Economy

ZURICH (Reuters) -Switzerland has frozen around 5.75 billion Swiss francs ($6.17 billion) worth of Russian assets covered by sanctions, and that amount is likely to rise, a government official said on Thursday.”Today, for the first time, I can give you an indication of the amount of frozen funds. To date, SECO has been notified of funds and assets totalling around 5.750 billion Swiss francs,” said Erwin Bollinger, a senior official at the State Secretariat for Economic Affairs (SECO) agency overseeing sanctions.That included a number of properties in cantons which served as tourism resorts, he told a news conference in Bern.SECO had until now declined to estimate the extent of assets frozen or potentially subject to sanctions since the neutral country began adopting European Union sanctions against Russia over its invasion of Ukraine.”The cited number of far over 5 billion francs relates to a snapshot in time,” Bollinger noted. “With further reports coming in and potential additions to EU sanctions lists, which Switzerland would also assume, it is likely this number will rise further.”Ukraine President Volodymyr Zelenskiy has heaped pressure on Switzerland — a popular destination for Moscow’s elite and a holding place for Russian wealth — to more quickly identify and freeze assets of hundreds of sanctioned Russians.Its banks hold up to $213 billion of Russian wealth, Switzerland’s bank lobby estimates.However, actually finding assets to freeze is a bureaucratic headache. SECO has faced criticism for being underprepared and understaffed to handle the reports swamping the agency, even as journalists quiz officials over further assets likely slipping through the cracks.”We can’t just go on a fishing expedition and collect material from every government department,” Bollinger said.”It’s the same as in road traffic: there are rules that have to be followed, even without a police officer standing at every traffic light.”Regional officials have expressed confusion over implementing the sanctions, pointing to a lack of clear directives. Bollinger acknowledged improvements could be made.Banks are combing through records to ensure no one under sanctions slips through the cracks. Credit Suisse (SIX:CSGN), for instance, has sought permission to let 20 compliance staff work nights, weekends and holidays.Bollinger cautioned against assuming that the hundreds of billions of Russian wealth parked in Switzerland was all subject to sanctions.”Not every sanctioned individual or entity has assets in Switzerland,” he said. “And, on the other hand, not every Russian who holds assets in Switzerland is simultaneously on the sanctions lists.”($1 = 0.9320 Swiss francs) More

European stocks steadied and government bond prices dropped as US President Joe Biden met Nato leaders to discuss the allied response to Russia’s invasion of Ukraine.The Stoxx Europe 600 index, which is more than 7 per cent lower for the year, was broadly flat. Germany’s Xetra Dax was steady, while the UK’s FTSE 100 added 0.2 per cent.Eurozone, UK and US government bonds came under renewed pressure, as higher energy prices driven by supply fears exacerbated concerns about surging inflation, reducing the appeal of fixed-income paying securities.The yield on Germany’s 10-year Bund rose 0.06 per cent to 0.54 per cent, its highest since October 2018, as the benchmark debt security’s price fell. The 10-year UK gilt yield added 0.07 percentage points to 1.7 per cent, following a shortlived price gain on Wednesday when the UK cut its debt issuance plans.But futures markets implied Wall Street’s S&P 500 share index would gain 0.5 per cent in early New York dealings, with the technology-focused Nasdaq 100 on track to gain 0.6 per cent, as traders switched money out of a global bond market that is undergoing its deepest downturn since at least 1990.The Stoxx meanwhile was trading at around its closing level of February 23, the day before Moscow launched an invasion of its neighbouring country.Equity markets were showing “a remarkable level of complacency”, said Unigestion investment manager Olivier Marciot, arguing that “it is hard to see how corporate earnings can be maintained alongside higher inflation and lower economic growth”.“There’s a clear divergence between the bond guys and the equity guys,” he said. “I think the bond guys have it right.”Biden was meeting Nato heads of state on Thursday in Brussels to discuss further responses to Russia’s invasion of Ukraine. He will also meet G7 leaders to address “consequences we are imposing on Russia for its war of choice”, a White House statement said.German Chancellor Olaf Scholz has warned that blocking Russian energy “would mean plunging our country and the whole of Europe into a recession”. Germany imports a third of its oil from Russia and more than half of its gas and coal. Consumer price inflation in the eurozone hit a record 5.8 per cent in February, with economists expecting it to rise further.Brent crude oil wavered at just below $122 a barrel, now up around a quarter since February 23. The benchmark could exceed $200 this year, traders warned at a Financial Times event in Switzerland.Futures tied to Europe’s wholesale gas price added almost 13 per cent to €127 per megawatt hour, having topped €130 on Wednesday after Russian President Vladimir Putin said “unfriendly” nations should pay for Russian gas in roubles, injecting doubt into existing supply deals. Prices are almost seven times higher than a year ago.The yield on the 10-year US Treasury note, which underpins global financing costs, rose 0.05 percentage points to 2.37 per cent, close to its highest level since May 2019. Italy’s 10-year bond yield rose 0.05 percentage points to 2.05 per cent, around its highest point since spring 2020.In Asia, Hong Kong’s Hang Seng share index fell 0.9 per cent. The Japanese yen, which is trading at around a six-year low against the US currency, weakened a further 0.4 per cent to ¥121.6 per dollar. More

