Economy

Eurozone consumer prices rose by a record 5.8 per cent in February, underscoring fears that the war in Ukraine will drive up the cost of living and increasing pressure on the European Central Bank ahead of its meeting next week.February’s flash estimate for annual eurozone inflation was up from 5.1 per cent in January and was above the 5.4 per cent average forecasts of economists polled by Reuters. ECB vice-president Luis de Guindos described the inflation figure for February as “a negative surprise” and predicted that the war in Ukraine would raise prices further and hit growth.The jump in the cost of living in the eurozone to well above the ECB’s 2 per cent inflation target has put the central bank in a difficult spot, creating tension between officials who are pushing for tighter monetary policy to tackle inflation and those who want a pause to assess the economic impact of Russia’s invasion of Ukraine. Steeper increases in the price of energy and food in February were accompanied by higher surges in the cost of services and manufactured goods, Eurostat said on Wednesday. Energy prices rose by a record 31.7 per cent in February, while unprocessed food prices rose 6.1 per cent.Excluding more volatile energy, food, alcohol and tobacco prices, core inflation increased from 2.3 per cent in January to 2.7 per cent in February. The highest national annual inflation rate was in Lithuania at 13.9 per cent, while France had the lowest at 4.1 per cent. On a month-by-month basis, consumer prices rose by an unprecedented 0.9 per cent, indicating that inflationary pressures were building rapidly in the 19-country bloc.Joachim Nagel, head of Germany’s central bank, has repeated his call for the ECB to hold its nerve on withdrawing its stimulus by ending net asset purchases and raising interest rates this year. “If price stability requires it, the governing council must adjust its monetary policy course,” he said in the Bundesbank annual report on Wednesday. “We need to keep our sights trained on the normalisation of our monetary policy,” he added.Economists are predicting eurozone inflation will rise above 6 per cent in March, as the Ukraine crisis causes significant disruption to the energy and commodity markets.Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said the ECB would have “no option but to end quantitative easing quicker than it currently plans” and predicted that its net bond purchases would stop in October and it would raise rates in December.However, several ECB governing council members said this week the potential for the war in Ukraine to hit growth and confidence should delay any tightening of monetary policy, even though it is also likely to drive energy and other prices higher.The heads of the Portuguese and Greek central banks have warned the crisis in Ukraine risks plunging the eurozone into a period of stagflation — a toxic mix of stagnating growth and inflationary supply pressures. Fabio Panetta, an ECB executive board member, said: “We should aim to accompany the recovery with a light touch, taking moderate and careful steps as the fallout from the current crisis becomes clearer.”Elga Bartsch, head of macro research at the BlackRock Investment Institute, said without the “horrific events in Ukraine” the ECB would have been likely to signal plans for raising interest rates by the end of the year at next week’s meeting.“But now they are likely to want to keep the option open to push that out into next year.”

Government bonds rallied this week as investors bet the economic fallout from Russia’s invasion of Ukraine would push central banks to raise interest rates more slowly than previously anticipated. Germany’s 10-year bond yield sank below zero for the first time in a month.Katharina Utermöhl, senior economist at Allianz, said a further ramping up of western sanctions on Russia, including on energy imports, could push the eurozone economy into recession — defined as two consecutive quarters of negative growth — and drive average inflation to 6 per cent for the whole year.This combination of a contraction in growth and high inflation would lead the ECB to “shelve its policy normalisation plans for 2022 altogether”, Utermöhl predicted. More

