The Group of 7 has announced a new infrastructure funding program that could rival China’s Belt and Road Initiative. One expert says the G-7′s plan offers hope to developing countries but it remains to be seen whether it can match the BRI.



On Sunday, the U.S. and the other members of the G-7 including Canada, Germany and Japan formally launched the Partnership for Global Infrastructure and Investment which aims to raise about $600 billion for global infrastructure projects in low- and middle-income countries in the next five years.



“It does promise something the BRI perhaps did not have at the beginning,” said Choi Shing Kwok, CEO of Singapore-based research institute ISEAS-Yusof Ishak Institute. “It promises hard and soft infrastructure, it promises a more holistic approach.”



The BRI is China’s ambitious program to build physical and digital infrastructure connecting dozens of countries spanning from Asia to Europe and the Middle East. It is the centerpiece of Chinese President Xi Jinping’s foreign policy.



“It is questionable whether at this stage the scale [of the G-7 initiative] can match that of the BRI but that is something to be seen later,” Choi told CNBC’s “Street Signs Asia” on Monday. 



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107080814-1656263971911-g7-820x461.jpg" alt="" class="wp-image-418105" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107080814-1656263971911-g7-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107080814-1656263971911-g7-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107080814-1656263971911-g7-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107080814-1656263971911-g7-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107080814-1656263971911-g7-1536x864.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107080814-1656263971911-g7.jpg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>U.S. President Joe Biden, center, attends a working lunch with other G7 leaders to discuss shaping the global economy. The Group of Seven leading economic powers are meeting in Germany for their three-day annual gathering. Kenny Holston | The New York Times via AP, Pool</figcaption></figure>



Choi acknowledged that it might not be entirely fair to compare the two projects especially since the BRI has had a 10-year headway and there were scant details in the G-7′s partnership proposal.



In the past decade or so, China has signed more than 170 BRI cooperation agreements with 125 countries and 29 international organizations across Asia and Europe, as well as Africa, Latin America and the South Pacific, Chinese official data showed. 



Nearly $800 billion in investments have been undertaken within the BRI, surpassing the investments currently&nbsp;pledged by the G-7. Trillions more dollars were expected to be invested through China’s infrastructure project into the network comprising six development corridors.&nbsp;



The G-7′s infrastructure project “is better than the initial approach for the BRI, which was done in a rather decentralized, I’d say piecemeal, approach,” Choi said.&nbsp;



The BRI “didn’t have the rigor in ensuring all the projects are economically sound and environmentally friendly,” he said, adding that the G-7′s plan appears to be more climate friendly and designed to ensure receiving countries benefit from the investments.



“But having said that, China has revamped its approach to the BRI in recent years and more of the money is now flowing to projects that are more sound.”



It has taken Western economies more than 10 years to come up with a program that could compete with the BRI, Choi said, adding it was initially dismissed as “a Chinese project.”



Still, the U.S. and the other members appear to be taking it seriously now, as seen with the latest infrastructure partnership, he said.&nbsp;



“Its scale is significant. It’s not quite the scale of the BRI but they are trying to match it so that it is not far off [from the BRI],” Choi said. 



When asked if the partnership is nothing more than “geopolitical battle lines being drawn” by the U.S. against China, Choi says the way the G-7 plan is delivered will signal its intentions.



“There are certain motivations for launching the partnership. It does offer alternatives to the BRI in a very deliberate way,” Choi said.&nbsp;



“In the end, if the implementation is done in such a way that it does not force countries to factor in&nbsp; geopolitics — to go with partnership or BRI — then it will be acceptable.”



<h2 class="wp-block-heading" id="h-who-could-benefit"><a></a>Who could benefit?</h2>



With major economies now stepping up their infrastructure support for developing countries, places like India, Brazil and Indonesia are likely to herald more economic growth, Riedel Research Group founder David Riedel told CNBC’s “Squawk Box” on Monday.&nbsp;



He said it did not matter who was the one investing, as long as more efforts were being expended but pointed out that outcomes would not be apparent overnight.&nbsp;



“It doesn’t mean much near term but longer term, investors need to appreciate the importance the investments made into infrastructure no matter who’s making it,” Riedel said. 



According to the OECD, Asia alone needs around $26 trillion to pay for infrastructure building, including green projects until 2030. 



If more money were offered to developing countries, places like Brazil, India and Indonesia would stand to gain, Reidel added.



Brazil has a large population and big economy and could do with more infrastructure to boost growth while Indonesia, being an energy exporter, would grow if more money was being invested in its energy project, he said.

107080814-1656263971911-g7

G-7′s infrastructure funding plan offers an alternative to China’s BRI in a ‘deliberate way’

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="550" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1234985015-820x550.jpg" alt="" class="wp-image-418082" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1234985015-820x550.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1234985015-300x201.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1234985015-134x90.jpg 134w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1234985015-768x515.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1234985015-1536x1030.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1234985015-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>UKRAINE &#8211; 2021/08/31: In this photo illustration a Prosus logo is seen on a smartphone and a pc screen. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)</figcaption></figure>



JOHANNESBURG/AMSTERDAM June 27 (Reuters)&nbsp;&#8211;&nbsp;Dutch technology investor Prosus NV&nbsp;PRX.AS,&nbsp;PRXJn.J&nbsp;on Monday announced it will gradually sell down its massive stake in Tencent&nbsp;0700.HK, reversing a pledge to retain the holding for a couple of years and knocking shares in the Chinese tech giant.



Prosus will use proceeds to repurchase shares, a move aimed at closing a gap between the market value of Prosus and parent Naspers and the market value of the 28.9% stake in Tencent they own, which is currently worth about $136 billion.



Prosus itself is currently worth less at some 109.8 billion euros ($116.2 billion).



&#8220;This will efficiently unlock immediate value for shareholders because we&#8217;re selling (Tencent) shares at full value and we&#8217;re buying back our stock at a considerable discount,&#8221; CFO Basil Sgourdos said.



Prosus shares, which are down 27% in the year to date, jumped 10% on the news to 58.36 euros in Amsterdam as of 0750 GMT.



Shares in Naspers in Johannesburg were up 13% while shares in Tencent were down 1.5% in Hong Kong.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YE08T&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



The share sale plan came as a surprise as Prosus had agreed not sell further Tencent shares after selling a 2% stake worth $15 billion in 2021.



Asked about whether violating the lock-up pledge was a problem, Sgourdos said no.



&#8220;It&#8217;s something we had to consider in arriving at this decision. (But) we think that this is the right thing for our shareholders. And, you know, we have Tencent support in this decision.&#8221;



Tencent said it expects the impact of the share sale to be &#8220;limited&#8221;.



&#8220;We support our long-term shareholders on their initiative to increase their net asset value per share through a share repurchase program,&#8221; it said.



Prosus and Naspers shares have fallen sharply over the past year amid a&nbsp;government crackdown on Chinese tech companies.



But Sgourdos said the company is still committed to China.



&#8220;We still have a very strong belief in Tencent and the Chinese economy and its ability to grow,&#8221; he said.



Investors say the complicated cross-holding structure between Prosus and Naspers has also been a factor in depressing their share price.



In addition to Tencent, Prosus houses all of&nbsp;Naspers&#8217; overseas investments in online classifieds, food delivery, fintech and education software.



Both the companies reported a fall in trading profit for the full year ending March 31, as their portfolio of investments boosted sales while losses increased.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YE09F&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



Revenue and profit earned from Tencent dwarf the contributions from Prosus/Naspers&#8217; other businesses.



