<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107008484-1643461966876-gettyimages-1238044957-ts12085f.jpeg" alt="" class="wp-image-414967" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107008484-1643461966876-gettyimages-1238044957-ts12085f.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107008484-1643461966876-gettyimages-1238044957-ts12085f-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107008484-1643461966876-gettyimages-1238044957-ts12085f-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A serviceman of the Teykovo Missile Formation (54th Guards Missile Division) takes part in combat patrol and anti-sabotage drills involving RS-24 Yars road-mobile intercontinental ballistic missile systems. Vladimir Smirnov | TASS | Getty Images</figcaption></figure>



Russia is willing to risk “real financial harm” and all-out war to achieve its political objectives in Ukraine, defense analysts have said.



Moscow has denied that it plans to invade neighboring Ukraine, a former part of the Soviet Union, despite having assembled around 100,000 troops at the border.



Russia is demanding that Ukraine never be permitted to become a member of the NATO military alliance and has said it wants the organization to roll back its presence in Eastern Europe.



Last week, the U.S. delivered a response to Moscow’s demands that repeated previous refusals to concede to Moscow’s demands. Diplomatic talks are expected to be held between the two countries at a U.N. Security Council meeting on Monday.



The British government claimed earlier this month that it had evidence the Kremlin was seeking to install a pro-Russian leader in the Ukrainian capital of Kyiv. In 2014, Russia invaded and annexed Crimea, a peninsula in the south of Ukraine with an ethnic Russian majority.



A spokesperson for the Russian government was not immediately available to comment when contacted by CNBC.



<h2 class="wp-block-heading" id="h-more-steps-before-an-invasion"><a></a>More steps before an invasion</h2>



Samuel Cranny-Evans, a research analyst at defense and security thinktank the Royal United Services Institute, said it was likely there was still a way to go before Russia invades Ukraine.



“This isn’t an invasion force yet,” he told CNBC in a phone call. “Russia has very deliberately built [this situation] in such a way that we will know when it is an invasion force.”



He added that what we have seen so far was “just the first step,” and now that things like air defense assets, convoys of fuel and ammunition — and the personnel to man all of the equipment — were being moved to the border, Russia was taking its second step.



“There are, I would argue, quite a few steps to go through before we actually get to Russian troops moving onto Ukrainian soil,” he said. “We might see standoff tactics like cruise missile test launches and cyber warfare attacks, a bit of unrest and assassination in Ukraine, perhaps.”



Cranny-Evans speculated that the first act of war would most likely be long-range missile strikes that targeted key military and industrial infrastructure in Ukraine.



“It’s all about showing that if you continue down this road of not doing what we want, we have the ability to target your values,” he told CNBC. “It isn’t about Russian men killing Ukrainian men and women, it’s about targeting the Ukrainian way of life.”



Mathieu Boulegue, a research fellow at Chatham House’s Russia and Eurasia program agreed, telling reporters during the think tank’s press briefing on Friday that the Russians did not yet appear to be ready to invade.



“We have now one of the largest concentrations of force in Europe since World War II with a force that looks like an invasion force,” he said. ”[But] we’re still missing some elements in terms of military logistics to make it fully able and capable of sustaining warfighting operations at the technical operational level.”



<h3 class="wp-block-heading">Read more: <a href="https://www.cnbcafrica.com/2022/twitter-sees-record-number-of-govt-demands-to-remove-content-japan-and-russia-lead-pack/">Twitter sees record number of govt demands to remove content, Japan and Russia lead pack</a></h3>



However, he said he suspected that Russia was willing to go to extreme lengths to achieve its political goals.



“You don’t send close to 100,000 troops and as many people in reserves to prove a point — Russia has raised the stakes so high for me at this stage that it seems improbable it will just simply back down unless it gets something in return,” he said.



Meanwhile, Cranny-Evans told CNBC that if these steps continued to unfold, it was worrying for the long-term outlook.



“According to Russian theory, they would actually only invade when they were pretty sure that the Ukrainians were already beaten,” he explained. “So they could, in theory, be beaten before Russian tanks even move across the border.”



Some NATO members have signaled their support for Ukraine as troops have continued to be amassed at the country’s border with Russia.



Speaking in Parliament last week, U.K. Prime Minister Boris Johnson warned that “many Russian mothers’ sons will not be coming home” if Russia moved to invade Ukraine.



Meanwhile, Britain’s Foreign Secretary Liz Truss has said the U.K. will introduce legislation this week to allow it to hit Russian banks, oligarchs and energy companies with economic sanctions.



On Sunday,&nbsp;Bob Menendez, chair of the U.S. Senate Committee on Foreign Relations, told CNN the committee was devising the “mother of all sanctions” against Russia that would be “crippling to their economy” as a method of defending Ukraine.



German ministers have also said that Russia will face “massive” economic consequences if it takes any aggressive action against Ukraine.



<h2 class="wp-block-heading"><a></a>Risking ‘real financial harm’</h2>



“Real financial harm could be inflicted on Russia if the right sanctions and the right enforcement were put into place,” Cranny-Evans said.



Even without sanctions, the entire operation is already likely to have been costly for Russia — and those costs will only continue to rise if its troops invade.



“Large scale military action obviously comes with significant costs in terms of fuel consumption, ammunition, losses and replacement losses,” Henry Boyd, research fellow for defense and military analysis at thinktank the IISS, told CNBC in a phone call. “The baseline cost of the [current] deployment is not a free action, but it’s a relatively sustainable action — you’re not having to pay an awful lot more in terms of your budget to achieve what you’re trying to do.”



But he said the military action would already have had “knock-on consequences” domestically, with a large amount of civilian transportation being diverted to the military over the last few months.



“You’ve also already seen the effects that rumors of military action and likely economic sanctions have had on the stock market,” he added. “So I think you will already have seen, indirectly, some level of significant economic cost for the action undertaken so far.”



The finance and resources used in some recent military campaigns — such as the Western-led air campaign in Libya — may “pale in comparison” to what Russia would need to expend in a significant ground invasion, according to Boyd.



“But there’s a pessimistic view that however costly and however much risk Russia may run in terms of short-term economic pain, it may still be seen as worth it if it’s the only way to preserve what, in their mind, is the essential political situation in Russia’s near abroad,” he warned.



“If they need to go through war — whatever the scale and the size — to obtain their political strategic goals, they will do it,” Chatham House’s Boulegue agreed. “If they can avoid it, of course they will, because nobody in their right mind in the Kremlin would want more sanctions and to be ostracized even more.”



War would be “costly and long” for Russia, he added, and potential sanctions and economic costs could carry additional political costs by sparking popular uprisings against the Kremlin.



“They would sign [Putin’s] death in a way,” he said.



Andrew Wood, associate fellow at Chatham House’s Russia and Eurasia Program and a former British ambassador to Russia, added that Putin was “motivated by a fear of popular revolutions,” such as those seen recently in Belarus.

107008484-1643461966876-gettyimages-1238044957-ts12085f

Russia is willing to go to war and incur sanctions over Ukraine, analysts warn

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106591960-15930918212020-06-24t234040z_1770291300_rc2yfh9v0fkd_rtrmadp_0_health-coronavirus-usa-testing.jpeg" alt="" class="wp-image-414963" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106591960-15930918212020-06-24t234040z_1770291300_rc2yfh9v0fkd_rtrmadp_0_health-coronavirus-usa-testing.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106591960-15930918212020-06-24t234040z_1770291300_rc2yfh9v0fkd_rtrmadp_0_health-coronavirus-usa-testing-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106591960-15930918212020-06-24t234040z_1770291300_rc2yfh9v0fkd_rtrmadp_0_health-coronavirus-usa-testing-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Cooper Neill | Reuters</figcaption></figure>



There are already dozens of cases across almost half of the U.S. of a new Covid subvariant that’s even more contagious than the already highly transmissible omicron variant.



Nearly half of U.S. states have confirmed the presence of BA.2 with at least 127 known cases nationwide as of Friday, according to a global data base that tracks Covid variants. The Centers for Disease Control and Prevention, in a statement Friday, said although BA.2 has increased in proportion to the original omicron strain in some countries, it is currently circulating at a low level in the U.S.



The subvariant is 1.5 times more transmissible than the original omicron strain, referred to by scientists as BA.1, according to Statens Serum Institut, which conducts infectious disease surveillance for Denmark.



The new sublineage doesn’t appear to further reduce the effectiveness of vaccines against symptomatic infection, according to the U.K. Health Security Agency.



“Currently there is no evidence that the BA.2 lineage is more severe than the BA.1 lineage,” CDC spokesperson Kristen Nordlund said.



BA.2 overtook the original omicron as the dominant variant in Denmark over the course of a few weeks, said Troels Lillebaek, the chairman of the Scandinavian nation’s committee that conducts surveillance of Covid variants.



BA.1 and BA.2 have many differences in their mutations in the most important areas. In fact, the difference between BA.1 and BA.2 is greater than the difference between the original “wild strain” and the Alpha variant, which was the first major mutation to take root across the world.



The BA.2 variant has five unique mutations on a key part of the spike protein the virus uses to attach to human cells and invade them, Lillebaek told CNBC. Mutations on this part of the spike, known as the receptor binding domain, are often associated with higher transmissibility.



The U.K. Health Security Agency on Friday said BA.2 has a “substantial” growth advantage over the original omicron. The sister variant spread faster than the original omicron in all regions of England where there were enough cases to conduct an analysis, according to the agency.