E.V. operations will focus on technology and growth while the traditional business continues to chase profits. “You can’t have people work on both at the same time,” the chief executive said.Ford Motor has decided the best way to make the transition to electric vehicles is to transform itself first.On Wednesday, the automaker said it had reorganized its auto operations into two distinct businesses — one that makes its gasoline-powered vehicles and focuses on maximizing profits and another that develops and ramps up production of electric models and aims for rapid growth.Ford’s chief executive, Jim Farley, said in an interview that the two businesses required different skills and mind-sets that would clash and hinder each area if they remained parts of one organization. “You can’t be successful and beat Tesla that way,” he said.Sales of battery-powered cars are rising rapidly, a trend that Mr. Farley and other auto executives see as the industry’s biggest disruption since Henry Ford introduced mass production and the Model T in 1908. Ford, General Motors, Toyota, Volkswagen and other traditional manufacturers are spending tens of billions of dollars to field new models, build battery plants and develop new technologies that Tesla has pioneered, such as advanced driver-assist systems and over-the-air software updates.Mr. Farley said Ford would spend $50 billion on electric vehicles between 2022 and 2026. It previously planned to spend $30 billion in the five years ending in 2025. It plans to spend $5 billion on E.V.s this year, double the 2021 total.A Critical Year for Electric VehiclesThe popularity of battery-powered cars is soaring worldwide, even as the overall auto market stagnates. Going Mainstream: In December, Europeans for the first time bought more electric cars than diesels, once the most popular option. Turning Point: Electric vehicles account for a small slice of the market, but in 2022, their march could become unstoppable. Here is why. Tesla’s Success: A superior command of technology and its own supply chain allowed the company to bypass an industrywide crisis. Rivian’s Troubles: Investors first embraced this electric vehicle maker. Now they worry it may not live up to its promise. Green Fleet: Amazon wants electric vans to make its deliveries. The problem? The auto industry barely produces any of the vehicles yet.This spring, Ford is supposed to start full production of an electric version of its F-150 pickup truck and has taken reservations for more than 150,000 of them. It is also building two battery plants in Kentucky, and a third battery plant and an electric truck factory in Tennessee.Separately on Wednesday, Stellantis outlined a long-term strategic plan that calls for rapid introductions of new electric vehicles. The company, which was formed a year ago from the merger of Fiat Chrysler and the French automaker Peugeot, said that it would introduce 25 E.V.s in the United States by 2030, and that all new models in Europe would be electric by that time. It plans to build two battery plants in the United States.G.M. has similar plans. It is building two battery plants, and aims to phase out internal-combustion models by 2035.Ford’s reorganization is one of the most sweeping taken by a traditional automaker in preparation for the transition to electric vehicles. Mr. Farley said the plan had come together after he and other top Ford executives noticed stark differences in the two business areas.In making gas-powered vehicles, Ford must focus on reducing costs and generating the profits it needs to fund its E.V. plans. Over the next four years, Ford aims to trim costs for its internal-combustion models by $3 billion, with some cuts coming through job reductions, Mr. Farley said.The electric business, in contrast, will have to spend heavily to develop software and technologies and to ramp up production quickly to achieve economies of scale. Ford aims to produce two million electric vehicles a year by 2026.“For Ford to win against the new players and the other manufacturers, we have to focus more than we do today,” Mr. Farley said. “You can’t have people work on both at the same time.”The E.V. group will be known as Ford Model e. Mr. Farley will serve as its president. Doug Field, a former Apple and Tesla executive hired by Ford in September, will lead its vehicle, software and digital systems development.The internal-combustion business, known as Ford Blue, will be led by Kumar Galhotra, who was president of Ford’s North American operations.Ford plans to begin breaking out the profits and losses of the two groups in 2023, and expects the electric business to become profitable within four years. Mr. Farley said the group would most likely have 2,000 to 5,000 employees. In addition to developing electric models, it will engineer new types of assembly lines to build them and manage Ford’s sourcing of key components like motors and inverters and raw materials such as lithium and rare earth metals.Mr. Farley said he envisioned the two groups working closely together. Ford Model e will use body engineering, stamping, and components like seats and steering systems that the internal-combustion group develops. The E.V. unit will produce software and digital components that will be incorporated into traditional gasoline vehicles made by Ford Blue.Mr. Farley said Ford had decided against spinning off the E.V. business because it would hinder the ability of the two groups to cooperate. “They would come to see each other as competitors, and the cooperation would stop,” he said. More