UK business activity slowed less than expected in March but waning optimism in the manufacturing and services sector combined with surging inflation pointed to the prospect of “stagflation” in the months ahead, according to a closely watched survey.The S&P flash UK purchasing manager composite index, a measure of the health of the services and manufacturing sectors, fell to a two-month low of 59.7 in March from 59.9 in February.However, the figure still surpassed the 57.8 forecast by economists polled by Reuters and was well above the 50 mark indicating that a majority of businesses had reported growth.Chris Williamson, chief business economist at S&P Global, said the survey indicated a sustained, robust pace of expansion as economic activity following the end of Covid-19 restrictions helped to offset headwinds from the Ukraine war, Brexit and rising prices.But he also warned of “potentially sharply slower growth in the coming months, accompanied by a further acceleration of inflation and a worsening cost of living crisis, which paints an unwelcome picture of ‘stagflation’ for the economy in the months ahead”. Stagflation refers to uncommon periods of slow growth combined with high inflation. On Wednesday, the Office for Budget Responsibility, the fiscal watchdog, downgraded the UK growth outlook this year to 3.8 per cent from 6 per cent forecast in October after real household income dropped to its lowest level since records began in 1957. The PMI survey showed that escalating inflationary pressures and concerns over Russia’s invasion of Ukraine led to a slump in business optimism, which this month dropped to a 17-month low.Moreover, surging fuel, energy and staff costs resulted in businesses charging their steepest prices since the index began in November 1999.The PMI reading, based on data gathered between March 12 and 22, showed that the average cost burden rose sharply in March, signalling the second-fastest rate of inflation for more than two decades. Growth was stronger than expected in the services sector, boosted by the removal of Covid-19 restrictions and people returning to offices, alongside the release of pent-up demand for travel, leisure and entertainment.However, this was offset by a slowdown in manufacturing output, which fell to a five-month low as a result of supply shortages and escalating inflationary pressures dampening demand. Growth in new manufacturing orders dropped to their lowest level since lockdown was reinstated in January 2021, dragged down by weaker domestic demand.

Gabriella Dickens, economist at Pantheon Macroeconomics, said that the PMIs were consistent with UK gross domestic product rising 1 per cent in the first quarter. But, she added: “With Covid-related health spending set to be wound down and the squeeze on real incomes about to intensify in April, GDP probably will fall by about 0.2 per cent in Q2.” In the eurozone, activity slowed to a two-month low as the economic impact of Russia’s invasion of Ukraine offset a boost in consumer demand following the lifting of Covid restrictions. More

Rishi Sunak promised to “support the British people as they deal with the rising costs of energy”. In the event, the chancellor’s Spring Statement added very little to previously announced measures and will be of little comfort to families worried about whether they will be able to afford the weekly shop.The cost-of-living crisis was brought into stark focus by the latest annual inflation reading, which rose at the highest rate in 30 years to hit 6.2 per cent in February. That might just be the tip of the inflation iceberg. Next month the energy price cap will rise sharply and we expect another 40 per cent increase to energy bills in October. Even though we should be out of the worst of winter weather, just keeping the lights on is going to ratchet up the pressure on household budgets.The prices of goods leaving the factory gate are at their highest level for 14 years and food products are at the top of the pile. The cost of materials is also heading up and the devastating war in Ukraine is exacerbating that.

