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India hikes spending, shuns ‘outright populism’ in last pre-election budget

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  • Capex to rise 33% to 10 trillion rupees in 2023/24
  • Govt targets gross borrowing of 15.43 trillion rupees
  • Eyes fiscal deficit of 5.9% in 2023/24, 4.5% by 2025/26

NEW DELHI, Feb 1 (Reuters) – India announced on Wednesday one of its biggest ever increases in capital spending for the next fiscal year to create jobs but targeted a narrower fiscal deficit in its last full budget ahead of a parliamentary election due in 2024.

Prime Minister Narendra Modi’s party has been under pressure to create jobs in the populous country where many have struggled to find employment, although the economy is now one of the world’s fastest-growing.

“After a subdued period of the pandemic, private investments are growing again,” Finance Minister Nirmala Sitharaman said as she presented the 2023/24 budget in parliament.

“The budget makes the need once again to ramp up the virtuous cycle of investment and job creation. Capital investment is being increased steeply for the third year in a row by 33% to 10 trillion rupees.”

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The capital spending increase to about $122.3 billion, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020/21 and 2021/22.

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Total spending will rise 7.5% to 45.03 trillion rupees ($549.51 billion) in the next fiscal year starting on April 1.

Sitharaman said the government would target a fiscal deficit of 5.9% of GDP for 2023/24 compared with 6.4% for the current fiscal year and slightly lower than a Reuters poll of 6%. The aim is to lower the deficit to 4.5% by 2025/26.

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STEADY ‘MACRO BOAT’

Brokerage Nomura said the budget “prudently pushes for growth, without rocking the macro boat”.

“In the event, the government has presented a good budget. It has pushed for growth via public capex and continued on the path towards fiscal consolidation, without offering much in terms of outright populism.”

Capital Economics said the “absence of a fiscal blowout”, a recent drop in inflation and signs of moderating growth could convince India’s central bank to slow the pace of rate hikes next week.

It said there was still a chance of fiscal slippage as campaigning kicks off for the election, in which Modi is widely projected to win a third straight term.

The finance ministry’s annual Economic Survey, released on Tuesday, forecast the economy could grow 6% to 6.8% next fiscal year, down from 7% projected for the current year, while warning about the impact of cooling global demand on exports.

Sitharaman said India’s economy was “on the right track, and despite a time of challenges, heading towards a bright future”.

India’s real GDP is forecast to grow in the range of 6-6.8% in FY24

Her deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal year at 3.75 trillion rupees. The government cut spending on a key rural jobs guarantee programme to 600 billion rupees – the smallest in more than five years – from 894 billion rupees for this fiscal year.

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The government’s gross market borrowing is estimated to rise about 9% to 15.43 trillion rupees next fiscal year.

Reuters Graphics Reuters Graphics

CONSTRAINTS

Moody’s Investors Service said the narrower fiscal deficit projection pointed to the government’s commitment to longer-term fiscal sustainability, but that a “high debt burden and weak debt affordability remain key constraints that offset India’s fundamental strengths”.

Among other moves to stimulate consumption, the surcharge on annual income above 50 million rupees was cut to 25% from 37%.

Indian shares reversed earlier gains to close lower on Wednesday, led by a fall in insurance companies after the budget proposed to limit tax exemptions for insurance proceeds, while Adani Group shares tumbled again as it struggles to repel concerns raised by a U.S. short seller.

Since taking office in 2014, Modi has ramped up capital spending including on roads and energy, while wooing investors through lower tax rates and labour reforms, and offering subsidies to poor households to clinch their political support.

A lack of jobs for young people, and meagre wages for those who do find work, has been one of the main criticisms of Modi.

Sitharaman also said the government was allocating 350 billion rupees for energy transition, as Modi focuses on green hydrogen and other cleaner fuels to meet India’s climate goals.

($1 = 81.7725 Indian rupees)

Reporting by Shubham Batra, Nikunj Ohri, Shivangi Acharya, Sarita Singh, Nigam Prusty, Manoj Kumar, Rupam Jain and Indian bureaux; Writing by Krishna N. Das; Editing by Kim Coghill, Jacqueline Wong and Gareth Jones

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World

‘Hands off Africa,’ Pope Francis tells rich world

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  • Pope begins trip to DR Congo and South Sudan
  • Francis to meet victims of war in Congo
  • Trip postponed from July due to pope’s knee ailment

KINSHASA, Jan 31 (Reuters) – Pope Francis denounced the “poison of greed” driving conflicts in Africa as he began a visit to Democratic Republic of Congo on Tuesday, saying the rich world had to realise that people were more precious than the minerals in the earth beneath them.

