LONDON — The U.K.’s ruling Conservative Party has begun its race to find its next leader, and the country’s next prime minister, with eight candidates now in the running for the top job.



The candidates all had to win the initial backing of at least 20 of their fellow Conservative lawmakers in order to proceed to the first round of voting which takes place Wednesday.



In order to whittle the number of candidates down to just two, more votes will now take place – beginning Wednesday – with the 358 Conservative MPs asked to choose their favorite candidate to take over the party.



Any candidate receiving less than 30 votes from his or her fellow MPs will be eliminated in the first round of voting. Then in the second round, the candidates with the fewest votes are eliminated. These rounds of voting continue until two candidates remain, which is expected to happen by the end of this week.



When two candidates remain, all the members of the Conservative Party (some 200,000 people) are asked to vote by postal ballot on their favorite candidate. The winner is expected to be announced on Sept. 5.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107087892-1657690092507-gettyimages-1241854442-220712_sunak_speech_16.jpeg" alt="" class="wp-image-418414" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107087892-1657690092507-gettyimages-1241854442-220712_sunak_speech_16.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107087892-1657690092507-gettyimages-1241854442-220712_sunak_speech_16-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107087892-1657690092507-gettyimages-1241854442-220712_sunak_speech_16-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Rishi Sunak makes a speech to launch his bid to be leader of the Conservative Party on July 12, 2022 in London, England. The former Chancellor was the second high-profile minister to resign from Boris Johnson’s cabinet last week setting in motion the events that saw Johnson step down as Conservative Party Leader. Carl Court | Getty Images News | Getty Images</figcaption></figure>



The eight candidates include well-known faces, such as former Finance Minister Rishi Sunak — one of the favorites to win — and Foreign Secretary Liz Truss and new Finance Minister Nadhim Zahawi, as well as those with less high-profiles such as Tom Tugendhat, Suella Braverman and Kemi Badenoch.



Former Health Minister Jeremy Hunt is also in the race, as well as Penny Mordaunt, international trade minister, another of the favorites who’s popular with grassroots party activists. Sajid Javid, former health secretary, withdrew from the leadership race on Tuesday.



Showing some division among Tory MPs and those among the more grassroots Conservative Party members and activists, Penny&nbsp;Mordaunt, a former defense secretary, topped a poll of Tory party members this week on who should be the next leader, with 20% of the vote.



Ex-local government minister Kemi Badenoch was seen with 19% of the vote, followed by Rishi Sunak on 12%, according to the poll of over 800 Tory party members on Tuesday by website Conservative Home.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107045260-gettyimages-1239761345-wlodarczyk-britishf220405_npoYc.jpeg" alt="" class="wp-image-418415" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107045260-gettyimages-1239761345-wlodarczyk-britishf220405_npoYc.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107045260-gettyimages-1239761345-wlodarczyk-britishf220405_npoYc-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107045260-gettyimages-1239761345-wlodarczyk-britishf220405_npoYc-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>“If Putin succeeds there will be untold further misery across Europe and terrible consequences across the globe,” said U.K. Foreign Secretary Liz Truss. Mateusz Wlodarczyk | Nurphoto | Getty Images</figcaption></figure>



Tuesday night, the eight candidates had 12 minutes each to try to convince their fellow MPs why they should be the next leader of the party and the country. Several promised to cut taxes and unite the party after the spectacular fall of Boris Johnson, who remains as prime minister but only in a caretaker role while his replacement is found.



Summing up the economic implications of the candidates expected to proceed to at least a second round of voting, Daiwa Capital Markets said that “at the time of writing, former Chancellor Rishi Sunak looked odds-on to make it to the second round. There he is most likely to face a challenger from the populist right wing — most likely Foreign Secretary Liz Truss or Trade Minister Penny Mordaunt.”



“While Sunak has argued against any further near-term loosening of fiscal policy, Truss, Mordaunt and several others have argued for unfunded tax cuts, which would arguably be inflationary and would likely lead to more monetary tightening than would be the case under a Sunak premiership,” Daiwa said in a note Tuesday.



<h2 class="wp-block-heading" id="h-wide-open-race"><a></a>Wide-open race</h2>



The leadership contest has come about after Johnson resigned as party leader last week after months of controversy over his conduct while in office. His government has been plagued by scandals over parties during Covid-19 lockdowns and several party officials have been hit with sleaze allegations.



The final straw for many MPs who had previously supported Johnson, despite his less than conventional style of leadership, was his appointment of a deputy chief whip (responsible for party discipline) who had previous sexual misconduct allegations made against him of which Johnson was aware. That led to a wave of resignations with ministers and officials saying Johnson no longer commanded their confidence.



Describing Johnson’s departure as a “Bjexit,” Ian Bremmer, president of Eurasia Group, commented this week that “near term, U.K. policy is paralyzed by the caretaker government’s lack of a mandate (whether Johnson-led or under a new temporary prime minister” and that economic, foreign and defense policy are “essentially in stasis until there’s new leadership in the fall.”



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107085539-16571947812022-07-07t114857z_676551886_rc2z6v949ewi_rtrmadp_0_britain-politics.jpeg" alt="" class="wp-image-418416" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107085539-16571947812022-07-07t114857z_676551886_rc2z6v949ewi_rtrmadp_0_britain-politics.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107085539-16571947812022-07-07t114857z_676551886_rc2z6v949ewi_rtrmadp_0_britain-politics-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107085539-16571947812022-07-07t114857z_676551886_rc2z6v949ewi_rtrmadp_0_britain-politics-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>British Prime Minister Boris Johnson makes a statement at Downing Street in London, Britain, July 7, 2022.  Henry Nicholls | Reuters</figcaption></figure>



“It’s a wide open race for the fall &#8230; but either way, Johnson’s two most important foreign policy initiatives—on Europe and on Ukraine — aren’t going to change. On the former, with Brexit and euroskepticism already firmly in place for the Conservative Party, there’s no lane for a softer Europe policy, even on the contentious Northern Ireland issue, among premiership competitors,” Bremmer noted on Monday.



European leaders, and particularly France’s President Emmanuel Macron, are happy to see the back of Johnson and will have less dysfunctional personal diplomacy with his successor, but the overarching U.K.-EU relationship will remain significantly strained, Bremmer added.



“That leaves plenty of uncertainty domestically— on fiscal easing and corporate tax policy for example. But I don’t see fireworks over who leads the United Kingdom driving much drama outside of old Blighty.”