The current discount of Prosus to the value of assets it owns is 54% and Naspers is 65%, according to company-provided figures based on analyst reports and market valuations of their stakes in listed companies.



($1 = 0.9446 euros)



(Reporting by Promit Mukherjee in Johannesburg and Toby Sterling in Amsterdam, Donny Kwok and Josh Ye in Hong Kong, Miyoung Kim in Singapore.Editing by Shri Navaratnam and Kim Coghill)

In this photo illustration a Prosus logo is seen on a

Tencent stock falls as Prosus/Naspers to sell shares to fund buybacks

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell-820x547.jpeg" alt="" class="wp-image-416636" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell-1536x1025.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Powell says taming inflation ‘absolutely essential,’ and a 50 basis point hike possible for May</figcaption></figure>



Wall Street and the Federal Reserve appeared to enter a new reality this week, and the result for investors was big losses with no obvious end point in sight.



The S&amp;P 500 posted its 10th down week in the last 11, and is now well into a bear market. On Thursday, all 11 of its sectors closed more than 10% below their recent highs. The Dow Jones Industrial Average fell below 30,000 for the first time since January 2021 this past week.



Unlike recent drawdowns for stocks, however, the central bank will not be putting a bottom in the market. Instead, the Fed raised interest rates by three-quarters of a percentage point on Wednesday — its biggest since 1994 — and signaled continued tightening ahead. Chair Jerome Powell will testify before Congress next week and is expected to hold firm on his plan for a more aggressive Fed until inflation is brought to heel.



Bank of America equity strategist Ajay Singh Kapur said in a note to clients on Friday that it is time for investors to stop fighting the Fed and give up the buy-the-dip mentality.



“In a bear market, heroism is punished. Valor is unnecessary, and cowardice is called for in portfolio construction — that is the way to preserve capital and live to fight another day, waiting for the next central bank panic, and better valuations and a new earnings upcycle,” Kapur wrote.



Tech stocks, which are sensitive to interest rates, have been hit particularly hard, as have cyclical plays such as airlines and cruise lines.



But the dramatic declines have not been limited to stocks. Bitcoin dropped more than 30% in a week amid reports about blowups of crypto-focused trading firms. Treasury yields, which move opposite of bond prices, have spiked.



Markets briefly rallied on Wednesday afternoon after the Fed’s announcement, but that optimism was quickly dashed and the gains reversed on Thursday. Many strategists are warning that markets and sentiment could have further to fall, pointing to Wall Street earnings estimates that curiously still show solid growth in the coming year.



“These people need to fight inflation as fast as possible and as hard as possible.&nbsp;And the market has consistently been behind the curve on trying to understand how aggressive this Fed was going to be,” said Andrew Smith, chief investment strategist at Delos Capital Advisors.



<h2 class="wp-block-heading" id="h-recession-ahead"><a></a>Recession ahead?</h2>



The impact of the Fed’s rate hikes on the market has been magnified by deteriorating economic data, as investors and strategists appear to be losing confidence in the central bank’s ability to achieve a soft landing.



The housing market appears to be cooling rapidly, with housing starts and mortgage applications plummeting. Consumer sentiment is plumbing record lows. Jobless claims are beginning to trend higher as reports of layoffs at tech firms grow. And all oil prices show no signs of falling back below $100 per barrel as the summer travel season kicks off.



In a note to clients on Friday, Bank of America global economist Ethan Harris described the U.S. economy as “one revision away from recession.”



“Our worst fears around the Fed have been confirmed: they fell way behind the curve and are now playing a dangerous game of catch up. We look for GDP growth to slow to almost zero, inflation to settle at around 3% and the Fed to hike rates above 4%,” Harris wrote.



Even among more optimistic economists, the outlook calls for a rather bumpy landing. JPMorgan’s Michael Feroli said in a note Friday that he expected Powell to be “largely successful” in balancing fighting inflation with economic growth, but a recession is a distinct possibility.



“This desired soft landing is not guaranteed, and Fed chair Powell himself has noted that achieving this goal may not be entirely straightforward. And with a tight labor market and the economy dealing with the shocks of tighter financial conditions and higher food and energy prices, recession risks are notable as we think about the next few years,” Feroli wrote. “Our models point to 63% chance of recession over the next two years and 81% odds that a recession starts over the next three.”



<h2 class="wp-block-heading" id="h-coming-up"><a></a>Coming up</h2>



Powell will be in the hot seat again next week, as he returns to Capitol Hill to testify before both houses of Congress, and he is unlikely to soften his stance over the weekend.



The Fed Chair said on Wednesday that he and his committee members were “absolutely determined” to keep inflation expectations from rising. The central bank said in a report to Congress on Friday ahead of the hearings that its commitment to price stability is “unconditional.”



Inflation has risen to a top political issue, as well as an economic one, and the Fed’s raised forecast for unemployment could also come under scrutiny from lawmakers.&nbsp;



“As they’re going to 2.5%, 3.5% [Fed funds rate], if the economy is slowing toward a recession, I don’t think they’re going to stand on the throat of the economy to get inflation to go down,” said Robert Tipp,&nbsp;chief investment strategist for PGIM Fixed Income. ”&#8230;Otherwise, in order to get inflation down from 3.5% to 2%, you’re going to have to lose your job. That’s going to be the message: We’re going to have to get some job losses and recession. And I don’t think that trade-off is going to be worth it for them.”



On Friday, investors will get an updated consumer sentiment reading from the University of Michigan. That measure has now taken on increased significance after Powell pointed to it this week as one of the reasons the Fed decided to raise its rate hike this month.



The survey’s preliminary reading for June showed a record low for sentiment, and confirmation of that number — or even further deterioration — would likely serve as further proof that the Fed will not waver in the coming months. The inflation expectations part of the survey, which rose in the preliminary reading, will be watched closely.



Outside of those events, next week is relatively light for economic events, with U.S. stock markets closed on Monday for Juneteenth. Investors will be looking for insight into the U.S. economy in earnings reports from a few bellwether stocks, such as Lennar on Tuesday and FedEx on Thursday.

106999520-16419153682022-01-11t153007z_1471999278_rc23xr9k3c5b_rtrmadp_0_usa-fed-senate-powell

Look for more selling pressure next week as investors learn the hard way not to fight the Fed

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="531" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines-820x531.jpeg" alt="" class="wp-image-417920" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines-820x531.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines-300x194.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines-139x90.jpeg 139w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines-768x497.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines-1536x994.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Vials with Pfizer-BioNTech and Moderna coronavirus disease (COVID-19) vaccine labels are seen in this illustration picture taken March 19, 2021. Dado Ruvic | Reuters</figcaption></figure>



The Food and Drug Administration on Friday authorized&nbsp;<a href="https://www.cnbc.com/quotes/MRNA" target="_blank" rel="noreferrer noopener">Moderna</a>’s and&nbsp;<a href="https://www.cnbc.com/quotes/PFE" target="_blank" rel="noreferrer noopener">Pfizer</a>’s Covid-19 shots for children as young as 6 months old, which makes nearly every person in the U.S. now eligible for vaccination.



The FDA decision comes after its committee of independent vaccine experts v<a href="https://www.cnbc.com/2022/06/15/covid-shots-for-kids-under-5-move-closer-to-fda-authorization-after-committee-backs-shots.html">oted unanimously to recommend the shots</a>&nbsp;after weighing their safety and effectiveness during an all-day meeting Wednesday that was open to the public.



The FDA authorized Pfizer’s three-dose vaccine for children 6 months to 4-years-old, and Moderna’s two-dose vaccine for children 6 months to 5-years-old. Children under age 5 were the only people left in the U.S. not eligible for vaccination. Many parents have been waiting months for the FDA to authorize the vaccines for their kids.