Many tens of thousands of people cheered as he travelled from the airport into the capital Kinshasa in his popemobile, with some breaking away to chase it while others chanted and waved flags.

But the joyous mood, one of the most vibrant welcomes of his foreign trips, turned sombre when the 86-year-old pope spoke to dignitaries at the presidential palace. He condemned “terrible forms of exploitation, unworthy of humanity” in Congo, where vast mineral wealth has fuelled war, displacement and hunger.

“Hands off the Democratic Republic of the Congo. Hands off Africa. Stop choking Africa: it is not a mine to be stripped or a terrain to be plundered,” Francis said.

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Congo has some of the world’s richest deposits of diamonds, gold, copper, cobalt, tin, tantalum and lithium, but those have stoked conflict between militias, government troops and foreign invaders. Mining has also been linked to inhumane exploitation of workers, including children, and environmental degradation.

“It is a tragedy that these lands, and more generally the whole African continent, continue to endure various forms of exploitation,” the pope said, reading his speech in Italian while seated. People listening to a French translation applauded repeatedly.

“The poison of greed has smeared its diamonds with blood,” he said, referring to Congo specifically.

Compounding the country’s problems, eastern Congo has been plagued by violence connected to the long and complex fallout from the 1994 genocide in neighbouring Rwanda.

Congo accuses Rwanda of backing the M23 rebel group fighting government troops in the east. Rwanda denies this.

“As well as armed militias, foreign powers hungry for the minerals in our soil commit, with the direct and cowardly support of our neighbour Rwanda, cruel atrocities,” Congolese President Felix Tshisekedi said, speaking just before the pope on the same stage on a hot, muggy afternoon.

The pope did not name Rwanda in his address or take sides in the dispute.

Rwandan government spokesperson Yolande Makolo rebuffed Tshisekedi’s comments. “It’s obvious that this ridiculous obsession with scapegoating Rwanda is President Tshisekedi’s electoral strategy – a distraction from the poor performance of his government, and failure to deliver to their citizens,” she told Reuters.

[1/9] Pope Francis sits next to Democratic Republic of Congo’s President Felix Tshisekedi as he attends the welcoming ceremony at the Palais de la Nation on the first day of his apostolic journey, in Kinshasa, Democratic Republic of Congo, January 31, 2023. Simone Risoluti/Vatican Media/Handout via REUTERS

‘DEVOURED BY VIOLENCE’

An estimated 5.7 million people are internally displaced in Congo and 26 million face severe hunger, largely because of the impact of armed conflict, according to the United Nations.

About half of Congo’s population of 90 million are Roman Catholics and the Church plays a crucial role in running schools and health facilities in the sprawling central African country, as well as promoting democracy.

The pope criticised rich countries for ignoring the tragedies unfolding in Congo and elsewhere in Africa.

“One has the impression that the international community has practically resigned itself to the violence devouring it (Congo). We cannot grow accustomed to the bloodshed that has marked this country for decades, causing millions of deaths,” he said.

Tshisekedi made a similar point: “While the international community has remained passive and silent, more than 10 million people have been horribly killed.”

First scheduled for last July, the pope’s trip was postponed because of a flare-up of a chronic knee ailment. Francis had originally planned to travel to Goma, in eastern Congo, but that stop was scrapped because of a resurgence in fighting between M23 rebels and government troops.

In an apparent reference to the M23 and other militias active in Congo’s eastern regions, the pope said the Congolese people were fighting to preserve their territorial integrity “against deplorable attempts to fragment the country”.

On Wednesday, Francis will celebrate Mass at a Kinshasa airport that is expected to draw more than a million people. He also will meet victims of violence from the east.

Francis will stay in Kinshasa until Friday morning, when he will fly to South Sudan, another African country grappling with conflict and poverty.

In a first, he will be accompanied for that leg of his journey by the Archbishop of Canterbury, leader of the global Anglican Communion, and by the Church of Scotland Moderator. The religious leaders have described their joint visit as a “pilgrimage of peace” to the world’s youngest nation.

South Sudan gained independence in 2011 from predominantly Muslim Sudan after decades of conflict. Two years later inter-ethnic conflict spiralled into a civil war that killed 400,000 people. A 2018 deal stopped the worst of the fighting.