<h3 class="wp-block-heading" id="h-read-more-who-says-omicron-won-t-be-last-covid-variant-as-global-cases-surge-by-20-in-a-week">Read more: <a href="https://www.cnbcafrica.com/2022/who-says-omicron-wont-be-last-covid-variant-as-global-cases-surge-by-20-in-a-week/">WHO says omicron won’t be last Covid variant as global cases surge by 20% in a week</a></h3>



However, a preliminary assessment found that BA.2 doesn’t appear to reduce the effectiveness of vaccines any more than the original omicron. A booster dose was 70% effective at preventing symptomatic illness from BA.2 two weeks after receiving the shot, compared with 63% effectiveness for the original omicron strain.



The World Health Organization has not labeled BA.2 a variant of concern. However, WHO officials have repeatedly warned that new variants will arise as omicron spreads across the world at an unprecedented rate. Maria Van Kerkhove, the WHO’s Covid-19 technical lead, warned on Tuesday that the next Covid will variant be more transmissible.



“The next variant of concern will be more fit, and what we mean by that is it will be more transmissible because it will have to overtake what is currently circulating,” Van Kerkhove said. “The big question is whether or not future variants will be more or less severe.”



Lillebaek said there is not enough data yet to determine whether BA.2 is able to reinfect people who caught the original omicron. However, prior infection would likely provide some crossover immunity to BA.2.



Pfizer and Moderna started clinical trials this week on omicron-specific shots amid growing concern that new variants will emerge as immunity induced by the original vaccines wanes.



New Covid cases are increasing in Denmark, with more than 50,000 new infections reported on Friday in a country of 5.8 million people, according to the country’s health ministry. Lillebaek said it’s safe to assume that BA.2 is driving the increase of new infections in Denmark right now.



New hospital admissions in Denmark rose by 12 for a total of 967 patients who are Covid positive. Lillebaek said this increase is likely within the limits of what the health system can manage. However, he noted that 80% of Danes are fully vaccinated and 60% have received booster shots.



“If you are in a community or living in a country where you have a low vaccination rate, then you will have for sure more admissions to hospital and more severe cases and then more going to ICU,” he said.



In the U.S., about 67% of those eligible are fully vaccinated, according to data from the CDC.

106591960-15930918212020-06-24t234040z_1770291300_rc2yfh9v0fkd_rtrmadp_0_health-coronavirus-usa-testing

The latest Covid variant is 1.5 times more contagious than omicron and already circulating in almost half of U.S. states

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="488" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/CSOGEXJ275JTJOJA36PKQHLO64-820x488.jpg" alt="" class="wp-image-414926" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/CSOGEXJ275JTJOJA36PKQHLO64-820x488.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/CSOGEXJ275JTJOJA36PKQHLO64-300x178.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/CSOGEXJ275JTJOJA36PKQHLO64-151x90.jpg 151w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/CSOGEXJ275JTJOJA36PKQHLO64-768x457.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/CSOGEXJ275JTJOJA36PKQHLO64-1536x913.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/CSOGEXJ275JTJOJA36PKQHLO64-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>FILE PHOTO: Facebook, WhatsApp and Instagram logos are displayed in this illustration taken October 4, 2021. REUTERS/Dado Ruvic/Illustration/File Photo</figcaption></figure>



BRUSSELS, Jan 27 (Reuters) &#8211; Facebook unit WhatsApp has been given until the end of February to explain changes to its privacy policy and whether this complies with EU consumer protection laws after complaints from consumer groups, the European Commission said on Thursday.



The European Consumer Organisation (BEUC) and eight of its members took their grievances to the EU executive and the European network of consumer authorities, saying WhatsApp was unfairly pressuring users to accept its new privacy policy which allows it to share some data with Facebook and other group firms.



EU Justice Commissioner Didier Reynders said he shared the worries and has asked WhatsApp to clarify the policy and if it complies with EU consumer protection law.



<h3 class="wp-block-heading" id="h-read-more-south-africa-s-information-regulator-says-whatsapp-cannot-share-users-contact-information">Read more: <a href="https://www.cnbcafrica.com/2021/south-africas-information-regulator-says-whatsapp-cannot-share-users-contact-information/">South Africa’s information regulator says WhatsApp cannot share users’ contact information</a></h3>



&#8220;WhatsApp has until the end of February to come back to us with concrete commitments on how they will address our concerns,&#8221; he said in a statement.



Areas of concern include whether the company provides sufficient information about its new terms of service and if its notifications prompting users to accept the new terms and privacy policy are fair.



The Commission said it was also concerned about the exchange of users&#8217; personal data between WhatsApp and third parties or other Facebook/Meta companies.



&#8220;We look forward to explaining to the European Commission how we protect our users&#8217; privacy in compliance with our obligations under EU law,&#8221; a WhatsApp spokesperson said. 



(Reporting by Foo Yun Chee; Editing by Hugh Lawson)

FILE PHOTO: Facebook, WhatsApp and Instagram logos are displayed in this illustration

WhatsApp has until end of Feb to clarify privacy policy change, EU says

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/GQVIXZF2BVM2PJUXTQZYI5DKUM-820x547.jpg" alt="" class="wp-image-414914" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/GQVIXZF2BVM2PJUXTQZYI5DKUM-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/GQVIXZF2BVM2PJUXTQZYI5DKUM-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/GQVIXZF2BVM2PJUXTQZYI5DKUM-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/GQVIXZF2BVM2PJUXTQZYI5DKUM-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/GQVIXZF2BVM2PJUXTQZYI5DKUM-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/GQVIXZF2BVM2PJUXTQZYI5DKUM-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 25, 2022. REUTERS/Brendan McDermid</figcaption></figure>



Jan 27 (Reuters) &#8211; Emerging market stocks slumped to over 14-month lows on Thursday and currencies were set for the worst session in more than five months, after the U.S. Federal Reserve signalled a March hike in interest rates and sustained policy tightening.



Subsequent interest rate increases and an eventual reduction in the Fed&#8217;s asset holdings would follow as needed, Fed Chair Jerome Powell said.



The comments spurred bets about more Fed tightening than speculated. Nomura now expects a 50-basis-points hike in March, as opposed to 25 bps markets had priced in, and along with BNP Paribas and BofA, now sees more than four hikes this year.



As U.S. Treasury yields hit 23-month highs and the dollar surged, most Asian currencies slumped, with the Chinese yuan sliding 0.7% for its steepest fall since June.



But currencies elsewhere in the developing world fared better.



For bond markets, the Fed&#8217;s balance sheet reduction is eyed, said Kiti Pantskhava, deputy head of research and fixed income at BCS Global Markets.



&#8220;Signs are coming from the Fed that they will stop asset purchase and begin to reduce the balance sheet. That&#8217;s potentially a bit more painful for EM. That will more likely affect long term U.S. Treasury yields and longer-term paper all over the world.&#8221;



Russia&#8217;s rouble gave up early losses to trade 1.2% higher. It was last at 78.5 per dollar after breaching 80 on Wednesday. Ukraine&#8217;s hryvnia hit fresh four-year lows and was last trading down 0.2%.



The United States had set out a diplomatic path to address sweeping Russian demands in eastern Europe, Washington said, as Moscow held security talks with Western countries and intensified its military build-up near Ukraine with new drills.



South Africa&#8217;s rand rose 0.6% ahead of a central bank meeting later in the day when investors expect a 25 basis points hike to 4% in the key interest rate as inflation rises.



As the dollar rally pressured the euro, the Czech crown rallied 0.4% against the euro.



Turkey&#8217;s lira fell 0.1% after the central bank hiked its year-end annual inflation forecast to 23.2%, from 11.8% three months ago.



The EM stocks gauge dropped 1.6%, as China property and technology majors slid with Alibaba down 7.2%.



China Evergrande Group slumped after the developer&#8217;s thinly detailed roadmap for restructuring left investors dissatisfied. A report on Thursday said Beijing was weighing breaking up Evergrande.



The broader EM stocks index is down about 4.2% so far this week, set for its worst weekly performance since August.



For GRAPHIC on emerging market FX performance in 2021, see <a href="http://tmsnrt.rs/2egbfVh">http://tmsnrt.rs/2egbfVh</a> 



For GRAPHIC on MSCI emerging index performance in 2021, see <a href="https://tmsnrt.rs/2OusNdX">https://tmsnrt.rs/2OusNdX</a>



(Reporting by Susan Mathew in Bengaluru; Editing by Shailesh Kuber)

Traders work on the floor of the NYSE in New York

Hawkish Fed hammers emerging stocks; currencies outside Asia rise

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="540" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/VEKKCY2HHZM3XHNAR6ZQ37Z7AY-820x540.jpg" alt="" class="wp-image-414909" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/VEKKCY2HHZM3XHNAR6ZQ37Z7AY-820x540.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/VEKKCY2HHZM3XHNAR6ZQ37Z7AY-300x197.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/VEKKCY2HHZM3XHNAR6ZQ37Z7AY-137x90.jpg 137w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/VEKKCY2HHZM3XHNAR6ZQ37Z7AY-768x505.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/VEKKCY2HHZM3XHNAR6ZQ37Z7AY-1536x1011.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/VEKKCY2HHZM3XHNAR6ZQ37Z7AY-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>FILE PHOTO: A giant excavator loads a mining truck at the Fortescue Solomon iron ore mine located in the Sheila Valley, around 400 km south of Port Hedland, in the Pilbara region of Western Australia December 2, 2013. REUTERS/David Gray/File Photo</figcaption></figure>



LAUNCESTON, Australia, Jan 27 (Reuters) &#8211; Iron ore is enjoying a rally built largely on two factors that have yet to eventuate, a renewed building boom in China and possible supply disruptions in top exporter Australia.



