Economy

Traders in US financial markets have cranked up their bets on how high inflation will soar in the coming years, complicating the Federal Reserve’s efforts to curb rapidly rising consumer prices. On Tuesday, one market measure of how hot investors believe inflation will run climbed to its highest level since 2014. The so-called five-year, five-year forward rate — a gauge of inflation forecasts over five years, five years from today — hit 2.5 per cent. That same measure stood at 2.1 per cent before Russia’s invasion of Ukraine sent commodity prices surging.The rapid shift in inflation views comes as the price of Brent crude, the international oil benchmark, escalated to a 14-year high this week and commodities including nickel, wheat and natural gas have rocketed.“Our inflation expectations are going up and growth expectations are going down,” said Elaine Stokes, a portfolio manager at Loomis Sayles. Data due out on Thursday are expected to show that consumer prices rose at the fastest level in 41 years in February, climbing 7.8 per cent from the year before, according to a survey of economists by Bloomberg.Higher commodity prices have led investors to wager that the Fed will be forced to tighten monetary policy at a more aggressive pace than might otherwise be expected in a volatile market.In recent days, as Russia’s invasion of Ukraine has reverberated through markets, traders have lifted their expectations for US interest rate rises this year. Now, investors expect borrowing costs to rise from just above zero to roughly 1.5 per cent by December. That marks a rapid reversal from just two weeks ago, when traders had lowered their expectations — predicting that rates would reach roughly 1 per cent.

“For the duration of this year we are going to be looking at very, very high inflation in the US at every upcoming Fed meeting,” said David Mericle, an economist at Goldman Sachs. “I just don’t see them going through a meeting with inflation so far above their target and not delivering a rate hike.”Investors are also factoring in a hit from higher commodity costs as consumers and businesses face higher energy bills. Coupled with tighter policy from the Fed, which is expected to raise borrowing costs for companies and individuals, the speed of the US economic recovery could slow.That means the Fed is walking a tightrope, given the central bank is loath to push the country into recession even as it attempts to bring down inflation, Mericle added.“The Fed is going to be hiking on eggshells,” said Meghan Swiber, a rates strategist at Bank of America. More