Additional reporting by Justin Makangara, Benoit Nyemba, Sonia Rolley and Stanis Bujakera, and Philbert Girinema in Kigali; Writing by Estelle Shirbon and Philip Pullella; Editing by Alexandra Hudson, Barbara Lewis and Mark Heinrich

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World

France hit by new wave of strikes against Macron’s pension reform

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  • Reform would raise retirement age to 64
  • Schools, transport networks, refinery deliveries hit
  • Macron: Reform vital to ensure viability of pension system

SAINT-NAZAIRE, France, Jan 31 (Reuters) – Striking workers disrupted French refinery deliveries, public transport and schools on Tuesday in a second day of nationwide protests over President Emmanuel Macron’s plan to make people work longer before retirement.

Crowds marched through cities across France to denounce a reform that raises the retirement age by two years to 64 and which is a test of Macron’s ability to push through change now that he has lost his working majority in parliament.

On the rail networks, only one in every three high-speed TGV trains were operating and even fewer local and regional trains. Services on the Paris metro were thrown into disarray.

Buoyed by their success earlier in the month when more than a million people took to the streets, trade unions which have been battling to maintain their power and influence urged the public to turnout en masse.

“We won’t drive until we’re 64!” bus driver Isabelle Texier said at a protest in Saint-Nazaire on the Atlantic coast, adding that many careers involved tough working conditions.

Others felt resigned ahead of likely bargaining between Macron’s ruling alliance and conservative opponents who are more open to pension reform than the left.

“There’s no point in going on strike. This bill will be adopted in any case,” said 34-year-old Matthieu Jacquot, who works in the luxury sector.

Unions said half of primary school teachers had walked off the job. TotalEnergies (TTEF.PA) said 55% of its workers on morning shifts at its refineries had downed tools, a lower number than on Jan. 19. The hard-left CGT union said the figure was inaccurate.

For unions, the challenge will be maintaining a strike movement at a time when high inflation is eroding salaries.

At a local level, some announced “Robin Hood” operations unauthorised by the government. In the southwestern Lot-et-Garonne area, the local CGT trade union branch cut power to several speed cameras and disabled smart power meters.

“When there is such a massive opposition, it would be dangerous for the government not to listen,” said Mylene Jacquot, secretary general of the CFDT union’s civil servants branch.

[1/16] Protesters attend a demonstration against French government’s pension reform plan in Paris as part of a day of national strike and protests in France, January 31, 2023. REUTERS/Gonzalo Fuentes

Opinion polls show a substantial majority of the French oppose the reform, but Macron intends to stand his ground. The reform was “vital” to ensure the viability of the pension system, he said on Monday.

A street march in Paris takes place later in the day.

‘BRUTAL’

The pension system reform would yield an additional 17.7 billion euros ($19.18 billion) in annual pension contributions, according to Labour Ministry estimates.

Unions say there are other ways to raise revenue, such as taxing the super rich or asking employers or well-off pensioners to contribute more.

“This reform is unfair and brutal,” said Luc Farre, the secretary general of the civil servants’ UNSA union. “Moving (the pension age) to 64 is going backwards, socially.”

French power supply was down by 4.5% or 3 gigawatts (GW), as workers at nuclear reactors and thermal plants joined the strike, data from utility group EDF (EDF.PA) showed.

TotalEnergies said deliveries of petroleum products from its French sites had been halted because of the strike, but that customers’ needs were met.

The government made some concessions while drafting the legislation. Macron had originally wanted the retirement age to be set at 65, while the government is also promising a minimum pension of 1,200 euros a month.

Prime Minister Elisabeth Borne has said the 64 threshold is “non-negotiable”, but the government is exploring ways to offset some of the impact, particularly on women.

Hard-left opposition figure Jean-Luc Melenchon, a vocal critic of the reform, said parliament would on Monday debate a motion calling for a referendum on the matter.

“The French are not stupid,” he said at a march in Marseille. “If this reform is vital, it should be possible to convince the people.”

Reporting by Forrest Crellin, Benjamin Mallet, Sudip Kar-Gupta, Leigh Thomas, Blandine Henault, Michel Rose, Dominique Vidalon, Benoit Van Overstraeten; Writing by Ingrid Melander and Richard Lough; Editing by Janet Lawrence

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World

Australian nuclear body joins search for missing radioactive capsule

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MELBOURNE, Jan 31 (Reuters) – Australia’s nuclear safety agency said on Tuesday it had joined the hunt for a tiny radioactive capsule missing somewhere in the outback, sending a team with specialised car-mounted and portable detection equipment.

Authorities have now been on a week-long search for the capsule which is believed to have fallen from a truck that made a 1,400 km (870 mile) journey in Western Australia. The loss has triggered a radiation alert for large parts of the vast state.

The capsule, part of a gauge used to measure the density of iron ore feed, had been entrusted by Rio Tinto Ltd (RIO.AX) to a specialist contractor to transport. Rio apologised on Monday for the loss, which happened sometime in the past two weeks.