The spot price of iron ore for delivery to north China , as assessed by commodity price reporting agency Argus, ended at $137.60 a tonne on Wednesday, a surge of 58% since the 18-month low of $87 in mid-November.



The catalysts for the rally are effectively a fear and a hope, and together they are proving enough to give the steel-making raw material a bullish tone.



The fear is that Australia&#8217;s supply will be affected by the Omicron coronavirus variant breaching the walls of fortress Western Australia state, which until now has been one of the few jurisdictions in the world to keep COVID-19 at bay using strict border controls.



Western Australia is home to the bulk of Australia&#8217;s iron ore mines, which in turn supply about 70% of the imports by China, the world&#8217;s biggest buyer of the raw material.



The state recorded 24 new cases of COVID-19 on Wednesday, and while this appears a tiny number compared to the 17,316 new cases and 29 deaths recorded in New South Wales state the same day, the concern is that Western Australia is at the start of an Omicron wave.



&#8220;We now have an outbreak and we&#8217;re not going to be able to get it under control,&#8221; Western Australia Premier Mark McGowan said on Wednesday.



Despite this pessimism, McGowan is still keeping his state&#8217;s borders shut in a bid to control how fast Omicron spreads, but this may also end up lowering iron ore output.



Many of the workers at the remote mines reside in other states and the big miners are concerned that some will give up their jobs unless Western Australia&#8217;s border controls are relaxed, allowing them to travel freely between the mines and their homes in Australia&#8217;s eastern states.



Rio Tinto, BHP Group and Fortescue Metals Group, Australia&#8217;s biggest iron ore miners, have all flagged likely labour disruptions to their operations.



An additional worry for Australia&#8217;s iron ore production is the coming cyclone season, which may be more severe than usual because of the La Nina weather phenomenon, which has in the past led to more and stronger storms.



<h2 class="wp-block-heading" id="h-export-volumes-steady">EXPORT VOLUMES STEADY</h2>



The potential disruptions are still just that, with actual export volumes holding up.



Australia&#8217;s iron ore exports are estimated by Refinitiv at 74.13 million tonnes in January, down from December&#8217;s 80.26 million, but above 68.25 million in November and October&#8217;s 71.71 million.



The solid exports in recent months have shown up in China&#8217;s import figures, with Refinitiv forecasting January imports at 117.41 million tonnes, which if confirmed by official customs data would be the highest on record, eclipsing the official 112.65 million from July 2020.



Commodity consultants Kpler are also expecting record iron ore imports by China in January, with their data pointing to arrivals of 117.42 million tonnes. The official data will likely show some difference as not all cargoes that are discharged in January may be assessed as having cleared customs in that month.



China&#8217;s robust iron ore imports form the hope part of the current rally, with expectations for strong construction activity in coming months.



Steel production in China may be constrained until March, given the desire to limit pollution over the Beijing Winter Olympics and the upcoming week-long Lunar New Year holidays.



However, once this period is over, expectations are for steel demand to rise as construction ramps up to the summer peak and as Beijing works to stimulate the economy in order to meet growth targets.



GRAPHIC-China iron ore imports vs spot price: <a href="https://tmsnrt.rs/3o1NbHw">https://tmsnrt.rs/3o1NbHw</a>



(Editing by Richard Pullin)

FILE PHOTO: File picture of a giant excavator loading a mining truck at the Fortescue Solomon iron ore mine south of Port Hedland

Iron ore rallies on Australia supply fears, China demand hopes: Russell

The International Monetary Fund has warned of further turbulence ahead for financial markets, particularly as governments around the world shift gears into recovery mode.



Central banks’ moves to tighten monetary policy and curb rising inflation could push riskier stocks deeper into the red even as policymakers pledge a smooth transition, the IMF’s Tobias Adrian, financial counsellor and director of monetary and capital markets, told CNBC’s Geoff Cutmore.



“We could certainly see further tightening of financial conditions, and that means that risk assets such as equities could sell off further,” Adrian said.



The market reaction will hinge largely on central banks’ ability to communicate their intentions, Adrian said, urging order and transparency.



On Wednesday, the Federal Reserve signaled that it could halt its asset purchasing program and start raising interest rates as soon as March.



“This is hopefully not going to be disorderly, but it’s going to be an orderly adjustment in terms of valuations,” he said.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106410712-1582721727936nyse.jpg" alt="" class="wp-image-414905" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106410712-1582721727936nyse.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106410712-1582721727936nyse-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106410712-1582721727936nyse-160x90.jpg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Traders work at New York Stock Exchange Feb. 25, 2020. Zhang Mocheng | Xinhua | Getty Images</figcaption></figure>



“We are estimating, for example, for an unexpected further tightening of 50 basis points you could see a substantial further sell-off in the equity markets,” he added, noting that some sectors would be worse affected than others.



Such disruption could translate into crypto markets too, Adrian said, which have exhibited an “increase in correlations” with traditional financial markets and have witnessed a major sell-off this year.



Adrian’s comments come as the IMF released on Thursday its Global Financial Stability report. It follows the release of its World Economic Outlook earlier this week, which downgraded global growth to 4.4% in 2022.



Despite downward pressure from rising interest rates, Thursday’s report noted that corporate earnings are forecast to surpass pre-pandemic levels in 2022 in most sectors.



Meanwhile, bond spreads —a key metric for measuring the price of a group of bonds — remain below average 2019 levels.



<h2 class="wp-block-heading" id="h-emerging-markets-under-pressure"><a></a>Emerging markets under pressure</h2>



The IMF’s report also highlighted the “spillover” risks to emerging markets from policy normalization among advanced economies.



The IMF had previously warned that U.S. policy tightening will hamper the economic recovery in emerging Asia.



“We have certainly seen capital flows through many emerging markets slow down already in the past three months, and we could see a further slowdown going forward,” Adrian said.



Inflationary pressures within emerging markets have also led many central banks to raise policy rates, putting nascent growth recovery at risk.



“Such further tightening of domestic financial conditions at a time of high fiscal deficits and external financing needs could generate significant strains,” the report said.

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IMF sees potential for further market turbulence as central banks hike rates

LONDON — European stocks retreated on Thursday as global markets react badly to the latest monetary policy decision from the U.S. Federal Reserve.



The pan-European&nbsp;Stoxx 600&nbsp;dropped 1% in early trade, with tech stocks shedding 3% to lead losses as all sectors slid into negative territory except banks, which gained 0.6%.



In terms of individual share price movement,&nbsp;Deutsche Bank&nbsp;gained 3.8% after defying market expectations to post a profit for the fourth quarter of 2021, as investment bank revenues rose.



The German lender said profit attributable to shareholders came in at 145 million euros ($162.7 million) for the final three months of the year — a sixth consecutive quarter of profit and almost triple its profit for the same period in 2020.



At the bottom of the European blue chip index, British boot brand Dr. Martens fell more than 16% after its quarterly earnings report.



Global markets are reacting badly to&nbsp;the Federal Reserve’s indication on Wednesday that it could soon raise interest rates for the first time in more than three years.



<h3 class="wp-block-heading" id="h-read-more-japan-and-south-korea-lead-declines-across-asia-pacific-as-investors-digest-fed-remarks">Read more: <a href="https://www.cnbcafrica.com/2022/japan-and-south-korea-lead-declines-across-asia-pacific-as-investors-digest-fed-remarks/">Japan and South Korea lead declines across Asia-Pacific as investors digest Fed remarks</a></h3>



The Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the&nbsp;first increase since December 2018.



The&nbsp;post-meeting statement&nbsp;from the Federal Open Market Committee did not provide a specific time for when the increase will come, though indications are that it could happen as soon as the March meeting.&nbsp; The statement comes in response to inflation running at its hottest level in nearly 40 years.



U.S. stocks initially rallied Wednesday&nbsp;even after the Federal Reserve pointed to an interest rate hike coming soon but overnight sentiment has changed.&nbsp;U.S. stock futures fell Thursday&nbsp;morning, indicating a sharply lower open on Wall Street.



Asia-Pacific markets fell across the board&nbsp;on Thursday overnight. Japan’s&nbsp;Nikkei 225&nbsp;fell 3.3% while the Topix was down 2.3%. Over in South Korea, the benchmark&nbsp;Kospi&nbsp;dropped 3.13% and in Hong Kong, the&nbsp;Hang Seng index&nbsp;and the Hang Seng Tech index dropped 2.56% and 4.61%, respectively. Chinese mainland shares also declined.



Along with Deutsche Bank, earnings in Europe on Thursday came from Unicredit, LVMH, SAP, Banco Sabadell, easyJet, Diageo and STMicroelectronics. Renault provided a strategic update on the Nissan/Mitsubishi alliance.



On the data front, Germany’s GfK consumer sentiment index came in at -6.7 points heading into February from a revised -6.9 points a month ago, exceeding average analyst expectations for a drop to -7.8.