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The race to replace Boris Johnson is wide open, and laying bare divisions in the Conservative Party

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/102526990-465676950.jpg" alt="" class="wp-image-418392" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/102526990-465676950.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/102526990-465676950-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/102526990-465676950-160x90.jpg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A financial trader monitors data on computer screens as a desktop television shows euro currency banknotes at the Frankfurt Stock Exchange in Frankfurt, Germany. Martin Leissl | Bloomberg | Getty Images</figcaption></figure>



The euro hovered close to parity with the U.S. dollar on Tuesday, as the euro zone’s energy supply crisis and economic woes continue to depress the common currency.



The euro was 0.3% lower to trade around $1.0005 at 10:20 a.m. London time on Tuesday morning.



Fears of a recession have grown in recent weeks due to rising uncertainty over the bloc’s energy supply, with Russia threatening to further reduce gas flows to Germany and the broader continent.



Russia temporarily suspended gas deliveries via the Nord Stream 1 pipeline on Monday for annual summer maintenance works.



The scheduled 10-day suspension of gas flows has stoked fears of a permanent cut to supplies, potentially derailing the region’s winter supply preparations and exacerbating a gas crisis.



The prospect of a starker economic slowdown has also cast doubt over whether the European Central Bank will be able to tighten monetary policy aggressively enough to rein in record-high inflation without deepening the economic pain.



“It is a key and obvious psychological level which is very much under threat here,” Jeremy Stretch, head of G-10 FX strategy at CIBC Capital Market, told CNBC’s “Street Signs Europe” on Tuesday.



Stretch said the prospect of the euro falling below this level was a reflection of burgeoning recession fears across the euro zone. It comes amid growing concerns about the prospect of a permanent cut to Russian gas supplies and the ECB’s slower pace of monetary policy tightening when compared to other major central banks.



“The ECB is in a very, very difficult position. You could argue that the ECB has been rather late to the party both in terms of ending their bond purchases but also considering monetary policy tightening,” Stretch said.



He added while the ECB “clearly missed a trick” at its last meeting, inflation expectations over the medium term had retreated toward the central bank’s target threshold.



“That is one sign that perhaps over the medium to longer run those inflation expectations are not necessarily becoming materially deanchored, but clearly from an ECB policy signaling perspective … the need to act and to act expeditiously is clear,” Stretch said.



Graham Secker, chief European equity strategist at Morgan Stanley, said the weakness of the euro could provide a boost for European companies ahead of the forthcoming second-quarter earnings season.



“Twelve months ago, the euro was above $1.20 and now we are obviously very close to parity so there is a pretty significant tailwind to earnings currently, but I view that as a positive offset against some of the other negative factors that are brewing,” Secker told CNBC’s “Street Signs Europe.”



“Right now, our expectation is that the second-quarter earnings season probably will end up with a net beat,” he added.

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Euro teeters on the brink of parity with the U.S. dollar on recession fears

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/104410219-AP_17034561978611r.jpg" alt="" class="wp-image-418388" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/104410219-AP_17034561978611r.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/104410219-AP_17034561978611r-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/104410219-AP_17034561978611r-160x90.jpg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>President Donald Trump talks with Tesla and SpaceX CEO Elon Musk at Trump Tower last February. Evan Vucci | AP</figcaption></figure>



Tesla and SpaceX CEO Elon Musk said Monday that he thinks former President Donald Trump should, “hang up his hat &amp; sail into the sunset.”



Writing on Twitter, where Musk has more than 100 million followers, the celebrity CEO said: “I don’t hate the man, but it’s time for Trump to hang up his hat &amp; sail into the sunset. Dems should also call off the attack – don’t make it so that Trump’s only way to survive is to regain the Presidency.”



A bipartisan House select committee is conducting public hearings to present initial findings from a yearlong investigation into the Jan. 6, 2021 riot at the U.S. Capitol by a violent mob of Trump’s supporters. The panel’s next public hearing is scheduled for Tuesday morning.



Over the weekend, Trump called Elon Musk a “bulls&#8212; artist” claiming that Musk said he voted for Trump in previous conversations between the two men. But Musk tweeted to deny that claim and hit back at Trump on Monday evening.



The Tesla CEO previously said his first vote for a Republican was for Mayra Flores, the winner of a special election in South Texas in June.



Last month, Musk also revealed that he was “leaning” toward voting for Florida Gov. Ron DeSantis, should he run for president in 2024.



Musk’s comments about Trump came after a tense day for his businesses.



SpaceX, his reusable rocket company, conducted a ground test of a rocket booster that ended in an unexpected explosion in Boca Chica, Texas.



Musk also faced a legal challenge from Twitter on Monday, after seeking to terminate an earlier deal he struck to acquire the social network for $54.20 per share. Twitter says his basis for terminating the deal was “invalid and wrongful.”



Musk’s electric vehicle maker Tesla saw shares decline on Monday after Shanghai ramped up mass-testing for Covid following reports of two dozen new cases there. The testing raised fears of a resurgence and more lockdowns that could once again hamper Tesla’s factory operations in China.

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Elon Musk says it’s time for Trump to ‘sail into the sunset’

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086062-1657270998093-gettyimages-630590200-93905900.jpeg" alt="" class="wp-image-418345" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086062-1657270998093-gettyimages-630590200-93905900.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086062-1657270998093-gettyimages-630590200-93905900-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086062-1657270998093-gettyimages-630590200-93905900-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>This 2016 photo shows then-Japanese Prime Minister Shinzo Abe at Joint Base Pearl Harbor Hickam’s Kilo Pier in Honolulu, Hawaii. Kent Nishimura | Getty Images</figcaption></figure>



Shinzo Abe, the former prime minister of Japan, died Friday after being shot while delivering a speech.



The 67-year-old, the country’s longest-serving prime minister, was shot while campaigning on behalf of the governing Liberal Democratic Party&nbsp;in the city of Nara, near Kyoto.



