Economy

NEW YORK (Reuters) -At least five vessels are headed toward Russia with nearly 200,000 tonnes of Brazilian raw sugar sold by European traders, according to shipping data seen by Reuters, about double the country’s normal annual imports of the sweetener.Sanctions following Russia’s invasion of Ukraine have boosted demand for sugar and other food staples there, and store shelves have been emptying due to food hoarding. Yet sanctions may also make it harder for shippers to get paid for their cargoes.The volume of sugar being shipped is unusually high, traders said, noting Russia tends to import roughly 100,000 tonnes of sugar per year. Russia is not a notable importer or exporter of sugar, but Russians have started to hoard the sweetener.While sugar sales are not covered by the sanctions, financial transactions are. Also, analysts said security issues in the Black Sea may hinder the vessels.Black Sea shipping routes have been tangled as the war has shut ports in Ukraine and as companies refuse to buy some commodities from Russia. A U.S.-based trader said the Russia-bound ships are waiting in the Black Sea area for clearance to move to the Novorossiysk port in Russia’s Krasnodar Krai area.In addition to the Russian shipments, there are also three vessels with nearly 100,000 tonnes of sugar heading to Russia’s neighbor Georgia, according to port movement data provided by shipping agencies in Brazil and information from sugar market traders.Russia was expected to import only around 100,000 tonnes of sugar in the whole year from all suppliers, not just Brazil, according to data from the International Sugar Organization. Georgia was expected to import 130,000 tonnes.”Well, all that sugar might land in Georgia, but then it will be sent to Russia,” said a U.S.-based sugar trader.Another sugar trader, based in Brazil, said the volumes are too high for a short period of time, both for Russia and for Georgia, saying buyers were probably looking to boost stocks. Shipments to both Russia and Georgia were loaded on vessels leaving Brazil, the world’s largest sugar exporter, with three European food traders and one Brazilian company behind the deals: Sucden, Louis Dreyfus Co and Tereos in Europe, and Raizen in Brazil. Sucden is the largest player in those deals, with one vessel heading to Georgia and four ships going to Russia with a total amount of 188,250 tonnes of raw sugar. The company did not respond to questions about safety and payment for the cargoes.Dreyfus said the vessel Pu Lan Hai, which left Brazil late in February declaring Russia as its destination, will now leave part of the load in Egypt and the remainder in Georgia. It declined to comment further.Dreyfus, one of the world’s largest commodities traders, said on March 4 it was stopping operations in Russia due to the conflict in Ukraine, which Moscow has called a “special operation.”Tereos said the vessel with 50,000 tonnes of sugar heading to Russia had been resold to another shipper and it is not in charge of that deal anymore. It says it complies with current European rules. Raizen declined to comment. More

TOKYO (Reuters) -The Bank of Japan is set to maintain its massive stimulus on Friday and focus on risks to a fragile economic recovery from the Ukraine crisis, reinforcing expectations it will remain an outlier amid a global shift towards tighter monetary policy.While inflation is seen approaching or even exceeding its 2% target in coming months, the BOJ is in no mood to withdraw stimulus as it sees the recent energy-driven price rise as transitory and a possible threat to an economy only just recovering from the coronavirus pandemic.BOJ Governor Haruhiko Kuroda is likely to stress his resolve to sustain huge monetary support until the rise in inflation is accompanied by strong wage growth.”I don’t think Japan is in a condition where inflation stably hits 2%, even when the impact of cellphone fee cuts taper off and energy prices rise further,” Kuroda told parliament on Thursday.Japan’s core consumer prices rose 0.6% in February from a year earlier, data showed on Friday, below the BOJ’s target but marking the fastest pace in two years in a sign of growing inflationary pressure from higher energy costs.At a two-day meeting ending on Friday, the BOJ is widely expected to maintain its short-term rate target at -0.1% and that for the 10-year bond yield around 0%.The BOJ’s dovish tone would be in stark contrast with the U.S. Federal Reserve, which raised interest rates on Wednesday for the first time since 2018 and laid out plans for aggressive tightening to combat surging inflation.The Bank of England followed suit on Thursday with a third consecutive meeting of rate hikes to stop fast-rising inflation becoming entrenched.With supply disruptions and COVID-19 curbs having hobbled growth in the current quarter, the BOJ may offer a bleaker view on the economy than in January – when it said there were “clearer signs of pick-up.”In a sign of the pain rising fuel costs is already inflicting on households, consumer inflation data showed energy and electricity bills both shooting up by around 20% in February from year-before levels, the fastest pace since 1981.But the central bank is expected to roughly maintain its projection of a moderate economic recovery, as policymakers prefer to wait for more clarity on how the war in Ukraine could affect the global growth outlook, analysts say. More

