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Russian invasion would bring more fear to markets – CNN

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

London (CNN Business)Uncertainty around the Federal Reserve’s plans just drove Wall Street to its worst week since the start of the pandemic.

But it’s not the only reason traders are jittery.
Investors are starting to tune in to the situation in Ukraine as fears grow that Russian President Vladimir Putin, who has been amassing troops on the country’s border, could order an invasion.
Michael Hewson, chief market analyst at CMC Markets, told me that the “tipping point” was news that the United States and United Kingdom are withdrawing some staff from their embassies.
“That’s really given European markets a really hard nudge lower,” he said. Germany’s DAX index and France’s CAC 40 are both down about 2% in early trading. US futures are also in the red, though the declines are narrower.
The US dollar and Japanese yen, both considered safe haven assets, are gaining ground.
State Department officials said that the decision was made out of an “abundance of caution” and that the threat to US personnel in the country has not increased in recent days. But investors are nervous.
“I think it’s important not to underestimate how big a deal this is,” Hewson said. “It suggests there is a real concern that diplomacy alone may not be enough to prevent a Russian incursion into Ukraine.”
Surging inflation has forced investors to reconsider how quickly the Fed could raise interest rates this year. That’s rattled stock and bond markets, which had become accustomed to rock-bottom rates during the pandemic. The CNN Business Fear & Greed Index finished last week in “fear” territory.
The Fed’s course of action remains the main source of anxiety. But Wall Street is worried that an escalation in Ukraine could disrupt the flow of energy supplies to Europe, sending already-elevated prices into the stratosphere.
Hewson said that oil prices could quickly rocket to $100 per barrel in that case. Oil is currently trading around $88 per barrel globally, near its highest level in seven years.
Natural gas prices would be heavily exposed, too.
“Should tensions between Russia and the Ukraine escalate, the initial uncertainty around its impact on gas flows would likely lead the market to once again add a significant risk premium to European gas prices,” Goldman Sachs analysts said in a recent note to clients.
A shock to energy markets would hurt the region’s economy as it recovers from the pandemic. An important gauge of activity from IHS Markit, released Monday, showed that output hit an 11-month low in January due to restrictions tied to the Omicron variant of the coronavirus.
The market mood is already on the rocks. Instability in Ukraine presents another reason to stress.
“The more markets are feeling this could evolve into a fully-fledged geopolitical disaster, the more risk sentiment will be impacted,” ING analyst Francesco Pesole told me.

Why Unilever’s stock has snapped back

Unilever’s stock got hammered last week after the company revealed it had made three failed bids to acquire GlaxoSmithKline’s consumer health care business. But investors are seeing reason for optimism on Monday.
The latest: Shares are up 6% in London following reports that activist investor Nelson Peltz has built up a stake in the consumer goods behemoth, which makes products like Ben & Jerry’s ice cream and Dove soap.
Shareholders are hungry for a turnaround at Unilever after shares stagnated in recent months. Peltz’s involvement could feed momentum for a bold overhaul.
On the radar: CEO Alan Jope has promised to reveal a new strategy soon — though it’s not yet clear what that will entail.
Last week, Jope defended Unilever’s attempts to buy the GlaxoSmithKline unit that makes Advil and Tums, saying that he saw ramping up the company’s exposure to health items and cosmetics as a winning strategy.
And yet: Unilever said Thursday that it would not raise its rejected £50 billion ($68 billion) offer, raising questions about Jope’s next move.
Unilever’s stock, which fell 10% in 2021, is now down 1% year-to-date.

Is the stock market a ‘superbubble’ about to burst?

Jeremy Grantham is not the only high-profile investor to warn that easy money has set off an unsustainable feeding frenzy. But as stocks fall, the latest amped-up admonition from the British money manager is getting lots of attention.
The scoop: In a report published last week, Grantham — who studies market bubbles and was also bearish ahead of the 2000 dot-com crash and the 2008 financial crisis — said US stocks are in their fourth “superbubble” of the past 100 years, and that a massive pullback can “begin at any time.”
Grantham said stocks were in an “epic bubble” this time last year. The market wrapped up 2021 near record highs and with its third straight year of gains.
But Grantham’s new letter is gaining traction as Wall Street debates what’s next for the market now that the Fed is backing away from crisis-era policies.
Grantham blamed the central bank for creating “superbubble” conditions by instituting near-zero interest rates and executing hundreds of billions of dollars in asset purchases. The public, he said, will pay the price.
“One of the main reasons I deplore superbubbles — and resent the Fed and other financial authorities for allowing and facilitating them — is the underrecognized damage that bubbles cause as they deflate and mark down our wealth,” he said.
As asset prices soar and personal wealth grows, people start spending accordingly, Grantham continued. That causes real pain when the party ends.
“As bubbles break, they crush most of those dreams and accelerate the negative economic forces on the way down,” he said. “To allow bubbles, let alone help them along, is simply bad economic policy.”