Gunshots were heard at around 11.30 a.m. local time, NBC reported, and Abe was taken to Nara Medical University Hospital’s emergency room.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086161-16572828492022-07-08t103922z_1278253707_rc2m7v9ezv07_rtrmadp_0_japan-abe.jpeg" alt="" class="wp-image-418354" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086161-16572828492022-07-08t103922z_1278253707_rc2m7v9ezv07_rtrmadp_0_japan-abe.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086161-16572828492022-07-08t103922z_1278253707_rc2m7v9ezv07_rtrmadp_0_japan-abe-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086161-16572828492022-07-08t103922z_1278253707_rc2m7v9ezv07_rtrmadp_0_japan-abe-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A man, believed to have shot former Japanese Prime Minister Shinzo Abe, is tackled by police officers in Nara, western Japan July 8, 2022 in this photo taken by The Asahi Shimbun.  Asahi Shimbun | Reuters</figcaption></figure>



“When he was brought to the hospital he was in a state of cardiopulmonary arrest,” Dr. Hidetada Fukushima, who operated on Abe, said at a news conference. “They tried to resuscitate him but at 17:03 he was pronounced dead.”&nbsp;



“He had gun wounds in two locations and died of heart failure from heavily damaged arteries,” the doctor said.



One person has been apprehended in relation to the shooting, NBC reported, citing officials.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086122-1657279225955-gettyimages-1241772234-AFP_32E28FZ.jpeg" alt="" class="wp-image-418355" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086122-1657279225955-gettyimages-1241772234-AFP_32E28FZ.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086122-1657279225955-gettyimages-1241772234-AFP_32E28FZ-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086122-1657279225955-gettyimages-1241772234-AFP_32E28FZ-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Pedestrians are silhouetted against a large public video screen showing an image of former Japanese prime minister Shinzo Abe in the Akihabara district of Tokyo on July 8, 2022, after he was shot and killed in the city of Nara. Toshifumi Kitamura | AFP | Getty Images</figcaption></figure>



After the gunfire was heard, a man was tackled by several people while the weapon lay on the street, according to a video that was verified by NBC.



Abe was not campaigning for a parliamentary seat himself, but was supporting the LDP ahead of elections for the country’s upper house of parliament Sunday. It is not clear whether the elections will go ahead as planned.



Current Prime Minister Fumio Kishida said the attack was “a despicable and barbaric act that took place in the midst of an election, which is the foundation of democracy,” adding that it was still being investigated.



The incident has sent shock waves through Japan, a country where gun violence is extremely rare. Gun rules are very strict in the country; handguns are banned and anyone who wants to own an air rifle or shotgun must undergo extensive training and checks.



Abe resigned as prime minister in August 2020, after serving two terms, due to his worsening health.



The former prime minister was known for his efforts to revive Japan’s economic growth through a range of stimulus policies which became known as “Abenomics.” The aim was to boost productivity, reform Japan’s corporate culture and bring down the country’s debt over the long term, although analysts have said it has had mixed results for the world’s third-largest economy.



<h2 class="wp-block-heading" id="h-international-leaders-respond"><a></a>International leaders respond</h2>



International leaders paid their respects to Abe following news of his death.



Indian Prime Minister Narendra Modi called Abe a “towering global statesman, an outstanding leader, and a remarkable administrator,” in a tweet.



In a subsequent post, Modi said Abe “made an immense contribution to elevating India-Japan relations.” The Indian leader said the country would hold a day of national mourning on July 9.



European Commission President Ursula von der Leyen called Abe a “wonderful person, great democrat and champion of the multilateral world order.”



Before the death of Abe was confirmed, Rahm Emanuel, the U.S. ambassador to Japan, said he was “saddened and shocked” by the news of the shooting.



“Abe-san has been an outstanding leader of Japan and unwavering ally of the U.S,” Rahm tweeted.



Abe has been widely credited with boosting Japan’s presence on the world stage.



He maintained relations with former U.S. President Donald Trump and even negotiated an initial trade agreement in 2019.



In 2016, he hosted Barack Obama, who was U.S. president at the time, at Hiroshima. Obama became the first U.S. president to visit there since the atomic bombings by America in 1945.



In October 2018, Abe met with Chinese President Xi Jinping, becoming the first Japanese prime minister to visit Beijing since 2011. For several decades, Japan and China have had tense and fragile relations.



Abe’s visit aimed to boost China-Japan relations. More recently however, he had been an increasingly vocal critic of China, particularly on the issue of Taiwan, which Beijing sees as a renegade province that must be returned to the mainland. “A Taiwan emergency is a Japanese emergency,” Abe said last year, suggesting that Japan and the U.S. should not stand by if China attacked Taiwan.



Abe had also been credited with being a key figure in the formation of “the Quad,” an informal security alignment between Australia, India, Japan and the United States.

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Japan’s former PM Shinzo Abe assassinated at campaign event

<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/GettyImages-1236313690-820x547.jpg" alt="" class="wp-image-416649" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/04/GettyImages-1236313690-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>IMF managing director Kristalina Georgieva speaks during a panel discussion at the COP26 UN Climate Summit in Glasgow on November 3, 2021. (Photo by Daniel LEAL / AFP) (Photo by DANIEL LEAL/AFP via Getty Images)</figcaption></figure>



WASHINGTON, July 7 (Reuters)&nbsp;&#8211;&nbsp;Official creditors of Zambia, Chad and Ethiopia are set to meet in July, according to International Monetary Fund (IMF) chief Kristalina Georgieva, in a bid to promote efforts to overhaul their debt burdens.



The three African nations have all signed up for debt treatment under the G20 Common Framework &#8211; an initiative launched in 2020 and designed to streamline debt restructuring efforts in the wake of poorer countries buckling under the fallout from the COVID-19 pandemic.



However, progress so far has been glacial, and IMF and World Bank officials have been blunt about the failings of the Common Framework. They are pushing for finance officials of the G20 major economies to apply more pressure on China and private sector creditors to participate.



&#8220;We expect in July to have some creditor committees for all three countries meeting, but time is not our friend,&#8221; Georgieva told Reuters in an interview. &#8220;Now is the time to show results.&#8221;



All three countries face different challenges.



In January 2021, Chad became the first country to request a restructuring of its $3 billion external debt under the Common Framework.



It struck a deal with creditor nations in June 2021, but has struggled to finalise talks with private creditors. Chad owes one third of its external debt burden to commercial creditors, and almost all of that to Glencore&nbsp;GLEN.L&nbsp;in oil-for-cash deals dating back to 2013 and 2014.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL2N2XI0N1&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a><a href="https://www.reutersconnect.com/all?search=all%3AL1N2QB0WE&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



&#8220;The oil price going up gave reasons for Glencore and others to challenge the debt sustainability analysis, they say &#8216;Oh well, it is not so bad anymore&#8217;,&#8221; said Georgieva, adding that the situation still &#8220;requires a debt restructuring and we are pressing for that.&#8221;



Georgieva was more upbeat on Zambia, where China had agreed to co-chair official creditor committee, but added &#8220;we have to move fast.&#8221;



Zambia&#8217;s Finance Minister Situmbeko Musokotwane said last week the country&#8217;s economy would be highly compromised without external support.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N2YF4EB&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



A Paris Club source said the group of wealthy creditor nations was working on providing financing assurances to the IMF that could unlock funds for Zambia.



