Economy

FRANKFURT/MADRID (Reuters) – European Union regulators have told some banks to scrutinise transactions by all Russian and Belarusian clients, including EU residents, to ensure that they are not used to circumvent Western sanctions against Moscow, three sources told Reuters.The instructions from European Central Bank (ECB) supervisors mean tens of thousands of Russians and Belarusians resident in the EU face intense surveillance by their banks, which are on alert for big payments and deposits as well as new credit applications, the sources familiar with the matter said.While EU sanctions against Moscow exempt people holding temporary or permanent EU residence permits, they place some restrictions on access by Russian nationals to banking services, including preventing banks from accepting deposits above 100,000 euros ($110,000) from Russian nationals or entities. The ECB move brings even EU residents under heightened scrutiny and would make it harder for them to operate bank accounts, with one of the sources saying some were already facing restrictions in Spain. This follows Moscow’s invasion of Ukraine, which the Kremlin describes as a special operation to demilitarise and “deNazify” the country.The ECB is checking that banks which it supervises “have in place the necessary arrangements to adhere to the sanctions”, including with regards to transactions and relationships with clients, but it has not issued any guideline beyond the EU’s rules, a spokesperson for the Frankfurt-based central bank said.Some ECB Joint Supervisory Teams, which include staff from the central bank and national authorities, have told banks to tighten control of EU residents too if they come from Russia or Belarus, the three sources, from banks and watchdogs, said.While it is not the ECB’s role to police sanctions, the supervisors are concerned that banks in the bloc could incur hefty fines if their clients channel money on behalf of sanctioned individuals, two of the sources said.     Supervisors informed the affected banks between the end of February and early March and gave them a week to comply, two of the sources said, adding an audit of responses is planned. It was not immediately clear when this would be completed.”At first, the measures were focused on those of Russian nationality, whether they were residents or non-residents, and later it was extended to Belarusians,” one of the sources said.Most Russians living in the EU are resident in Germany, where Eurostat says there are more than 230,000, followed by Spain, with more than 81,000. Other popular places are France, Italy, Latvia, Czech Republic, Austria and Finland. Belarusians living in the EU are chiefly in Germany, Lithuania and Italy, the Eurostat data shows.’EXISTING RISKS’    In one instance, a Spanish bank has put around 8,000 Russian clients who are not on the EU sanctions list and are residing in Spain under surveillance, one of the sources said. All new lending to Russians who do not have Spanish residency has been halted and at least one bank will not allow non-resident Russians to open new accounts, they added.Italian banks, too, were monitoring all accounts above 100,000 euros held by Russian clients even if they were living in the EU and were not on the sanctions list, a fourth source familiar with the situation said.    Asked if lenders were intensifying scrutiny of Russian clients, the Bank of Spain told Reuters that both supervisors and banks were “carrying out the necessary controls to assess the situation and the possible existing risks”.           The Bank of Italy declined to comment.While the banks affected do not have to stop transfers, the first three sources said they must make additional checks to establish the source of the money, its destination and purpose.Supervisors also told banks they should take extra care with loan applications from Russians or Belarusians, they added.     However, one of the sources said there is nothing to stop banks from granting credit to a well-established Russian customer who is not subject to sanctions.    More

Investing.com — The Federal Reserve is set to raise interest rates for the first time in over three years – but how many more hikes will the central bank guide for this year? Retail sales data for February are due. China’s government and central bank promise support to the economy and to financial markets, triggering the biggest one-day rally in Chinese stocks in years. U.S. stocks are set to build on Tuesday’s gains as oil remains under pressure, relieving some of the fears about stagflation. And the Russian Federation is expected to miss payments on its international debt for the first time.  Here’s what you need to know in financial markets on Wednesday, 16th March. 1. Fed set to start rate hike cycle; February retail sales dueThe Federal Reserve is set to raise interest rates for the first time since 2018 when it winds up its regular policy meeting at 2 PM ET (1800 GMT).Consensus expectations are for a 25 basis point increase in the fed funds target range, taking it to 0.25%-0.5%.  