Federal Reserve Chairman Jerome Powell Photo: via Flickr

European markets fall as investors react to Fed decision; Stoxx 600 down 1%

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105538285-1540869430647gettyimages-503573074-820x461.jpeg" alt="" class="wp-image-414894" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105538285-1540869430647gettyimages-503573074-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105538285-1540869430647gettyimages-503573074-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105538285-1540869430647gettyimages-503573074-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105538285-1540869430647gettyimages-503573074-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105538285-1540869430647gettyimages-503573074-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105538285-1540869430647gettyimages-503573074.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo: via CNBC</figcaption></figure>



SINGAPORE — Asia-Pacific markets fell across the board on Thursday as investors reacted to an overnight update from the U.S. Federal Reserve that indicated the central bank plans to raise interest rates as soon as March.



Japan’s Nikkei 225 fell 3.11% to 26,170.30 while the Topix declined 2.61% to 1,842.44. In South Korea, the benchmark Kospi dropped 3.5% to 2,614.49 and Hong Kong Hang Seng index and the tech-focused Hang Seng Tech index slipped 2.5% and 4.7%, respectively, in afternoon trade.



Chinese mainland shares also declined: The Shanghai Composite slipped 1.78%, and the Shenzhen component was down 2.77%.



In Australia, the ASX 200 retraced early gains and closed 1.77% lower at 6,838.30.



Markets in South Asia and Southeast Asia also sold off: India’s Nifty 50 was down 2.12%, Singapore’s Straits Times Index fell 0.7%, and Indonesia’s Jakarta Composite declined 0.11%.



The MSCI Asia ex-Japan index was down 2.38%.



Thursday’s session in the Asia-Pacific followed overnight declines on Wall Street where the Dow Jones Industrial Average ended the day down 129 points, after gaining more than 500 points at one point, following the Fed’s update.



The Taiwan market was closed for a holiday on Thursday.



<h2 class="wp-block-heading" id="h-tech-shares-fall"><a></a>Tech shares fall</h2>



In South Korea, shares of Samsung Electronics fell 2.73% after the company reported a 53% jump in operating profit in the fourth quarter of 2021 compared to the year before, but it was down 12% from the previous three months.



The global chipmaker said its money-making memory business expects server demand to grow in 2022 as companies increase their investments into information technology, but supply chain issues are set to persist.



Meanwhile, Hong Kong-listed shares of major Chinese tech names were also down sharply. Alibaba shares fell 7.36%, JD was down 4.21%, Meituan fell 8.36%, Baidu was down 4.2% and Tencent lost 2.9%.  Chinese video platform Bilibili also plunged 11.3%.



Block shares trading in Australia also fell 5.35% following a report that Apple is planning to allow merchants to receive payments with a phone tap instead of using hardware attachments like those produced by Square.



Block is founded and led by Twitter’s Jack Dorsey and was formerly called Square.



<h2 class="wp-block-heading" id="h-fed-meeting-u-s-markets"><a></a>Fed meeting, U.S. markets</h2>



The Federal Open Market Committee said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming — it would be the Fed’s first hike since December 2018.



Fed Chair Jerome Powell indicated at a news conference that the U.S. central bank had “quite a bit of room to raise interest rates without threatening the labor market.” Inflation stateside is running at its hottest level in nearly 40 years.



While the Fed’s post-meeting statement did not provide a specific time for when the hike would come, indications suggest it could happen as soon as at its March meeting.



“The Fed also used this meeting to continue discussion on balance sheet normalisation and released a set of principles on its approach to shrinking the balance-sheet. Of most importance was a desire to make it predictable but sensitive to both the economy and markets,” the ANZ analysts said.



Markets interpreted Powell’s comments as “another hawkish tilt in Fed stance” and are pricing in almost 5 interest rate hikes this year, Maybank analysts said in a Thursday note.



<h2 class="wp-block-heading">Oil prices retreat</h2>



Oil prices fell Thursday during Asian trading hours. U.S. crude futures were down 0.48% to $86.93 while global benchmark Brent declined 0.41% to $89.59 a barrel.



In overnight trade, prices rose more than 2% amid growing tensions between Russia and Ukraine, where experts say fears of Moscow’s invasion of the Eastern European country remain. Brent prices hit $90 at one point, but pulled back slightly.



Elsewhere, South Korea’s military said that North Korea fired what appears to be two ballistic missiles on Thursday, Reuters reported. The reclusive state has conducted six missile tests this month.



Meanwhile, spot gold declined after the Fed’s latest comments, falling as much as 1.8% to its lowest in a week at $1,815.06, according to Reuters. It last traded at $1,812 in Asia on Thursday.



<h2 class="wp-block-heading"><a></a>Currencies</h2>



The U.S. dollar index, which tracks the greenback against a basket of its peers, rose 0.83% to 96.748.



“USD extended its FOMC‑inspired gains in the Asia session and broke above its 4 January high of 96.46,” Carol Kong from the Commonwealth Bank of Australia said in an afternoon note. The world’s reserve currency could “test the 96.94 resistance level if US equities continue to sell‑off.”



U.S. futures traded lower Thursday during Asian trading hours.



Elsewhere, the Japanese yen traded at 114.63 per dollar, while the Australian dollar fell 0.6% to $0.7071.



— CNBC’s Saheli Roy Choudhury, Jeff Cox, Hannah Miao and Fred Imbert contributed to this report.

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Japan and South Korea lead declines across Asia-Pacific as investors digest Fed remarks

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106705643-1611772669606-pow-820x547.jpg" alt="" class="wp-image-414889" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106705643-1611772669606-pow-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106705643-1611772669606-pow-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106705643-1611772669606-pow-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106705643-1611772669606-pow-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106705643-1611772669606-pow-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106705643-1611772669606-pow-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo: via CNBC</figcaption></figure>



Facing both turbulent financial markets and raging inflation, the Federal Reserve on Wednesday indicated it could soon raise interest rates for the first time in more than three years as part of a broader tightening of historically easy monetary policy.



In a move that came as little surprise, the Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first rise since December 2018.



Chairman Jerome Powell added that the Fed could move on an aggressive path.



“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” Powell said at his post-meeting news conference. After being up strongly earlier, the major stock market averages turned negative shortly following Powell’s pronouncement.



The committee’s statement came in response to inflation running at its hottest level in nearly 40 years. Though the move toward less accommodative policy has been well telegraphed over the past several weeks, markets in recent days have been remarkably choppy as investors worried that the Fed might tighten policy even more than expected.



The post-meeting statement from the Federal Open Market Committee did not provide a specific time for when the increase will come, though indications are that it could happen as soon as the March meeting. The statement was adopted without dissent.



“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement said. The Fed does not meet in February.



In addition, the committee noted the central bank’s monthly bond-buying will proceed at just $30 billion in February, indicating that program is expected to end in March as well at the same time that rates increase.



There were no specific indications Wednesday when the Fed might start to reduce bond holdings that have bloated its balance sheet to nearly $9 trillion.



However, the committee released a statement outlining “principles for reducing the size of the balance sheet.” The statement is prefaced with the notion that the Fed is preparing for “significantly reducing” the level of asset holdings.



<h3 class="wp-block-heading" id="h-read-more-the-federal-reserve-is-scaring-markets-with-the-triple-threat-of-policy-tightening">Read more: <a href="https://www.cnbcafrica.com/2022/the-federal-reserve-is-scaring-markets-with-the-triple-threat-of-policy-tightening/">The Federal Reserve is scaring markets with the triple threat of policy tightening</a></h3>



That policy sheet noted that the benchmark funds rate is the “primary means of adjusting the stance of monetary policy.” The committee further noted that the balance sheet reduction would happen after rate hikes start and would be “in a predictable manner” by adjusting how much of the bank’s proceeds from its bond holdings would be reinvested and how much would be allowed to roll off.



“The Fed’s announcement that it will ‘soon be appropriate’ to raise interest rates is a clear sign that a March rate hike is coming,” noted Michael Pearce, senior U.S. economist at Capital Economics. “The Fed’s plans to begin running down its balance sheet once rates begin to rise suggests an announcement on that could also come as soon as the next meeting, which would be slightly more hawkish than we expected.”



Markets had been anxiously awaiting the Fed’s decision.



Investors had been expecting the Fed to tee up the first of multiple rate hikes, and in fact are pricing in a more aggressive schedule this year than FOMC officials indicated in their December outlook. At that time, the committee penciled in three 25 basis point moves this year, while the market is pricing in four hikes, according to the CME’s FedWatch tool that computes the probabilities through the fed funds futures market.



Traders are anticipating a funds rate by the end of the year of about 1%, from the near-zero range where it’s currently pegged.



Fed officials have been expressing concern lately about persistent inflation, following months of insisting that the price increases were “transitory.” Consumer prices are up 7% from a year ago, the fastest 12-month pace since the summer of 1982.



The durability of inflation has caused officials to rethink a strategy that has produced the easiest monetary policy in Fed history. The central bank slashed its benchmark rate to a target of 0%-0.25% in the early days of the Covid pandemic and has been buying billions of dollars in Treasurys and mortgage-backed securities each month.



“Part of this will be the Fed moving away from very high accommodative policy to substantially less accommodative policy and over time to a policy that’s not accommodative,” Powell said.



The bond-buying program, sometimes called quantitative easing, has brought the Fed’s total assets on its balance sheet to nearly $9 trillion. Powell said the Fed will wait a few months then probably start allowing some of the proceeds from its bond holdings to run off each month while reinvesting the rest. As things stand now, the Fed reinvests all of those proceeds.



