Economy

Boris Johnson has told Rishi Sunak that his Spring Statement on Wednesday must prove that the government is on the side of people struggling with the crisis in the cost of living.The prime minister’s edict will reinforce expectations that Sunak will cut taxes on fuel, with speculation of either a temporary reduction in VAT or 5p coming off fuel duty to offset high prices at the pumps.The chancellor is also under pressure to soften his planned £12bn national insurance rise, intended to raise money to clear an NHS treatment backlog and to fund social care, or to cut other taxes.One ally of Johnson said: “The prime minister is acutely aware of the pressure on people’s household budgets. He has made it clear to the chancellor we should be on their side.”The prime minister said that as well as “cushioning” the cost of living now, he also wanted to take some “long-term bets” — for example investing in nuclear energy, according to his aides.Sunak’s team say the chancellor has been making those points himself ahead of the Spring Statement and that he has a record of helping people in difficulties, notably over Covid.Treasury insiders say the Spring Statement will be a “policy-light” event. Sunak has been adamant that it is not a “mini Budget” and that major fiscal decisions will be taken in the autumn.But they confirm that even if there are relatively few new policies in the statement, the chancellor will take decisive action to alleviate pressures on households caused by rising fuel bills and higher inflation.

Sunak wants to be a tax-cutting chancellor and might make a downpayment on this by reducing income tax, perhaps by increasing tax allowances or the threshold where people start paying national insurance contributions.Sunak’s officials have also considered raising the employment allowance, which allows small companies to reduce their annual national insurance liability by up to £4,000. That figure could increase, perhaps to £5,000.Ministers do not expect Sunak to increase next month’s planned 3.1 per cent rise in benefits, including universal credit, even though inflation is predicted to be heading towards a peak of 10 per cent.Sunak’s statement will also set out how he hopes to boost the growth potential of the economy. A shake-up of business taxation and incentives for investment and research will feature in his October Budget.Labour wants Sunak to levy a windfall tax on North Sea oil companies, but the chancellor has so far resisted, arguing that he wants them to invest more in developing new fields as Britain “transitions” to a net zero economy.However, some Tory MPs believe he could yet raise some kind of tax on businesses benefiting from the big spike in energy prices. Italy last week imposed a windfall profit tax of 10 per cent on some energy companies that will raise more than €4bn.The automotive industry is also expecting to hear more details of the government’s strategy to boost the use of electric vehicles, including the rollout of car-charging points. More

TOKYO (Reuters) -The Bank of Japan must maintain ultra-loose monetary policy as recent cost-push inflation could hurt the economy, Governor Haruhiko Kuroda said on Tuesday, highlighting a widening gap with the U.S. Federal Reserve’s aggressive tightening plan.The central bank’s increasingly isolated dovish stance helped push the yen below 120 to the dollar on Tuesday for the first time since 2016, drawing a warning from the finance minister against rapid exchange-rate moves.Kuroda said consumer inflation was expected to accelerate as some firms pass on rising energy and food costs to households.”Instead of leading to higher wages and corporate profits, such cost-push inflation will weigh on the economy in the long run by hurting corporate profits and households’ real income,” Kuroda told parliament.While nominal wages may increase “quite significantly”, the rise in consumer inflation may sap households’ purchasing power by pushing down price-adjusted real wages, he added.”Given recent price developments, we need to patiently maintain our powerful monetary easing,” Kuroda said.Kuroda’s remarks came in the wake of those by Fed Chair Jerome Powell, who pledged on Monday to move “expeditiously” to raise rates to keep an upward price spiral from getting entrenched.A weak yen has become a politically sensitive topic for Japan as it pushes up already rising import costs for energy and raw materials, adding pain to an economy only just emerging from the coronavirus pandemic’s wounds.Finance Minister Shunichi Suzuki warned that while a weak yen helped boost exporters’ profits, it added a burden to importers and households.”A weak yen has both positive and negative effects on the economy,” Suzuki told reporters.”It’s undesirable for currencies to swing sharply … The government is closely watching how currency moves may affect the economy,” he added.As part of efforts to fire up inflation to its elusive 2% target, the BOJ caps long-term borrowing costs at around zero. While it has slowed purchases of government bonds and exchange-traded funds (ETF) in recent years, it continues to hold huge amounts of assets on its balance sheet.In the event the BOJ decides to reduce its ETF holdings, it will do so in a way that minimises the central bank’s losses and any disruption to financial markets, Kuroda said on Tuesday.But it was premature now to debate an exit from easy policy, including how the BOJ could reduce its ETF holdings, with inflation yet to sustainably hit 2%, he said. More