A bigger hike of 50 basis points hasn’t been entirely ruled out but would go against the guidance given by Chairman Jerome Powell at his recent Congressional testimony. Wall Street analysts suggest the Fed will raise rates by some 150-175 basis points in all this year, as well as starting the run-off of the massive bond portfolio it has accumulated over the last two years.A minority argues that such dramatic tightening won’t be necessary, due to the economic slowdown to be expected from the impact of war in Ukraine and higher energy prices. February’s retail sales data, due at 8:30 AM ET, may throw some light on how much the U.S. consumer has been affected so far by such factors.2. Team China charges to the rescue China’s stock markets roared to their biggest one-day gain in years after coordinated statements from the central bank and the government promising support both to the economy in general and – in a rare move – to financial markets in particular.Chinese stocks had slumped in recent days on a combination of fears over Covid-related lockdowns, regulatory campaigns against tech companies, and the threat of delisting from U.S. exchanges. The property sector continues to suffer from a much-needed deleveraging process, meanwhile.The statements from the government promised a measured approach to domestic regulation and said progress was being made in talks with the U.S. 3. Stocks set to open higher as oil slides againU.S. stock markets are set to open higher later, with early trading set to be dominated by the retail sales numbers and later developments completely dependent on the Fed.By 6:15 AM ET, Dow Jones futures were up 330 points, or 1.0%, while S&P 500 futures were up 1.2% and Nasdaq 100 futures were up 1.8%. All three indices had risen sharply on Tuesday as the slump in oil prices assuaged one of the market’s biggest fears.Stocks likely to be in focus later include Lennar (NYSE:LEN), which reports earnings on the same day as the National Association of Home Builders releases its monthly report on the housing market. Chinese ADRs, meanwhile, look set for the mother of all bounces. 4. Ukrainian peace talks continue as Russia prepares to miss payment on foreign debtUkrainian and Russian officials continued to strike a more positive tone in their comments regarding the possibility of a ceasefire and a diplomatic solution to the war, although the difficult choreography of such comments ensures that there are always conflicting statements to be found.In an interview with the Russian media company RBC, Foreign Minister Sergey Lavrov echoed comments from a top advisor to Ukrainian President Volodymyr Zelensky that there are areas of progress and opportunities for compromise (Zelensky repeated his admission that NATO membership for Ukraine is impossible in the foreseeable future on Tuesday). Lavrov said a neutrality model akin to that of Austria and Sweden after World War 2 is on the table.However, in comments late on Tuesday, President Vladimir Putin had said Ukraine was “not serious” in wanting a ceasefire, and officials announced a counteroffensive had started in several areas. Zelensky is due to make a virtual address to Congress today and is likely to repeat his determination to carry on the conflict.Elsewhere, the Russian government is likely to miss interest payments on its international debt later, given that it has signalled its intention to make payments only in rubles. In contrast to its 1998 default, this would be a default of choice, rather than the result of an inability to pay.5. Oil slides as IEA slashes demand outlook, Iran signals closing in on nuclear dealCrude oil prices edged down in volatile trading, extending Tuesday’s slump on fears for the trajectory of Chinese demand as Iran announced the release of two Western citizens in a move that appeared to be a prelude to lifting the sanctions related to its nuclear program.The International Energy Agency earlier revised down its estimate of global oil demand this year by 1 million barrels a day due to the impact of the war in Ukraine and the Western sanctions that have accompanied it. It argued, however, that 3 million b/d of supply in Russia could be shut in from April as a result of the sanctions.Elsewhere, the U.S. government will release its weekly oil inventories data, after a shocking 3.75 million build in crude stocks reported by the American Petroleum Institute suggested that record-high gasoline prices had finally had an effect on U.S. demand.By 6:25 AM ET, U.S. crude futures were down 1.5% at $95.39 a barrel, while Brent crude futures were down 0.9% at $99.00 a barrel. More

TOKYO (Reuters) – Japan will work closely with G7 advanced economies to prevent Russia from tapping loans from the International Monetary Fund and other international lenders, Prime Minister Fumio Kishida said on Wednesday.In a news conference, Kishida also said he will expand the scope of asset freezes against Russian elites, and ban imports of certain products from Russia. More