Since Russia’s invasion, the prices of oil, gas, wheat, metals and vegetable oil have soared. Making stuff, transporting stuff and ultimately buying stuff is only getting more expensive. The Bank of England had hoped 7.5 per cent would be the peak of the inflation pain, but it has already accepted the landscape has changed. Prices will get higher still — for the first time in 40 years double-digit inflation is a real possibility.The Spring Statement was therefore a great opportunity to make some bold changes that would help households during the difficult months ahead. Disappointingly, it looks like an opportunity missed.The big news was a cut to income tax rates, but this is scheduled to happen in 2024, so is no help to families struggling with the cost of living now — or indeed for the next two years.There were loud calls from many corners for the chancellor to do more to help families facing rising bills today. On the basis that those bills cannot be paid with an IOU for two years’ time, many will think he’s fallen short.The cut in fuel duty by 5p a litre means a driver of the average 55-litre car will save £3.30 each time they fill up. This is a tiny portion of the overall recent rise in fuel costs and is no benefit to those who don’t use a car regularly or don’t own one.Savings on that scale will also do little to offset the £1,500 increase every household is expected to see in their home energy bills this year. And on that topic, the chancellor had very little to say besides an extra £500mn added to the household support fund, taking it to £1bn.On national insurance, Sunak went one step further than leaked plans suggested and raised the threshold for paying national insurance contributions to £12,570, meaning that most people earning below that limit will pay no income tax or national insurance. By bringing in the move in July, rather than immediately, the government ensures taxpayers will not get a full year of the benefit. But it will still mean that the average worker who earns more than the £12,570 threshold will save £330 a year, once the change kicks in. The government says that 70 per cent of people currently paying national insurance will see a reduction in their bill, even as it pushes ahead with the increased 1.25 per cent levy.However, the current crisis requires more drastic action. The national insurance increase could have been scrapped or at least postponed until household finances are under less pressure and better able to shoulder the extra burden.Sunak could have chosen to postpone freezes to income tax bands, a measure which is a stealth tax on the working population, especially with inflation rising.Government borrowing this year is set to be £50bn less than the Office for Budget Responsibility forecast in October. More of that money could have been put to use helping families cope with a surge in prices they are now facing in nearly every aspect of their lives. The author is head of personal finance at AJ Bell. More

The move marks another step towards ending the extraordinary support measures the bank deployed to cushion the economic impact of COVID-19. The ECB has already wound down a massive money-printing scheme and opened the door to its first interest rate hike in a decade.In a sign of continued support for the euro zone’s weakest members, however, the ECB will continue to let banks post Greek government bonds as collateral despite their junk-credit rating and said it reserved the right to do so whenever it sees fit.Under the decision, the ECB will gradually remove measures that have allowed banks borrow more easily from the central bank, including at a time of high market stress in the spring of 2020, by mobilising additional collateral worth 240 billion.It will start in July by no longer accepting “fallen angels”, or bonds that have lost their investment-grade rating during the pandemic, and increasing certain “haircuts”, or valuation discounts, on the loans that banks post as collateral.The process will end in December 2024 when the last tranche of the ECB’s latest multi-year loans, another plank of its pandemic-response, is repaid. “This gradual phasing out allows ample time for the Eurosystem’s counterparties to adapt,” the ECB said in a statement.The ECB also reaffirmed a waiver on Greek government bonds for as long as it keeps investing the proceeds from its Pandemic Emergency Purchase Programme (PEPP).In a hopeful sign for other countries with lower credit ratings, such as Cyprus, Portugal or Italy, the ECB added that it may disregard agencies’ ratings again in the future.”The ECB’s Governing Council reserves the right to deviate also in the future from credit rating agencies’ ratings if warranted,” the ECB said. More

Today’s world is like a giant, fragile train set. From about 1990 to 2008, as China, India and the former Soviet bloc joined the global economy, we essentially took almost every unused piece of track out of the box and joined them all together. The new enlarged circuit turbocharged global trade. From 1992 to 2008, Russian gas exports rose nearly eightfold. From 2000 until Russia’s invasion, Ukrainian corn production jumped more than tenfold. New containers made shipping cheaper. Humanity had never lived so well, nor so long. There was just one problem: if any piece of track malfunctioned, the global train could derail. And that’s been happening ever more often, most recently with Vladimir Putin’s invasion of Ukraine. We’re living in the age of fragility. Just since 2001, inter­connectedness has produced four serious derailments. First, a Saudi-bred perversion of Islam killed nearly 3,000 Americans and prompted misbegotten wars in Iraq and Afghanistan that eventually helped send the US into an internal breakdown. Then, subprime mortgages in the US sparked a global financial crisis. Next, a virus in Wuhan, exacerbated by Chinese secrecy, shut down the world. Now Putin’s late-life crisis is decimating Ukraine, closing off Russia again and making two human necessities — food and fuel — unaffordable for many. Contrast this with the era when these countries were closed: their implosions, such as the killing by Stalin and Mao of millions of their own people, scarcely affected the outside world. Indeed, hardly any foreigners even heard the screams. Given the fragility of today’s system, you’d want a globally appointed stationmaster, but that’s become inconceivable.