The FDA on Friday also authorized&nbsp;<a href="https://www.cnbc.com/2022/06/14/fda-committee-recommends-moderna-covid-vaccine-for-kids-age-6-to-17.html">Moderna’s vaccines for kindergarteners through high schoolers</a>. Previously, Pfizer’s vaccine was the only Covid shot available for this age group.



However, there is still one more step left before vaccinations of children under age 5 can begin. The Centers for Disease Control and Prevention’s committee will meet on Saturday to vote on guidelines for pharmacies and doctors’ offices. CDC Director Dr. Rochelle Walensky then has to sign off on those guidelines before kids can start receiving the shots.



The White House expects vaccinations to begin as soon as Tuesday. Appointments might be limited initially but every parent who wants to get their child vaccinated should be able to do so within weeks, according to Dr. Ashish Jha, who oversees the Biden administration’s&nbsp;<a href="https://www.cnbc.com/coronavirus/">Covid</a>&nbsp;response.



The federal government has made 10 million Pfizer and Moderna doses available to state and local authorities.



Dr. Arnold Monto, acting chair of the FDA committee, said it took longer for the agency to authorize the shots for infants through preschoolers than for other ages because they are a vulnerable group that requires special care to make sure the shots were safe and effective.



Pfizer’s and Moderna’s vaccines for infants through preschoolers differ in the number of shots they use, the dosage level and the eligibility age to receive them. Pfizer’s vaccine also appeared more effective than Moderna’s shots with children under 5, though the data is preliminary.



Pfizer’s vaccine is administered in three doses for children 6 months to 4 years old. The shots are dosed at 3 micrograms, one-tenth the level of what adults receive. Three shots were about 75% effective at preventing infection from omicron in 6-month- to 2-year-olds and 82% effective in 2- to 4-year-olds.



However, it is crucial that parents who opt for Pfizer make sure their kids get the third shot to have protection against the virus. Two doses were only about 14% effective at preventing infection for kids under age 2, and 33% effective for those ages 2 to 4.



Moderna’s vaccine is administered in two doses for children 6 months to 5 years old. The shots are dosed at 25 micrograms, one-fourth the level that adults receive.



Moderna’s vaccine was about 51% effective at preventing infection from omicron for kids 6 months to 2 years old, and about 37% effective for kids ages 2 to 5 years old. However, the company expects the vaccine to provide strong protection against severe illness because the kids had higher antibody levels than adults who received two doses.



The most common side effects from the vaccines were pain at the injection site, irritability and crying, loss of appetite and sleepiness, according to the FDA. Very few children who received either shot developed a fever higher than 102 degrees Fahrenheit, and there were no cases of myocarditis, a type of heart inflammation, in Pfizer’s or Moderna’s trials.

106899017-16239532812021-06-17t180407z_2120766641_rc2i2o9sh2p8_rtrmadp_0_health-coronavirus-usa-vaccines

FDA authorizes Pfizer and Moderna’s Covid vaccines for children as young as 6 months

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg-820x547.jpg" alt="" class="wp-image-417783" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo: via CNBC</figcaption></figure>



LONDON — Global stock markets are falling sharply after May’s U.S. inflation print reignited fears that central banks will be forced into aggressive monetary policy tightening.



Friday’s highly-anticipated consumer price index report came in hotter than expected at 8.6% annually, resurfacing market concerns that action from the Federal Reserve and other central banks could risk tipping the economy into recession.



Major averages in the U.S. closed out their biggest weekly declines since January on Friday, and futures point to further losses on Wall Street when the opening bell sounds on Monday.



Shares in Asia-Pacific plunged on Monday, with Hong Kong’s Hang Seng index, Japan’s Nikkei 225 and South Korea’s Kospi all falling more than 3%. European stocks also tumbled in early trade, with the pan-European Stoxx 600 shedding 2% as a sea of red swept through global risk assets.



Meanwhile, the U.S. 2-year Treasury rate hit its highest level since 2007 on Monday morning and edged closer to an inversion with the benchmark 10-year rate – seen by many as a sign of an impending recession.



<h3 class="wp-block-heading" id="h-punch-in-the-gut">‘Punch in the gut’</h3>



Central to the adverse market reaction to Friday’s CPI reading is the fear that inflation expectations have broadened and become entrenched, beyond the well-documented ephemeral drivers such as supply chain bottlenecks and energy shocks.



“I do think that the probability of falling into a bear market and indeed a recession has undeniably increased as a result of Friday’s punch in the gut, in a way,” Fahad Kamal, chief investment officer at Kleinwort Hambros, told CNBC on Monday.



Kamal added that there was “very, very little good” in Friday’s inflation report, which he said indicated that inflation has not peaked and has instead broadened throughout the economy.



“It’s talked about less in the sex and violence of oil and commodity prices and other things, but actually, rent is very sticky and it’s a huge part of the index. There seems to be upward momentum there as well, implying that inflation is going to be with us higher and longer than we expected even last week,” he said.



<h3 class="wp-block-heading">Read more: <a href="https://www.cnbcafrica.com/2021/the-fed-is-in-early-stages-of-a-campaign-to-prepare-markets-for-tapering-its-asset-purchases/">The Fed is in early stages of a campaign to prepare markets for tapering its asset purchases</a></h3>



Richard Kelly, head of global strategy at TD Securities, told CNBC Monday that both the bond and stock markets were now signalling that a recession is coming down the pike, most probably in the fourth quarter of 2022 and first quarter of 2023.



“Overall, if you look at equity markets, they’re telling you the ISM (U.S. economic activity index) probably falls to 50 or sub-50 over the next two to three months, and in part this is what the Fed and central banks have to do to get inflation back under control,” Kelly said.



The 50 mark separates expansion from contraction in a purchasing managers’ index reading, a reliable gauge of economic activity.



“While (the Fed) can’t sit there and say their job is to end job creation for the moment, that is basically what they need to do if they are going to get inflation back under control now,” Kelly added.



<h2 class="wp-block-heading"><a></a>All eyes on the central banks</h2>



The coming week will be pivotal in the battle against soaring inflation for global central banks and markets.



Federal Reserve officials will meet on Tuesday and Wednesday to discuss their next monetary policy move. The Federal Open Market Committee is widely expected to announce at least a 50-basis-point hike on Wednesday, having already raised rates twice this year, though market bets for a 75 basis point hike have risen in light of Friday’s CPI figure.



The Bank of England’s Monetary Policy Committee will announce its latest interest rate decision on Thursday, while the Bank of Japan, Swiss National Bank and Brazil’s BCB also meet this week.



Investors will also be digesting a slew of economic activity data, including Chinese industrial production and retail sales, U.K. industrial production, employment and retail sales, and U.S. producer price inflation, retail sales and industrial production.



U.K. GDP shrank by 0.3% month-on-month in April, official figures showed Monday, falling short of economist expectations for a 0.1% expansion and furthering fears of an economic slowdown ahead of the Bank of England’s Thursday decision.



“In broad terms, the run of data will be combed for recessionary signals, with the added irony that any signs of activity strength are likely to be a case of ‘good news’ being bad (i.e. putting further upward pressure on rate expectations), while the pressure on central banks is to retain some semblance of control over rate trajectory narratives, despite having been proved hopelessly wrong on inflation,” said Marc Ostwald, chief economist and global strategist at ADM Investor Services International.