&#8220;We hope that that can be done before the end of July,&#8221; the source added.



Ethiopia&#8217;s creditor nations held a meeting chaired by China and France in September 2021 but further progress has been held up by the country&#8217;s civil war.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2QO0H3&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



The IMF said in June it wanted to start talks with Ethiopia over a funding program as soon as conditions allowed.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N2Y84DW&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



Georgieva said there had been close engagement with the senior leadership in China &#8211; the largest bilateral creditor to the world &#8211; on debt issues.



&#8220;We are seeing some signs that China recognizes it is actually in their own interest to prevent that crisis because they will be the first to lose dramatically if that is the case,&#8221; she said.



Beijing had now designated officials to deal with debt issues in key bodies such as the ministry of finance and the central bank, she added.



&#8220;The critical sign of seriousness is complete Zambia, complete Chad, complete Ethiopia &#8211; it is the very old saying: the proof of the pudding is in the eating.&#8221;



(Reporting by Andrea Shalal in Washington, additional reporting by Leigh Thomas in Paris, writing by Karin Strohecker; Editing by Hugh Lawson)

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IMF chief Georgieva: Creditors of Common Framework countries to meet in July

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="429" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/HO56RUQKZFKH7BVXO47CNZANC4-820x429.jpg" alt="" class="wp-image-418338" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/HO56RUQKZFKH7BVXO47CNZANC4-820x429.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/HO56RUQKZFKH7BVXO47CNZANC4-300x157.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/HO56RUQKZFKH7BVXO47CNZANC4-160x84.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/HO56RUQKZFKH7BVXO47CNZANC4-768x402.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/HO56RUQKZFKH7BVXO47CNZANC4.jpg 1200w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Russian Foreign Minister Sergei Lavrov meets Indonesia&#8217;s Foreign Minister Retno Marsudi at the G20 Foreign Ministers&#8217; Meeting in Nusa Dua, Bali, Indonesia, July 8, 2022. REUTERS/Willy Kurniawan/Pool</figcaption></figure>



NUSA DUA, Indonesia, July 8 (Reuters) &#8211; Indonesia urged the G20 on Friday to help end the war in Ukraine, as foreign ministers from the group met for a summit that has put some of the staunchest critics of Russia&#8217;s invasion in the same room as Moscow&#8217;s top diplomat.



The buildup to the gathering on the Indonesian island of Bali has been dominated by the war and its impact on the global economy, with top officials from Western countries and Japan stressing it would not be &#8220;business as usual&#8221; at the forum.



Shouts of &#8220;When will you stop the war&#8221; and &#8220;Why don&#8217;t you stop the war&#8221; were heard as Russian Foreign Minister Sergei Lavrov shook hands with his Indonesian counterpart Retno Marsudi at the start of the meeting.



Underlining tensions in the buildup, Retno said earlier G7 counterparts had informed her they could not join Thursday&#8217;s welcome dinner where Lavrov was present.



&#8220;It is our responsibility to end the war sooner than later and settle our differences at the negotiating table, not at the battlefield,&#8221;&nbsp;she&nbsp;said on Friday at the opening of talks.



Invoking Indonesia&#8217;s religious diversity as a example of how divergent beliefs can co-exist harmoniously, Retno urged the G20 to &#8220;find a way forward&#8221; to address the challenges rippling across the globe. She said the repercussions of the war, including rising energy and food prices, would hit low-income countries the hardest.



A senior official for the Indonesian foreign ministry told Reuters no communique was expected from Friday&#8217;s meeting.



&#8220;With Russia’s presence and participation, certainly I doubt there would be consensus on Ukraine, for example,&#8221; a senior U.S. State Department official said ahead of the summit.



Russia&#8217;s invasion has cast a cloud over Indonesia&#8217;s presidency of the Group of 20 largest economies this year, with speculation of boycotts from some members and a walkout in April at a finance ministers&#8217; meeting in Washington.



Retno said late on Thursday it was important for the host to &#8220;create an atmosphere that&#8217;s comfortable for everybody&#8221;,&nbsp;noting it was the first time since the February 24invasion of Ukraine that all major players were sitting in the same room.



Lavrov was seated between representatives from Saudi Arabia and Mexico at Friday&#8217;s meeting.



<h2 class="wp-block-heading" id="h-china-warns-risk-of-new-cold-war">CHINA WARNS RISK OF &#8220;NEW COLD WAR&#8221;</h2>



A senior U.S. State Department official said on Thursday it was important to prevent &#8220;disruptions or interruptions&#8221; to the G20 agenda, while ensuring nothing took place that could legitimise Russia&#8217;s &#8220;brutalising&#8221; of Ukraine.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YO0A0&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



After discussions on the issue of Ukraine with Indian External Affairs Minister S. Jaishankar on Thursday, China’s Foreign Minister Wang Yi said Beijing opposed any act of hyping up bloc confrontation, and creating a &#8220;new Cold War&#8221;.



Russia&#8217;s invasion, which it calls a &#8220;special military operation&#8221;, has caused major disruption to the global economy, with a blockade on Ukrainian grain and sanctions on Russian oil and gas driving a food crisis and global spike in inflation.



Friday&#8217;s agenda includes a closed meeting with top diplomats of G20 countries including China, India, the United States, Brazil, Canada, Japan, South Africa, as well as bilateral talks on the sidelines. Ukraine&#8217;s foreign minister is expected to address the meeting virtually.



Lavrov met Chinese counterpart Wang Yi in Bali on Thursday, during which he praised Beijing but lashed out at an &#8220;openly aggressive&#8221; West.



For the first time in three years, the Chinese and Australian foreign ministers will hold talks on the sidelines of the meeting on Friday, signalling a thaw in relations that has soured over claims of foreign interference and retaliatory trade sanctions.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL4N2YO25L&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



Absent from Friday&#8217;s meeting was British Foreign Secretary Liz Truss, who was represented by Tim Barrow, second permanent under-secretary at the foreign office. Truss had cut her Bali trip short after the resignation of British Prime Minister Boris Johnson, media reports said.