China, which has refused to condemn Russia’s invasion of Ukraine, has repeatedly criticised what it calls illegal and unilateral sanctions.”As far as financial sanctions are concerned, we do not approve of these, especially the unilaterally launched sanctions because they do not work well and have no legal grounds,” Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, told a news conference.”We will not participate in such sanctions. We will continue to maintain normal economic and trade exchanges with relevant parties,” he said.China and Russia have grown increasingly close in recent years, including as trading partners. Total trade between the two jumped 35.9% last year to a record $146.9 billion, according to Chinese customs data, with Russia serving as a major source of oil, gas, coal and agriculture commodities, running a trade surplus with China.”The impact from the sanctions on China’s economy and financial sector is so far not too significant,” Guo added.”Overall they will not have much impact (on China) even in the future,” Guo said, citing the resilience of China’s economy and financial sector. More

MOSCOW (Reuters) – Russia’s top airline Aeroflot said on Wednesday that it was assessing the impact of Western sanctions on its leased planes and that it was asking European Union (EU) regulators for clarity about the sanctions.It added in a financial report that it was hard to estimate the impact of sanctions on its planes made in Russia and the United States, but that 41% of its planes in operation were EU-made. More

“For three years, all IT companies will be exempt from paying profit tax and from inspections by controlling authorities,” Mishustin told a government meeting. “They will be able to take loans on favourable terms and new projects at a rate not exceeding 3%.”Russia’s central bank hiked its key interest rate to 20% on Monday. More

Investing.com — Commodity prices skyrocket to multiyear highs as the difficulty of replacing Russian energy and grain supplies to global markets becomes apparent. OPEC is expected to steer a steady course, however, having rebuffed U.S. pressure for a bigger increase in oil output. Fed Chair Jerome Powell and a host of European Central Bank officials will talk about the impact of the war in Ukraine on the outlook for inflation and monetary policy. Eurozone inflation surges to 5.8%. ADP reports its monthly figures on U.S. private-sector hiring. Here’s what you need to know in financial markets on Wednesday, 2nd March.1. Commodities surgeOil and gas prices skyrocketed, with crude prices touching their highest since 2013 and European natural gas prices hitting new all-time highs on fears that Western sanctions will hit exports from Russia.By 6:30 AM ET (1130 GMT), U.S. crude futures were up 4.9% at $108.44 a barrel, while Brent crude was up 5.3% at $110.48 a barrel. Benchmark European gas futures were up over 30% at an all-time high.The moves come ahead of a monthly meeting between Russia and OPEC nations to decide April output levels. They are expected to stick with their existing plan to raise output by a notional 400,000 barrels a day, the U.S.’s traditional Gulf allies having resisted U.S. diplomatic pressure for a larger increase.Weekly U.S. inventory data are due at 10:30 AM ET, as usual.Price spikes are also being seen in other commodities where Russia and Ukraine are major exporters. US Wheat Futures rose as much as 7.6% to their highest since 2008, while U.S. Corn Futures in Paris rose 7.5% to an all-time high.2. Private sanctions compound difficulties for Russian economyThe imposition of official sanctions is being reinforced