From 8h ago
Introduction: World Bank warns of 'human catastrophe' from food crisis
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
The world is facing a “human catastrophe” from soaring food prices following Russia’s invasion of Ukraine, warns the president of the World Bank, David Malpass.
In an interview with the BBC, Malpass said record rises in food prices would push hundreds of millions of people into poverty. He said on the sidelines of the IMF-World Bank spring meetings in Washington:
It’s a human catastrophe, meaning nutrition goes down. But then it also becomes a political challenge for governments who can’t do anything about it, they didn’t cause it and they see the prices going up.”
The World Bank estimates that there could be a “huge” 37% increase in food prices, which is “magnified for [the] poor”, who will
eat less and have less money for anything else such as schooling. And so that means that it’s really an unfair kind of crisis. It hits the poorest the hardest. That was true also of Covid.
It’s affecting food of all different kinds: oils, grains, and then it gets into other crops, corn crops, because they go up when wheat goes up.
Ukraine and Russia are major exporters of wheat and other grains but the war has disrupted production. Malpass called on governments around the world to increase supply of food, energy and fertiliser wherever possible and to introduce measures targeted at the poorest.
The International Monetary Fund said yesterday that it was open to providing emergency financing to nations facing food insecurity.
Malpass also warned of a debt crisis, with developing countries struggling to service large debts that have grown during the Covid pandemic, amid soaring food and energy prices.
As many as 60% of the poorest countries right now are either in debt distress or at high risk of being in debt distress.
European stock markets bounced back yesterday after losses earlier in the week, while on Wall Street the tech-heavy Nasdaq fell 1.2%, dragged down by Netflix. The streaming giant’s shares crashed 35% after it said it expected to lose 2 million subscribers in coming months.
Many Asian markets are up on Thursday, as Japan’s Nikkei rose 1.2% and the Australian market added 0.3%. However, Hong Kong’s Hang Seng lost more than 2% and the Chinese CSI 300 index fell 1.8%, dragged down by worries about the Chinese economy. European shares are expected to extend their bounce, supported by positive company results from Nestlé and others.
Also coming up
The central bank ‘holy trinity’ of US Federal Reserve chair Jerome Powell, European Central Bank president Christine Lagarde and Bank of England governor Andrew Bailey are all due to speak in Washington DC later today.
Michael Hewson, chief market analyst at CMC Markets UK, said:
Lagarde’s comments will be closely scrutinised after yesterday’s comments from Latvian governing council member Martin Kazaks said that a rate rise in July was possible, and that tightening measures needn’t have to wait for evidence of wages growth. Those comments were in contrast to the tone of Lagarde’s ECB press conference earlier this month, so it will be notable if she doesn’t push back on them.
Sterling traders will be looking for clues from Bank of England governor Andrew Bailey on the central bank’s intentions at its May meeting when some form of rate hike is expected, although the extent of any move remains uncertain, whether it be 25 basis points or 50bps. Traders would still be well advised to exercise some caution with respect to any comments Bailey might make given that in previous instances Bank of England guidance has been about as reliable as a chocolate teapot.
The Agenda
IMF/World Bank spring meetings in Washington
- 7.45am BST: France business confidence for April
- 10am BST: Eurozone inflation final for March (forecast: 7.5%)
- 1.30pm BST: US Initial jobless claims for week of 16 April
- 2pm BST: Bank of England policymaker Catherine Mann speaks
- 3pm BST: Eurozone Consumer confidence flash for April (forecast: -20)
- 4.15pm BST: IMF managing director Kristalina Georgieva holds press conference
- 5.30pm BST: Bank of England governor Andrew Bailey speaks at Peterson Institute for International Economics
- 6pm BST: Georgieva, ECB president Christine Lagarde, Fed chair Jerome Powell and others debate the global economy
Manchester United shares dipped 0.6% when they opened in New York. The Premier League club confirmed that the Ajax coach Erik ten Hag will be their new manager on contract to June 2025, with the option to extend for a further year, but the announcement had little impact on the share price.