(Additional reporting by Ryan Woo in Beijing, Kirsty Needham in Sydney and Yuddy Cahya Budiman in Nusa Dua; Writing by Kate Lamb; Editing by Martin Petty, Ed Davies and Raju Gopalakrishnan)

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Indonesia urges G20 to help end war in Ukraine as Russia’s Lavrov looks on

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086032-1657259956720-gettyimages-1241768433-JAPAN_ABE_SHOOTING.jpeg" alt="" class="wp-image-418332" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086032-1657259956720-gettyimages-1241768433-JAPAN_ABE_SHOOTING.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086032-1657259956720-gettyimages-1241768433-JAPAN_ABE_SHOOTING-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086032-1657259956720-gettyimages-1241768433-JAPAN_ABE_SHOOTING-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Police officers at the scene where former Japanese Prime Minister Shinzo Abe was shot during a campaign event in Nara, Japan on July 8, 2022. Abe was unresponsive after the attack, shocking a nation where gun violence is rare. Kosuke Okahara | Bloomberg | Getty Images</figcaption></figure>



Former Japanese leader Shinzo Abe is in critical condition after being shot at a campaign event on Friday, Prime Minister Fumio Kishida said.



Abe, Japan’s longest-serving prime minister, had just begun a speech in the city of Nara when gunfire was heard around 11:30 a.m. local time (10:30 p.m. Thursday ET). Public broadcaster NHK, citing the local fire department, reported that Abe was in a state of cardio and pulmonary arrest, suggesting that his heart had stopped.



It said he had been admitted to Nara Medical University Hospital. Officials said that one person had been apprehended in relation to the shooting.



Speaking from his office in Tokyo, a visibly shaken Kishida said that while the attack was still being investigated, “it was a despicable and barbaric act that took place in the midst of an election, which is the foundation of democracy.”



“I condemn it in the harshest possible terms,” he told a hastily arranged news conference after returning from campaigning in the country’s north.



Elections for the upper house of the Japanese Parliament are Sunday. Abe, 67, who stepped down in 2020, was campaigning for other members of the governing conservative Liberal Democratic Party (LDP) but is not a candidate himself.



The incident sent shockwaves through Japan, where gun violence is extremely rare. Handguns are banned in the country and people must undergo extensive tests, training and background checks to obtain and keep shotguns and air rifles.



Iwao Horii, an LDP member of the upper house representing Nara, was standing next to Abe when the former prime minister was shot. “We heard two loud sounds while he was talking and he fell immediately after that,” said Horii at a news conference. He added that Abe was unresponsive when emergency medics tried to resuscitate him.



Horii said Abe’s appearance at that location had been advertised locally via faxes to the media and loudspeakers on election vans. He said he was not aware of any threats made against Abe or the LDP before the speech.



“This is something that shakes the very foundations of democracy and cannot be forgiven,” he said. “At this point we are all praying for the quick recovery of former Prime Minister Abe.”



The shooting was also condemned by the country’s main opposition party, the center left Constitutional Democrats. “This is an unforgivable act of barbarism, but the first and utmost priority is the condition of former Prime Minister Abe, and I just pray that he survives,” party leader Kenta Izumi told reporters.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086006-1657254246749-gettyimages-1241767805-AFP_32E23V2.jpeg" alt="" class="wp-image-418333" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086006-1657254246749-gettyimages-1241767805-AFP_32E23V2.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086006-1657254246749-gettyimages-1241767805-AFP_32E23V2-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107086006-1657254246749-gettyimages-1241767805-AFP_32E23V2-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Workers stand near the scene where Japan’s former prime minister, Shinzo Abe, was shot outside the Kintetsu Yamato-Saidaiji station square in Nara on July 8, 2022. STR | Jiji Press | AFP | Getty Images</figcaption></figure>



The U.S. ambassador to Japan, Rahm Emanuel, said that he was shocked and saddened by news of the shooting.



“Abe-san has been an outstanding leader of Japan and unwavering ally of the United States,” Emanuel said in a statement Friday. “The U.S. Government and American people are praying for the well-being of Abe-san, his family, and people of Japan.”



Secretary of State Antony Blinken, speaking from Indonesia, where he is attending a G-20 Foreign Ministers’ Meeting, expressed how “deeply saddened and deeply concerned we are by the news coming from Japan, about the attempt on the life of former Prime Minister Abe.”



“Our thoughts, our prayers are with him and his family, with the people of Japan,” Blinken said. “This is a very, very sad moment, and we’re awaiting news from Japan.”



Abe hails from Japan’s political elite and as prime minister had made reviving economic growth through his “Abenomics” policies a key pillar of his time in office.



Though Abe had been praised for amplifying Japan’s profile on the world stage, his party was plagued by scandals and he was accused of mishandling the country’s response to the Covid-19 pandemic.



Abe’s resignation two years ago came amid a worsening of his ulcerative colitis, a chronic bowel condition he’d battled for years.



He made the announcement days after he set a record as Japan’s longest-lasting prime minister, having been in office for almost eight years. He previously served as prime minister from 2006 to 2007.



In a post to his Truth Social platform late Thursday, former President Donald Trump called Abe “a truly great man and leader.”



“He was a true friend of mine and, much more importantly, America,” Trump said. “This is a tremendous blow to the wonderful people of Japan, who loved and admired him so much. We are all praying for Shinzo and his beautiful family!”



Abe was the first foreign leader to meet with Trump after he became president-elect in November 2016.

Japanese Prime Minister Shinzo Abe to resign

Former Japanese PM Shinzo Abe shot at campaign event, in critical condition

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/GettyImages-1404854299-820x547.jpg" alt="" class="wp-image-418289" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/GettyImages-1404854299-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/GettyImages-1404854299-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/GettyImages-1404854299-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/GettyImages-1404854299-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/GettyImages-1404854299-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/GettyImages-1404854299-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>BAKU, AZERBAIJAN &#8211; JUNE 24: Russia&#8217;s Foreign Minister Sergei Lavrov speaks during a joint news conference with his Azerbaijani counterpart inJeyhun Baramov following talks on June 24, 2022 in Baku, Azerbaijan. During the talks the ministers discussed issues related to the development of bilateral relations. (Photo by Aziz Karimov/Getty Images)</figcaption></figure>



July 6 (Reuters)&nbsp;&#8211;&nbsp;G20 foreign ministers travel to the resort island of Bali this week for a meeting that will be overshadowed by the war in Ukraine, with Russia&#8217;s attendance creating rifts in the bloc as host Indonesia tries to mediate.