The Australian Radiation Protection and Nuclear Safety Agency said it was working with the Western Australian government to locate the capsule. It added that the Australian Nuclear Science and Technology Organisation has also sent radiation services specialists as well as detection and imaging equipment.

The truck travelled from Rio’s Gudai-Darri mine, north of Newman, a small town in the remote Kimberley region, to a storage facility in the suburbs of Perth – a distance longer than the length of Great Britain.

State emergency officials on Tuesday issued a fresh alert to motorists along Australia’s longest highway to take care when approaching the search parties, as vehicles carrying the radiation detectors are travelling at slow speeds.

“It will take approximately five days to travel the original route, an estimated 1400kms, with crews travelling north and south along Great Northern Highway,” Department of Fire and Emergency Services Incident Controller Darryl Ray said in a statement late on Monday.

The gauge was picked up from the mine site on Jan. 12. When it was unpacked for inspection on Jan. 25, the gauge was found broken apart, with one of four mounting bolts missing and screws from the gauge also gone.

Authorities suspect vibrations from the truck caused the screws and the bolt to come loose, and the capsule fell out of the package and then out of a gap in the truck.

The silver capsule, 6 mm in diameter and 8 mm long, contains Caesium-137 which emits radiation equal to 10 X-rays per hour.

People have been told to stay at least five metres (16.5 feet) away as exposure could cause radiation burns or radiation sickness, though driving past the capsule is believed to be relatively low risk, akin to taking an X-ray.

Reporting by Melanie Burton in Melbourne; Editing by Muralikumar Anantharaman and Edwina Gibbs

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World

Western allies differ over jets for Ukraine as Russia claims gains

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  • Biden says ‘no’ when asked about F-16s for Ukraine
  • Zelenskiy says Moscow seeks ‘big revenge’
  • Russian administrator claims foothold in Vuhledar
  • Kyiv could recapture ground when Western weapons arrive – group

KYIV, Jan 31 (Reuters) – Ukraine’s defence minister is expected in Paris on Tuesday to meet President Emmanuel Macron amid a debate among Kyiv’s allies over whether to provide fighter jets for its war against Russia, after U.S. President Joe Biden ruled out giving F-16s.

Ukraine planned to push for Western fourth-generation fighters like F-16s after securing supplies of main battle tanks last week, an adviser to Defence Minister Oleksiy Reznikov said on Friday.

Asked at the White House on Monday if the United States would provide F-16s, Biden told reporters: “No.”

But France and Poland appear to be willing to entertain any such request from Ukraine, with Macron telling reporters in The Hague on Monday that “by definition, nothing is excluded” when it comes to military assistance.

In remarks carried on French television before Biden spoke in Washington, Macron stressed any such move would depend on several factors including the need to avoid escalation and assurances that the aircraft would not “touch Russian soil.” He said Reznikov would also meet his French counterpart Sebastien Lecornu in Paris on Tuesday.

In Poland on Monday, Prime Minister Mateusz Morawiecki also did not rule out a possible supply of F-16s to neighbouring Ukraine, in response to a question from a reporter before Biden spoke.

Morawiecki said in remarks posted on his website that any such transfer would take place “in complete coordination” with NATO countries.

Andriy Yermak, head of the Ukraine president’s office, noted “positive signals” from Poland and said France “does not exclude” such a move in separate posts on his Telegram channel.

NATO Secretary-General Jens Stoltenberg was in Japan on Tuesday where he thanked Tokyo for the “planes and the cargo capabilities” it is providing Ukraine. A day earlier in South Korea he urged Seoul to increase its military support to Ukraine.

Biden’s comment came shortly after Ukrainian President Volodymyr Zelenskiy said Russia had begun exacting its revenge for Ukraine’s resistance to its invasion with relentless attacks in the east, where it appeared to be making incremental gains.

Zelenskiy has warned for weeks that Moscow aims to step up its assault after about two months of virtual stalemate along the front line that stretches across the south and east.

Ukraine won a huge boost last week when Germany and the United States announced plans to provide heavy tanks, ending weeks of diplomatic deadlock on the issue.

While there was no sign of a broader new Russian offensive, the administrator of Russian-controlled parts of Ukraine’s eastern Donetsk province, Denis Pushilin, said Russian troops had secured a foothold in Vuhledar, a coal-mining town whose ruins have been a Ukrainian bastion since the outset of the war.

Pushilin said that despite “huge losses” Ukrainian forces were consolidating positions in industrial facilities.