After 20 years of turmoil, we’re all deglobalisers now, including even the politicians mocked by nativists as “globalists”. Trade peaked as a percentage of the global economy in 2008. Now Joe Biden promises “to make sure everything from the deck of an aircraft carrier to the steel on highway guardrails is made in America from beginning to end. All of it.” Emmanuel Macron wants France to make its own pharmaceuticals. The EU pledges to wean itself off Russian oil, gas and coal by 2027. Each new bloc — the west, and China with its unreliable Russian junior partner — aims to build its own, smaller, self-contained train set. Even the globalisation of the mind is being reversed: Russia is following China in shutting out the global internet. And lord knows when the pre-2020 hordes of Chinese tourists and students will return to the west. Deglobalisation is already making us poorer. Just as many Europeans in the late 1940s remembered 1913 as a golden age of plenty, so our generation may yearn forever for 2007.But global fragility will persist despite deglobalisation. That’s mostly because of strongmen, their nukes and climate change. As my FT colleague Gideon Rachman notes in his new book, The Age of the Strongman, Putin is not a one-off but a harbinger. Several other strongmen are likewise trying to set themselves up as leaders for life — most notably China’s Xi Jinping, Turkey’s Recep Tayyip Erdogan, and next perhaps Saudi Arabia’s Mohammed bin Salman or India’s Narendra Modi. The strongman grows old, isolated and starts obsessing — as Putin did — about his place in history. More than boring economic growth, he seeks greatness. And he’s increasingly likely to be nuclear-armed. India, Pakistan and North Korea all first tested workable nuclear bombs between 1998 and 2015. Iran and Saudi Arabia could be next. If the strongman decides to press the button, who’s to stop him? As Rachman points out, Russia, China and Saudi Arabia have all shifted away from collective leadership (politburos, vast numbers of Saudi royals) to one man’s whims. The Russian army’s incompetence in Ukraine may only heighten dangers. Six weeks ago, Putin thought he had a strong military. Now, to adapt the cold war jibe about the USSR, Russia looks like Burkina Faso with nukes plus a brutal artillery. That could encourage Putin to use his one unbeatable weapon: nuclear. We may, God forbid, start getting used to isolated nuclear attacks, after which we move on, like after the atomic bombs of 1945.The next derailment could be Donald Trump’s re-election in 2024, especially if he then lets his old pal Putin have eastern Europe. In that case, the world’s two largest economies and strongest militaries might both have Russia’s back. But other global threats haven’t gone away since this war began. We’re just ignoring them. In an age of constant crisis, the urgent shoves aside the important, which in our case is climate change. I don’t see how we fix this. Follow Simon on Twitter @KuperSimon and email him at [email protected] @FTMag on Twitter to find out about our latest stories first More

“We had a very small amount of assets related to Russia. In the meantime, we could sell most of those assets so that the exposure to Russia-related assets is close to zero,” Thomas Jordan told reporters on a call following the central bank’s decision to keep rates on hold.He also said he did not believe the Russian invasion of Ukraine was a problem for the stability of Switzerland’s financial sector. “The exposure of the Swiss financial sector to Russia is rather limited so the war itself has only a limited impact on banks or financial institutions in Switzerland,” Jordan said.If the war changed the global economy completely, there could be a negative impact on Switzerland, but so far the impact was “very small, very limited”.Jordan said the SNB did not have a business relationship with the Russian central bank and did not hold rouble reserves.”I assume that the commercial banks would mostly be responsible if the situation made it necessary to provide roubles to the economy, not the central bank,” he said in answer to a question.Russian President Vladimir Putin said on Wednesday that Russia, the world’s largest natural gas producer, would soon require “unfriendly” countries including Switzerland to pay for gas in the country’s currency, the rouble. More

The government will cut the tax on fuel for three months by 30 euro cents ($0.33) for gasoline and 14 cents for diesel, Finance Minister Christian Lindner told reporters in Berlin. Taxpayers will also receive a one-off payment of 300 euros, he added.©2022 Bloomberg L.P. More