TOKYO (Reuters) – Sanctions imposed on Russia could prod more countries like China to look at central bank digital currencies (CBDC) as a tool to counter the dollar’s dominance in the global financial system, former Bank of Japan executive Hiromi Yamaoka said on Wednesday.While sanctions using financial infrastructure are necessary in extreme cases like the Ukraine crisis, they are “emergency means” that should not be over-used, said Yamaoka, who is well versed in CBDC and global settlement affairs.U.S. allies including Japan imposed a series of sanctions against Russia for invading Ukraine on Feb. 24, including the freezing of the central bank’s foreign assets and the removal of many Russian banks from the global payments system SWIFT.”The most effective, powerful weapon was the freezing of Russia’s foreign reserves,” said Yamaoka, former head of the BOJ’s payment and settlement systems department.”It meant U.S. allies intentionally created a situation that pushes Russia into default,” he told Reuters.Yamaoka said it was unlikely crypto-currencies would serve as a useful loophole against sanctions for Russia, as they are too risky as a means to transfer huge amounts of funds.But the Western sanctions on Russia underscored how politics and national security are increasingly affecting the world of finance including digital currencies, he said.China’s rapid progress in developing a digital yuan has alarmed some lawmakers in G7 advanced economies as a potential threat against the U.S. dollar’s global hegemony.U.S. President Joe Biden signed an executive order last week that requires the government to assess the risks and benefits of creating a central bank digital dollar.”There’s a chance a country like China could promote usage of digital yuan for cross-border transactions and create a currency bloc” to counter the dollar’s dominance, Yamaoka said.”Defense and national security will likely become key themes when debating CBDC.”During his stint at the BOJ, Yamaoka was directly in charge of the central bank’s research on digital currencies including a joint experiment with the European Central Bank. He now chairs a group of banks and companies looking at building a common settlement infrastructure for digital payments. More

The region is home to the largest concentration of online shoppers in the country. The facilities, key to delivering packages on time, are reshaping neighborhoods.An e-commerce boom turbocharged by the pandemic is turning the New York City region into a national warehouse capital.In just two years, Amazon has acquired more than 50 warehouses across the city and its surrounding suburbs. UPS is building a logistics facility larger than Madison Square Garden on the New Jersey waterfront near Lower Manhattan.In Brooklyn, Queens and the Bronx, 14 huge warehouses to help facilitate e-commerce operations are rising, including multistory centers previously found only in Asia.Fueled by the soaring growth of e-commerce while so many Americans have been working from home, online retailers, manufacturers and delivery companies are racing to secure warehouses in the country’s most competitive real estate market for them.Every day, more than 2.4 million packages are delivered just in New York City, an online-buying mecca in a region of 20.1 million people.The feverish activity has already transformed the landscape of city neighborhoods and rural towns, transforming Red Hook in Brooklyn into a bustling logistics hub and replacing farmland in southern New Jersey with sprawling warehouses where packages are sorted, packed and delivered, often within hours of being ordered.An Amazon grocery hub in Red Hook, Brooklyn, which has emerged as a nexus of e-commerce warehouses in New York because it offers relatively easy access to Lower Manhattan, Queens and the rest of Brooklyn.Clark Hodgin for The New York TimesJust 1.6 percent of all warehouses in New York City and only 1.3 percent in New Jersey are available for lease, according to the real estate firm JLL; only the Los Angeles area has fewer warehouse vacancies in the United States. Some companies are converting buildings never intended to be warehouses. Amazon turned a shuttered supermarket in Queens into a makeshift package hub.The soaring demand for warehouses, once the ugly duckling of the real estate industry, underscores their pivotal role in a complex global supply chain. Nationwide, developers are pouring billions of dollars into the construction of new facilities, helping lift the commercial real estate sector, which has been battered by the emptying of offices during the pandemic.But the rise of warehouses has also sparked significant opposition. While they provide jobs and can lower residential property taxes by contributing to the local tax base, people across the region say the large hubs will lead to constant flows of semi-trucks and delivery vans that will worsen pollution and traffic congestion.Understand the Supply Chain CrisisThe Origins of the Crisis: The pandemic created worldwide economic turmoil. We broke down how it happened.Explaining the Shortages: Why is this happening? When will it end? Here are some answers to your questions.A New Normal?: The chaos at ports, warehouses and retailers will probably persist through 2022, and perhaps even longer.A Key Factor in Inflation: In the U.S., inflation is hitting its highest level in decades. Supply chain issues play a big role.They have also bemoaned the loss of open land to mega facilities. In recent months, residents in the southern New Jersey township of Pilesgrove, just across the Delaware River from Wilmington, Del., protested plans for a 1.6 million square-foot warehouse — larger than Ellis Island — on former farmland.While Amazon, major retailers and logistics operators such as UPS, FedEx and DHL dominated the initial wave of warehouse deals at the start of the pandemic, interest is now coming from smaller businesses seeking greater control of their supply chain amid a global bottleneck in the movement of goods.