The US has blocked the transfer of fighter jets from Poland to Ukraine for fear of being dragged into a direct conflict with Russia.John Kirby, a Pentagon spokesman, said the Polish proposal for Warsaw to transfer its fleet of MiG-29 fighter jets, which Ukrainian pilots are trained to fly, to Kyiv was not “tenable”.Washington and Warsaw had been in talks about the military transfer to help the Ukraine government repel Russian air power for days. US secretary of state Antony Blinken said at the weekend the Biden administration was looking “actively” at a deal that would involve the US supplying American F-16 fighter jets to Poland to make up for the shortfall.The Polish government said yesterday it would send the Soviet-era jets to the US air force base in Ramstein, Germany “immediately and free of charge”, adding it was prepared to pay for the F-16 replacements.But the Pentagon last night ruled out the complex plan. “The prospect of fighter jets ‘at the disposal of the . . . US’ departing from a US Nato base in Germany, to fly into airspace that is contested with Russia over Ukraine, raises serious concerns for the entire Nato alliance,” Kirby said.The Kremlin warned western countries against providing combat aircraft to Ukraine, describing the proposal as a “potentially dangerous scenario”.Meanwhile, Russia is pushing ahead with its planned invasion of the Ukrainian capital Kyiv, with fighting ongoing in the north-west of the city. The Russian army has also continued to besiege the cities of Kharkiv, Chernihiv, Sumy and Mariupol which have all been subjected to heavy shelling. Volodymyr Zelensky, Ukraine’s president, has repeatedly asked Nato members who own old Russian-made warplanes to give them to Ukraine. The Biden administration had ruled out a transfer of fighter jets, but an emotional plea by Zelensky to 300 members of Congress via a Zoom call at the weekend prompted a rethink by the White House, administration officials said.More on UkraineEnergy market: The Biden administration has told US shale producers they must do “whatever it takes” to increase supplies. Yesterday, the US and UK announced a ban on Russian oil imports and the EU unveiled a plan to radically reduce its dependency on Russian oil and gas. What does banning Russian oil mean for global energy markets? Our energy team explains.Business news: McDonald’s led a fresh exodus of western businesses from Russia, saying it would temporarily close all of its 850 restaurants in the country. The exit of iconic American brands from Russia marks the end of an era. Markets Briefing: Nickel prices hit another record high today. A bad bet has left a Chinese metals tycoon facing billions of dollars in potential losses.Financial services: International lenders including Citigroup, ING and JPMorgan are reviewing their relationship with Dutch telecoms group Veon after the owner of its largest shareholder, Mikhail Fridman, was hit by sanctions.Cyber security: A secret US mission across several years may explain why Ukrainian networks have held up so far against Russian cyber attacks.China: US intelligence chiefs said the rapid response of the west to Russia’s invasion of Ukraine would probably influence Beijing’s calculus over its goal of securing control of Taiwan.Opinion: The west should strengthen sanctions, though they may ruin Russia’s economy without changing its policy or regime, argues Martin Wolf. The war in Ukraine is prompting a rethink among investors of ESG and the defence sector, writes Peggy Hollinger.Follow our live blog for the latest developments and the conflict explained in maps.Four more stories in the news1. Apple launches high-end PC The iPhone maker yesterday announced the launch of a new high-end desktop computer as it seeks to capitalise on the success of its M1 desktop processor. It also announced the revamp of its entry level iPhone SE phone with 5G.In other technology news: Google has agreed to acquire cyber security company Mandiant for $5.4bn. The all-cash deal comes as the internet giant looks to boost its cloud computing business and catch up with Amazon and Microsoft. 2. Venezuela frees US oil executive Gustavo Cárdenas, an oil manager who worked for the US-based, Venezuelan-owned oil company Citgo Petroleum Corp was freed yesterday following talks between the Maduro government and the Biden administration at the weekend. Jorge Alberto Fernández, a Cuban-American man arrested just over a year ago and accused of spying, was also freed.3. Qatar mediates between Iran and US in nuclear talks Qatar has stepped up its role in mediating between the US and Iran as western powers have been striving to convince wary Iranian leaders to sign a deal to revive the 2015 nuclear accord, according to people briefed on the talks.4. Ex-Apollo executive explores bid for Chelsea FC Josh Harris, the US billionaire and former top executive at Apollo Global Management, is exploring a bid for Chelsea football club, according to people familiar with the matter.The day aheadIMF votes on aid package for Ukraine The proposed support package would meet the request made by Ukraine last week for $1.4bn under the IMF’s Rapid Financing Instrument.Russia bond ruling The Credit Derivatives Determinations Committee, a group of banks and asset managers tasked with ruling when a company or country defaults on its debts, will determine whether Moscow’s move to allow some bonds to be paid in roubles rather than other currencies would contravene other rules underpinning credit default swaps.Corporate earnings  Campbell Soup Co is likely to post a slight dip in second-quarter revenue, as demand for its soups and sauces is expected to ease from the soaring levels seen at the height of the pandemic. Investors will be looking out for the company’s outlook and its commentary on margins and cost inflation.Join us tomorrow for an hour of empowering talk about money with a panel of female experts convened by the FT and its new charity, the Financial Literacy and Inclusion Campaign (FT FLIC). We will share practical tips and answer your questions about the money issues that matter most to women. Register for free.What else we’re readingWill the Baltics become the ‘new West Berlin’? Estonia, Latvia and Lithuania could potentially be encircled by Russian expansion, but their leaders insist they have never been so secure. Richard Milne, the FT’s Nordic and Baltic bureau chief, reports from the region for today’s big read. Dealers cannot sell EVs they do not have Russia’s attack on Ukraine has highlighted concerns about oil dependency and petrol prices as electric vehicle manufacturers start to make good on their promises to deliver greener cars. But there are complications ahead, warns Brooke Masters.‘Brutal’ selling knocks Tiger Cub hedge funds Steep losses have proved “wicked punishment” in recent months for managers holding speculative US stocks, pummelling several hedge funds spawned by Julian Robertson’s investment firm Tiger Management. But the relative resilience of some companies to the “tech wreck” obscures the extent of wealth destruction.Hong Kong is stuck in limbo as Covid cases soar Living in Hong Kong is like being stuck in a real-life version of Waiting for Godot, writes Ravi Mattu, the FT’s deputy Asia editor. Residents are faced with a difficult choice: continue waiting for authorities to act — or decide to leave.My phone was controlling me, so I went on a digital diet For two weeks I tried to build a new healthier relationship with technology, writes technology correspondent Madhumita Murgia, with mixed results.Property From a solar-powered villa on the edge of Lake Como to a Nassau beach house with its own rainwater treatment system, here are five exclusive homes for sale with sustainable features. More