106882214-16208517468072-SMWB-OB-Photo-210512-PRESS-24-jpg

Global markets are tanking ahead of a huge week for central banks

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c-820x461.jpeg" alt="" class="wp-image-417738" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c.jpeg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>The European Central Bank faces a tough balancing act, with inflation running at record highs while the war in Ukraine casts a shadow over the growth outlook. Thomas Lohnes | Getty Images News | Getty Images</figcaption></figure>



The European Central Bank on Thursday confirmed its intention to hike interest rates at its policy meeting next month and downgraded its growth forecasts.



Following its latest monetary policy meeting, the Governing Council announced that it intends to raise its key interest rates by 25 basis points at its July meeting.



The ECB expects a further hike at the September meeting, but said the scale of that increment would depend on the evolving trajectory of the medium-term inflation outlook.



For now, the interest rates on the main refinancing operations, marginal lending facility and deposit facility remain unchanged at 0.00%, 0.25% and -0.50% respectively.



“Beyond September, based on its current assessment, the Governing Council anticipates that a gradual but sustained path of further increases in interest rates will be appropriate,” the ECB said in a statement on Thursday.



<h3 class="wp-block-heading">Read more: <a href="https://www.cnbcafrica.com/2022/european-central-bank-poised-to-signal-july-rate-hike-as-inflation-jumps-to-fresh-record-high/">European Central Bank poised to signal July rate hike as inflation jumps to fresh record high</a></h3>



“In line with the Governing Council’s commitment to its 2% medium-term target, the pace at which the Governing Council adjusts its monetary policy will depend on the incoming data and how it assesses inflation to develop in the medium term.”



Annual consumer price inflation across the 19-member euro area hit a fresh record high of 8.1% in May, but the ECB in its previous guidance indicated that a first rate hike would only come following the formal end of its net asset purchases on July 1.



Markets had been eagerly awaiting the meeting in Amsterdam on Thursday, the Governing Council’s first outside of Frankfurt since the onset of the coronavirus pandemic, for signs of how aggressive the shift in interest rates will have to be in the coming months.



Policymakers face the challenge of reining in inflation without compounding the economic slowdown resulting from the war in Ukraine and the associated sanctions and embargoes imposed between the European Union and Russia, previously a key source of energy imports for the bloc.



Economists have been torn on whether to expect hikes of 25 basis points or 50 basis points at the July and September meetings, with the ECB broadly expected to climb out of negative rate territory by the end of September from its current historic low of -0.5%.



<h3 class="wp-block-heading" id="h-slowing-growth-higher-inflation">Slowing growth, higher inflation</h3>



The ECB also downgraded its growth forecasts and upwardly revised its inflation projections. Annual inflation is now expected to hit 6.8% in 2022, declining to 3.5% in 2023 and 2.1% in 2024. This marks a substantial increase from its March projections of 5.1% in 2022, 2.1% in 2023 and 1.9% in 2024.



Growth forecasts were revised down significantly to 2.8% in 2022 and 2.1% in 2023, and revised up slightly to 2.1% in 2024. This compares to projections at the ECB’s March meeting of 3.7% in 2022, 2.8% in 2023 and 1.6% in 2024.



Randall Kroszner, professor of economics at the University of Chicago and former governor of the Federal Reserve System, told CNBC ahead of Thursday’s meeting that it was “very important” that the ECB began to move on interest rates.



The U.S. Federal Reserve began hiking rates in March and implemented a 50 basis point hike in May, its largest in 22 years, with FOMC meeting minutes pointing to further aggressive hikes ahead. The Bank of England has hiked rates at four consecutive meetings to take the base interest rate to a 13-year high.



<h3 class="wp-block-heading">Read more: <a href="https://www.cnbcafrica.com/2021/the-fed-is-in-early-stages-of-a-campaign-to-prepare-markets-for-tapering-its-asset-purchases/">The Fed is in early stages of a campaign to prepare markets for tapering its asset purchases</a></h3>



“Inflation is very high, it has the potential to become entrenched unless [ECB policymakers] move, and they move aggressively and make it clear that they are going to be moving further,” Kroszner told CNBC’s “Squawk Box Europe” on Thursday.



“They run the risk of inflation becoming entrenched, inflation expectations becoming unanchored, and having to raise rates much higher than they otherwise would have to.”



However, Kroszner expressed empathy with the difficult position in which the Governing Council finds itself, given Europe’s proximity to the war in Ukraine, interdependence with Russia and therefore state of economic peril.



“The concern that they have is that there are so many negative shocks coming from the war, sanctions, uncertainty, that the economy is going to slow down even without raising rates, so the inflationary pressures are going to come off,” he said.



“But there is sufficient inflationary pressure and sufficient risk of inflation expectations becoming unanchored, that they have really got to get moving.”

107011988-1644249906080-gettyimages-1368409609-tl1_1909_f9481bd2-d808-4b33-9365-aa2f4778ed3c

European Central Bank confirms July rate hike plans, raises inflation projections significantly

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022-820x461.jpeg" alt="" class="wp-image-417726" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022.jpeg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Christine Lagarde, president of the European Central Bank, seen during a panel session at the World Economic Forum in Davos, Switzerland, on Wednesday, May 25, 2022. Bloomberg | Bloomberg | Getty Images</figcaption></figure>



The European Central Bank is expected to confirm its intention to raise interest rates next month, as policymakers meet in Amsterdam Thursday for their first policy meeting outside of Frankfurt since the onset of the coronavirus pandemic.



While inflation for the 19-member euro area hit another record high in May, a rate hike would only come in July as the ECB first needs to formally end its net asset purchases, according to its forward guidance.



The key question is how aggressive the shift will be over the coming months — some analysts have moved their estimates for a larger hike in September at the latest.



“A handful of Governing Council members are already open to a 50bp hike,” said Mark Wall, a chief economist with Deutsche Bank, in a research note.



“We believe the ECB is continuing to underestimate inflation and we expect support for a 50bp hike will increase as the summer progresses.”



The ECB will also publish new staff projections for growth and inflation this week — and market participants are likely to closely monitor the 2024 inflation print as this constitutes the ECB’s medium-term price target.



The ECB is also expected to downgrade its growth forecasts and upwardly revise its inflation projections, with the 2024 inflation number probably hitting 2%, the medium-term target of the ECB.



<h3 class="wp-block-heading" id="h-read-more-the-fed-is-in-early-stages-of-a-campaign-to-prepare-markets-for-tapering-its-asset-purchases">Read more: <a href="https://www.cnbcafrica.com/2021/the-fed-is-in-early-stages-of-a-campaign-to-prepare-markets-for-tapering-its-asset-purchases/">The Fed is in early stages of a campaign to prepare markets for tapering its asset purchases</a></h3>



Persistently high inflation is the top concern for policymakers on the ECB’s Governing Council.



“Inflation is not only too high, but also too broad,” Francois Villeroy de Galhau, France’s central bank governor, said last week at a conference in Paris. “This requires a normalization of monetary policy — I say normalization and not tightening.”



While inflation, and the fight against it, is of course the core mandate of the ECB, the topic of fragmentation risk will most likely be addressed this week as well.



Bond markets have already reacted to the end of the asset purchases and reassessed the different risks associated with different euro zone countries.



As a result, the spread between German and Italian bonds has been widening. The 10-year spread was above 200 basis points on Monday, compared with less than 140 basis points at the start of the year



“Fragmentation makes life complicated for the ECB. This is not to say that these considerations will overrule whatever the inflation picture dictates in terms of policy tightening,” Dirk Schumacher, an ECB watcher with Natixis, said in a research note.



“But it is nevertheless an important implicit argument for gradualism,” he added.