The Group of 20 includes Western countries that have accused Moscow of war crimes in Ukraine and rolled out sanctions, but also countries like China, Indonesia, India and South Africa that have not followed suit.



The gathering will be the first time that foreign ministers from some of the world&#8217;s top economies meet Russian Foreign Minister Sergei Lavrov since Russia invaded Ukraine in February.



Speaking ahead of the G20 meeting that runs from Thursday to Friday, German foreign ministry spokesperson Christian Wagner said it would not be a &#8220;normal summit&#8221; nor &#8220;business as usual&#8221;.



Germany holds the presidency of the Group of Seven industrialised nations and would coordinate in Bali over how to respond to Lavrov in light of the war in Ukraine, he said.



Top officials from Britain, Canada and the United States walked out on Russian representatives during a G20 finance meeting in Washington in April.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL2N2WI15Q&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



U.S. Secretary of State Antony Blinken would be an active participant at the meeting while &#8220;also staying true to another over-riding objective, and that is the fact that it cannot be business as usual with the Russian Federation&#8221;, a U.S. state department spokesperson said.



Blinken will meet Chinese Foreign Minister Wang Yi in Bali, but no meeting is expected with Lavrov.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YM0RQ&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



As G20 chair this year, Indonesia has been caught at the centre of a geopolitical storm over the war, attempting to head off threats by Western countries to boycott meetings. After the foreign ministers&#8217; meeting, G20 finance ministers are scheduled to meet next week, also in Bali.



Trying&nbsp;to leverage Indonesia&#8217;s neutrality, President Joko Widodo embarked on an ambitious peace-brokering mission last week, visiting Kyiv and Moscow to meet Ukrainian President Volodymyr Zelenskiy and Russian President&nbsp;Vladimir&nbsp;Putin.



The president, who is widely known as Jokowi, has invited Ukraine to the G20 this year, attempted to convince Russia to end a blockade on grain exports that is driving a global food crisis, and offered up Indonesia as a &#8220;diplomatic bridge&#8221; between the nations.



Ukraine&#8217;s ambassador to Indonesia Vasyl Hamianin said his country&#8217;s foreign minister would give a virtual address at the Bali meeting.



<h2 class="wp-block-heading" id="h-plan-to-snub-g20-meetings-rethought">PLAN TO SNUB G20 MEETINGS RETHOUGHT</h2>



Despite early talk of snubbing some G20 meetings, Western leaders ultimately decided that ceding the floor to Russia would be counter-productive, said Max Bergmann, a Russia and Europe expert and a former senior U.S. State Department official.



&#8220;If you don&#8217;t show up, and then the Russians have the floor with some really critical countries like Indonesia, India, and others, then they&#8217;re making their arguments unopposed,&#8221; said Bergmann, who is now at Washington&#8217;s Center for Strategic and International Studies.



Ramin Toloui, U.S. assistant secretary of state for economic and business affairs, said on Tuesday that food and energy would feature prominently at the meeting.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AW1N2XZ015&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



&#8220;G20 countries should hold Russia accountable and insist that it support ongoing U.N. efforts to reopen the sea lanes for grain delivery,&#8221; he said.



During a trip to Vietnam on Wednesday, Russia&#8217;s Lavrov called on all parties in the world to make efforts to protect international laws as &#8220;the world is evolving in a complicated manner.&#8221;



His comments ahead of his arrival in Bali come as Russia has been accused by Western countries of breaching international law through its invasion of Ukraine, which Moscow calls a &#8220;special operation&#8221;.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YN05S0&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



The reaction to Lavrov in Bali could also provide an indication of how G20 members might respond if Putin attends November&#8217;s summit meeting of the group in person, which is yet to be confirmed.



The Indonesian president, until recently not normally very active on foreign policy issues, has come to see his handling of the group&#8217;s presidency as a defining moment in his presidency, said Murray Hiebert, a Southeast Asia expert at CSIS.



&#8220;Jokowi desperately hopes to avoid a diplomatic train wreck if Putin shows up in November,&#8221; he said.



(Reporting by Alexander Ratz in Berlin, David Brunnstrom in Washington and Kate Lamb in Sydney; Editing by Ed Davies and Raju Gopalakrishnan)

Russian Foreign Minister Sergey Lavrov Visits His Azerbaijani Counterpart Jeyhun Baramov

Not ‘business as usual’ for G20 foreign ministers meeting in Bali

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/106255443-1574240778568gettyimages-1179906331.jpeg" alt="" class="wp-image-418276" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/106255443-1574240778568gettyimages-1179906331.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/106255443-1574240778568gettyimages-1179906331-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/106255443-1574240778568gettyimages-1179906331-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A euro currency symbol sits on display in the visitor centre at the European Central Bank (ECB) building in Frankfurt, Germany. Alex Kraus | Bloomberg | Getty Images</figcaption></figure>



The euro fell to its lowest level in two decades on Tuesday as fears of a recession in the euro zone ramped up, with gas prices soaring and the Ukraine war showing no signs of abating.



The euro shed around 1.3% for the session to hit $1.029 by mid-afternoon in Europe, having earlier been as low as $1.028.



Euro zone inflation hit a record 8.6% in June, prompting the European Central Bank to give markets advance notice of its intention to hike interest rates for the first time in 11 years at its July meeting.



However, growing fears of a recession may limit the central bank’s capacity to tighten monetary policy. The July Sentix Economic Index on Monday showed investor morale across the 19-country euro zone has plunged to its lowest level since May 2020, pointing toward an “inevitable” recession.



Record-high inflation in Europe has been abetted by skyrocketing gas prices over recent months.



Natural gas prices in Europe on Monday extended their relentless rise, climbing to highs not seen since early March as planned strikes in Norway added to market woes about Russian supply cuts. The front-month gas price at the Dutch TTF hub, a European benchmark for natural gas trading, was last seen trading up 7.8% to hit 175.5 euros ($180.8) per megawatt-hour.



All of these factors have converged to hit the euro hard. The currency of the euro zone has lost over 9% of its value against the dollar since the start of the year.



The dollar’s strength continues, meanwhile, as risk-averse investors seek a safe haven, and the U.S. Federal Reserve embarks upon what looks to be an aggressive rate hike regime.



After raising benchmark interest rates by three-quarters of a percentage point in June, Fed Chair Reserve Chair Jerome Powell said the central bank could raise interest rates by a similar magnitude next month.