Investing.com — Global markets brighten up on first signs of compromise from the Russian and Ukrainian governments (but the fighting goes on, regardless). Apple (NASDAQ:AAPL) moves into the market for high-end desktops, at the same time as relaunching its cut-price iPhone SE. Nickel trading remains halted as a major Chinese producer faces an $8 billion loss. Russia’s central bank bans foreign currency sales, pushing the ruble lower again. The Labor Department publishes its monthly job openings survey and U.S. oil inventory data will show the impact of record-high gasoline prices. Here’s what you need to know in financial markets on Wednesday, 9th March.1. Markets up on signs of diplomatic shift in Russia, UkraineThe mood in global markets brightened after Russia’s Foreign Ministry spokeswoman Maria Zakharova said Russia has no intention of occupying Ukraine or overthrowing its government, a clear step away from its previous position of wanting to ‘de-Nazify’ the country.The comments came a day after Ukraine’s democratically-elected (and Jewish) President Voldymyr Zelensky said he had “cooled” on the idea of joining NATO, the prospect of which was a prime factor behind Russia’s invasion.European stock markets rose as much as 5%, while the euro rebounded 0.8% to $1.0985 by 6:15 AM ET (1115 GMT).As ever, diplomatic rhetoric shifts according to its audience, and is often at odds with events. Zakharova also said that Russia’s actions aren’t aimed at Ukraine’s peaceful population – despite widespread evidence of repeated shelling of refugees trying to flee through ‘safe’ corridors it had guaranteed. Zelensky, meanwhile, told the British parliament that Ukraine would fight on “to the end” on Tuesday.2. Russian economic crisis worsens as exodus continues, central bank restricts stops FX salesRussia’s economy continues to lurch into chaos. The Central Bank late on Tuesday stopped banks from selling foreign currency for six months, a move that suggests it expects the current sanctions regime to last at least that long. The dollar rose another 12% on local exchanges to 118.07 rubles.Vladimir Putin signed a decree late on Tuesday restricting the export of raw materials, in an attempt to appear still in control of an economic situation largely driven by external forces. The U.S. and U.K. both said they will ban Russian oil imports on Tuesday, while the EU outlined plans to cut its imports of Russian gas by two-thirds within a year.The list of private companies exiting Russia continued to lengthen: McDonald’s (NYSE:MCD) and Yum! Brands (NYSE:YUM), the owner of KFC and Pizza Hut, both said they will suspend operations. Coca-Cola (NYSE:KO), PepsiCo (NASDAQ:PEP) and Starbucks (NASDAQ:SBUX) have all done the same within the last 24 hours.3. Stocks set to open higher; Apple, JOLTS eyedU.S. stock markets are set to join the global bounce later, with dip-buying trading algorithms making the most of the shift in sentiment.By 6:15 AM ET, Dow Jones futures were up 468 points, of 1.4%, while S&P 500 futures were up 1.7% and Nasdaq 100 futures were up 2.0%. That’s considerably more than what they lost on Tuesday.Stocks likely to be in focus later include Apple, which announced plans to expand in the high-end desktop computer market late on Tuesday, offsetting some fears about cannibalization of its iPhone business with the relaunch of its iPhone SE product. Also in focus will be electric vehicle makers, as the consequences of the turmoil in nickel futures continue to ripple through markets. Oatly is arguably the most interesting of the few companies reporting earnings, while Adidas’ figures released earlier went some way to making up for recent volatility.The Labor Department’s monthly job openings survey leads a thin data calendar.4. Nickel market remains shut as Chinese producer faces $8 billion lossNickel trading remained closed in both Shanghai and London as the two exchanges made slow progress in unwinding the massive loss-making short position held by Tsingshan, a Chinese nickel producer.Tsingshan faces losses of some $8 billion on its position, according to various reports.The London Metals Exchange has been fiercely criticised for its decision to cancel some trades made earlier in the week, which it said was due to the threat to the viability of some its members.“The ability of the financial system to get that money to the members in London and then into the exchange I think would have been significantly stressed,” LME CEO Matt Chamberlain told Bloomberg.5. Oil eases off highs; U.S. inventories eyedCrude oil prices eased off recent highs, in a further reflection of the slight improvement in global market sentiment.By 6:20 AM ET, U.S. crude futures were down 2.3% at $120.92 a barrel, while Brent futures were down 1.7% at $125.75 a barrel.The upward pressure on oil has also been relieved by realizations that the ban announced by the U.S. and U.K. on Russian oil imports will have a largely symbolic character, owing to the small volumes affected. U.S. imports from Russia were running at less than 100,000 barrels a day so far this year, according to government data.The U.S. publishes inventory data at 10:30 AM ET, where the key variable will be what impact record-high pump prices are having on gasoline demand. More