107072159-1654612804938-gettyimages-1240891252-DAVOS_WEF_2022

European Central Bank poised to signal July rate hike as inflation jumps to fresh record high

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="517" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-820x517.jpg" alt="" class="wp-image-415106" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-820x517.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-300x189.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-143x90.jpg 143w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54-768x484.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/02/GNZ4EKIZHBJMHAHGTKTLUHIQ54.jpg 1200w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>A 3D-printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/File Photo</figcaption></figure>



DEAD SEA, Jordan June 8 (Reuters)&nbsp;&#8211;&nbsp;Efforts by OPEC+ oil producers to boost output are &#8220;not encouraging&#8221;, UAE energy minister Suhail al-Mazrouei said on Wednesday, noting the group was currently 2.6 million barrels per day short of its target.



&#8220;According to last month&#8217;s report, we have seen the conformity (to output cuts) of the OPEC+ group and the conformity was more than 200%,&#8221; Mazrouei told an energy conference in Jordan.



Conformity above 100% means a country is producing less than what it is supposed to be as OPEC+ looks to gradually remove its production curbs.



&#8220;The risk is when China is back,&#8221; Mazrouei said in an apparent reference to Chinese demand.



Prospects for demand growth in China, which is relaxing lockdowns, have been buoying crude prices recently.



This is a developing story&#8230;



(Reporting by Suleiman Al-Khalidi and Nadine Awadalla; writing by Maha El Dahan; editing by Toby Chopra and Jason Neely)

GNZ4EKIZHBJMHAHGTKTLUHIQ54

OPEC+ efforts to boost oil output ‘not encouraging’, UAE minister says

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-820x461.jpg" alt="" class="wp-image-417701" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1536x864.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>The Maersk Line freighter stands at sunset in the Mediterranean port of Limassol. Cyprus, Friday, April 10, 2020. Global shipping giant Maersk has suspended its 2020 full-year guidance on earnings citing the severe impact of COVID-19 on international transport market and supply chains. (Photo by Danil Shamkin/NurPhoto via Getty Images)</figcaption></figure>



The Organization for Economic Cooperation and Development has become the latest international institution to cut its predictions for global growth this year, but has downplayed the possibility of a prolonged period of so-called “stagflation.”



The OECD estimates that global GDP will hit 3% in 2022 — a 1.5 percentage point downgrade from a projection done in December.



“The invasion of Ukraine, along with shutdowns in major cities and ports in China due to the zero-COVID policy, has generated a new set of adverse shocks,” the Paris-based organization said in its latest economic outlook Wednesday.



Russia’s invasion of Ukraine is having massive ramifications on the global economy, but China’s zero-Covid policy — a strategy Beijing uses to control the virus with strict lockdowns — is also a drag on global growth given the importance of the country in international supply chains and overall consumption.



The World Bank said Tuesday that it had also turned more negative on global growth prospects. The institution said global GDP would reach 2.9% this year — an estimate lower from its 4.1% forecast in January.



The OECD said in its report Wednesday that the downgrade, in part, “reflects deep downturns in Russia and Ukraine.”



“But growth is set to be considerably weaker than expected in most economies, especially in Europe, where an embargo on oil and coal imports from Russia is incorporated in the projections for 2023,” it said.



The European Union in late May moved to impose an oil embargo on Russia, after agreeing the previous month to also stop coal purchases from the country. The bloc has been heavily dependent on Russian fossil fuels and cutting some of these supplies overnight will have a significant economic impact.



Nonetheless, the euro zone, the 19-nation region that shares the euro, and the United States do not differ much in terms of their economic outlook. The OECD said the former will grow 2.6% this year and the U.S. will expand by 2.5%.



For the United Kingdom, where the cost of living crisis is also an economic issue, GDP is seen at 3.6% this year before slumping to zero next year.



“Inflation [in the U.K.] will keep rising and peak at over 10% at the end of 2022 due to continuing labour and supply shortages and high energy prices, before gradually declining to 4.7% by the end of 2023,” the OECD said.



The global macro picture has darkened for emerging economies, notably because they are expected to be hurt the most from food supply shortages.



“In many emerging-market economies the risks of food shortages are high given the reliance on agricultural exports from Russia and Ukraine,” the OECD said. China is seen growing by 4.4% this year, India by 6.9% and Brazil by a marginal 0.6%.



<h2 class="wp-block-heading" id="h-no-stagflation"><a></a>No stagflation?</h2>



Mathias Cormann, secretary general of the OECD, said that despite the difficult economic environment, it’s unlikely that the global economy is heading into a period of stagflation — where an economy sees high inflation and high unemployment alongside stagnant demand as experienced in the 1970s.



“We do see some parallels with the experience in the 1970s but we do not use the term stagflation, we do not believe it is the right term to describe what we are observing in the global economy now,” he told CNBC’s Charlotte Reed.



“Essentially most countries have gone through four quarters of very strong growth and yes we have inflation, we expect elevated inflation to last for longer, but we do expect it to subside throughout the second half of 2022 to the end of 2023,” Cormann added.



The World Bank had said Tuesday that risks were growing on potential stagflation and warned that this would make the lives of those in middle and low-income economies even harder.

Cyprus Economy

OECD slashes global growth prediction on Ukraine war and China’s zero-Covid policy

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/P64ABSGIEBNHJMWOUR3LEQZUCU-820x547.jpg" alt="" class="wp-image-416491" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/P64ABSGIEBNHJMWOUR3LEQZUCU-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/P64ABSGIEBNHJMWOUR3LEQZUCU-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/P64ABSGIEBNHJMWOUR3LEQZUCU-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/P64ABSGIEBNHJMWOUR3LEQZUCU-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/P64ABSGIEBNHJMWOUR3LEQZUCU-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/P64ABSGIEBNHJMWOUR3LEQZUCU-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>FILE PHOTO: British Prime Minister Boris Johnson takes questions in Parliament, in London, Britain June 23, 2021. UK Parliament/Jessica Taylor/Handout via REUTERS</figcaption></figure>



The U.K.’s Prime Minister Boris Johnson will face a vote of confidence later on Monday amid increasing dissatisfaction in his leadership.



To trigger a vote of confidence, 15% of Conservative lawmakers (or 54 of the current 360 Conservative Party MPs) are required to write letters to Graham Brady, chairman of the 1922 Committee which oversees the party’s leadership challenges.



On Monday, Brady announced that threshold had been exceeded.



The vote will take place Monday evening local time, and between 6 p.m. and 8 p.m. London time (1 p.m. and 3 p.m. ET.)



Last month a report into several high-profile Covid-19 lockdown-breaking parties at Johnson’s office and residence was released, sparking calls for a confidence vote.



Soon after the confidence vote was announced, a Downing Street spokesperson released a short statement saying that the vote tonight “is a chance to end months of speculation and allow the government to draw a line and move on, delivering on the people’s priorities,” Sky News reported.



The statement added that the prime minister welcomed the opportunity to make his case to lawmakers, and “will remind them that when they’re united and focused on the issues that matter to voters there is no more formidable political force.”



Some senior Conservative lawmakers have already thrown their support behind the prime minister. Foreign Secretary Liz Truss tweeted Monday that Johnson had her “100% backing” in the vote.



“He has delivered on covid recovery and supporting Ukraine in the face of Russian aggression. He has apologised for mistakes made. We must now focus on economic growth,” she said.



If Johnson wins the vote, he will be protected from another vote of confidence for another 12 months, although there are reports that these rules could be changed.



If Johnson loses the vote, he will be forced to step down and a Conservative leadership contest will begin. In that eventuality, Johnson, as an ousted leader, will not be allowed to stand.