WASHINGTON (Reuters) -U.S. Senate Banking Committee Chairman Sherrod Brown and other Senate Democrats have asked government regulators to examine Wells Fargo (NYSE:WFC)’s mortgage refinancing policies to ensure they do not discriminate against minority borrowers.In letters to the Department of Housing and Urban Development and the Consumer Financial Protection Bureau, the lawmakers said the government should ensure Wells Fargo is complying with fair lending laws after a recent analysis found the bank approved less than half of mortgage refinancing applications from Black borrowers, while signing off on 72% of such requests from white applicants.”The stark racial disparity in refinance approval rates at Wells Fargo raises questions about whether its mortgage systems and processes comply with all federal fair housing and fair lending laws and regulations,” the group, which included influential Senators Dick Durbin and Elizabeth Warren, wrote.The lawmakers said borrowers denied refinancing may have missed out on an opportunity to take advantage of record-low mortgage rates, leading to higher costs that could span decades, now that the Federal Reserve has begun to raise interest rates for the first time since 2018.The letter references a Bloomberg News analysis that found Wells Fargo lagged its counterparts in approving refinancing applications from minority borrowers.In addition to finding that the bank approved less than half of all refinancing applications from Black borrowers, the analysis found that just 53% of Hispanic applicants were approved in 2020. The average approval rate among all other lenders for Black and Hispanic applicants came in at 71% and 79%, respectively, according to Bloomberg’s analysis.A Wells Fargo spokesperson said in response to the letter that the bank complies with the law and works closely with regulators on “our shared goal of decreasing the homeownership gap.” The bank previously told Bloomberg its own internal review determined the discrepancy was due to additional credit factors. More

Mortgage rates topped 4 percent this week for the first time in nearly three years — and are expected to keep climbing.The rate on 30-year fixed-rate mortgages averaged 4.16 percent for the week through Thursday, the first time it exceeded 4 percent since May 2019, according to Freddie Mac. That was up from 3.85 percent a week earlier and 3.09 percent a year ago.Rates have been ticking up thanks to a 40-year high in inflation, which the Federal Reserve is attempting to rein in by raising interest rates. On Wednesday, the Fed raised its benchmark rate by a quarter of a percentage point, the first increase since 2018, and it signaled that six more similarly sized increases were on the way.Mortgage rates don’t move in lock step with the Fed benchmark — they instead track the yield on 10-year Treasury bonds. That figure is influenced by a variety of factors, including the inflation rate, the Fed’s actions and how investors react to them.“The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year,” Sam Khater, Freddie Mac’s chief economist, said in a statement.“While home purchase demand has moderated, it remains competitive due to low existing inventory, suggesting high house price pressures will continue during the spring home-buying season,” he added.The average rate on 30-year fixed mortgages dropped as low as 2.65 percent in January 2021. More