“I’ve been doing this for 30-some-odd years, and I’ve never seen it like this,” said Rob Kossar, a vice chairman at JLL who oversees the company’s industrial division in the Northeast. “In order for tenants to secure space, they are having to negotiate leases with multiple landlords on spaces that aren’t even available. It’s insane what they are having to do.”The rising cost to lease facilities has frustrated some small business owners who cannot compete with retail and logistics giants, as well as newcomers like Tesla and Rivian, which have opened showrooms and service centers for their electric vehicles in Brooklyn warehouses. Leasing prices for warehouses in the Bronx, for instance, have jumped 22 percent since the pandemic started.Warehouse jobs are still just a fraction of New York City’s labor force, but companies are on a hiring spree. Since 2019, the number of warehouse jobs doubled to 16,500 positions in late 2021. New hires at Amazon make around $18 an hour and get starting bonuses up to $3,000. But the company has also been fighting workers at some of its warehouses, including on Staten Island, who are trying to unionize to improve working conditions.Prose employs about 150 employees at its facility in Brooklyn from where it ships products across the United States and to Canada.Clark Hodgin for The New York TimesToday, nearly everything — from cars to electronics and groceries to prescription drugs — can be ordered online and arrive in as little as a few hours. In New York City, new companies are offering 15-minute grocery delivery.And though most retail sales nationwide still happen at brick-and-mortar stores, online sales are increasing at breakneck speed, growing by 50 percent over the last five years to reach 13 percent of all retail purchases, according to the census.That surge is pummeling many retailers, especially smaller businesses, that have also had to weather the loss of customers during the pandemic.At the onset of the pandemic shoppers switched to online buying at a rate that had been expected to take a decade to reach, according to analysts.Some large retailers, such as Target and Best Buy, that have a handful of warehouses in the region lean on their stores to fulfill online orders. Wal-Mart, the nation’s largest retailer, does not have a store in New York City so it uses a warehouse in Lehigh Valley, Pa., just over the border from New Jersey, and stores in surrounding suburbs to serve city residents.Amazon is taking a different approach. Across New Jersey to the northern New York City suburbs to Long Island, Amazon is cobbling together a sprawling network of fulfillment centers, package-sorting facilities and last-mile hubs. In the city it has set up a handful of facilities in the Red Hook and Sunset Park neighborhoods of Brooklyn.Amazon’s rapid expansion is not unique to the New York area. Last September alone, Amazon said in a recent earnings call, it added another 100 facilities to its delivery network in the United States.Red Hook, a neighborhood of just under a square mile bounded by water on three sides, has become a center for warehouses in the city because it is near major roadways into population centers in other parts of Brooklyn, Lower Manhattan and Queens.The owner of Prose decided to keep all his manufacturing under one roof before the supply chain problems emerged. “It has been a great decision,” he said.Clark Hodgin for The New York TimesAt least three new warehouses have opened in the neighborhood and more could be on the horizon. UPS paid $300 million for a 12-acre property, and two developers of logistics centers spent $123 million in December to buy several industrial sites there.How the Supply Chain Crisis UnfoldedCard 1 of 9The pandemic sparked the problem. More

Prices for groceries, couches and rent are all climbing rapidly, and Federal Reserve officials have been warily eyeing that trend. On Wednesday, they are expected to take their biggest step yet toward counteracting it.Central bank officials — who have been signaling for months that they are preparing to pull back economic support — are expected to raise their policy interest rate by a quarter percentage point. That small change will carry with it a major signal. Policymakers are telling markets and the public that they have fully pivoted to inflation-fighting mode and will do what is necessary to make sure price gains do not remain hot for months and years to come.The Fed will release its decision at 2 p.m., and Jerome H. Powell, the central bank’s chair, will hold a news conference at 2:30 p.m.The Fed is acting at a tense moment for many consumers, when people are worrying about rising day-to-day expenses and trying to think through what higher interest rates could mean for their finances. Here’s a rundown of what is happening, why it is happening and what it is likely to mean for markets and the economy.The Fed is taking its foot off the accelerator. More