by a growing number of international companies cutting their links with Russia, a development that threatens to dampen global growth in the short term as well as restricting Russia’s medium-term economic potential.The world’s largest shipping companies – Maersk, Hapag-Lloyd, MSC and CPM – have all said they will halt all non-humanitarian shipments to Russia, while Apple (NASDAQ:AAPL) said on Tuesday it will halt product sales there and suspend services such as Apple Pay. Visa (NYSE:V) and Mastercard (NYSE:MA) have restricted Russian banks’ access to their networks.Russian Central Bank chief Elvira Nabiullina was quoted by newswires earlier as saying that the Russian economy is in an “extreme position”. The dollar touched a new record high of 109.59 rubles before retracing. Trading on Moscow’s stock exchanges remained suspended for a third day. The dollar also rose to a 21-month high against the euro, as investors priced in a bigger hit to the Eurozone economy. ECB President Christine Lagarde will later attend a meeting of EU finance ministers to discuss the situation.3. Powell to testify; Lane, Nagel also weigh inThe head of the U.S. Federal Reserve and the European Central Bank’s chief economist will speak later, amid growing expectations that they will water down their plans to tighten monetary policy in response to the latest developments.Jerome Powell will testify before the House Committee on Financial Services at 10 AM ET, while ECB chief economist Philip Lane speaks at 11 AM ET.  Earlier, German central bank head Joachim Nagel said that German inflation and Eurozone inflation are likely to run well ahead of prior forecasts this year, requiring a monetary policy response. Data released earlier showed Eurozone prices rose 5.8% on the year in February, far more than the 5.3% expected.  The U.S. data calendar for Wednesday is dominated by the ADP private payrolls report for February, which is expected to iron out last month’s blip of a 301,000 drop in private jobs.4. U.S. Stocks set to open with modest bounce; Dollar Tree, Salesforce, SoFi eyedU.S. stock markets are set to open moderately higher later, recouping less than half of Tuesday’s losses.By 6:15 AM ET, Dow Jones futures were up 198 points, or 0.6%, while S&P 500 futures were up in parallel and NASDAQ 100 futures were outperforming slightly with a gain of 1.8%. The three main cash indices had all lost between 1.5% and 1.8% on Tuesday.Stocks likely to be in focus later include Salesforce (NYSE:CRM) and SoFi (NASDAQ:SOFI), both of which posted stronger-than-expected results after the close on Tuesday. Dollar Tree, Coupang, Snowflake and Abercrombie & Fitch head Wednesday’s roster for earnings releases.5. Russian troops advance, backed by artillery barrages against citiesThe war in Ukraine itself grinds on, with the Ukrainian government playing down earlier (Russian) reports of fresh peace talks.The mayor of Kharkiv, the country’s second city, was quoted by newswires saying that Russia continues to launch indiscriminate rocket artillery strikes against it. Russia’s Defense Ministry claimed that its forces had taken the southern city of Kherson and made further progress in creating a ‘land bridge’ between eastern Ukraine and Russian-held Crimea. If confirmed, it would bring the Russian forces closer to encircling government forces fighting in eastern Ukraine. The UN estimates more than 600,000 refugees have fled Ukraine, most of them to neighboring Poland, Hungary, Moldova and Romania. The currencies of those countries, which have disproportionately large trade exposure to Ukraine, all remain under pressure More