Waymo in August started giving autonomous rides free of charge to a limited number of people in San Francisco, with safety drivers on board, using its Jaguar electric vehicles. Waymo co-CEO Tekedra Mawakana said on Monday that it has given hundreds of people ‘robo-taxi’ rides for the past six months since the rollout in the densely populated city. The planned driverless operation would mark “a major step on our path to deploying a fully autonomous commercial service,” Mawakana said in a blog posting. Waymo and its rival Cruise, majority owned by General Motors (NYSE:GM), earlier this month obtained permits from the California Public Utilities Commission (CPUC) to allow them to charge riders for trips with a safety driver present in California.They need to obtain separate permits from the CPUC to start collecting fares for driverless passenger service in California. Waymo declined to comment on the status of its driverless permit application with CPUC. More

Evergrande said in a stock exchange filing that due to the “drastic changes” in its operations since the second half of last year, the auditor has added a large number of additional audit procedures.The developer will publish the audited annual results “as soon as practicable” after the audit procedures have been completed, it said, adding as per rules a trading suspension in its shares will remain in place until it publishes the latest results. More

Short selling of OFZ bonds will remain unavailable, it said. Stocks last traded on the Moscow Exchange on Feb. 25. The central bank then curbed trading as Western sanctions over events in Ukraine threw markets into turmoil. More

BALTIMORE, Md. (Reuters) – U.S. and British officials kicked off two days of meetings to strengthen trade ties on Monday, underscoring transatlantic cooperation at a time when Western countries are ratcheting up pressure on Russia over its war in Ukraine.The talks in the port city of Baltimore mark a broad effort to take stock of the $260 billion bilateral trade relationship, while specific disputes will be dealt with separately and formal talks on a free trade agreement remain on ice.U.S. Trade Representative Katherine Tai said the two allies had resolved disputes over aircraft subsidies and digital services taxes over the past year, and were now working together closely to punish Russian President Vladimir Putin for his invasion of Ukraine.”In the battle between democracy and autocracy, democracies are rising to the moment and the world is clearly choosing the side of peace and security, so it’s never been more important for us to work to strengthen our economic ties with our closest allies, like the United Kingdom,” Tai told a plenary attended by dozens of U.S. and British executives and trade officials. Tai said U.S. and British officials would work to identify mutual trade priorities and promote “innovation and inclusive economic growth for citizens on both sides of the Atlantic.”Key U.S. priorities include collaboration on expanding protection of labor rights and the environment, decarbonizing their economies, promoting racial and gender equity, building more resilient supply chains and tapping the “democratizing” benefits of the digital economy, U.S. officials said.UK Trade Secretary Anne-Marie Trevelyan told business and labor leaders later that the huge shocks of recent years and weeks, an apparent reference to the COVID-19 pandemic and the war in Ukraine, showed “that resilience and a different way of doing business is required. Protectionism is not the solution.”Trevelyan said Britain was seeking to “forge even closer bonds of trade and investment between us, because we do more business together than any other two countries in the world.”SANCTIONS AND TARIFFSClose coordination on economic sanctions, export controls and trade measures against Russia have also brought the United States and Europe closer together as they address challenges posed by non-market economies like China, a U.S. official said.Cathy Feingold, who leads the international department at the AFL-CIO labor union federation, welcomed efforts to give workers a voice in shaping trade policies and shifting away from free trade policies that resulted in “brutal global competition,” lower wages and lower standards of living in both countries.”Our countries must be aligned in dealing with non-market economies like China and Russia and Belarus,” she said. “By building a unified approach, we can more effectively create global rules that create fair competition and higher worker and environmental standards.”The two sides are “making good progress” in separate talks on resolving a dispute over U.S. steel and aluminum tariffs that helped clear the way for this week’s broader talks, Trevelyan said. Those talks are ongoing, another UK official said.Washington also remains concerned about UK food safety standards that prevent imports of U.S. chlorine-treated chicken, but will address that issue separately, a second official said.This week’s meetings do not mark a resumption of formal free trade talks held under the former Trump administration that were suspended once President Joe Biden took office, much to the chagrin of business leaders on both sides of the Atlantic.Duncan Edwards, chief executive of BritishAmerican Business, a transatlantic trade group that represents 450 companies, welcomed the meetings, adding, “We’d much rather see a resumption of the actual free trade agreement discussions.”Marjorie Chorlins, senior vice president at the U.S. Chamber of Commerce, agreed, adding, “We should have been able to restart the U.S.-UK negotiations. We were five rounds in and a lot of great work was done.”Washington has hit the pause button on such agreements, which have historically been viewed skeptically by labor leaders, viewing them as “just one tool at our disposal.” The two sides will meet again later this spring in Britain, but the location has not been finalized, officials said. More