“The balance sheet is substantially larger than it needs to be,” Powell said. “There’s a substantial amount of shrinkage in the balance sheet to be done. That’s going to take some time. We want that process to be orderly and predictable.”



Goldman Sachs said a few days ago that it expects the balance sheet reduction to start in June at a pace of $100 billion a month, about double the pace of the previous move of a runoff several years ago.

106705643-1611772669606-pow

Federal Reserve points to interest rate hike coming in March

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/twitter-1795652_1280-820x547.jpg" alt="" class="wp-image-406024" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/twitter-1795652_1280-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/twitter-1795652_1280-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/twitter-1795652_1280-120x80.jpg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/twitter-1795652_1280-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/twitter-1795652_1280.jpg 1280w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo: via Flickr</figcaption></figure>



Jan 25 (Reuters) &#8211;&nbsp;Twitter&nbsp;said governments around the world made requests to remove content from a record number of user accounts between January and June last year, in data to be released by the social media company on Tuesday.



The platform said governments made 43,387 legal demands for the removal of content from 196,878 accounts in the six-month period, according to data in its latest transparency report seen by Reuters.



Twitter&nbsp;said this was the largest number of accounts ever targeted with government removal requests in a reporting period since the company started releasing transparency reports in 2012. It was also the largest number of government removal requests in a reporting period.



Ninety-five percent of these legal demands came from five countries, with the most coming from Japan, followed by Russia, Turkey, India, and South Korea, it said. The site is blocked in several countries including China and North Korea.



Twitter said it either &#8220;withheld&#8221; access to content in certain countries or required account holders to remove some or all of the reported content in response to 54% of the global legal demands in this period.



<h3 class="wp-block-heading" id="h-read-more-nigerians-give-muted-welcome-to-end-of-twitter-ban">Read more: <a href="https://www.cnbcafrica.com/2022/nigerians-give-muted-welcome-to-end-of-twitter-ban/">Nigerians give muted welcome to end of Twitter ban</a></h3>



&#8220;We&#8217;re facing unprecedented challenges as governments around the world increasingly attempt to intervene and remove content,&#8221;&nbsp;Twitter&#8217;s vice president of global public policy and philanthropy Sinead McSweeney said in a statement. &#8220;This threat to privacy and freedom of expression is a deeply worrying trend that requires our full attention.&#8221;



Major social media companies face ongoing scrutiny from global governments and regulators over the material they allow on their platforms. In the past year,&nbsp;Twitter&nbsp;has faced high-profile tussles with governments from India to Nigeria over content moderation and regulation.



Twitter&nbsp;has also, along with companies like Facebook and Google, faced criticism in the United States and other countries over how it combats issues like misinformation and violent rhetoric on its platform.



The number of accounts specified in the legal requests was up almost 50% from 131,933 accounts from the previous six months, according to the data. The number of government removal requests increased 14% from 38,524 in the last reporting period and was up about 2.8% year-over-year,&nbsp;Twitter&nbsp;said.



The company said this summer it had seen a surge in government demands worldwide in 2020 to take down content posted by journalists and news outlets, but it said the number of such accounts subject to these requests decreased 14% in the latest reporting period.



The report also said requests from governments for Twitter to preserve account information were down by about 4% from the previous reporting period. It said the United States accounted for about 57% of these requests and the U.S. was also the single largest source of government information requests. 



(Reporting by Elizabeth Culliford in New York Editing by Chris Reese)

twitter-1795652_1280

Twitter sees record number of govt demands to remove content, Japan and Russia lead pack

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107005371-1643039437930-gettyimages-1237649604-AFP_9VX32Q.jpeg" alt="" class="wp-image-414841" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107005371-1643039437930-gettyimages-1237649604-AFP_9VX32Q.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107005371-1643039437930-gettyimages-1237649604-AFP_9VX32Q-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107005371-1643039437930-gettyimages-1237649604-AFP_9VX32Q-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>The seal for the International Monetary Fund is seen near the World Bank headquarters (R) in Washington, DC on January 10, 2022. Stefani Reynolds | AFP | Getty Images</figcaption></figure>



The International Monetary Fund has downgraded its global growth forecast for this year as rising Covid-19 cases, supply chain disruptions and higher inflation hamper economic recovery.



In its delayed World Economic Outlook report, published Tuesday, the IMF said it expects global gross domestic product to weaken from 5.9% in 2021 to 4.4% in 2022 — with this year’s figure being half a percentage point lower than previously estimated.



“The global economy enters 2022 in a weaker position than previously expected,” the report noted, highlighting “downside surprises” such as the emergence of the omicron Covid variant, and subsequent market volatility, since its October forecast.



The revised outlook is led by growth markdowns in the world’s two largest economies; the U.S. and China.



The U.S. is expected to grow 4.0% in 2022, 1.2 percentage points lower than previously forecast as the Federal Reserve moves to withdraw its monetary stimulus, even as supply chain disruptions weigh on the economy. The updated outlook also removed President Biden’s signature Build Back Better fiscal policy package from its baseline projection after failure to pass the original bill.



China, meanwhile, is predicted to grow 4.8% this year, down 0.8 percentage points from earlier estimates amid disruptions caused by its zero-Covid policy, as well as “projected financial stress” among its property developers.



<h2 class="wp-block-heading" id="h-inflation-in-focus"><a></a>Inflation in focus</h2>



Elsewhere, still surging Covid cases coupled with rising inflation and higher energy prices weighed on growth estimates globally, most notably in Brazil, Canada and Mexico.



The IMF said higher inflation is set to persist for longer than previously anticipated, but added that it should ease later this year, “as supply-demand imbalances wane in 2022 and monetary policy in major economies responds.”



Looking ahead, the report upgraded its 2023 growth forecast by 0.2 percentage points to 3.8%. However, it warned that the estimate precluded the emergence of a new Covid variant, and said any pickup would be dependent on equitable global access to vaccines and health care.



“The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective,” it said.



“The emphasis on an effective global health strategy is more salient than ever,” it added.

107005371-1643039437930-gettyimages-1237649604-AFP_9VX32Q

IMF cuts 2022 global growth forecast as U.S., China recovery wanes

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106943545-1631892234086-gettyimages-1235313083-BIDEN_CLIMATE.jpeg" alt="" class="wp-image-414828" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106943545-1631892234086-gettyimages-1235313083-BIDEN_CLIMATE.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106943545-1631892234086-gettyimages-1235313083-BIDEN_CLIMATE-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106943545-1631892234086-gettyimages-1235313083-BIDEN_CLIMATE-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>The Marriner S. Eccles Federal Reserve building in Washington, D.C., on Friday, Sept. 17, 2021. Stefani Reynolds | Bloomberg | Getty Images</figcaption></figure>



The current slide in the stock market may be spooking some investors, but it’s seen as unlikely to scare Federal Reserve officials enough to deviate from their current policy track.



In fact, Wall Street is looking at a Fed that might even talk tougher this week as it is seemingly locked in a fight against generational highs in inflation amid market turmoil.



Goldman Sachs and Bank of America both have said in recent days that they see increasing chances of an even more hawkish central bank, meaning a better chance of even more interest rate hikes and other measures that would reverse the easiest monetary policy in U.S. history.



That sentiment is spreading, and is causing investors to reprice a stock market that had been hitting new historic highs on a consistent basis but has taken a steep turn in the other direction in 2022.



“The S&amp;P is down 10%. That’s not enough for the Fed to go with a weak backbone. They have to show some credibility on inflation here,” said Peter Boockvar, chief investment officer at the Bleakley Advisory Group. “By kowtowing to the market so quickly without doing anything with respect to inflation would be a bad look for them.”



<h3 class="wp-block-heading">Read more: <a href="https://www.cnbcafrica.com/2022/the-federal-reserve-is-scaring-markets-with-the-triple-threat-of-policy-tightening/">The Federal Reserve is scaring markets with the triple threat of policy tightening</a></h3>



Over the past two months the Fed has taken a sharp pivot on inflation, which is running at a nearly 40-year high.



Central bank officials spent most of 2021 calling the rapid price increases “transitory” and pledging to keep short-term borrowing rates anchored near zero until they saw full employment. But with inflation more durable and intense than Fed forecasts, policymakers have indicated they will start hiking interest rates in March and tightening policy elsewhere.



Where the market had been able to count on the Fed to step in with policy easing during previous corrections, a Fed committed to fighting inflation is considered unlikely to step in and stem the bleeding.



“That gets into the circular nature of monetary policy. It gooses asset prices when they are pedal to the metal, and asset prices fall when they back off,” Boockvar said. “The difference this time is they have rates at zero and inflation is at 7%. So they have no choice but to react. Right now, they are not going to roll over for markets just yet.”



The Federal Open Market Committee, which sets interest rates, meets Tuesday and Wednesday.



<h2 class="wp-block-heading" id="h-comparisons-to-2018"><a></a>Comparisons to 2018</h2>



The Fed does have considerable history of reversing course in the face of market turmoil.



Most recently, policymakers turned course after a series of rate hikes that culminated in December 2018. Fears of a global economic slowdown in the face of a tightening Fed led to the market’s worst Christmas Eve rout in history that year, and the following year saw multiple rate cuts to assuage nervous investors.



There are differences aside from inflation between this time and that market washout.