The euro also fell fractionally against sterling to trade at £0.8595 by mid-afternoon, and dropped by around 1.2% against the Japanese yen, itself near multi-decade lows against a resurgent dollar.



— CNBC’s Sam Meredith contributed to this report

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Euro slides to 20-year low against the dollar as recession fears build

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083058-1656592302584-gettyimages-1241584476-20090101220628-99-829679.jpeg" alt="" class="wp-image-418246" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083058-1656592302584-gettyimages-1241584476-20090101220628-99-829679.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083058-1656592302584-gettyimages-1241584476-20090101220628-99-829679-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083058-1656592302584-gettyimages-1241584476-20090101220628-99-829679-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>The G7 has floated the idea of an oil price cap, but experts are doubtful about how effective this would be. Picture Alliance | Picture Alliance | Getty Images</figcaption></figure>



The world’s seven-largest industrialized economies have floated the idea of a price cap on Russian oil to further squeeze the Kremlin’s ability to fund its onslaught in Ukraine and try to protect consumers amid surging energy prices.



The G-7′s pursuit of a price ceiling on Russian oil is not without its challenges, however, with energy analysts highly skeptical about the integrity of the proposal.



For its part, the Kremlin has warned any attempt to impose a price cap on Russian oil will cause more harm than good.



<h2 class="wp-block-heading" id="h-how-the-idea-came-about"><a></a>How the idea came about</h2>



The United States seems to be the biggest supporter of a price cap on Russian oil.



Back in May, U.S. Treasury Secretary Janet Yellen explained the idea to her European counterparts, saying it would work as a tariff or cap on Russian oil and help Europe in the interim period until imposing a full ban.



The EU agreed in late May to impose a gradual embargo on Russian oil until the end of 2022 — after several weeks of tough negotiations among the 27 nations.



The bloc used to receive about 25% of its oil imports from Russia and it represented one of the most important buyers for the Kremlin. Stopping these oil purchases are an attempt to hurt Russia’s economy after the unprovoked invasion of Ukraine, but they are difficult to end overnight given how some EU countries are heavily dependent on Russian fossil fuels.



U.S. President Joe Biden presented the idea of an oil price cap to the rest of the G-7 leaders over the weekend of June 25 and 26 and his counterparts agreed to look at how to do it. The G-7 is comprised of the U.S., Canada, France, Germany, Italy, the U.K. and Japan.



German Chancellor Olaf Scholz said the idea was very ambitious and needed a “lot of work” before becoming reality.



A spokesperson for the European Commission, the executive arm of the EU, said in an email to CNBC Friday: “We share the G7 countries’ concerns about the burden of energy price increases and market instability, and how these aggravate inequalities nationally and internationally.”



“In this context, as tasked by the European Leaders, the Commission will continue our work on ways to curb rising energy prices, including assessing the feasibility of introducing temporary import price caps where appropriate,” the same spokesperson said, adding the discussions are treated as “a matter of urgency.”



<h2 class="wp-block-heading"><a></a>How might a price cap work?</h2>



Energy analysts have questioned exactly how the G-7 can impose a price ceiling for Russian oil, warning that the plan could backfire if key consumers are not involved, and time may be running out to make it workable.



“I’m one of those scratching my head,” Neil Atkinson, an independent oil analyst, told CNBC’s “Squawk Box Europe” on Thursday.



“Something like this could only work if you get all of the key producers and crucially all of the key consumers working together and then finding some way of enforcing whatever plan you come up with,” he added.



“And the reality is that the biggest consumers of Russian oil, or amongst the biggest consumers of Russian oil, are China and India.”







<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083621-1656664592399-gettyimages-1239439340-ROMANIA_PORT.jpeg" alt="" class="wp-image-418247" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083621-1656664592399-gettyimages-1239439340-ROMANIA_PORT.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083621-1656664592399-gettyimages-1239439340-ROMANIA_PORT-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/07/107083621-1656664592399-gettyimages-1239439340-ROMANIA_PORT-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A tanker moored in a gas and oil dock at the Port of Constanta in Romania. Bloomberg | Bloomberg | Getty Images</figcaption></figure>



China and India have “benefitted enormously” from discounted Russian crude, Atkinson said. Russian oil has been selling at a heavy discount of $30 or more when compared to international benchmark Brent crude futures at $110 a barrel — and China and India have been snapping it up.



Atkinson also highlighted a lack of unity over Russia’s invasion of Ukraine given that China and India have failed to explicitly condemn the Kremlin.



“In any event, the Russians won’t just sit there and do nothing. They can play games with supplies of oil and indeed gas … they can mess with the G-7′s head in some respect so I think this plan is really a non-starter,” Atkinson said.



“For me, honestly the mechanism doesn’t work,” Amrita Sen, co-founder and director of research at Energy Aspects, told CNBC’s “Squawk Box Europe” on Friday.



“They haven’t thought it through, they haven’t spoken to India and China … Do we really think they are going to agree to this? And do we really think that Russia will actually accept this and not retaliate? I think this sounds like a very, very good theoretical concept but it is just not going to work in practice.”



Sen said the idea that countries around the world are on the same page as Western policymakers, particularly relating to energy security, is “the biggest misconception right now.” She added, “I think that really needs to go away.”



For Claudio Galimberti, senior vice president at energy research firm Rystad, the most direct mechanism to impose a price cap on Russian oil is via insurance.



“The International Group of Protection &amp; Indemnity Clubs in London covers around 95% of the global oil shipping fleet. Western countries could try to impose a price cap by letting buyers keep that insurance, as long as they agree to pay no more than a certain price cap for the Russian oil on board,” Galimberti said in a note.



“However, there are many obstacles that could derail such a plan,” he added.



Among the most obvious examples, Galimberti said, was the fact that Russia could simply decide not to sell at the prices set by the cap, particularly if the benchmark is very low and close to the cost of production.



President Vladimir Putin has already shown his willingness to withhold natural gas supplies to so-called “unfriendly countries” that have refused to meet his gas-for-rubles payment demands.



China is the “next most likely obstacle,” Galimberti said, since Beijing may decide for geopolitical reasons “to lend support to Russia by accepting inferior Russian insurance and therefore facilitate a loophole for the price cap.”



“Still, a price cap is surely a measure worth considering at this stage, albeit time is running out, as the EU is determined to ban imports of Russian oil by the end of the year,” Galimberti said.



<h2 class="wp-block-heading"><a></a>How has Russia responded?</h2>



Russia has warned any attempt to limit the price of Russian oil could wreak havoc in the energy market and push commodity prices even higher.