(Reuters) -Picketers marching at the gates of a large Chevron Corp (NYSE:CVX) oil refinery outside of San Francisco said on Monday they could endure a lengthy walkout to press claims for a new labor contract.But the plant was continuing to operate normally and fuel supply and prices are not expected to be impacted, gasoline analysts said. More than 500 United Steelworkers members at the 245,000 barrel per day Richmond, California, facility went off the job early on Monday after members rejected a Chevron contract proposal over the weekend. The walkout is the first in more than 40 years at the plant, which is a major supplier of gasoline, jet fuel and diesel fuel. The last strike, in 1980, continued for five months, said United Steelworkers union local 5 First Vice President B.K. White.”We are waiting for Chevron to come to the table,” White said in an interview outside the gates as truck drivers blared their horns in support. The union is prepared to “stay put until we get a fair and equitable contract,” he added. NO IMPACT AT THE PUMPCalifornia, which has some of the highest fuel prices in the nation, is unlikely to feel an impact, said fuel analysts. Wholesale California gasoline prices fell 21.5 cents and 13 cents per gallon, respectively, in the Los Angeles and San Francisco markets on Monday, traders said. A gallon of unleaded regular gasoline in the state on Monday sold on average for $5.86 and a gallon of diesel for $6.26, according to motorist group AAA.”A strike at a refinery is not necessarily a catastrophic event in terms of prices and supply. Motorists, at least at this point, are not likely to notice anything,” said Patrick De Haan, head of petroleum analysis at GasBuddy. Chevron is continuing to operate the facility and remains willing to engage in further discussions with the union, said spokesman Tyler Kruzich.The company began replacing union workers at the controls of production units on Sunday evening with managers, technical staff and others. NO NEW TALKS SET No plans for a resumption of contract talks have been set.”The strike potential scares folks, but in reality and in the short term, it shouldn’t affect anything,” said one Los Angeles fuel trader, who spoke on condition of anonymity to preserve business relationships. “It’s different here in California where strikers don’t get violent,” the trader said. “Refinery management should be able to operate the refinery at least as well as union crews.”Still, U.S. gasoline futures jumped 4.5% in New York on reports that European Union officials are weighing a ban of Russian petroleum over the country’s invasion of Ukraine, said Devin Gladden, a spokesperson at motorist group AAA.The USW union local at the plant has asked for a 5% pay increase above that agreed last month under a national labor agreement because of the higher cost of living in the San Francisco Bay Area. It also wants the company to add staffing to reduce the 60-70 hours that union members must sometimes work, the USW’s White told Reuters. More