Bank of England policymaker Mann: interest rates to go up 'a little bit'
UK interest rates will probably have to go up “a little bit” further, said Bank of England monetary policymaker Catherine Mann, adding that in some ways Britain’s economy is already suffering from stagflation.
Answering questions after delivering a speech today, she said:
We want to avoid inflation getting out of control. And it may mean that interest rates go up a little bit. We’ll just have to see where we are in May.
Asked about the risk of stagflation – a combination of slow economic growth (stagnation) and high inflation – Mann said “in some senses, we could say we’re already there” because of the recent jump in energy prices and slowing retail sales.
But... it’s premature to kind of hearken back to the 1980s or the 1970s, in the US context in particular, and use that vocabulary.
The Bank of England is widely expected to lift interest rates again next month, although the size of the rate hike (a quarter or half point) is uncertain. Markets are eagerly waiting for further clues when the central bank’s governor Andrew Bailey speaks at 5.30pm BST today, at the Peterson Institute for International Economics, a think tank based in Washington, DC.
Consumer confidence in the eurozone improved in April, after a sharp decline in March (following Russia’s invasion of Ukraine on 24 February) – but remained far below its long-term average.
The European Commission said its confidence indicator rose by 1.8 points to -16.9 in the eurozone, and by 2 points to -17.6 in the wider European Union.
Shares in Tesla jumped nearly 11% when Wall Street opened, after the electric carmaker smashed Wall Street estimates for revenue and profit in another record quarter– despite a tumultuous few months for its CEO, Elon Musk, and ongoing supply chain concerns.
This brought some respite to Nasdaq, which was dragged down by Netflix yesterday. The tech-heavy index is trading 1.6% higher.
More Brits went shopping and dined out in the run-up to the Easter holiday weekend, and bookings at restaurants rose to a seven-month high, according to official figures.
In the latest week the number of UK seated diners was 138% of the equivalent week in 2019, the highest level since early September 2021, the Office for National Statistics said. Visits to “retail and recreation” locations increased by 8% in the latest week to 91% of pre-coronavirus levels.
The latest economic activity and social change data show
▪️UK seated diners were at 138% of the equivalent week in 2019, its highest relative level since early Sept 2021
▪️Retail and recreation trips rose 8% in the latest week to 91% of pre-COVID levelshttps://t.co/BEVDD8fyph pic.twitter.com/nkFB4sirwA
— Office for National Statistics (ONS) (@ONS) April 21, 2022
Here is a bit more on the latest 26 UK sanctions against Russian generals and defence companies, announced today.
The companies include:
- Kalashnikov Concern, a Russian developer and manufacturer of army Russian equipment whose weapons have been used by Russian armed forces during the invasion of Ukraine
- Arzamas Machine-Building Plant, who build amphibious armoured personnel carriers that have been used in the invasion of Ukraine
- Military Industrial Company, a major supplier of arms and military equipment to the Russian armed forces
- GTLK, Russia’s largest leasing company which operates in different types of transport and special equipment for Russian companies in the transport industry
You can read the government announcement here.
NEWS: Today I announce new sanctions on those with Ukrainian blood on their hands including the commander of the unit which occupied Bucha and other individuals and businesses supporting Putin’s military.
We are relentless in support of Ukraine.https://t.co/kUMdnKjJ5D
— Liz Truss (@trussliz) April 21, 2022
KitKat maker Nestlé ups prices by 5.2%
Nestlé, the owner of KitKat, Häagen-Dazs and Felix cat food, raised its prices by 5.2% in the first three months of this year and has said rising costs will force another increase soon, reports our retail correspondent Sarah Butler.
Mark Schneider, Nestlé’s chief executive, said: “Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.”
Nestlé is the latest major brand owner to issue a warning about the impact of rising prices of raw ingredients combined with higher energy, fuel, labour and transport costs. Greggs the bakers, the consumer goods maker Unilever and the fashion chain Next are among those who have said more inflation is on the way.
Here is our full story on the Lukoil president stepping down today.