DataTrek Research compared December 2018 with January 2022 and found some key differences:



<ul class="wp-block-list"><li>A 14.8% decline then in the S&amp;P 500 compared with 8.3% now, as of Friday’s close.</li><li>A slide in the Dow Jones industrials of 14.7% then to 6.9% now.</li><li>The Cboe Volatility Index peaking at 36.1 then to 28.9 now.</li><li>Investment-grade bond spreads at 159 basis points (1.59 percentage points) then to 100 now.</li><li>High-yield spreads of 533 basis points versus 310 basis points now.</li></ul>



“By any measure as the Fed looks to assess capital markets stress &#8230; we are nowhere near the same point as in 2018 where the central bank reconsidered its monetary policy stance,” DataTrek co-founder Nick Colas wrote in his daily note.



“Put another way: until we get a further selloff in risk assets, the Fed will simply not be convinced that raising interest rates and reducing the size of its balance sheet in 2022 will more likely cause a recession rather than a soft landing,” he added.



But Monday’s market action added to the rough waters.



Major averages dipped more than 2% by midday, with rate-sensitive tech stocks on the Nasdaq taking the worst of it, down more than 4%.



Market veteran Art Cashin said he thinks the Fed could take notice of the recent selling and move off its tightening position if the carnage continues.



“The Fed is very nervous about these things. It might give them a reason to slow their step a little bit,” Cashin, director of floor operations for UBS, said Monday on CNBC’s “Squawk on the Street.” “I don’t think they want to be too overt about it. But believe me, I think they will have the market’s back if things turn worse, if we don’t bottom here and turn around and they keep selling into late spring, early summer.”



Still, Bank of America strategists and economists said in a joint note Monday that the Fed is unlikely to budge.



<h2 class="wp-block-heading"><a></a>‘Every meeting is live’</h2>



The bank said it expects Fed Chairman Jerome Powell on Wednesday to signal that “every meeting is live” regarding either rate hikes or additional tightening measures. Markets already are pricing in at least four increases this year, and Goldman Sachs said the Fed could hike at every meeting starting in March if inflation doesn’t subside.



While the Fed isn’t likely to set concrete plans, both Bank of America and Goldman Sachs see the central bank nodding toward the end of its asset purchases in the next month or two and an outright rundown of the balance sheet to start around midyear.



Though markets have expected the asset purchase taper to come to a complete conclusion in March, BofA said there’s a chance that the quantitative easing program might be halted in January or February. That in turn could send an important signal on rates.



“We believe this would surprise the market and likely signal an even more hawkish turn than already expected,” the bank’s research team said in a note. “Announced taper conclusion at this meeting would increase the odds we assign to a 50bp hike in March and another potentially 50bp hike in May.”



<h3 class="wp-block-heading">Read more: <a href="https://www.cnbcafrica.com/2022/global-markets-slump-on-hawkish-fed-minutes/">Global markets slump on hawkish Fed minutes</a></h3>



Markets already have priced in four quarter-percentage point increases this year and had been leaning toward a fifth before reducing those odds Monday.



The note further went on to say that a market worried about inflation “will likely continue bullying the Fed into more rate hikes this year, and we expect limited pushback from Powell.”



Boockvar said the situation is the result of a failed “flexible average inflation targeting” Fed policy adopted in 2020 that prioritized jobs over inflation, the pace of which has garnered comparisons with the late 1970s and early 1980s at a time of easy central bank policy.



“They can’t print jobs, so they’re not going to get restaurants to hire people,” he said. “So this whole idea that the Fed can somehow influence jobs is specious in the short term for sure. There’s a lot of lost lessons here from the 1970s.”

106943545-1631892234086-gettyimages-1235313083-BIDEN_CLIMATE

The stock market slide is unlikely to budge the Fed from tightening

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106445687-1584363442885gettyimages-1205265918-1.jpeg" alt="" class="wp-image-414757" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106445687-1584363442885gettyimages-1205265918-1.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106445687-1584363442885gettyimages-1205265918-1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/106445687-1584363442885gettyimages-1205265918-1-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>International Monetary Fund Managing Director Kristalina Georgieva speaks at a press conference in Washington D.C., on March 4, 2020. Liu Jie | Xinhua | Getty Images</figcaption></figure>



Kristalina Georgieva, managing director of the International Monetary Fund, has said that interest rate hikes by the Federal Reserve could “throw cold water” on already weak economic recoveries in certain countries.



Georgieva, speaking via videoconference at The Davos Agenda virtual event on Friday, said an increase in U.S. rates could have significant implications for countries with higher levels of dollar-denominated debt.



<h3 class="wp-block-heading" id="h-read-more-world-bank-slashes-global-growth-forecast-and-warns-about-growing-inequality">Read more: <a href="https://www.cnbcafrica.com/2022/world-bank-slashes-global-growth-forecast-and-warns-about-growing-inequality/">World Bank slashes global growth forecast and warns about growing inequality</a></h3>



She said it was therefore “hugely important” that the Fed was clearly communicating its policy plans to prevent surprises.



On a panel moderated by CNBC’s Geoff Cutmore, Georgieva said the IMF’s message to countries with high levels of dollar-denominated debt was: “Act now. If you can extend maturities, please do it. If you have currency mismatches, now is the moment to address them.”



The IMF expects the global economic recovery to continue, Georgieva said, but stressed that it was “losing some momentum.”

106445687-1584363442885gettyimages-1205265918-1

IMF chief says Fed rate hike could ‘throw cold water’ on global recovery

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/W7JB7ABGUVKVBJKY2CMEO4G6JU-820x547.jpg" alt="" class="wp-image-414741" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/W7JB7ABGUVKVBJKY2CMEO4G6JU-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/W7JB7ABGUVKVBJKY2CMEO4G6JU-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/W7JB7ABGUVKVBJKY2CMEO4G6JU-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/W7JB7ABGUVKVBJKY2CMEO4G6JU-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/W7JB7ABGUVKVBJKY2CMEO4G6JU.jpg 960w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>A price tag for tomatoes is pictured at a street market in Istanbul, Turkey, January 4, 2022. REUTERS/Murad Sezer/File Photo</figcaption></figure>



LONDON/NEW YORK, Jan 21 (Reuters) &#8211; More governments are seeking ways to prevent surging inflation whipping up economic trouble &#8211; and even public unrest &#8211; without raising interest rates.



But as the examples below show, past attempts to rein in soaring prices without hiking borrowing costs have often ended badly.



<h2 class="wp-block-heading" id="h-turkey">TURKEY</h2>



Turkey has spent years slashing rates only to hike again when the lira collapses, stoking inflation.



It has dabbled with measures including FX restrictions, but this time <a href="https://www.reuters.com/markets/europe/turkeys-lira-weakens-fifth-day-monetary-policy-worries-2021-12-31">President Tayyip Erdogan is going all-in by offering to compensate lira savers</a> from the public purse if <a href="https://www.reuters.com/markets/europe/turkish-depositors-delight-lira-let-up-will-erdogans-plan-deliver-2021-12-21">currency losses exceed bank account interest rates</a>.



That could prove costly, and put at risk a main draw for foreign investors &#8211; Turkey&#8217;s relatively low government debt.



&#8220;What the Turks are trying, honestly &#8211; I have never seen anything like it before,&#8221; said AXA&#8217;s chief economist Gilles Moec.



<h2 class="wp-block-heading">ARGENTINA</h2>



A lack of trust in economic institutions &#8211; and the peso &#8211; has plagued Argentina for decades.



Efforts by right- and left-wing governments to rein in galloping inflation have seen price freezes on many products and capital controls.



Argentines often prefer to do business in dollars but limited access to the U.S. currency has created a huge gap between official and black market exchange rates.



The central bank recently <a href="https://www.reuters.com/article/idUSS0N2MM02A">raised interest rates to 40% from 38%</a>. But the &#8220;real&#8221; rate, taking inflation into account, remains deeply negative.



Goldman Sachs&#8217; Argentina economist Alberto Ramos says headline inflation has averaged 47.2% since July 2018, attesting to &#8220;significant macro policy dysfunction and the failure of the monetary authority in securing monetary control&#8221;.



<h2 class="wp-block-heading">VENEZUELA</h2>



Hard-left governments have tried virtually everything over two decades, <a href="https://www.reuters.com/article/venezuela-currency/venezuelan-currency-tourists-grab-cheap-dollars-idUKN1651534820081216">from fixing prices in 2007 to offering cut-price</a> <a href="https://www.reuters.com/article/venezuela-currency/venezuelan-currency-tourists-grab-cheap-dollars-idUKN1651534820081216">dollars</a> &#8211; a policy quickly reversed due to frenzied demand.



Venezuela defaulted in 2017 and money-printing to cover the budget deficit caused hyperinflation which reached 65,000% in 2018. The IMF sees inflation at 2,000% this year.



President Nicholas Maduro eased some price controls in 2019 and lifted a ban on foreign currency transactions. Official and unofficial exchange rates were brought into line but the bolivar plunged 8,000% and Venezuela&#8217;s debt-to-GDP ratio soared to 500%.



Last month <a href="https://www.reuters.com/markets/us/exclusive-venezuela-government-paying-providers-dollars-sources-2021-12-03">Reuters reported</a> the government was paying providers in dollars to help control inflation.



But the <a href="https://publications.iadb.org/publications/english/document/A-Look-to-the-Future-for-Venezuela.pdf">Inter-American Development Bank </a>and others have warned that such &#8216;dollarisation&#8217; leaves those unable to obtain dollars with little access to basic goods, including food.