‘BATTLE FOR EVERY METER’

Pushilin said Ukrainian forces were throwing reinforcements at Bakhmut, Maryinka and Vuhledar, towns running from north to south just west of Donetsk city. The Russian state news agency TASS quoted him as saying Russian forces were making advances there, but “not clear-cut, that is, here there is a battle for literally every meter.”

Ukrainian military analyst Oleh Zhdanov said Ukraine still controlled Maryinka and Vuhledar, where Russian attacks were less intense on Monday.

Pushilin’s adviser, Yan Gagin, said fighters from Russian mercenary force Wagner had taken partial control of a supply road leading to Bakhmut, a city that has been Moscow’s focus for months.

A day earlier, the head of Wagner said his fighters had secured Blahodatne, a village just north of Bakhmut, although Kyiv said it had repelled assaults on Blahodatne.

Reuters could not independently verify the battlefield reports. But the locations of the reported fighting indicated clear, though gradual, Russian gains.

In central Zaporizhzhia region and in southern Kherson region, Russian forces shelled more than 40 settlements, Ukraine’s General Staff said. Targets included the city of Kherson, where there were casualties.

The Russians also launched four rocket attacks on Ochakiv in southern Mykolaiv, the army said, on the day Zelenskiy met the Danish prime minister in Mykolaiv city, to the northeast.

WESTERN DELAYS

Zelenskiy is urging the West to hasten delivery of its promised weapons so Ukraine can go on the offensive, but most of the hundreds of tanks pledged by Western countries are months away from delivery.

British Defence Minister Ben Wallace said the 14 Challenger tanks donated by Britain would be on the front line around April or May, without giving an exact timetable.

Kremlin spokesperson Dmitry Peskov said Western countries supplying arms leads “to NATO countries more and more becoming directly involved in the conflict – but it doesn’t have the potential to change the course of events and will not do so.”

The U.S.-based Institute for the Study of War think-tank said “the West’s failure to provide the necessary materiel” last year was the main reason Kyiv’s advances had halted since November.

The researchers said in a report that Ukraine could still recapture territory once the promised weapons arrive.

The Belarusian defence ministry said on Tuesday that Russia and Belarus had started a week-long session of staff training in preparation for joint drills in Russia in September.

The Russian invasion of Ukraine, which Moscow justifies as necessary to protect itself from its neighbour’s ties with the West, has killed tens of thousands of people and driven millions from their homes.

Reporting by Reuters bureaus; Writing by Doina Chiacu and Stephen Coates; Editing by Cynthia Osterman & Simon Cameron-Moore

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World

Biden says no F-16s for Ukraine as Russia claims gains

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  • Russian administrator claims foothold in Vuhledar
  • Kyiv says Russian gains come at huge cost
  • Think-tank says delay in Western arms halted Ukraine’s advance

KYIV, Ukraine/WASHINGTON Jan 30 (Reuters) – The United States will not provide the F-16 fighter jets that Ukraine has sought in its fight against Russia, President Joe Biden said on Monday, as Russian forces claimed a series of incremental gains in the country’s east.

Ukraine planned to push for Western fourth-generation fighter jets such as the F-16 after securing supplies of main battle tanks last week, an adviser to Ukraine’s defence minister said on Friday. A Ukrainian air force spokesman said it would take its pilots about half a year to train on such fighter jets.

Asked if the United States would provide the jets, Biden told reporters at the White House, “No.”

The brief exchange came shortly after Ukrainian President Volodymyr Zelenskiy said that Russia had begun exacting its revenge for Ukraine’s resistance to its invasion with relentless attacks in the east.

Zelenskiy has warned for weeks that Moscow aims to step up its assault on Ukraine after about two months of virtual stalemate along the front line that stretches across the south and east.

Ukraine won a huge boost last week when Germany and the United States announced plans to provide heavy tanks, ending weeks of diplomatic deadlock on the issue.

“The next big hurdle will now be the fighter jets,” Yuriy Sak, who advises Defence Minister Oleksiy Reznikov, told Reuters on Friday.

While there was no sign of a broader new Russian offensive, the administrator of Russian-controlled parts of Ukraine’s eastern Donetsk province, Denis Pushilin, said Russian troops had secured a foothold in Vuhledar, a coal-mining town whose ruins have been a Ukrainian bastion since the outset of the war.

Pushilin said Ukrainian forces were continuing to throw reinforcements at Bakhmut, Maryinka and Vuhledar, three towns running from north to south just west of Donetsk city. The Russian state news agency TASS quoted him as saying Russian forces were making advances there, but “not clear-cut, that is, here there is a battle for literally every meter.”

