WORLDWIDE: HEADLINES 

IMF Warns Of ‘Stagflationary’ Risks In Asia, Cuts Growth Outlook 

The Asian region faces a “stagflationary” outlook, a senior International Monetary Fund (IMF) official warned on Tuesday, citing the Ukraine war, spike in commodity costs and a slowdown in China as creating significant uncertainty. 

While Asia’s trade and financial exposures to Russia and Ukraine are limited, the region’s economies will be affected by the crisis through higher commodity prices and slower growth in European trading partners, said Anne-Marie Gulde-Wolf, acting director of the IMF’s Asia and Pacific Department. China’s economic slowdown is adding to pressure on regional growth. 

“Therefore, the region faces a stagflationary outlook, with growth being lower than previously expected, and inflation being higher,” she told an online news conference in Washington. 

The headwinds to growth come at a time when policy space to respond is limited, Gulde-Wolf said, adding that Asian policymakers will face a difficult trade-off of responding to slowing growth and rising inflation. 

Full coverage: REUTERS  

British Cost Of Living Crisis To Have Severe Impact On Economic Growth: Reuters Poll 

The cost of living crisis in Britain will have a severe impact on economic growth this year but the Bank of England will still lift interest rates again next week, marking its fourth consecutive meeting of increasing borrowing costs, a Reuters poll found. 

Inflation hit a 30-year high last month of 7.0% and the poll suggested it would be higher this quarter, meaning households are facing the biggest cost-of-living squeeze since records began in the 1950s, according to Britain’s budget forecasters. 

Supply chain disruptions caused by the coronavirus pandemic have been exacerbated by Russia’s invasion of Ukraine and renewed lockdowns in China while energy bills have soared and taxes have risen, putting a big dent in consumer spending power. 

When asked what impact the cost of living crisis would have on growth 17 of 22 economists said it would be severe and one said very severe. Only four said it would be mild. 

“The shock to real incomes was already in the making in autumn last year, but the scale of the problems we are seeing right now is unimaginable,” said Stefan Koopman at Rabobank. 

It will be over a year before the crisis eases significantly according to more than half the respondents to another question. 

Prices are set to rise 8.4% this quarter, more than four times the BoE’s 2.0% target and sharper than the 7.7% prediction given last month. It will then ease gradually over the coming quarters but median estimates did not show it at target until the tail end of 2023. 

Like its global peers the BoE slashed borrowing costs to a record low at the start of the pandemic to support growth but began the current tightening cycle in December. 

Thirty-three of 44 economists in the April 19-25 poll said the Bank would add another 25 basis points when it meets on May 5, taking Bank Rate to 1.00%. Ten said there would be no change while one expected a 50 basis point increase. 

Full coverage: REUTERS 

WORLDWIDE: FINANCE/BUSINESS 

Asia Shares Edge Up, Sentiment Fragile On China Growth Fears 

Asian shares were cautiously higher on Tuesday after a late revival on Wall street, though global growth fears stoked by China’s stringent COVID-19 curbs and an expected streak of aggressive Federal Reserve tightening sapped risk appetite. 

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) ticked up 0.8%, helped by China’s blue chip index (.CSI300) adding 0.33%, after its worst day in two years on Monday. Hong Kong’s benchmark Hang Seng Index (.HSI) also bounced 0.6%. 

Yet sentiment remained fragile, after Twitter Inc (TWTR.N), shares rose on news that Elon Musk, the world’s richest person, clinked a deal to pay $44 billion cash for the social media platform populated by millions of users and global leaders. 

The nervousness about China’s economic slowdown hit Australian shares in early trade, with the local benchmark down 1.78%, hurt particularly by declines in miners. 

Japan’s Nikkei stock index (.N225) rose 0.57%. U.S. stock futures , were little changed in Asia trade. 

The stringent lockdown in China, and its proliferation as cases spread to other big cities like Beijing, is weighing on the economic growth outlook and investment sentiment, said Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas. 

“If the lockdown situation persists for longer,” it impact China’s economy significantly and “also have an impact on the supply chains across the world,” he said. 

On top of the China lockdown worries, markets have also been fretting that an aggressive pace of Fed tightening could derail the global economy, which has only just started to recover from the COVID-19 pandemic hit. 

Full coverage: REUTERS 

Dollar Ascends On China COVID Fears, Fed Rate Hike Pace 

The dollar climbed to around a two-year high against the euro and an 18-month high versus the pound as fears about the economic impact of China’s COVID-19 lockdowns and an aggressive pace of U.S. rate hikes sent investors scrambling for safety. 

China’s offshore yuan was steadier in early trading, however, at 6.5770 per dollar after the People’s Bank of China said late on Monday it would cut the amount of foreign exchange banks must hold as reserves. 

That helped the currency to recover from a year low of 6.609 per dollar on Monday, hurt by fears about China’s economic growth. 

The dollar index, which measures the greenback against six main peers, was at 101.58, after jumping 0.58% on Monday and hitting a two-year peak of 101.86. 

It has gained 3.3% so far this month, which would be its largest month of gains since November 2015. 

“Further (dollar index) upside remains a good bet. China growth risks are rising as authorities pursue an aggressive COVID campaign, conditions around Ukraine remain volatile and ‘Fedspeak’ remains as hawkish as ever,” said analysts at Westpac in a note. 

China’s financial hub of Shanghai has now been under strict lockdown to fight COVID for around a month, and a Beijing official said late on Monday that a mass-testing campaign there will be expanded from the city’s most populous district to another 10 districts and one economic development area. 

Full coverage: REUTERS 

Australia’s Woodside Anticipates Long-term Gain From Energy Security Fears 

Australia’s Woodside Petroleum (WPL.AX) reported a more than twofold jump in quarterly revenue on Tuesday, buoyed by rising oil and gas prices, and it expects to benefit in the longer term from energy security fears due to Russia’s invasion of Ukraine. 

Tight supply drove prices of liquefied natural gas (LNG) to record highs last year before Russia, a top exporter of oil and gas, invaded Ukraine in what Moscow calls a “special military operation”, sparking sanctions which have further hit supply. 

“We expect in the second quarter to see the continued benefit of stronger pricing, reflecting the oil price lag in many of our LNG contracts,” Woodside Chief Executive Officer Meg O’Neill said in a statement. 

The Ukraine conflict has unnerved LNG buyers in Europe and Asia, putting producers like Woodside in Australia in a strong position to negotiate longer-term sales deals at higher prices than envisioned when the coronavirus hammered demand two years ago, she said. 

“Since the invasion, we are seeing more interest,” O’Neill told Reuters in an interview. 

Woodside is also attracting more potential bidders for a stake it wants to sell in its Scarborough gas project off Western Australia. 

Full coverage: REUTERS