Dollar stores have had a good pandemic. Mass job cuts and shrinking household income during the early stages of the crisis boosted demand for lower-priced groceries and household supplies. The shops continue to flourish, even as the economy recovers. With inflation running at its highest level in four decades, consumers are pinching their pennies and turning to discount stores to stretch their budgets.Dollar General is among those betting that consumers’ appetite for cheaper goods will remain strong. The company, which already operates 18,130 stores across the US, plans to open another 1,110 locations in the coming months. It forecasts net sales to grow 10 per cent this year and earnings per share to be up between 12 and 14 per cent.New store openings and planned share buybacks help. But simply put, it pays to cater to lower income Americans. Dollar General customers tend to live in rural areas and have an annual household income of $40,000 or less. Rising food prices and job losses have hit this demographic the hardest. Despite the recent sell-off, Dollar General shares are still up 16 per cent over the past 12 months. It remains decent value at 20 times forward earnings. Walmart trades on a multiple of over 21 times, despite boasting a much lower ebitda margin.The $34bn in sales Dollar General pulled in last year was about 23 per cent higher than its pre-pandemic levels. Still, the discounter is not immune to supply chain woes and cost inflation, which reduced both margins and net profits last year. Mitigation came from opening in remote areas and keeping stores thinly staffed. The company also keeps prices low, partly by selling in smaller quantities. Customers end up paying more on a unit basis. Strategies such as a push into healthcare and the introduction of a higher margin format called Popshelf look smart. The pandemic has reshaped the US economy and widened the gap between the richest and poorest Americans. Dollar General is well placed to cash in on this growing income divide. More

LONDON (Reuters) -Investors scaled back their expectations for future Bank of England interest rate rises this year, sending British bond prices sharply higher, after the BoE hiked again on Thursday but softened its language about further tightening. The BoE has now raised interest rates at three successive meetings, taking Bank Rate back to its pre-pandemic level of 0.75%. On Thursday it changed its guidance to suggest further tightening “might” be needed, however, rather than being “likely” as in February.While surging commodity prices fuelled by Russia’s invasion of Ukraine are likely to cause inflation to peak higher than previously expected, it also increases the risk of an economic downturn, the BoE said.Unlike in February, none of the nine Monetary Policy Committee members voted for a 50 basis point increase, and Deputy Governor Jon Cunliffe opposed any change.”The BoE still signals hikes ahead but also more caution,” Bank of America (NYSE:BAC) economist Robert Wood and bond strategist Agne Stengeryte wrote in a note to clients.The BoE’s message appeared calibrated to eliminate market bets that the central bank would raise rates by half a percentage point at a future meeting, they said. Last month four out of nine policymakers voted for such a move to tame inflation expectations, bigger than any rate increase by the British central bank since it gained operational independence in 1997.Interest rate sensitive two-year gilt yields struck a one-month high of 1.472% moments before the BoE decision but later slumped by 20 basis points. At 1659 GMT the two-year yield was 10 basis points lower from Wednesday’s close at 1.29%.The intra-day fall was one of the biggest in two-year yields after any BoE decision. There were larger drops in November, when many investors had expected the BoE to start tightening policy, and in March 2020 when it announced an emergency 200 billion pounds of bond purchases as the COVID-19 pandemic began.Benchmark 10-year gilt yields were 6 basis points down on the day at 1.57%.Financial markets see a 91% chance that the BoE will raise rates to 1% at its next meeting in May – when inflation is set to reach 8% – and a 73% chance that they will reach 2% by the end of the year.Before the meeting, markets had fully priced in rates of 1% in May and 2% in December, with a 50 basis point rate rise priced in for some point in the next three months.Pantheon Macroeconomics’ Samuel Tombs said the repricing of market interest rate expectations for the next six months was sharper than any in more than a decade except that in the wake of November’s surprise decision. More