STRASBOURG (Reuters) – European Union governments are preparing a new round of travel bans and asset freezes on some 100 Russians over Moscow’s invasion of Ukraine and a decision could come later on Wednesday, the EU’s top diplomat said.”Member states are working on a package of sanctions, around 100 people responsible at different levels of government,” Borrell told the European Parliament in Strasbourg. He said he hoped for agreement “by the end of this session today”, without giving more details. More

China’s biggest smartphone makers are slashing their shipments to Russia because of the rouble’s collapse and western sanctions despite pressure from Beijing to support Vladimir Putin after his invasion of Ukraine.The cutbacks, led by Huawei and Xiaomi, show that efforts by China’s president Xi Jinping and his counterpart Putin to build a close personal relationship are not shielding Chinese groups from the economic fallout of the war. The sanctions are also making it difficult for Chinese companies to exploit opportunities created by an exodus of western groups from Russia. Shipments from leading Chinese smartphone producers Xiaomi, Oppo and Huawei have fallen by at least half since the outbreak of the war, people familiar with the matter said. Chinese brands comprise about 60 per cent of the Russian smartphone market. Xiaomi and Huawei did not comment. Oppo was not immediately available for comment. “It is politically sensitive to openly announce a sales suspension in the Russian market like Apple and Samsung,” said one former Xiaomi executive, referring to Beijing’s support for Moscow. “But from a business perspective, it makes [sense] to stand by and watch what happens next.”Chinese factories making everything from smartphones to air conditioners have counted on Russia in recent years for their overseas growth, gaining a strong foothold in the country of 140m people. Bilateral trade hit a record high of $146bn last year with China accounting for about 14 per cent of Russian imports, including almost all electronic goods. Within days of Russia’s assault on Ukraine, western companies pledged to cut ties with Moscow — among them BP, Apple, Nike and Netflix — to avoid reprisals stemming from any association with the Kremlin.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