Joe Biden said Vladimir Putin would would “pay the price” for his unprovoked invasion of Ukraine while praising the resistance shown by Ukrainians and the west’s unity in the face of Europe’s worst security crisis since the second world war. The US president said the Russian “dictator” had badly miscalculated the west’s resolve as he announced tougher measures to isolate Russia further from the global economy, including shutting off its flights from US airspace.“When the history of this era is written, Putin’s war on Ukraine will have left Russia weaker and the rest of the world stronger,” Biden said a State of the Union address that was applauded by lawmakers from both sides of Congress.The first section of the speech was dedicated to Russia’s invasion of Ukraine but Biden spent the rest of the time touting his domestic policies ahead of the November midterm elections.Meanwhile, in Kharkiv a Russian missile struck a police headquarters this morning as the aerial bombardment of Ukraine’s second largest city continued. The regional governor said at least 21 people had been killed and 112 wounded over the past 24 hours.In Kyiv, residential areas in the east and west of the city were shelled overnight as a full-scale siege of Ukraine’s two biggest cities now appeared to be under way.The human cost of the war is growing rapidly. According to the UN, 660,000 people have already fled Ukraine as the number of civilian casualties grows and Europe faces its biggest refugee crisis this century.In other developments:Energy: Brent crude, the international benchmark for oil markets, surged to more than $112 a barrel and European natural gas prices hit an all-time high. US oil major ExxonMobil said it would exit a major oil and gas project and cease investing in Russia, following in the footsteps of BP, Shell and Norway’s Equinor. Business: Apple suspended the sales of its products in Russia and Boeing said it would halt major operations as the exodus of western businesses from the country increased.China: Beijing signalled it was ready to play a role in finding a ceasefire in Ukraine as it “deplored” the outbreak of conflict in its strongest comments yet on the war. Cryptocurrency: Trading between the Russian rouble and crypto assets such as bitcoin and tether has doubled since the assault on Ukraine began, leading Ukraine’s vice prime minister to call on crypto exchanges to block transactions from Russia.Opinion: A war of choice on the children of a peaceful democracy is not an action we can allow ourselves to forget, writes Martin Wolf. Follow the latest developments on our live blog and you can also follow the conflict in maps. Sign up to receive my colleague Valentina Pop’s essential newsletter, Europe Express, for the latest analysis and reaction. Thanks for reading FirstFT Americas and here is the rest of the day’s news — GordonFive more stories in the news1. Ericsson’s Iraq crisis deepens The world’s largest telecoms equipment maker said the US Department of Justice had told it that disclosures about its internal investigation into Iraq were “insufficient” ahead of a 2019 $1bn settlement over corruption.2. Credit Suisse asks investors to destroy documents Credit Suisse has asked investors to destroy documents relating to its richest clients’ yachts and private jets, in an attempt to stop information leaking about a unit of the bank that has made loans to oligarchs who were later sanctioned.3. Palantir technology to help cut NHS elective care backlog Palantir, the controversial data analytics group best known for its ties to the defence and security industries, is rolling out software across the UK’s NHS to help reduce the backlog of 6mn patients waiting for elective care.4. Macron’s re-election chances boosted by Ukraine war Emmanuel Macron is set to confirm this week that he will be a candidate in next month’s French presidential election, with polls and political commentators suggesting that the war in Ukraine has further boosted his status as favourite.5. Target delivers upbeat outlook The Minneapolis-based retailer forecast low- to mid-single digit revenue growth in fiscal 2022, compared with analysts’ expectations of about 2.2 per cent, and said that supply chain bottlenecks would gradually ease.The day aheadOpec+ meeting Saudi Arabia and others are likely to stick with planned supply increases when the oil cartel meets today. The meeting comes a day after the US and other big energy consuming nations agreed to tap 60mn barrels of oil from their emergency stockpiles to address fears of depleted supplies. The Energy Source newsletter has more on how the Ukraine war is impacting global oil supplies. Jay Powell testimony The chair of the Federal Reserve testifies before Congress in what are likely to be his final public remarks on monetary policy before the US central bank begins raising interest rates to fight decades-high inflation. Separately, the Fed issues its latest economic outlook. Canada rate decision The Bank of Canada will make an interest rate decision, with analysts expecting a 25 basis points rise as the central bank becomes more decisive in withdrawing policy stimulus. (Fitch Ratings)What else we’re reading Political risks upturn commodity markets The Russian invasion of Ukraine has pushed up the prices of everything from oil to wheat and aluminium and highlighted the threat of raw materials becoming a foreign policy weapon. And the political risks keep mounting.Will Japan bet on esport? Gambling in Japan is legal only for a select group of activities. But a debate on esports comes from technology and the pandemic conspiring to transform how entertainment is consumed.Is paternity leave the key to workplace equality? It has traditionally been mothers who have had to take time off work to look after children. But in the past two years the pandemic has accelerated a huge shift towards many more fathers wanting to play an active role in family life.TravelCan you be an explorer in the 21st century? For Benedict Allen, a lifetime of travel has not been about planting flags and staking claims but about leaving his own culture behind.

Benedict Allen taking part in a Vodou ritual in Haiti in 2004 © Benedict Allen More

LVIV (Reuters) – The Ukrainian central bank on Wednesday asked the International Monetary Fund and the Group of Seven major economies to limit the participation of Russian and Belarussian representatives in their activities.This would include banning them from attending meetings this spring of the IMF and the World Bank group, it said in a statement. More