Johnson could also resign of his own accord, but despite previous rumblings of discontent among Tory MPs over Johnson’s colorful, and often controversial leadership, he has shown no signs of intending to do so.

British Prime Minister Boris Johnson takes questions in Parliament, in London

UK Prime Minister Boris Johnson to face vote of confidence on Monday

KEY POINTS



<ul class="wp-block-list"><li>Oil prices jumped after EU leaders reached an agreement late Monday to ban 90% of Russian crude by the end of the year.</li><li>The embargo is part of the European Union’s sixth sanctions package on Russia since it invaded Ukraine.</li></ul>



Oil prices jumped after EU leaders reached an agreement late Monday to ban 90% of Russian crude by the end of the year.



During Asia hours on Tuesday,&nbsp;<a href="https://www.cnbc.com/quotes/@CL.1">U.S. crude futures</a>&nbsp;for July were up 3.53% to $119.12, while&nbsp;<a href="https://www.cnbc.com/quotes/@LCO.2">Brent crude futures</a>&nbsp;rose 1.87% to $123.95. At one point, U.S. crude rose to $119.42 per barrel — a 12-week high, according to Refinitiv data.



Contracts for August also traded higher: WTI crude jumped 3.66% to $116.34, and Brent was up nearly 2% to $119.96 per barrel.



The agreement resolves a deadlock after Hungary initially&nbsp;<a href="https://www.cnbc.com/2022/05/30/eu-to-discuss-watered-down-oil-embargo-on-russia-as-hungary-holds-firm.html">held up talks</a>. Hungary is a major user of Russian oil and its leader, Viktor Orban, has been on friendly terms with&nbsp;<a href="https://www.cnbc.com/vladimir-putin/">Russia’s Vladimir Putin</a>.



Charles Michel, president of the European Council, said the move would immediately hit 75% of Russian oil imports.



The embargo is part of the European Union’s sixth sanctions package on&nbsp;Russia&nbsp;since it invaded Ukraine. Talks to impose an oil embargo have been underway since the start of the month.



“The European Council agrees that the sixth package of sanctions against Russia will cover crude oil, as well as petroleum products, delivered from Russia into Member States, with a temporary exception for crude oil delivered by pipeline,” according to a&nbsp;<a href="https://www.consilium.europa.eu/en/press/press-releases/2022/05/31/european-council-conclusions-on-ukraine-30-may-2022/" target="_blank" rel="noreferrer noopener">May 31 statement from</a>&nbsp;the European Council.



The European Council added that in case of “sudden interruptions” of supply, “emergency measures” will be introduced to ensure security of supply.



That temporary exception covers the remaining Russian oil not yet banned, European Commission President Ursula von der Leyen said in a press conference.



“We have agreed that the Council will revert to the topic as soon as possible in one way or the other. So this is a topic where we will come back to and where we will still have to work on, but this is a big step forward, what we did today,” she said, referring to the temporary exemption.



Von der Leyen explained that the temporary exemption was granted so that Hungary, along with Slovakia and the Czech Republic — all connected to the southern leg of the pipeline — have access which they cannot easily replace.



Roughly 36% of the EU’s oil imports come from Russia, a country that plays an outsized role in global oil markets.



The ban could exacerbate worries over an already-tight energy market. Energy prices have soared over the past year, contributing to a heated inflationary environment in many countries.



“While pipeline imports were not included in this agreement, an embargo on seaborne oil imports is still significant, accounting for around two thirds of the EU’s oil imports from Russia,” Vivek Dhar, director of mining and energy commodities research at the Commonwealth Bank of Australia, wrote in a note following the news.



“A further ban on Russian Crude delivered by shipments will tighten already strained supply amid rising demand due to onset of driving season in [the] United States,” wrote Avtar Sandu, senior manager of commodities at trading platform Philip Nova.



Meanwhile, OPEC+ is expected to stick to its original plan of a modest increase of 432,000 barrels a day for July, Sandu added.

107006470-1643191219978-gettyimages-1237968413-UKRAINE_ODESSA-1

Oil prices jump after EU leaders agree to ban most Russian crude imports

KEY POINTS



<ul class="wp-block-list"><li>“China and India are expected to become the world’s largest and third largest economies respectively in the next decade while their consumers will increasingly dictate global tastes and trends,” Bird said.</li><li>Abrdn – which has around $586.35 billion in assets under management as of most recent results – has observed that interest in sustainable investment among local investors is also on the rise.</li><li>Bird urged Asian governments to strengthen the credibility of their net zero commitments, offering investors greater surety in allocating capital to the region.</li></ul>



Indian and Chinese stock market capitalization may grow fourfold by 2050 as Asia turns from “laggard to leader” in the climate transition, according to&nbsp;<a href="https://www.cnbc.com/quotes/ABDN-GB" target="_blank" rel="noreferrer noopener">Abrdn</a>&nbsp;CEO Stephen Bird.



In a letter seen by CNBC marking the 30-year anniversary of the British investment company’s first Asian office opening in Singapore, Bird lauded the economic transformation over the last three decades that has seen more than a billion people lifted out of poverty.



He also noted that the region’s share of the global economy has become eight times larger than it was during the Asia Financial Crisis of 1997.



“Capital markets have also evolved and the region has switched from being mostly a destination for foreign investors to one where local investors dominate its markets,” Bird said.



He added that “the next 30 years looks to be every bit as exciting as the last,” and recommended investors remain calm during periods of volatility, keeping their “eye on the long game.”



Chinese stocks have endured a bruising year as&nbsp;<a href="https://www.cnbc.com/2022/05/26/china-holds-an-unprecedented-massive-videoconference-on-the-economy.html">President Xi Jinping’s “zero-Covid” strategy has stifled economic activity</a>&nbsp;and caused supply chain bottlenecks that have rippled through global markets.



<a href="https://www.cnbc.com/quotes/GS" target="_blank" rel="noreferrer noopener">Goldman Sachs</a> analysts recently said they were <a href="https://www.cnbc.com/2022/05/20/goldman-sachs-picks-chinese-stocks-set-to-benefit-from-covid-reopening.html">“seeing light at the end of the tunnel,”</a> and Bird supported the long-term view that Asian equities can transition from “laggards to leaders,” in terms of both performance and their role in tackling the climate crisis.



“China and India are expected to become the world’s largest and third largest economies respectively in the next decade while their consumers will increasingly dictate global tastes and trends. Capitalization of their equity markets could also increase by a factor of four or more by 2050,” Bird predicted.



“Other countries in the region present exciting opportunities too. Bangladesh, Indonesia and Vietnam have some of the highest potential growth rates in the world, while Japan and South Korea’s aging populations have built up significant savings that need to be put to better work. And, as the region’s most open global financial center, Singapore will be at the heart of all of it.”



However, Bird acknowledged that progress is unlikely to be linear, with the globalization that has driven Asia’s economic growth in danger of fizzling out and climate change posing an “acute challenge” for the region.



“A by-product of Asia’s growth is that it has accounted for the lion’s share of the increase in global carbon emissions over the past three decades. This increased human footprint is also evident in rising air pollution and biodiversity loss,” he said.



While Asia alone cannot solve the climate crisis, its major economies must find ways to decouple their economic growth from fossil fuels, Bird suggested. Most major economies in the region have now adopted net-zero targets, while Asia is also playing a role in developing technological solutions to climate change.



“Whether in the form of solar panels, batteries for electric vehicles or green hydrogen, decarbonisation is dependent on Asian innovation,” Bird said.