Pushilin’s adviser, Yan Gagin, said fighters from Russian mercenary force Wagner had taken partial control of a supply road leading to Bakhmut, a city that has been Moscow’s main focus for months.

A day earlier, the head of Wagner said his fighters had secured Blahodatne, a village just north of Bakhmut.

Kyiv said it had repelled assaults on Blahodatne and Vuhledar, and Reuters could not independently verify the situations there. But the locations of the reported fighting indicated clear, though gradual, Russian gains.

Zelenskiy said Russian attacks in the east were relentless despite heavy casualties on the Russian side, casting the assaults as payback for Ukraine’s success in pushing Russian forces back from the capital, northeast and south earlier in the conflict.

[1/7] U.S. Air Force F-16 Fighting Falcon from the 140th Wing of the Colorado Air National Guard during NATO exercise Saber Strike flies over Amari military air base, Estonia June 12, 2018. REUTERS/Ints Kalnins

“I think that Russia really wants its big revenge. I think they have (already) started it,” Zelenskiy told reporters in the southern port city of Odesa.

Mykola Salamakha, a Ukrainian colonel and military analyst, told Ukrainian Radio NV that Moscow’s assault in Vuhledar was coming at huge cost.

“The town is on an upland and an extremely strong defensive hub has been created there,” he said. “This is a repetition of the situation in Bakhmut – one wave of Russian troops after another crushed by the Ukrainian armed forces.”

WESTERN DELAYS

The hundreds of modern tanks and armoured vehicles pledged to Ukraine by Western countries in recent weeks for a counteroffensive to recapture territory are months away from delivery.

This leaves Kyiv to fight through the winter in what both sides have described as a meat grinder of relentless attritional warfare.

Moscow’s Wagner mercenary force has sent thousands of convicts recruited from Russian prisons into battle around Bakhmut, buying time for Russia’s regular military to reconstitute units with hundreds of thousands of reservists.

Zelenskiy is urging the West to hasten delivery of its promised weapons so Ukraine can go on the offensive.

Kremlin spokesman Dmitry Peskov said Western countries supplying arms leads “to NATO countries more and more becoming directly involved in the conflict – but it doesn’t have the potential to change the course of events and will not do so.”

The U.S.-based Institute for the Study of War think-tank said “the West’s failure to provide the necessary materiel” last year was the main reason Kyiv’s advances had halted since November.

That allowed Russia to apply pressure at Bakhmut and fortify the front against a future Ukrainian counter-attack, its researchers said in a report, though they said Ukraine could still recapture territory once the promised weapons arrive.

Zelenskiy met Danish Prime Minister Mette Frederiksen on Monday in Mykolaiv, a rare visit by a foreign leader close to the front. The city, where Russia’s advance in the south was halted, had been under relentless bombardment until Ukraine pushed the front line back in November.

Russia’s invasion, which it launched on Feb. 24 last year claiming it was necessary to protect itself from its neighbour’s ties with the West, has killed tens of thousands of people and driven millions from their homes.

Additional reporting by Pavel Polityuk, Kevin Liffey, Ronald Popeski and Reuters bureaus; Writing by Peter Graff, Philippa Fletcher and Doina Chiacu; Editing by Gareth Jones, William Maclean and Cynthia Osterman

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Business

Shares and bonds nervy as rate-hike week looms

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  • Fed seen hiking 25 bps, ECB and BOE by 50 bps
  • Technology giants lead host of earnings results
  • Shares edge down after robust January rally

LONDON, Jan 30 (Reuters) – Stock markets worldwide halted their January rally on Monday, pausing for breath at the start of an agenda-setting week of central bank rate hikes and data releases that will clarify if progress has been made in the battle against inflation.

Investors expect the Federal Reserve will raise rates by 25 basis points on Wednesday, followed the day after by half-point hikes from the Bank of England and European Central Bank, and any deviation from that script would be a real shock.

Europe’s benchmark STOXX index fell 0.8% on Monday morning, echoing a slight dip in MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), which has surged 11% in January so far as China’s reopening bolsters sentiment.

The U.S. Nasdaq index is likewise on course for its best January since 2001, a rally that will be tested by earnings updates from tech giants this week.

U.S. stocks were set to follow the nervous Monday mood with S&P 500 futures down 1% and Nasdaq futures falling 1.3%, as investors await guidance later in the week on the Federal Reserve’s policy.

Analysts expect a hawkish tone suggesting that more needs to be done to tame inflation. read more

“With U.S. labour markets still tight, core inflation elevated and financial conditions easing, Fed Chair Powell’s tone will be hawkish, stressing that a downshifting to a 25bp hike doesn’t mean a pause is coming,” said Bruce Kasman, chief economist at JPMorgan, who expects another rise in March.