But the more than 35 per cent plunge in the rouble against the dollar since the invasion has also made it difficult for Chinese companies to sell their products in Russia without incurring a loss. They need to charge Russian customers a much higher price in roubles to make up for the exchange rate, yet that is difficult given the deteriorating economy.“You need to set a new price every day in order to avoid making losses,” said Ivan Lam, a Hong Kong-based analyst at Counterpoint Research, a consultancy. Lam added that many Russian smartphone distributors have stopped placing new orders with Chinese manufacturers because of the exchange rate risks. “It is very risky to operate in Russia right now,” said one former Huawei executive who has worked in Moscow. According to experts, the risk of secondary sanctions being imposed on China was also expected to grow as the war dragged on if the US believed Beijing was significantly undermining efforts to punish Russia.Beijing was thinking “very seriously about the potential costs of embroilment in Russia’s confrontation” despite “considering most restrictions imposed by the US and its allies as illegitimate”, said Andrew Gilholm, the head of China analysis at Control Risks, a consultancy.The former Xiaomi executive said the nation’s technology industry expected the impact of US-led sanctions on Russia to ultimately be as severe — if not more so — as US actions against Iran.“A lot of US-made goods, including even small parts, could be banned from being shipped to Russia while a violation of the rules may lead to another Meng Wanzhou incident,” said the executive, referring to the Huawei chief financial officer who was detained in Canada on allegations she misled banks into breaching sanctions against Iran.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Zhan Kai, a Shanghai-based lawyer at East & Concord Partners who has advised Chinese companies on their Russia operations, said he had received an influx of inquiries on the new sanctions.“The Russia-related sanctions are still not very clear and a lot depends on enforcement, on which the US government has a lot of leeway,” he said. Despite strong international opposition to the war, Beijing has refused to condemn Putin for the invasion. Instead China has pledged “normal” business and trade ties with Russia. Chinese brands have not left Russia en masse. Great Wall Motor and Geely, two of China’s biggest carmakers, said they had no plans to immediately suspend their operations in Russia, a signal that some Chinese groups retained long-term ambitions in the market despite the toughening business conditions. “The foreign brands leave this vacuum but the Russian consumers are probably in no shape to buy the Chinese goods that will fill that vacuum,” said Tu Le, managing director of Sino Auto Insights.Policymakers are assessing how China-Russian trade can be financed, after the west imposed sanctions on Russia’s central bank and cut Russia from the Swift international payments system. While Beijing has for years touted Cips, a renminbi-based payment system, as a replacement for dollar-powered Swift, progress has been slow.

Multiple Chinese companies have reported increased use of renminbi payments by their Russian clients but complain of problems.“It takes at least two weeks to open a renminbi account at the Bank of China Moscow branch because of a surge in demand,” said John Jin, overseas sales manager at a Huizhou-based toy company with Russian clients.An executive at Wuhan Zoncare Bio-medical Electronics Co, a medical equipment maker, said many Russian clients have cancelled their orders as the Swift ban made it difficult for them to make dollar or euro payments. Most Russian banks did not provide renminbi payments or did not have enough Chinese currency in hand.“We believe the Russian market bears a lot of potential and the country will need Chinese products more than ever after the war,” said the executive. “But for now, we will wait for better timing to enter the country.”Additional reporting by Emma Zhou and Maiqi Ding in Beijing More