Deputy Prime Minister Alexander Novak on Wednesday described the move by Western leaders to consider imposing a price cap as “another attempt to intervene into the market mechanisms which may only lead to market’s disbalance … which would lead to [a] price increase,” according to Reuters.



Novak said he was confident Russia would restore oil output to pre-sanction levels in the coming months, largely because a significant amount of Russian crude had been re-routed to Asian markets.

107083058-1656592302584-gettyimages-1241584476-20090101220628-99-829679

The G-7 is considering a price cap on Russian oil. But energy analysts think it’s impossible

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="529" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/3E6NE363LNJ5HHZTB4NIPAEJRM-820x529.jpg" alt="" class="wp-image-418162" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/3E6NE363LNJ5HHZTB4NIPAEJRM-820x529.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/3E6NE363LNJ5HHZTB4NIPAEJRM-300x193.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/3E6NE363LNJ5HHZTB4NIPAEJRM-140x90.jpg 140w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/3E6NE363LNJ5HHZTB4NIPAEJRM-768x495.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/3E6NE363LNJ5HHZTB4NIPAEJRM-1536x990.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/3E6NE363LNJ5HHZTB4NIPAEJRM-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>FILE PHOTO: A view shows polished colorless and yellow diamonds produced at &#8220;Diamonds of ALROSA&#8221; factory in Moscow, Russia April 30, 2021. Picture taken April 30, 2021. REUTERS/Tatyana Makeyeva/File Photo</figcaption></figure>



JOHANNESBURG, June 29 (Reuters)&nbsp;&#8211;&nbsp;Russia condemned what it called a push to &#8220;politicise&#8221; its diamonds over the conflict in Ukraine and said attempts to question its compliance with the international diamond certification scheme were &#8220;totally unfounded&#8221; and &#8220;far-fetched&#8221;.



The Kimberley Process, a coalition of governments, the diamond industry and civil society responsible for certifying diamonds as conflict-free, is split over a push by Ukraine and others to expand its definition of conflict diamonds to include those funding aggression by states.



The KP Civil Society Coalition (CSC) and some member states sought to discuss whether Russia&#8217;s diamonds were helping to fund the war in Ukraine during a KP meeting in Botswana last week.<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YB1CR&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



&#8220;The Russian Federation absolutely condemns the orchestrated attempts of CSC, backed by absolute minority of some Western participants, to politicize the work of the Kimberley Process by deliberately distorting or even openly replacing its basic principles,&#8221; Russia&#8217;s finance ministry said in an emailed statement. It did not specify which principles it felt were being distorted or replaced.



The CSC did not immediately respond to an emailed request for comment.



The KP defines conflict diamonds as those that fund rebel movements seeking to overthrow legitimate governments, a narrow definition that many have sought to widen since the KP was founded in 2003.



The revision of that definition should be part of a review of the KP certification scheme due in 2023, the finance ministry said, adding that Russia, which was KP chair last year, has &#8220;championed&#8221; work on revising the definition for the past five years.



&#8220;We therefore call on our opponents to refrain from further speculative accusations, abstain from political demagoguery and concentrate on the substantive work of the KP,&#8221; the finance ministry said.



The KP makes all decisions by consensus and the rift over Russia and Ukraine could jeopardise its effectiveness.



(Reporting by Helen Reid; Editing by Emelia Sithole-Matarise)

FILE PHOTO: A view shows polished colorless and yellow diamonds produced at “Diamonds of ALROSA” factory in Moscow

Russia hits back at attempts to ‘politicise’ its diamonds

<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/HQ4CYEMKPJLQJJPLAFWIAQ2CGA-820x547.jpg" alt="" class="wp-image-418109" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/HQ4CYEMKPJLQJJPLAFWIAQ2CGA-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/HQ4CYEMKPJLQJJPLAFWIAQ2CGA-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/HQ4CYEMKPJLQJJPLAFWIAQ2CGA-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/HQ4CYEMKPJLQJJPLAFWIAQ2CGA-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/HQ4CYEMKPJLQJJPLAFWIAQ2CGA-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/HQ4CYEMKPJLQJJPLAFWIAQ2CGA-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>An Iranian Army paratrooper flies with the Iranian flag during a military exercise dubbed &#8216;Zulfiqar 1400&#8217;, in the coastal area of the Gulf of Oman, Iran, in this picture obtained on November 7, 2021. Iranian Army/WANA (West Asia News Agency)/Handout via REUTERS ATTENTION EDITORS &#8211; THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY</figcaption></figure>



DUBAI, June 27 (Reuters)&nbsp;&#8211;&nbsp;Iran has submitted an application to become a member in the group of emerging economies known as the BRICS, an Iranian official said on Monday.



Iran&#8217;s membership in the BRICS group, which includes Brazil, Russia, India, China and South Africa, &#8220;would result in added values for both sides,&#8221; Iran&#8217;s Foreign Ministry spokesperson said.



Russian Foreign Ministry spokeswoman Maria Zakharova said separately that Argentina had also applied to join the group. Argentinian officials could not be reached for immediate comment.



Argentina&#8217;s President Alberto Fernandez, currently in Europe, has in recent days reiterated his desire for Argentina to join BRICS.



&#8220;While the White House was thinking about what else to turn off in the world, ban or spoil, Argentina and Iran applied to join the BRICS,&#8221; Zakharova wrote on the Telegram messaging app.



Russia has long been pushing to forge closer ties with Asia, South America and the Middle East, but it has intensified its efforts recently to weather sanctions imposed by Europe, the United States and other countries over its invasion on Ukraine.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AR4N2XO03B&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



On Monday, the United States and other Western nations pledged unwavering support for Ukraine after 28 civilians were killed in several Russian attacks, including a missile strike on a crowded shopping centre.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YE018&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



Russia denies targeting civilians in what it calls is a &#8220;special military operation&#8221; to disarm Ukraine and protect it from fascists. Kyiv and its allies in the West say the war is an unprovoked act of aggression.



(Reporting by Parisa Hafezi in Dubai and Lidia Kelly in Melbourne; additional reporting by Adam Jourdan in Buenos Aires; editing by Richard Pullin)

Iranian Army exercise in the coastal area of the Gulf of Oman

Iran applies to join BRICS group of emerging countries

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.

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International

The race to replace Boris Johnson is wide open, and laying bare divisions in the Conservative Party

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Japan’s former PM Shinzo Abe assassinated at campaign event

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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

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

News Tips

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