“We also look for him to continue to push back against market pricing of rate cuts later this year.”

There is a lot of pushing to do given futures currently expect rates to peak at 5% in March and to fall back to 4.5% by year end.

Europe offered a brisk reminder that the fight against rising prices is far from over, as bond yields in the region rose sharply on Monday in the wake of stronger-than-expected Spanish inflation data.

The data showing inflation rose 5.8% year-on-year in January, against expectations of 4.7%, pushed up the zone’s benchmark German 10-year government bond yield 7 basis points (bps) to 2.3190%, its highest since Jan. 10.

Italian and Spanish yields also inched up.

The dollar index was flat ahead of the week’s key data, on course for a fourth straight monthly loss of more than 1.5% on growing expectations that the Fed is nearing the end of its rate-hike cycle.

APPLE’S CORE

Yields on 10-year notes have fallen 33 basis points so far this month to 3.50%, essentially due to easing financial conditions even as the Fed talks tough on tightening.

That dovish outlook will also be tested by data on U.S. payrolls, the employment cost index and various ISM surveys.

Reading on EU inflation could be important for whether the ECB signals a half-point rate rise for March, or opens the door to a slowdown in the pace of tightening. read more

As for Wall Street’s recent rally, much will depend on earnings from Apple Inc (AAPL.O), Amazon.com (AMZN.O), Alphabet Inc (GOOGL.O) and Meta Platforms (META.O), among many others.

“Apple will give a glimpse into the overall demand story for consumers globally and a snapshot of the China supply chain issues starting to slowly abate,” wrote analysts at Wedbush.

“Based on our recent Asia supply chain checks we believe iPhone 14 Pro demand is holding up firmer than expected,” they added. “Apple will likely cut some costs around the edges, but we do not expect mass layoffs.”

Market pricing of early Fed easing has been a burden for the dollar, which has lost 1.6% so far this month to stand at 101.85 against a basket of major currencies.

The euro is up 1.5% for January at $1.0878 and just off a nine-month top. The dollar has even lost 1.3% on the yen to 129.27 despite the Bank of Japan’s dogged defence of its ultra-easy policies.

The drop in the dollar and yields has been a boon for gold, which is up 5.8% for the month so far at $1,930 an ounce .

The precious metal was flat on Monday ahead of the slew of key central bank moves and data releases.

China’s rapid reopening is seen as a windfall for commodities in general, supporting everything from copper to iron ore to oil prices.

Oil steadied on Monday after earlier losses, with prices bolstered by rising Middle East tension over a drone attack in Iran and hopes of higher Chinese demand.

Brent crude rose 10 cents, or 0.12%, to $86.76 a barrel by 1200 GMT while U.S. West Texas Intermediate crude added 4 cents, or 0.05%, to $79.72.

Reporting Lawrence White and Wayne Cole; Editing by Christopher Cushing, Arun Koyyur and Christina Fincher

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Business

Oil falls ahead of OPEC+, U.S. Federal Reserve meetings

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SINGAPORE, Jan 30 (Reuters) – Oil prices fell on Monday, giving up earlier gains, as global producers this week will likely keep output unchanged during a meeting this week and investors are cautious ahead of a U.S. Federal Reserve meeting that may spur market volatility.

Brent crude futures fell 20 cents, or 0.2%, to $86.46 a barrel by 0435 GMT while U.S. West Texas Intermediate crude was at $79.57 a barrel, down 11 cents, or 0.1%.

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, are unlikely to tweak their current oil output policy when they meet virtually on Feb. 1.

Still, an indication of a rise in crude exports from Russia’s Baltic ports in early February caused Brent and WTI to post their first weekly loss in three last week.

“No change to the OPEC+ output is expected to be announced at this week’s meeting and we expect outlook commentary from the U.S. Fed to be the key driver of the outlook in the near term,” said National Australia Bank analysts in a research note.

Ahead of the Federal Reserve’s policy meeting scheduled on Jan. 31-Feb. 1, the market broadly expects the U.S. central bank to scale back rate hikes to 25 basis points (bps) from 50 bps announced in December, which may ease concerns of an economic slowdown that would curb fuel demand in the world’s biggest oil consumer.

Oil prices earlier gained amid tensions in the Middle East following a drone attack in oil producer Iran and as China, the world’s biggest crude importer, pledged over the weekend to promote a consumption recovery which would support fuel demand.

“It is not really clear yet what’s happening in Iran, but any escalation there has the potential to disrupt crude flow,” said Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore.