P&O Ferries has brought a brutal end to a lengthy truce between labour and capital in the UK. On Thursday, the company sacked 800 sailors without warning. The RMT union said P&O had bussed in lower-paid contract staff to replace them. The company, ultimately controlled by the Emirate of Dubai, said in a statement that it would have “no future” without the job cuts.Tactics as aggressive as these have rarely been seen in a UK labour confrontation since the Wapping print workers strike of 1986. They make P&O Ferries an outlier among UK employers. But industrial disputes are set to increase in frequency and intensity as a result of spiralling inflation. CPI inflation hit 5.5 per cent in the 12 months to January. The median pay settlement in the three months to January was up 3 per cent, according to data company XpertHR.P&O said it had made “a £100mn loss year on year”, implying consecutive hits in 2021 and 2020, the last year disclosed in Companies House filings. That would reflect tough trading during intermittent lockdowns and travel bans — but not the current buoyant outlook for short-hop leisure travel.P&O’s maritime staff earned an average of £35,000 each on a yearly basis in 2020, according to Lex calculations, for staff ranging from ferry captains to deckhands. That compared with UK median annual full-time earnings of £31,500. Staff overheads increased 200 basis points to 17 per cent of revenues that lossmaking year.Fuel costs are likely to be a far bigger burden on P&O Ferries than its unionised workforce.A typical ferry burns three tonnes of fuel an hour. The cost of that has risen from $700 two years ago to $2,400 today. DP World, the group’s immediate owner, is heavily leveraged following a 2020 buyout of minorities.By happenstance, UK prime minister Boris Johnson this week visited the United Arab Emirates, of which Dubai is a member, to lobby for increases in oil and gas production. The actions of P&O Ferries are out of kilter with his government’s insistence that employers should be prepared to pay UK workers higher wages as a “Brexit dividend”.Few UK managers are old enough to have any experience of pay bargaining during a period of sustained wage inflation. If they are wondering how to do it, P&O Ferries provides them with a clear example: not like this.The Lex team is interested in hearing more from readers. Please tell us what you think of the actions of P&O Ferries in the comments section below More

Sentiment is rising for so-called secondary sanctions on any country or entity that helps Russia evade sanctions. On Thursday, Republican Senator Marco Rubio introduced a bill specifically aimed at Chinese financial institutions that conduct transactions with Russian entities through any alternative to the SWIFT financial messaging system.“We cannot allow China to become a safe haven for Russian firms seeking to avoid international sanctions,” Rubio said in a statement. “My bill would make it nearly impossible for Chinese banks to access the U.S. financial system if they choose to transact with Russian banks using Chinese or Russian financial messaging systems.”READ MORE: Why China’s Payment System Can’t Easily Save Russia: QuickTakeRubio said the legislation is a “powerful” disincentive for China deepening its ties with Russia. It would impose sanctions on any Chinese financial institution that uses the Cross-Border Interbank Payment System, or CIPS, to help Russia evade sanctions.Senator Chris Van Hollen, a Maryland Democrat, said he has discussed the issue of secondary sanctions with President Joe Biden’s administration. Any such move by the U.S. should be done in coordination with European allies, he said.The moves in Congress come as Biden is set to speak with China’s President Xi Jinping on Friday as the U.S. leader looks to shore up global pressure on Russia to halt its war in Ukraine. It will be their first call since November, and follows a meeting in Rome Monday between National Security Adviser Jake Sullivan and China’s top diplomat, Yang Jiechi. “The two leaders will discuss managing the competition between our two countries, as well as Russia’s war against Ukraine and other issues of mutual concern,” the White House said in a statement.Biden to Speak With Xi Friday in Bid to Pressure Putin (2)Lawmakers acknowledged that Xi could be one of the few people in the world capable of persuading Putin to pull back from Ukraine, though that’s tempered by skepticism that he would take that extraordinary step after publicly backing the Russian president in the weeks leading up to the invasion. “Could Xi be aggressive enough to convince him to do something different?” Senator Jim Risch, the top Republican on the Foreign Relations Committee said, referring to Putin. “Perhaps but I don’t think he’d do it.”The CIPS system was set up in October 2015 as a settlement and payment clearing system for transactions that use the yuan, also known as the renminbi, or “people’s currency.” It is supervised by China’s central bank but is run by CIPS Co. Ltd in Shanghai, with ownership spread among dozens of shareholders including state-owned Chinese financial institutions, exchanges and Western banks. While the system handles only a fraction of global financial transactions, lawmakers worry it could become a back door for Russian banks and oligarchs to transfer money out of the country.©2022 Bloomberg L.P. More