Up next

Philips and Halliburton report results before US markets open. IBM follows after the close.
Also today: The latest Purchasing Managers’ Index for the United States posts at 9:45 a.m. ET.
Coming tomorrow: Earnings from Johnson & Johnson, Lockheed Martin, Verizon, Microsoft and Texas Instruments.

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US stocks rally as Fed minutes meet expectations – Al Jazeera English

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Investors fear that overly aggressive interest rate hikes by the Fed could tip the economy into recession.

Wall Street closed higher Wednesday, boosted after minutes from the Federal Reserve’s latest monetary policy meeting showed policymakers unanimously felt the United States economy was very strong as they grappled with reining in inflation without triggering a recession.

The minutes from the Federal Open Market Committee’s May meeting, which culminated in a 50-basis-point rise in the Fed funds target rate – the biggest jump in 22 years – showed most of the committee’s members judged that further such rate hikes would “likely be appropriate” at its upcoming June and July meetings.

“The uniformity of opinion is a good thing,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “There’s a lack of uncertainty of what needs to be done in the near term.”

“By the time [the Fed] gets to September, they will have plenty of economic data to make their move from there, so they continue to maintain optionality,” Mayfield added.

All three major US stock indexes gyrated earlier in the day amid increasing jitters stemming from business and consumer surveys, economic data and corporate earnings reports suggesting a cooling American economy – even as the Fed prepares to toss a bucket of cold water on it to tackle decades-high inflation.

Fears that overly aggressive interest rate hikes by the Fed could tip the economy into recession despite evidence that inflation peaked in March has driven those concerns.

“There’s some credence to the idea that inflation is doing [the Fed’s] job for them,” Mayfield said. “There’s already a cooling occurring, and financial conditions have tightened over the last month because of dollar strength and equity market weakness.”

On Thursday, the Department of Commerce is due to release its second take on first-quarter GDP, which analysts are expected to show a slightly shallower contraction than the 1.4 percent quarterly annualised drop originally reported.

The Personal Consumption Expenditures report will follow on Friday, which will provide further clues regarding consumer spending and whether inflation peaked in March, as other indicators have suggested.

The Dow Jones Industrial Average rose 191.66 points, or 0.6 percent, to 32,120.28, the S&P 500 gained 37.25 points, or 0.95 percent, to 3,978.73 and the Nasdaq Composite added 170.29 points, or 1.51 percent, to 11,434.74.

Nine of the 11 major sectors in the S&P 500 rose, with consumer discretionary stocks leading the pack with a gain of 2.8 percent.

Amazon.com Inc and Tesla Inc provided the strongest lift to the S&P 500 and the Nasdaq, rising 2.6 percent and 4.9 percent, respectively.

Department store operator Nordstrom Inc surged 14.0 percent on the heels of its upbeat annual profit and revenue forecasts.

Fast-food chain Wendy’s Co jumped 9.8 percent after a regulatory filing revealed that shareholder Nelson Peltz was considering a potential takeover bid for the company.

Shares of Nvidia Corp fell more than 8 percent in after-hours trading after the company’s second-quarter revenue forecast missed expectations.

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Gas Up Nearly 4 Cents; Price Freeze Lifts in Labrador – VOCM

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Despite predictions to the contrary, the regulated price of gas is up in most parts of the province.

Gasoline is up by 3.9 cents a litre, except along the coast of Labrador. Diesel on the island is up by 1.3 cents while diesel in Labrador has dropped by 11.6 cents a litre. Furnace oil costs over a cent a litre more on the island while stove oil on the island up by the same amount. Stove oil in Labrador is down by 23.70 cents a litre.

Propane meanwhile is down by just under 2 cents.

The suspension of maximum price adjustments on the coast of Labrador lifts as of today as fuel deliveries resume for the season—that means significant increases, in some cases by about a dollar a litre, for some fuels.

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Cheese not on the table in Canada-U.K. trade talks as Britain seeks market access

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OTTAWA — The British foreign secretary has often been mocked for her preoccupation with cheese. It started eight years ago when Liz Truss expressed outrage in a speech to her party’s annual conference.

“We import two thirds of our cheese,” she raged. “That is a disgrace.”

Now Truss is facing another battle over cheese, this time with Canada.

Britain wants greater access to Canadian markets for more than 700 varieties of cheese including Stilton, Cheshire, and Wensleydale, a crumbly variety originating from Yorkshire.

But Ottawa has made it clear it does not want to see more British cheddar, let alone artisan varieties such as stinking bishop, renegade monk and Hereford hop, on Canadian fridge shelves.