The Federal Reserve is expected to lift its benchmark interest rate for the first time since 2018 and set the stage for rate rises at most of the remaining seven policy meetings this year as it seeks to combat the highest inflation in four decades. The US central bank is all but guaranteed to increase the federal funds rate by a quarter of a percentage point on Wednesday, bringing the target range to 0.25 to 0.50 per cent, in the latest milestone for the US economy in its recovery from the pandemic.Fed officials are also set to sharply revise higher their projections for interest rates this year compared to three months’ prior, when they had forecast three quarter-point rate rises in 2022, followed by five more through 2024.Policymakers on Wednesday are expected to signal their support for at least four more interest rate increases in 2022, in addition to the March move. Another three or four increases are set to be pencilled in for 2023, bringing the fed funds rate closer to a more “neutral” setting that neither boosts nor constrains growth.The so-called “dot plot” of individual interest rate projections is also set to show several Fed officials expecting rates to eventually rise above a neutral level. Fed chair Jay Powell recently estimated the neutral rate to be between 2 and 2.5 per cent.Underscoring the enormity of the shift in just a matter of months, officials were evenly split on the need for an interest rate increase as recently as last September.The Fed’s statement and its latest economic projections will be published at 2pm Eastern Time, followed by a press conference with Powell shortly after. The Fed’s embrace of a much more aggressive policy stance comes despite a sharp escalation in geopolitical tensions stemming from Russia’s invasion of Ukraine, which is broadly expected to dent growth and intensify price pressures. The European Central Bank also turned hawkish this month, scaling back its bond-buying plan as the war boosted inflation expectations. While the US central bank has in the past delayed making major policy decisions in periods of acute conflict to avoid exacerbating volatility at a turbulent time, surging inflation and an extremely strong labour market are likely to prompt the Fed to press ahead with plans to more substantively tighten monetary policy.Fed officials are also expected to significantly revise higher their forecasts for inflation, which is derived from the personal consumption expenditures price index. The median estimate for core inflation, which strips out volatile items such as food and energy, is set to rise above 3 per cent by the end of the year, up from 2.7 per cent last December. Next year’s estimates are also likely to increase. The core PCE index is at 5.2 per cent.Forecasts for US economic growth are also set to moderate from the 5.5 per cent pace projected in December, while the unemployment rate is forecast to hold steady at 3.5 per cent.The Fed is also likely to shed light on its plans to reduce its enormous balance sheet, which more than doubled in size over the course of the pandemic to $9tn as the central bank hoovered up government bonds as part of its efforts to shore up the economy. The process is expected to start as early as May, with the Fed scaling back its holdings of Treasuries at an initial pace of $60bn a month and its stock of agency mortgage-backed securities by $40bn by ceasing to reinvest the proceeds of maturing securities. The pace is set to quicken over time. More

Nearly everyone who crossed the Danube on the open-air ferry from Ukraine and landed in the frostbitten Romanian port city of Isaccea on a recent morning had a roller bag and a stopgap plan. One woman planned to join her husband in Istanbul. Another was headed to Munich, where her company has its headquarters. Others were meeting brothers, cousins, in-laws and friends in Paris or Sofia, Madrid or Amsterdam.And then, they hoped to go back to Ukraine.“I need to return,” said Lisa Slavachevskaya, who traveled with her 10-year-old son and 5-year-old daughter from Odessa. “My husband, my mother and my grandmother are there.” She said she planned to go home in a month.Whether such quick turnabouts are possible is one of the many uncertainties hanging over Europe’s fastest-growing refugee crisis since World War II. No matter how the catastrophe in Ukraine ends, the costs of helping the millions of Ukrainians fleeing Russian bombs will be staggering. Some early estimates put the bill for housing, transporting, feeding and processing the flood of humanity at $30 billion in the first year alone.