Banxico’s target rate of 3%. The bank has a one percentage point tolerance range above and below the target.”We don’t know yet if we’re going to maintain this pace (of rate hikes) or another. It’ll be what is necessary to comply with our mandate of a 3% inflation target,” said Rodriguez.Rodriguez expects inflation should peak during the first half of 2022 and then begin a downward trajectory towards target in the first quarter of 2024.However, risks and uncertainty have risen following Russia’s invasion of Ukraine, which have fueled energy and grains price hikes.”Regarding inflation there could be a significant impact…we will be paying attention to what happens and if we see an impact on inflation we will take the necessary measures,” said Rodriguez. More

WASHINGTON (Reuters) -The Federal Communications Commission (FCC) on Friday added Russia’s AO Kaspersky Lab, China Telecom (NYSE:CHA) (Americas) Corp and China Mobile (NYSE:CHL) International USA to its list of communications equipment and service providers deemed threats to U.S. national security.The regulator last year designated five Chinese companies including Huawei Technologies Co and ZTE Corp (HK:0763) as the first firms on the list, which was mandated under a 2019 law. Kaspersky is the first Russian company listed.FCC Commissioner Brendan Carr said the new designations “will help secure our networks from threats posed by Chinese and Russian state-backed entities seeking to engage in espionage and otherwise harm America’s interests.” U.S. officials have long said that running Kaspersky software could open American networks to malign activity from Moscow and banned Kaspersky’s flagship antivirus product from federal networks in 2017. Moscow-based Kaspersky has consistently denied being a tool of the Russian government, In naming Kaspersky, the FCC announcement did not cite Russia’s invasion of Ukraine or recent warnings by President Joe Biden of potential cyberattacks by Russia in response to U.S. sanctions and support of Ukraine. Kaspersky said in a statement that it was disappointed in the FCC decision, arguing it was “made on political grounds.” The move was “unsubstantiated and is a response to the geopolitical climate rather than a comprehensive evaluation of the integrity of Kaspersky’s products and services,” the company said. The Chinese Embassy in Washington said Friday that the FCC “abused state power and maliciously attacked Chinese telecom operators again without factual basis. The U.S. should immediately stop its unreasonable suppression of Chinese companies.”China will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies,” it added.The Chinese companies did not immediately comment.In October, the FCC revoked the U.S. authorization for China Telecom (Americas), saying it “is subject to exploitation, influence and control by the Chinese government.” [nL1N2RM1QE]The FCC cited its prior decisions to deny or revoke the Chinese telecom companies’ ability to operate in United States in its decision to add them to the threat list.The FCC also revoked the U.S. authorizations of China Unicom (NYSE:CHU) and Pacific Networks and its wholly owned subsidiary ComNet.In 2019, the FCC rejected China Mobile’s bid to provide U.S. telecommunications services, citing national security risks.Inclusion on the “covered list” means money from the FCC’s $8 billion annual Universal Service Fund may not be used to purchase or maintain products from the companies. The fund supports telecommunications for rural areas, low-income consumers, and facilities such as schools, libraries and hospitals.The FCC last year also named Hytera Communications, Hangzhou Hikvision Digital Technology and Dahua Technology as security threats.FCC Chair Jessica Rosenworcel said the agency worked closely with U.S. national security agencies to update the list and will add additional companies if warranted. More

NEW YORK (Reuters) – The S&P 500 ended higher on Friday as financial shares rose after the benchmark Treasury yield jumped to its highest level in nearly three years.The Nasdaq ended lower, and tech and other big growth names mostly declined, but they finished off session lows following a late-session rally.For the week, the Nasdaq and S&P 500 registered solid gains of 2% and 1.8%, respectively, and the Dow was nominally higher with a 0.3% rise. The S&P 500 financials sector gave the S&P 500 its biggest boost on Friday, rising 1.3%, while technology and consumer discretionary sectors were the only two major sectors to end lower on the day.Investors are assessing how aggressive the Federal Reserve will be as it tightens policy after Fed Chair Jerome Powell this week said that the central bank needed to move “expeditiously” to combat high inflation and raised the possibility of a 50-basis-point hike in rates in May.U.S. Treasury yields jumped on Friday, with the benchmark 10-year note surging to nearly three-year highs, as the market grappled with high inflation and a Federal Reserve that could easily spark a downturn as it aggressively tightens policy.Ten-year Treasury yields were last at 2.492% after earlier rising above 2.50% for the first time since May 2019. The equity market is pricing in a higher rate environment, said Keith Buchanan, portfolio manager at Globalt Investments in Atlanta.That is causing bank stocks to outperform, while “adding more pressure to the riskier elements of the market,” such as growth shares, he said.Higher borrowing rates benefit banks, while higher rates are a negative for tech and growth stocks, whose valuations rely more heavily on future cash flows.The Dow Jones Industrial Average rose 153.3 points, or 0.44%, to 34,861.24, the S&P 500 gained 22.9 points, or 0.51%, to 4,543.06 and the Nasdaq Composite dropped 22.54 points, or 0.16%, to 14,169.30.Shares of growth companies like Nvidia (NASDAQ:NVDA) Corp eased after leading a Wall Street rebound earlier this week.The utilities sector also rose sharply, hitting a record high as investors favored defensive stocks with the Russia-Ukraine war still raging after a month. The sector ended up 1.5% on the day and up 3.5% for the week, while the energy sector ended up 2.3% on the day and jumped more than 7% for the week following sharp gains in oil prices.Moscow signaled on Friday it was scaling back its ambitions in Ukraine to focus on territory claimed by Russian-backed separatists.Economists at Citibank are expecting four 50 basis points interest rate hikes from the Fed this year, joining other Wall Street banks in forecasting an aggressive tightening path against the backdrop of soaring inflation.The U.S. central bank last week raised interest rates for the first time since 2018.”The market’s really macro driven,” said Steve DeSanctis, small- and mid-capitalization equity strategist at Jefferies in New York. “Company fundamentals haven’t really mattered.”Volume on U.S. exchanges was 11.92 billion shares, compared with the 14.28 billion average for the full session over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE by a 1.08-to-1 ratio; on Nasdaq, a 1.40-to-1 ratio favored decliners.The S&P 500 posted 57 new 52-week highs and five new lows; the Nasdaq Composite recorded 73 new highs and 79 new lows. More