The multibillionaire Russian oligarch Vagit Alekperov has stepped down as the president of the London-listed firm Lukoil after sanctions were imposed on him by the UK and EU, writes my colleague Rob Davies.
In a statement to the stock market, Russia’s second-largest oil company said Alekperov, who is on good terms with Vladimir Putin, had formally notified the company of his decision to resign on Thursday.
Lukoil is among 27 companies whose shares were suspended by the London Stock Exchange early last month in order to avoid market turmoil. The Moscow-headquartered firm is not subject to sanctions.
However, the UK government has said Alekperov was targeted because of his role in the Russian energy sector, including an 8.5% equity stake in Lukoil that was worth £3bn before the shares were suspended.
“Through his directorship of Lukoil, Alekperov continues to obtain a benefit from and/or continues to support the government of Russia by working as a director […] trustee, or equivalent, of entities carrying on business in sectors of strategic significance to the government of Russia, namely the Russian energy sector,” the official sanctions list states.
Globalisation is not working – in an age of insecurity, we need more local solutions, writes our economics editor Larry Elliott.
Elon Musk to collect $23bn bonus
Elon Musk, chief executive of Tesla and the world’s richest person, is set to collect a $23bn (£17.6bn) bonus after the California electric car company’s first-quarter results exceeded performance targets, reports our wealth correspondent Rupert Neate.
Musk, who is already sitting on an estimated $249bn fortune, is in line for the bonus share payout after Tesla hit share price and financial growth milestones in its earnings on Wednesday night.
Tesla made an adjusted profit of $5bn on revenue of $18.8bn in the first quarter of the year – an 81% increase on the same period a year earlier. The results, combined with the growth in Tesla’s share price performance, mean Musk has hit targets that should lead to a bonus share payout worth about $23bn.
The company outlined an extraordinary deal for Musk in 2018 that would pay him an unprecedented $55.8bn (£40bn) bonus if he built the business into a $650bn company within a decade.
Here is our full story on THG.
The online shopping group THG has dismissed “numerous” takeover approaches as “unacceptable”, saying they undervalued the company.
Manchester-based THG (formerly known as The Hut Group), which runs beauty and nutrition websites including Lookfantastic, Cult Beauty and Myprotein, confirmed there had been interest from third parties, but said the company was not currently involved in any talks.
UK government sets out 26 new sanctions against Russia
The UK government has set out 26 new sanctions against Russia over its invasion of Ukraine, including on military figures and defence companies.
This comes on top of hundreds of other sanctions, such as asset freezes and travel bans on Russian oligarchs and companies.
The latest sanctions include Colonel General Nikolay Bogdanovsky of the Russian army, who is the first deputy chief of the general staff, the manufacturer Military Industrial Company and the industrial group Promtech-Dubna.
Lukoil president Alekperov resigns
Vagit Alekperov has resigned as president and as a director of Russia’s second-largest oil producer Lukoil, the company said.
It did not disclose the reasons behind the 71-year-old’s resignation. Lukoil shares fell 3.3% in Moscow. Its London-listed shares have previously been suspended. Alekperov is one of a number of Russian businessmen who have been sanctioned by the UK government and the European Union, while Lukoil is not subject to sanctions.
The multi-billionaire, who has frequently been pictured with Vladimir Putin, controls an 8.5% stake in Lukoil (3.1% directly, for which he has voting rights, and a further 5.4% through family trusts or mutual funds, without voting rights) but is not a controlling shareholder, the group said.
A Russian oil tanker that was impounded by Greek authorities this week will be released, Reuters is reporting, citing a government source.
Greek authorities said on Tuesday that the Russian-flagged Pegas (renamed Lana in March), with 19 Russian crew members on board, was seized off the island of Evia, as part of EU sanctions.
The government source told Reuters:
The coastguard has been ordered by the anti-money laundering authority to release the vessel.
The coastguard said the ship’s oil cargo has not been confiscated. The vessel is managed by Russia-based Transmorflot.