<h2 class="wp-block-heading">BRAZIL</h2>



High inflation in the 1980s became hyperinflation in the 1990s, just as Brazil returned to democracy.



Under then-president Fernando Collor de Mello, prices, wages and 80% of private assets were frozen and financial transactions heavily taxed.



Inflation peaked near 3,000% in 1990 and though it dropped to 433% in 1991 it was back to almost 2,000% by 1993.



The &#8216;Real Plan&#8217; of 1994 brought things under control, establishing a new currency, hiking rates and slashing spending. Since 1997, inflation has been in single digits every year but one.



<h2 class="wp-block-heading">POLAND</h2>



Poland&#8217;s <a href="https://www.reuters.com/markets/commodities/poland-limit-gas-price-rises-some-public-institutions-says-minister-2022-01-11">&#8220;anti-inflation shield 2.0&#8221;</a> includes temporary cuts in value-added tax (VAT) on fuel, food and fertilisers to offset annual price growth that could hit double digits for the first time since 2000.



JPMorgan reckons last week&#8217;s measures and November&#8217;s Shield 1.0 will reduce inflation by 3 percentage points by mid-year, while Poland&#8217;s prime minister estimates Shields 1.0 and 2.0 will cost up to 30 billion zloty ($7.53 billion) &#8212; nearly 1% of GDP.



But &#8220;maintaining an optically lower CPI is a lost battle if price pressures prove persistent&#8221;, said JPMorgan&#8217;s José Cerveira.



<h2 class="wp-block-heading">CONGO AND ZIMBABWE</h2>



Prices in Democratic Republic of Congo rose by a cumulative 6.3 billion percent in first half of the 1990s as budget deficits were financed with rampant money-printing.



Monetary and fiscal policy restraint and a floating exchange rate system brought hyperinflation under control in 2001.



Zimbabwe printed so much money including a Z$100 trillion banknote &#8212; <a href="https://www.reuters.com/article/ozabs-uk-zimbabwe-economy-idAFKBN1AI1FK-OZABS">that its inflation rate hit 500 billion percent in 2008</a>, rendering the currency almost worthless.



Price ceilings imposed by the government left sellers unable to make a profit, leading to major shortages.



By late 2008 Zimbabweans were using U.S. dollars for transactions and in 2009 a multicurrency system also including South Africa&#8217;s rand was introduced.



A new Zimbabwe dollar was launched in 2019 but Harare was forced to return to the multicurrency set-up when COVID-19 struck in 2020, pushing inflation to an IMF-reported 349%.



<h2 class="wp-block-heading">FRANCE</h2>



Hyperinflation during the French Revolution saw monthly price rises peak at 143%. The 1793 &#8220;Law of the General Maximum&#8221; responded with price limits and the death penalty for price &#8216;gouging&#8217;.



Historians say it was mostly a failure, as traders forced to sell at below cost price turned to the black market or kept goods for themselves, resulting in major shortages.



<h2 class="wp-block-heading">MEXICO</h2>



Falling oil prices and U.S. rate hikes halted Mexico&#8217;s economic boom in 1980-81 and left the peso&#8217;s dollar peg under strain, with capital flight and dwindling FX reserves forcing a 260% devaluation in 1982.



Dollar bank deposits were converted into pesos and a moratorium declared on debt payments. By year-end, all trade became regulated, full capital controls were adopted and banks were nationalised.



Annual inflation neared 100% in 1982-83 as real per capita GDP slumped. It stayed high, topping 150% in 1987.



In 1994 the peso crisis &#8212; which spread to other emerging economies &#8212; forced a free float that saw the currency dive in value. Mexico&#8217;s banking sector collapsed and the country needed a $50 billion international bailout to avoid default.



A severe recession and more hyperinflation followed but by 2002 Mexico held investment-grade credit ratings.



<h2 class="wp-block-heading">THE 1970s</h2>



Many countries turned to price controls after the Bretton Woods system of fixed exchange rates collapsed in 1971 and the 1973 oil crisis triggered a worldwide surge in inflation.



After withdrawing from Bretton Woods, the United States imposed a 90-day freeze on prices and wages for the first time since World War Two.



It was considered a political success but turned into economic failure, ushering in stagflation and currency instability. The dollar plunged by a third during the 1970s.



France also brought in price controls, as did Britain where inflation neared 25%. The unpopular policy helped trigger labour strikes that marked the 1978-79 &#8220;Winter of Discontent&#8221;.



Inflation receded in the early 1980s after interest rate hikes and an easing in oil prices.



&#8220;History tells you it never works,&#8221; AXA&#8217;s Moec said of price and wage caps. &#8220;But it doesn&#8217;t stop people from trying.&#8221;



(Reporting by Marc Jones in London and Rodrigo Campos in New York; Editing by Catherine Evans)

W7JB7ABGUVKVBJKY2CMEO4G6JU

A handbook of (mostly failed) radical inflation-fighting efforts

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105949584-1559711930288gettyimages-1078405216.jpeg" alt="" class="wp-image-414714" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105949584-1559711930288gettyimages-1078405216.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105949584-1559711930288gettyimages-1078405216-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/105949584-1559711930288gettyimages-1078405216-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Pedestrians walk past the People’s Bank of China headquarters in Beijing, China. Giulia Marchi | Bloomberg | Getty Images</figcaption></figure>



China’s central bank cut its benchmark lending rates again on Thursday amid concerns about an economic slowdown in the world’s second-largest economy.



The People’s Bank of China reduced the one-year loan prime rate by 10 basis points from 3.8% to 3.7%. In December, the PBOC cut the one-year loan prime rate for the first time since April 2020.



The five-year loan prime rate was lowered by 5 basis points from 4.65% to 4.6% — it was the first cut since April 2020, at the height of the coronavirus pandemic in the country.



Loan prime rates (LPR) affect the lending rates for corporate and household loans in the country.



Most new and outstanding loans in China are based on the one-year LPR, but the five-year rate influences the pricing of home mortgages, according to Reuters. A snap poll by Reuters had showed that most participants expected China to slash both the lending rates on Thursday.



The rate cuts continue the PBOC’s efforts to push down borrowing costs, according to Capital Economics.



“Mortgages will now be slightly cheaper which should help shore up housing demand. The PBOC has already pushed banks to increase the volume of mortgage lending,” Sheana Yue, China economist at the firm, said in a note following the announcement.



“Targeted support for property buyers does appear to be limiting one of the more severe downside risks facing the economy,” Yue added.



<h3 class="wp-block-heading" id="h-read-more-south-african-reserve-bank-to-hike-rates-by-25-bps-to-4-00-on-jan-27">Read more: <a href="https://www.cnbcafrica.com/2022/south-african-reserve-bank-to-hike-rates-by-25-bps-to-4-00-on-jan-27/">South African Reserve Bank to hike rates by 25 bps to 4.00% on Jan. 27</a></h3>



However, Nomura’s Chief China Economist Ting Lu said the impact of the LPR cuts “will be quite limited, as these cuts are too small to have a material impact.”



“They are unlikely sufficient to clear up the real bottlenecks, and because rates on existing mortgage loans will not be reset this year,” he wrote.



Nomura expects further cuts to the one-year and five-year LPR as well as the reserve requirement ratio, and a “significant rise in FX purchases to add liquidity and limit [renminbi] appreciation over the next few months.”



Though China was the first major economy to shake off most of its pandemic-driven economic shock, concerns grew last year around the sustainability of growth. They came as a result of muted consumer spending, tighter regulations, a struggling property sector as well as Beijing’s zero-tolerance Covid policy.



On Monday, the central bank defied market expectations and lowered borrowing costs of medium-term loans for the first time since April 2020.



The PBOC said it was reducing the interest rate on 700 billion yuan ($110.33 billion) worth of one-year medium-term lending facility loans by 10 basis points from 2.95% to 2.85%.



Bruce Pang from China Renaissance noted that the central bank’s cuts to different rates would help both the slumping property market and struggling small businesses.



The varying cuts send a rather strong signal for policy direction, he said. They reflect how the central bank is responding more quickly with efforts to lower financing costs, ease pressure on the property market and spur consumption and investment.



The Chinese economy grew by 8.1% in 2021 as steadily growing industrial production offset a drop in retail sales. Still, that figure fell short of economists’ expectations for an 8.4% growth.



—&nbsp;CNBC’s Weizhen Tan and Evelyn Cheng contributed to the report.

105949584-1559711930288gettyimages-1078405216

China’s central bank cuts key lending rates, including one for the first time in nearly 2 years

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="489" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/32JLL6XQNRMRVEAJDAIJCIRWUI-820x489.jpg" alt="" class="wp-image-414710" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/32JLL6XQNRMRVEAJDAIJCIRWUI-820x489.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/32JLL6XQNRMRVEAJDAIJCIRWUI-300x179.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/32JLL6XQNRMRVEAJDAIJCIRWUI-151x90.jpg 151w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/32JLL6XQNRMRVEAJDAIJCIRWUI-768x458.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/32JLL6XQNRMRVEAJDAIJCIRWUI-1536x916.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/32JLL6XQNRMRVEAJDAIJCIRWUI-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard&#8217;s games characters in this illustration taken January 18, 2022. REUTERS/Dado Ruvic/Illustration</figcaption></figure>



WASHINGTON, Jan 19 (Reuters) &#8211; World Bank President David Malpass on Wednesday criticized Microsoft&#8217;s $69 billion takeover of gaming developer Activision Blizzard as a questionable allocation of capital at a time when poor countries are struggling to restructure debts and fight COVID-19 and poverty.