Abrdn – which has around £464 billion ($586.35 billion) in assets under management as of most recent results – has observed that interest in sustainable investment among local investors is also on the rise, along with active engagement between asset managers and companies, creating potential opportunities for new forms of “sustainability-linked loans and bonds.”



<h3 class="wp-block-heading" id="h-taking-action">Taking action</h3>



Bird – who took the reins of Abrdn in September 2020 after a 21-year career with Citigroup’s Asian and Latin American operations – urged Asian governments to strengthen the credibility of their net zero commitments, offering investors greater surety in allocating capital to the region.



“More countries should follow China’s lead and establish carbon pricing which would bring certainty and encourage investment in low-carbon technologies and infrastructure. The revenue generated could be recycled into ensuring that the zero-carbon transition is a just one,” he said.



“We would also encourage the greater use of dedicated climate-related instruments such as green bonds; this would help align the interests of capital markets participants while the increased issuance would also encourage portfolio diversification.”



The continent’s political, trade and economic forums should be an opportunity to harmonize climate and sustainability standards, Bird said, suggesting a continent-wide common framework could strengthen financial flows into Asia.



“This century is Asia’s century. It must also be the century in which economic objectives are reconciled with sustainability goals,” Bird concluded. “The financial industry can and must play a pivotal role in converging these two priorities, guiding investment to support both outcomes.”

Stock market exchange graph price drop with red numbers investment lose of business financial digital background – Candle stick charts stock crash crisis fall risk decreasing arrow down trend sell

Indian and Chinese stock markets could grow fourfold by 2050, Abrdn CEO says

GENEVA, May 24 (Reuters)&nbsp;&#8211;&nbsp;The World Health Organization&#8217;s (WHO) members re-elected Tedros Adhanom Ghebreyesus as Director General by a strong majority for another five years, the president of the World Health Assembly said on Tuesday.



The vote by secret ballot, announced by Ahmed Robleh Abdilleh from Djibouti at a major annual meeting, was seen as a formality since Tedros was the only candidate running.



Ministers and delegates took turns to shake hands and hug Tedros, a former health minister from Ethiopia, who has steered the UN agency through a turbulent period dominated by the COVID-19 pandemic. The president had to use a gavel several times to interrupt the applause.



Addressing the assembly soon after his re-election, Tedros said the WHO&#8217;s focus will be on emergency preparedness and improvement of the agency.



&#8220;This pandemic has been very unprecedented and many lessons that we should learn and we are learning. But, at the same time we cannot just pause, learn and implement&#8230;instead of pausing to learn, we&#8217;re saying while learning let&#8217;s implement.&#8221;



The newly re-elected WHO head teared up while talking about the current Ukraine crisis and the death of his younger brother from a childhood disease amidst war and poverty decades ago.



&#8220;When I visited Ukraine when I saw especially the kids..It was the image from more than 50 years ago that came to my mind, so visible, so hounding. The smell, sound and image of war. That is what I don&#8217;t want to happen to anyone.&#8221;



Several countries including Germany and the United States were quick to offer their congratulations.



German Health Minister Karl Lauterbach tweeted that Tedros got 155 of 160 votes, calling it a spectacular result. &#8220;Congratulations, fully deserved.&#8221;



Germany recently overtook the United States as the UN health agency&#8217;s top donor.



However, Tedros’ second-term candidacy did not receive the support of his native Ethiopia due to friction over the Tigray conflict. Ethiopia&#8217;s envoy to the assembly made it clear that Botswana&#8217;s statement congratulating Tedros did not represent all 47 countries of the African group.



&#8220;The established working method of the African group is to work by consensus. I would like to point out that there was no consensus. Hence, the distinguished representative of Botswana cannot deliver the statement on behalf of the African group.&#8221;



(Reporting by Jennifer Rigby, Emma Farge and Mrinalika Roy; Additional reporting by Paul Carrel; Editing by Catherine Evans)VIEW LESS

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Tedros re-elected as head of World Health Organization

LONDON, May 24 (Reuters)&nbsp;&#8211;&nbsp;Rising borrowing costs and the worldwide fallout from the Russia-Ukraine war could see up to 10% of riskier &#8216;junk&#8217;-rated emerging market countries suffer debt crises this year, analysts at U.S. investment bank JPMorgan have warned.



More acute balance of payment pressures and larger fiscal deficits are now compounding problems for heavily-indebted countries that import most of their energy and food.



Sri Lanka has just suffered its first ever sovereign default, joining a list that already included Lebanon, Suriname, Venezuela and Zambia. Russia and Ukraine are both teetering too and the worry is the numbers globally will soon balloon.



&#8220;Nearly half of the (52) country sample is classified as carrying high repayment risk in our assessment. Of these, eight are at risk of reserve depletion by the end of 2023, signalling high default risks. These are Sri Lanka, Maldives, Bahamas, Belize, Senegal, Rwanda, Grenada, and Ethiopia,&#8221; said the note led by strategist Trang Nguyen on Tuesday.



A jump in world interest rates in response to fast-rising inflation also means many countries are facing the reality of rising borrowing costs, a departure from over a decade of so-called &#8220;easy money&#8221;.



&#8220;Accounting for risks of a potential default in Russia and restructuring in Ukraine&#8230;the EM sovereign HY default rate could reach 10% this year,&#8221; JP Morgan&#8217;s note added, also pointing out how Ethiopia was moving towards a G20-led restructuring of its debts.



The International Monetary Fund too has said that nearly 60% of low income countries are either in, or at high risk of, debt distress.



Analysts at investment firm Tellimer this week highlighted how a record 27 emerging market countries now have eurobond yields above 10%.



Those yields are a proxy for what a government has to pay to borrow in the international capital markets and anything above 10% is generally seen as a sign of trouble.



JP Morgan said that in addition to the eight countries flagged as in immediate default danger, larger economies such as Egypt, Ghana and Pakistan were also highly vulnerable from fiscal and debt standpoints over the slightly longer term.



(Reporting by Marc Jones, editing by Jorgelina do Rosario, Kirsten Donovan)

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JPMorgan warns 10% of junk-rated emerging markets facing debt crises this year

KEY POINTS



<ul class="wp-block-list"><li>Speaking to CNBC’s “Squawk Box Europe” at the World Economic Forum in Davos, Switzerland, on Tuesday, Herbert Diess said alleviating supply chain issues would likely help create some momentum for the German auto giant over the coming months.</li><li>“Markets are always about the future,” Diess said when asked why investors valued Tesla at such a premium to other traditional carmakers.</li><li>“We are still aiming at keeping up and probably overtaking by 2025 when it comes to sales,” Diess said.</li></ul>



The chief executive of&nbsp;<a href="https://www.cnbc.com/quotes/VOW3-DE">Volkswagen</a>&nbsp;believes Europe’s biggest carmaker can overtake&nbsp;<a href="https://www.cnbc.com/quotes/TSLA" target="_blank" rel="noreferrer noopener">Tesla</a>&nbsp;to become the world’s largest seller of electric vehicles by 2025.



Speaking to CNBC’s “Squawk Box Europe” at the World Economic Forum in Davos, Switzerland, on Tuesday, Herbert Diess said alleviating supply chain issues would likely help create some momentum for the German auto giant over the coming months.



“Markets are always about the future,” Diess said when asked why investors valued Tesla at such a premium to other traditional carmakers, such as Volkswagen.



“Tesla currently is in the lead when it comes to EVs, probably also it is the most digital car company already and they have some advantages,” he continued. “We are still aiming at keeping up and probably overtaking by 2025 when it comes to sales.”