“This is a humanitarian and medical emergency in the next weeks,” said Giovanni Peri, director of the Global Migration Center at the University of California, Davis.Tania Uzunova with her three children on a ferry headed to Isaccea in Romania.What happens over the next few months will determine if Europe will face the additional costs of a massive resettlement that has the potential to reshape the economic landscape.European economies are still recovering from the pandemic and coping with stubborn supply chain shortages and high inflation. As costly as it will be to provide short-term relief to families temporarily displaced by the war, over the long term the expense of integrating millions of people would be much greater and put immense strain on housing, education and health care systems. While a giant influx of workers, particularly skilled ones, is likely to increase a nation’s output over time, it could intensify competition in the job market. Roughly 13 million people were unemployed in the European Union in January.“It is uncertainty that now dominates the economic calculation,” Mr. Peri said.More than three million refugees fled Ukraine in less than three weeks, according to the U.N. International Organization for Migration, and millions more are likely to follow as the war rages on.Officials, migration experts and economists say it is too early to say whether most displaced Ukrainians will end up staying.That is a stark contrast to 2015, when 1.3 million migrants from the Middle East and North Africa escaped to Europe after years of war and terror, seeking asylum because they feared persecution. Return was not an option.So far, officials say, relatively few have asked for such protection. Of the 431,000 Ukrainians who have crossed into Romania, for example, only 3,800 have asked for asylum. Indeed, many winced at the “refugee” label.Of the 431,000 Ukrainians who have crossed into Romania, only 3,800 have asked for asylum, according to a government spokesman.“I don’t consider myself a refugee,” Evgeniy Serheev, a lawyer, said through a translator as he waited to cross into the northeastern Romanian town of Siret. But with his wife, three children and their bags crammed into one of hundreds of cars inching toward the border, he acknowledged that he looked the part.The urgent humanitarian and moral case is compelling on its face; the economic argument can be harder to make. Most research, though, over the long term shows that working refugees can help economies grow, expanding a nation’s productive capacity, paying taxes and generating more business for grocery stores, hair salons, and clothing and electronics stores. That was what happened in Germany after 2015 when it took in more than a million refugees, most of them from Syria.“Economically speaking it was a net positive,” said Ángel Talavera, head of European economics at Oxford Economics.But countries face significant initial costs.The European Union last week pledged 500 million euros, or $550 million, in humanitarian support, but it will have to put up more. “European governments are going to blow the budget,” said Claus Vistesen, chief eurozone economist for Pantheon Macroeconomics. This latest drain comes on top of an extraordinary amount of public spending over the last two years to battle the coronavirus pandemic.The sudden need for more housing, fuel, food, health care services and more is going to further exacerbate supply shortages. “Inflation is going to go up, up, up,” Mr. Vistesen said.Igor Korolev with his family and their cat, Murka, inside a makeshift shelter in the ballroom of a hotel in Romania.The Ukranians were welcomed by Romania with food and shelter.Cristian Movila for The New York TimesMost Ukrainians have been met with care packages and offers of free shelter in Romania.In the eurozone, inflation is running at 5.8 percent, and Mr. Vistesen said he expected it to rise to 7 percent this year given soaring energy prices. Those are up by nearly a third since last year. For the European Central Bank, he added, it will make the delicate task of balancing the risk of inflation with the risk of recession all the more difficult.For those living and working in Europe, it will mean less spending power in the short run. If wages don’t rise, they will be poorer.For now, Ukrainians, with strong kinship, cultural and religious ties in other European countries, have mostly been met with care packages and offers of free shelter, transportation and food.At the border in Siret, volunteers rushed up to Ukrainian families trudging up the road with offers of cups of hot tea and €5 cellphone SIM cards. Organizations, businesses and individuals jockeyed for a spot closest to the checkpoint to be the first to give chicken soup, kebabs, blankets, toothbrushes, stuffed animals and hats.The government in Bucharest has so far allocated $49 million to cover the costs. The prime minister, Nicolae Ciuca, said he expected the European Union to reimburse a big chunk of that.The E.U. has granted Ukrainians immediate permission to stay for up to three years, get a job and go to school — access that migrants from other parts of the globe could only dream of. And some countries, including Romania and Poland, have agreed to allow refugees to receive the same social and health services available to their own citizens.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More