NEW YORK (Reuters) -Sharp moves in the U.S. Treasury market are increasingly pointing to the risk of an approaching recession, with “bond vigilantes coming out of the woodwork” and markets doubting the U.S. Federal Reserve’s plan to engineer a “soft landing” for the economy as it hikes interest rates to fight inflation, market experts said.Fed Chair Jerome Powell said on Monday the U.S. central bank must move “expeditiously” to bring too-high inflation to heel and that it could use bigger-than-usual interest rate hikes if needed. Bond yields, which move inversely to prices, spiked while the U.S. Treasury yield curve continued its flattening trend. “The market seems to be challenging the soft-landing view for the U.S. economy that the Fed argued at the March FOMC meeting”, BofA strategists said.The U.S. Treasury yield curve reflects “recession risks, and not just through the curve’s extreme flatness at the inception of the Fed tightening cycle,” the strategists said.The closely followed part of the yield curve measured between 10-year and two-year Treasuries has narrowed by about 60 basis points since the start of the year, with the longer-dated notes now yielding less than 20 basis points more than two-year debt.Any inversion of that part of the curve, when shorter notes yield more than longer ones, is generally seen as presaging a recession by six to 24 months. “The yield curve does look ominous,” wrote Christopher Murphy, Co-Head of Derivatives Strategy at Susquehanna Financial Group, although he said an inversion does not always guarantee a recession.Melissa Brown, Global Head of Applied Research at Qontigo, said the yield curve is reflecting a shift in market views on the ability of the Fed to tighten monetary policy just enough to reduce inflation without throwing the economy into a recession.”The market perhaps is assuming that they can’t thread that needle … it’s going to be tough to not drive us into recession”, she said.Still, Powell on Monday said he did not see an elevated likelihood of a recession in the next year and others are skeptical of such an event.That prompted Federal funds rate futures on Monday to raise the chances of a half percentage-point tightening at the next policy meeting in May.Analysts at NatWest said Powell was clearly “warning of risks to 50bp hike(s) at the coming meetings,” which they said sent Treasuries into “free fall.” When asked on Monday about concerns on what the yield curve is saying, Powell said that he focused on the short end of the curve, meaning the first 18 months of maturities. Morgan Stanley (NYSE:MS) said in a research note on Sunday that an inversion of the yield curve was possible in the second quarter this year, but that an inversion does not necessarily anticipate a recession.”However, it does support our view for sharply decelerating earnings growth”, it said.For Tim Holland, chief investment adviser at Orion Advisor Solutions, a recession is not imminent, despite the flat curve.Another part of the curve which compares three-month bills with 10-year notes has steepened this year, from 145 basis points on Dec. 31 to 181.54 basis points on Monday.”If the past 30 years is any guide, both parts of the curve need to flatten and invert before we are at risk of recession”, he said.Powell’s speech on Monday at a National Association for Business Economics conference caught some market participants off guard as they seemed more hawkish than his remarks after the Fed last Wednesday raised the federal funds rate by 25 basis points.Yields spiked on Monday with the 10-year benchmark note up to a yield of 2.298% from 2.153% on Friday – the highest since May 2019. Yields of two-year Treasuries, which more closely reflect monetary policy expectations, jumped to 2.111% from 1.942% on Friday.”What you saw today is Powell basically throwing the towel, he said he’s going to do whatever it takes, and it took the market a little bit back”, said Andrew Brenner, head of international fixed income at National Alliance Securities. Brenner described the bond market behaviour as that of bond vigilantes – when investors insist on high yields to compensate for the risk of inflation.”Bond vigilantes have come out of the woodwork,” Brenner said, adding he saw a large amount of selling in the futures market, particularly concentrated in five-year futures. More