Diess said Tesla has been able to demonstrate good results and high returns with a credible business model. However, he reaffirmed his belief that Volkswagen could soon close the gap when it comes to EV sales.



“I think for Tesla, also, ramping up now will probably be a bit more challenging. They are opening up new plants and we are trying to keep up speed. We think in the second half of the year, we are going to create some momentum,” Diess said.



Volkswagen’s Frankfurt-listed shares traded around 0.9% lower on Tuesday morning, roughly in line with losses in the autos sector on the pan-European Stoxx 600.



<h2 class="wp-block-heading" id="h-supply-chain-crisis-to-alleviate"><a></a>Supply chain crisis to alleviate</h2>



More than two years into the coronavirus pandemic, the auto industry continues to grapple with the challenge of obtaining crucial parts and building enough vehicles to meet demand.



Shortages of critical supplies, particularly when it comes to battery production, are expected to be an ongoing constraint for the growth of electric vehicle sales in the years ahead.



Nonetheless, Diess said there are some positive signs on the horizon. He expects to see some relief from the semiconductor supply market from the middle of the year.



“I would say that we would see an alleviation of this situation towards mid-year and second half we should be in better shape — if the situation is not getting any worse, which I don’t think so,” Diess said.



When asked whether this means he expects the semiconductor crisis could end in the second half of the year, Diess replied: “I wouldn’t say end but we see a much-improved situation. I think supply chains are getting in order again.&#8221;

Volkswagen chief says German car giant will overtake Tesla on electric vehicle sales by 2025

WASHINGTON, May 23 (Reuters)&nbsp;&#8211;&nbsp;The United States issued an advisory on Monday warning U.S. companies of growing reputational risks of doing business with state-owned enterprises and military-controlled firms in Sudan.



&#8220;These risks arise from, among other things, recent actions undertaken by Sudan&#8217;s Sovereign Council and security forces under the military&#8217;s command, including and especially serious human rights abuse against protesters,&#8221; State Department spokesperson Ned Price said in a statement.



The African country has been racked by protests since a military coup in October, and lawyers say dozens of political prisoners remain in detention.



&#8220;Businesses and individuals operating in Sudan should undertake increased due diligence related to human rights issues and be aware of the potential reputational risks of conducting business activities and/or transactions with SOEs and military-controlled companies,&#8221; Price said.



The advisory was issued by the U.S. departments of State, Treasury, Commerce and Labor, he said.



(Reporting by Eric Beech; Editing by Tim Ahmann, Bernard Orr)

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U.S. warns companies of ‘reputational risks’ of doing business in Sudan

KEY POINTS



<ul class="wp-block-list"><li>In a blog post ahead of this week’s World Economic Forum, IMF Managing Director Kristalina Georgieva said the global economy faces its “biggest test since the Second World War.”</li><li>In combining the Russia-Ukraine war, the Covid-19 pandemic and the spike in volatility in financial markets and persistent threat from climate change, the IMF said the world faces a “potential confluence of calamities.”</li></ul>



The International Monetary Fund has warned against “geoeconomic fragmentation” as policymakers and business leaders gather at the World Economic Forum in Davos, Switzerland.



In a blog post ahead of this week’s event, IMF Managing Director Kristalina Georgieva said the global economy faces its “biggest test since the Second World War,” with Russia’s invasion of Ukraine compounding the residual economic effects of Covid-19 crisis, dragging down growth and driving inflation to multi-decade highs.



Spiraling food and energy prices are squeezing households around the world, while central banks are tightening monetary policy to rein in inflation, exerting further pressure on indebted nations, companies and families.



When combined with the spike in volatility in financial markets and persistent threat from climate change, the IMF said the world faces a “potential confluence of calamities.”



“Yet our ability to respond is hampered by another consequence of the war in Ukraine—the sharply increased risk of geoeconomic fragmentation,” Georgieva said.



“Tensions over trade, technology standards, and security have been growing for many years, undermining growth—and trust in the current global economic system.”



She added that uncertainty around trade policies alone cut global GDP by almost 1% in 2019, according to IMF research, and the D.C.-based institution’s monitoring also indicates that around 30 countries have restricted trade in food, energy and other key commodities.



Georgieva warned that further disintegration would have enormous global costs, harming people across the socio-economic spectrum, and said technological fragmentation alone could lead to losses of 5% of GDP for many countries.



Carmine Di Sibio, global chairman and CEO of consultancy giant EY, told CNBC on Monday that the economy has “taken center stage” in discussions among big business leaders at Davos.



“The economy is the top conversation – inflation is a big concern and you do see some leading indicators starting to slow,” he said.



Although corporate deal volumes have slowed, Di Sibio said EY was still seeing signs of “pretty robust activity” and business leaders were still looking at options to transform their businesses, with pricing in the sector coming down of late amid resolute demand.



“The transformation that companies are going through – the transformation in terms of technology, in terms of supply chain and location of supply chain, and de-risking of supply chains – that is still going on and we do a lot around that as well,” Di Sibio said.



<h3 class="wp-block-heading" id="h-solutions">Solutions</h3>



In order to address the growing fragmentation, the IMF has firstly called for governments to lower trade barriers to alleviate shortages and reduce the prices of food and other commodities, while diversifying exports to improve economic resilience.



“Not only countries but also companies need to diversify imports—to secure supply chains and preserve the tremendous benefits to business of global integration,” Georgieva said.



“While geostrategic considerations will drive some sourcing decisions, this need not lead to disintegration. Business leaders have an important role to play in this regard.”



Secondly, the IMF urged collaborative efforts to deal with debt, as roughly 60% of low-income countries currently have significant debt vulnerabilities and will need restructuring.



“Without decisive cooperation to ease their burdens, both they and their creditors will be worse off, but a return to debt sustainability will draw new investment and spur inclusive growth,” Georgieva said.



“That is why the Group of Twenty’s Common Framework for Debt Treatment must be improved without delay.”



Thirdly, the IMF called for a modernization of cross-border payments, with inefficient payment systems posing a barrier to inclusive economic growth. The institution estimates that the 6.3% average cost of an international remittance payment means around $45 billion annually is diverted toward intermediaries and away from lower-income households.



“Countries could work together to develop a global public digital platform—a new piece of payment infrastructure with clear rules—so that everyone can send money at minimal cost and maximum speed and safety. It could also connect various forms of money, including central bank digital currencies,” Georgieva said.



Finally, the IMF called for an urgent closing of the “gap between ambition and policy” on climate change, arguing for a comprehensive approach to the green transition that combines carbon pricing and renewable energy investment with compensation for those adversely affected by climate change.

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International

G-7′s infrastructure funding plan offers an alternative to China’s BRI in a ‘deliberate way’

Tencent stock falls as Prosus/Naspers to sell shares to fund buybacks

Look for more selling pressure next week as investors learn the hard way not to fight the Fed

FDA authorizes Pfizer and Moderna’s Covid vaccines for children as young as 6 months

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OECD slashes global growth prediction on Ukraine war and China’s zero-Covid policy

UK Prime Minister Boris Johnson to face vote of confidence on Monday

Oil prices jump after EU leaders agree to ban most Russian crude imports

Indian and Chinese stock markets could grow fourfold by 2050, Abrdn CEO says

Tedros re-elected as head of World Health Organization

JPMorgan warns 10% of junk-rated emerging markets facing debt crises this year

Volkswagen chief says German car giant will overtake Tesla on electric vehicle sales by 2025

U.S. warns companies of ‘reputational risks’ of doing business in Sudan

IMF says global economy faces ‘confluence of calamities’ in biggest test since World War II

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