During the first round of negotiations of the U.K.-Canada trade deal, Canada told Britain that a larger quota for British cheese is not on the negotiating table.

When it was a European Union member, Britain was part of the Comprehensive Economic and Trade Agreement with Canada, giving it some access to Canada’s cheese market.

After the U.K. left the EU, a “continuity agreement” with Canada was swiftly put in place to maintain the CETA arrangement until a bilateral trade deal could be struck.

Ralph Goodale, Canada’s high commissioner to the U.K., said if Britain wants more access to Canadian markets for its cheese as part of a bilateral free-trade agreement, it will have to knock on Brussels’ door and get its part of the dairy quota back.

“The point is we have already provided that volume in the EU deal and the British left it there without taking it with them,” he said in an interview. “That’s an issue they need to resolve with the Europeans because the Europeans have their quota.”

Goodale said the U.K.’s request for extra access for British cheese — on top of the access given to the EU — is “what the Canadian negotiators consider to be pretty much a dead end.”

“You are talking about a double concession — one we have already made to the EU and the request is being made by the U.K. for yet another one on top of that,” he said.

The high commissioner said Canada values its trading relationship with the U.K., adding that he is confident that a mutually-beneficial trade deal will be reached.

But if Canada allows the British to export more of their cheese it would involve “a major commitment of compensation to dairy producers” in Canada to make up for lost incomes.

In 2018, after the United States-Mexico-Canada Agreement gave the U.S. fresh access to the Canadian dairy market, Prime Minister Justin Trudeau said he would compensate Canadian dairy farmers.

Canada’s dairy industry was worth over $7 billion in 2020, according to the Canadian Dairy Commission’s annual report.

There are over 10,000 dairy farms in Canada — most of them in Quebec and Ontario — with an average of 92 cows per farm, it said.

Until at least the end of next year, Britain will be able to keep exporting its cheese to Canada under the trade continuity agreement, the U.K.’s trade department said.

This allows U.K. cheese exporters to access the Canadian market tariff-free under the EU portion of Canada’s World Trade Organization cheese tariff rate quota.

As part of the 1995 WTO agreement on agriculture, Canada established tariff rate quotas for cheese and other dairy products. The quotas set out quantities of dairy that could enter Canada with little or no duty.

For Britain, a fully fledged free trade deal with Canada is crucial after Brexit left it looking for fresh tariff-free markets.

“We want to negotiate an ambitious and comprehensive new agreement with Canada that will strengthen our close and historic bilateral trade relationship,” said a U.K. government trade spokesman in a statement, adding the relationship was worth about $34.5 billion in 2021.

In March, U.K. Trade Secretary Anne-Marie Trevelyan flew to Canada to announce with Canada’s Trade Minister Mary Ng that bilateral negotiations had officially begun.

In a speech in the House of Lords in London earlier this month, Goodale reported on progress in the talks, saying that “both sides are optimistic that, as good as CETA and the continuity agreement were, we can do better still when Canada and the U.K. negotiate a deal face-to-face, directly with each other.”

Like Goodale, Ng said Canada is confident a free-trade deal with Britain will be reached, enhancing co-operation in a number of areas, including on renewables, sustainability and the digital economy.

“Canada values the relationship with the United Kingdom. They are … an important trading partner and a trade agreement with the U.K. will be very good for Canadian businesses,” she said in a phone interview from Thailand last weekend.

But she was also firm about the need to protect Canada’s dairy producers, and that means keeping more British cheese out.

“I have been very clear, our government has been very clear, that we will not provide access to our supply-managed sector,” she said. “We have been clear about that from the get-go.”

The Canadian dairy sector now produces 1,450 varieties of cheese, including ewe, goat and buffalo varieties, as well as the cheese curds used in the Québécois dish poutine.

At least half of Canada’s cheese is made in Quebec, which is home to a number of artisan varieties including bleu l’ermite, or blue hermit, and Oka, a popular semi-soft rind cheese.

Pierre Lampron, president of the Dairy Farmers of Canada, has made it clear he will fiercely protect Canadian cheese from British interlopers.

Lampron said he had “validated that the issue of access to the Canadian dairy market was not on the agenda of these trade talks.”

Canada’s protectionist stance toward its dairy industry may have pleased farmers. But it has caused some tension with close allies.

Earlier this month, New Zealand launched a formal trade dispute against Canada, accusing the federal government of breaking promises to give access for dairy imports under the Trans-Pacific Partnership agreement.

The Biden administration also recently said it was asking for a second dispute settlement panel under the U.S.-Mexico-Canada Agreement to review a trade dispute with Canada over dairy import quotas.

This report by The Canadian Press was first published May 26, 2022.

 

Marie Woolf, The Canadian Press

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