Malpass said during a Peterson Institute for International Economics virtual event that more capital needed to flow into poor countries, but these flows have been disrupted by unusually easy monetary policies in developed countries.



He said he was struck by the scale of Microsoft&#8217;s acquisition <a href="https://www.reuters.com/technology/microsoft-buy-activision-blizzard-deal-687-billion-2022-01-18">deal for &#8220;Call of Duty&#8221; maker Activision Blizzard</a>. This dwarfed the $23.5 billion in cash contributions agreed in December by <a href="https://www.worldbank.org/en/news/press-release/2021/12/15/global-community-steps-up-with-93-billion-support-package-to-boost-resilient-recovery-in-world-s-poorest-countries">wealthier donor countries</a> to the International Development Association, the World Bank&#8217;s fund for the poorest countries &#8212; about $8 billion annually over three years, he said.



&#8220;You have to wonder: &#8216;Wait a minute, is this the best allocation of capital?'&#8221; Malpass said of the Microsoft deal. &#8220;This goes to the bond market. You know, a huge amount of (capital) flows are going to the bond market.&#8221;



A very small portion of the developing world has access to such bond financing, while too much capital remains bottled up in advanced countries, especially in central bank reserve assets used to back long-term bond purchases, he added.



<h3 class="wp-block-heading" id="h-read-more-world-bank-slashes-global-growth-forecast-and-warns-about-growing-inequality">Read more: <a href="https://www.cnbcafrica.com/2022/world-bank-slashes-global-growth-forecast-and-warns-about-growing-inequality/">World Bank slashes global growth forecast and warns about growing inequality</a></h3>



A spokesperson for Microsoft did not immediately respond to a Reuters request for comment on Malpass&#8217; remarks.



His comments echoed a similar call last week for central banks to cut long term bond holdings to free up lending capital.



&#8220;That gets you into a situation where a huge amount of the capital is being allocated to already capital-intensive parts of the world &#8212; the advanced economies &#8212; building more and more on top of already heavily built infrastructure and real estate, for example,&#8221; Malpass said.



Meanwhile, a return to more normal global investment returns is needed to bring more financing capacity to small businesses in the developing world,&#8221; he said.



&#8220;In order to address the refugee flow, that malnutrition that&#8217;s going on, and so on, there has to be more money and growth flowing into the developing countries,&#8221; Malpass added. 



(Reporting by David Lawder; Editing by David Gregorio and Sandra Maler)

Illustration of Microsoft and Activision Blizzard game characters

World Bank chief takes swipe at Microsoft’s $69 bln gaming deal as poor countries struggle

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107001399-1642162483129-gettyimages-1235698851-RAFAPRESS_04102021-1204.jpeg" alt="" class="wp-image-414674" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107001399-1642162483129-gettyimages-1235698851-RAFAPRESS_04102021-1204.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107001399-1642162483129-gettyimages-1235698851-RAFAPRESS_04102021-1204-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/01/107001399-1642162483129-gettyimages-1235698851-RAFAPRESS_04102021-1204-160x90.jpeg 160w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>As part of its 14th Five Year Plan, China plans to increase support for research and development into 6G or sixth generation internet. 6G is said to come after current 5G technology though no global standards or definition have been agreed upon yet. Rafael Henrique | SOPA Images | LightRocket | Getty Images</figcaption></figure>



China is aiming to boost the digital economy’s share of its gross domestic product by 2025, driven by next-generation technologies like 6G internet and big data.



The ambition highlights China’s push to get ahead in new technology as it continues a rivalry with the U.S. in areas from semiconductors to artificial intelligence.



In a document released last week, China’s State Council, the country’s top executive body, said “core industries of the digital economy” will account for 10% of its GDP by 2025, up from 7.8% in 2020.



The targets are part of China’s 14th Five Year Plan, a development blueprint that runs from 2021 to 2025. Last year,&nbsp;China highlighted areas of “frontier technology”&nbsp;for which it will boost research and aim for self-sufficiency in. The latest State Council document also gives more specific targets for the coming few years.



For example, China is aiming for national online retail sales to rise from 11.76 trillion yuan in 2020 to 17 trillion yuan in 2025. It expects the software and information technology industry to rise from 8.16 trillion yuan in 2020 to 14 trillion yuan in 2025.



China anticipates users of gigabit broadband, the current fastest internet connection speed, to increase from 6.4 million in 2020 to 60 million in 2025.



In fact, boosting internet connections and speeds is part China’s strategy to boost the digital economy’s share of GDP.



China is aiming to boost the digital economy’s share of its gross domestic product by 2025, driven by next-generation technologies like 6G internet and big data.



The ambition highlights China’s push to get ahead in new technology as it continues a rivalry with the U.S. in areas from semiconductors to artificial intelligence.



In a document released last week, China’s State Council, the country’s top executive body, said “core industries of the digital economy” will account for 10% of its GDP by 2025, up from 7.8% in 2020.



The targets are part of China’s 14th Five Year Plan, a development blueprint that runs from 2021 to 2025. Last year,&nbsp;China highlighted areas of “frontier technology”&nbsp;for which it will boost research and aim for self-sufficiency in. The latest State Council document also gives more specific targets for the coming few years.



For example, China is aiming for national online retail sales to rise from 11.76 trillion yuan in 2020 to 17 trillion yuan in 2025. It expects the software and information technology industry to rise from 8.16 trillion yuan in 2020 to 14 trillion yuan in 2025.



China anticipates users of gigabit broadband, the current fastest internet connection speed, to increase from 6.4 million in 2020 to 60 million in 2025.



<h3 class="wp-block-heading">Read more: <a href="https://www.cnbcafrica.com/2022/chinas-economy-grew-8-1-in-2021-compared-to-a-year-ago/">China’s economy grew 8.1% in 2021 compared to a year ago</a></h3>



In fact, boosting internet connections and speeds is part China’s strategy to boost the digital economy’s share of GDP.



China will promote the commercial deployment and large-scale application of 5G, according to the plan. 5G relates to next-generation internet that promises super fast speeds. It has already started rolling out in China and other countries.



But Beijing’s plan also lays out ambitions in 6G or sixth-generation internet. China plans to increase support for 6G research and development and be involved in the creation of international standards for 6G. China began&nbsp;laying the foundations for work on 6G in 2019. Fifth generation has only just started rolling out and there are no agreed standards or definitions of what 6G is yet.



The world’s second-largest economy also aims to&nbsp;take a bigger role in shaping technology standards around the world, a move analysts said could have big implications for the power Beijing wields in areas from mobile internet to artificial intelligence. Standards are often globally agreed upon technical rules for how technologies work.



<h2 class="wp-block-heading" id="h-regulation-chips-in-focus"><a></a>Regulation, chips in focus</h2>



China’s plan also continues themes of self-sufficiency in areas like semiconductors. The document includes other areas like cloud computing, building data centers and cross-border e-commerce.



Beijing also pledged to continue regulatory oversight on the domestic technology sector. Over the past year, China has tightened regulation for internet companies and brought in new laws in areas from&nbsp;antitrust&nbsp;to&nbsp;data protection.



The State Council document said it would explore establishing governance methods that are compatible with the “sustainable and healthy development of the digital economy.” Beijing also said it would clarify the responsibilities of various regulators and strengthen collaboration between different authorities.

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Japan and South Korea lead declines across Asia-Pacific as investors digest Fed remarks

Federal Reserve points to interest rate hike coming in March

Twitter sees record number of govt demands to remove content, Japan and Russia lead pack

IMF cuts 2022 global growth forecast as U.S., China recovery wanes

The stock market slide is unlikely to budge the Fed from tightening

IMF chief says Fed rate hike could ‘throw cold water’ on global recovery

A handbook of (mostly failed) radical inflation-fighting efforts

China’s central bank cuts key lending rates, including one for the first time in nearly 2 years

World Bank chief takes swipe at Microsoft’s $69 bln gaming deal as poor countries struggle

From 6G to big data, China is looking to boost tech’s share of its economy

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International

Russia is willing to go to war and incur sanctions over Ukraine, analysts warn

The latest Covid variant is 1.5 times more contagious than omicron and already circulating in almost half of U.S. states

WhatsApp has until end of Feb to clarify privacy policy change, EU says

Hawkish Fed hammers emerging stocks; currencies outside Asia rise

Iron ore rallies on Australia supply fears, China demand hopes: Russell

IMF sees potential for further market turbulence as central banks hike rates

European markets fall as investors react to Fed decision; Stoxx 600 down 1%

Japan and South Korea lead declines across Asia-Pacific as investors digest Fed remarks

Federal Reserve points to interest rate hike coming in March

Twitter sees record number of govt demands to remove content, Japan and Russia lead pack

IMF cuts 2022 global growth forecast as U.S., China recovery wanes

The stock market slide is unlikely to budge the Fed from tightening

IMF chief says Fed rate hike could ‘throw cold water’ on global recovery

A handbook of (mostly failed) radical inflation-fighting efforts

China’s central bank cuts key lending rates, including one for the first time in nearly 2 years

World Bank chief takes swipe at Microsoft’s $69 bln gaming deal as poor countries struggle

From 6G to big data, China is looking to boost tech’s share of its economy

News Tips

Advertise With Us

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