“We have Russia on the supply side and China on the demand side. Both can swing by more than 1 million barrels per day above or below expectation,” said Grasso, formerly an oil trader with Italy’s Eni.

“China seems to have surprised the market in terms of how fast they are coming out of zero COVID while Russia has surprised in terms of resilience of export volume despite the sanctions.”

China resumes business this week after its Lunar New Year holidays. The number of passengers travelling prior to the holidays rose above levels in the past two years but is still below 2019, Citi analysts said in a note, citing data from the Ministry of Transport.

“Overall international traffic recovery remains gradual, with high-single to low-teens digits to 2019 level, and we expect further recovery when outbound tour group travel resumes on Feb. 6,” the Citi note said.

Reporting by Florence Tan and Emily Chow; Editing by Muralikumar Anantharaman and Christian Schmollinger

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World

New Zealand counts cost of Auckland floods, more rain forecast

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WELLINGTON, Jan 30 (Reuters) – Flood-ravaged Auckland is forecast to receive further heavy rain in the coming days, authorities in New Zealand’s largest city said on Monday, as insurers counted the costs of what looks likely to be the country’s most expensive weather event ever.

Four people lost their lives in flash floods and landslides that hit Auckland over the last three days amid record downpours. A state of emergency remains in place in Auckland. A state of emergency in the Waitomo region south of Auckland was lifted.

Flights in and out of Auckland Airport are still experiencing delays and cancellations, beaches around the city of 1.6 million are closed and all Auckland schools will remain closed until Feb. 7.

“There has been very significant damage across Auckland,” New Zealand Prime Minister Chris Hipkins told state-owned television station TVNZ on Monday. “Obviously there were a number of homes damaged by flooding but also extensive earth movements.”

Currently, around 350 people were in need of emergency accommodation, he added.

LOOMING CLOUDS

Metservice is forecasting further heavy rains to hit the already sodden city late on Tuesday.

“We have more adverse weather coming and we need to prepare for that,” Auckland Emergency Management duty controller Rachel Kelleher told a media conference.

Fire and Emergency services received 30 callouts overnight Monday, including responding to a landslide when a carport slid down a hill.

The council has designated 69 houses as uninhabitable and has prevented people from entering them. A further 300 properties were deemed at risk, with access restricted to certain areas for short periods.

The north of New Zealand’s North Island is receiving more rain than normal due to the La Nina weather event.

The National Institute of Water and Atmospheric Research (NIWA) said Auckland has already recorded more than eight times its average January rainfall and 40% of its annual average rainfall.

INSURERS FACE HEFTY BILL

The cost of the clean up is expected to top the NZ$97 million ($63 million) bill for flooding on the West Coast in 2021 but will not be anywhere near as expensive as the estimated NZ$31 billion insured costs of two major earthquakes in Christchurch in 2010-2011, said Insurance Council of New Zealand spokesperson Christian Judge.

Insurance Australia Group’s (IAG.AX) New Zealand divisions have received over 5,000 claims so far and Suncorp Group (SUN.AX) said it received around 3,000 claims across the Vero and AA Insurance Brands. New Zealand’s Tower (TWR.NZ) said it had received around 1,900 claims.

“The number of claims is expected to rise further over the coming days, with the event still unfolding and as customers identify damage to their property,” IAG said in a statement.

Economists say the recovery and rebuild could add to inflationary pressures in New Zealand as vehicles and household goods need to be replaced and there is an increase in construction work needed to repair or rebuild houses and infrastructure damaged by the flooding.

($1 = 1.5385 New Zealand dollars)

Reporting by Lucy Craymer; Editing by Aurora Ellis and Lincoln Feast

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World

Peru bus plunges off cliff, killing at least 24

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Jan 28 (Reuters) – At least 24 people died in northern Peru after a bus carrying 60 passengers plunged off a cliff in early on Saturday, police told local media.

Peru’s transportation supervisory agency (SUTRAN) confirmed the crash in a statement, without providing a number of fatalities or injuries.

Bodies of victims are transported on the back of a pick-up truck, after a bus carrying 60 passengers plunged off a cliff, in the district of El Alto, Peru January 28, 2023. Piura Government/Handout via REUTERS

The tragedy, involving a bus for the company Q’Orianka Tours Aguila Dorada, occurred in the district of El Alto in the far north of Peru, SUTRAN said.

SUTRAN said early investigations showed the bus appeared to have an up-to-date safety inspection and accident insurance.

Road accidents are relatively common in Peru, with many drivers operating vehicles on precarious roads and without proper training. In 2021, 29 people died when a bus plunged off a highway in the Andes mountains.

Reporting by Brendan O’Boyle; Editing by Cynthia Osterman

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