(Reuters) – An oil-driven inflation shock triggered by the war in Ukraine is forcing Asia’s policymakers to rethink their assumptions for 2022, with the risks of weak growth coupled with surging prices adding unwanted complexity to monetary setting plans.Having largely lagged their Western counterparts in scrapping harsh pandemic restrictions, Asian economies, among the largest consumers of global commodities, now face the threat of crippling inflation.For some central banks in the region, such as New Zealand, South Korea and Singapore, deep worries about prices and imported inflation have already set off aggressive policy tightening cycles. For most others, however, the need to sustain a fragile recovery from the pandemic slump is likely to complicate deliberations.Matt Comyn, chief executive at Commonwealth Bank of Australia (OTC:CMWAY), the country’s largest retail bank, said his customers are already talking about surging input costs for their businesses.”Raising interest rates doesn’t necessarily help that – it’s a different funding proposition for central banks,” he told a conference this week. “They’re taking extreme steps because extreme steps are warranted in light of what’s happening in Ukraine and Russia.”Analysts worry the Ukraine crisis could upend the region’s economy through various channels including slowing trade, though the biggest hit will likely come from soaring energy costs. Barclays (LON:BARC) expects the energy shock to knock 0.3-0.5 of a percentage point off China’s economic growth by boosting output costs, curbing consumption and dampening external demand.Soaring fuel costs will deal a severe blow to the economy of resource-poor Japan, forcing the central bank to keep monetary policy ultra-loose even as inflation creeps up towards its elusive 2% target.Fending off the hit to growth from high fuel costs appears to be the priority for many other Asian central banks.Even though rising fuel costs and the risk of abrupt capital outflows keep pressure on them to tighten policy, many emerging Asian central banks appear to prefer going slow in raising interest rates.BIGGER RISK IF WAR PERSISTSThailand might miss the government’s forecast of 3.5-4.5% economic growth this year due to the impact of the Ukraine crisis on tourism, trade and domestic consumption, its finance minister Arkhom Termpittayapaisith said on Tuesday.While inflation is already at a 13-year high, Thailand’s central bank won’t hike rates any time soon, analysts say.”If we acknowledge that the root of inflation is from a supply shock rather than excessive demand, it is prudent to keep monetary policy accommodative,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.The Philippines’ central bank warned that under a worst-case scenario of oil prices reaching $120-$140 a barrel this year, inflation would average between 4.4% and 4.7% – above its 2.0-4.0% target band.But Bangko Sentral ng Pilipinas Governor Benjamin Diokno said in a statement on Sunday the country has sufficient buffers, signaling that it won’t resort to imminent rate hikes to counter capital outflows.Australia’s central bank chief said on Wednesday the Ukraine conflict was a major downside risk for the global economy, with the biggest impact coming through inflation.However, he noted underlying inflation in Australia was still well below levels seen in the United States and Britain.”The recent lift in inflation has brought us closer to the point where inflation is sustainably in the target range. But we are not yet at that point,” Reserve Bank of Australia (RBA) Governor Philip Lowe said on Wednesday.”We can be patient in a way that countries with substantially higher rates of inflation cannot,” he said in a sign the RBA will carefully assess the impact of the crisis before likely raising rates later in the year.Some analysts, however, warn of bigger challenges for Asian policymakers if the war and rising fuel costs persist, particularly for those reliant on fuel imports.”Inflation has been fairly subdued in many Asian emerging economies, allowing central banks to maintain easy monetary policy,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.”But they could be forced to tighten” if their economies and currencies weaken and lead to higher inflation, he said. More

Americans have felt inflation at the hair salon and in the frozen food aisle. They have seen it while buying pet food, pantry staples and diapers. Yes, gas is pinching them. But so is the price of bacon. Nearly nine in 10 Americans say they have noticed prices rising around them, according to a survey […] More

The U.S. could “essentially shut” down Semiconductor Manufacturing International Corp or any Chinese companies defying U.S. sanctions by continuing to supply chips and other advanced technology to Russia, Raimondo said in an interview published on Tuesday.Washington is threatening to add companies to a trade blacklist if they skirt new export curbs against Russia, as it ramps up efforts to keep a vast array of technology out of the country that invaded Ukraine last month.If the United States were to find that a company like SMIC was selling its chips to Russia, “We could essentially shut SMIC down because we prevent them from using our equipment and our software,” Raimondo was quoted as saying.SMIC did not immediately respond to a request for comment. In Beijing, a foreign ministry spokesman said China opposed any unilateral sanctions and curbs by the United States, and urged that Washington’s policy towards Ukraine and Russia “should not harm China’s rights and interests”.The spokesman, Zhao Lijian, told a regular news briefing, “China will take all necessary measures to resolutely defend Chinese companies’ and individuals’ rights.” More