What to watch in Europe today
France: The country will mark Europe Day, commemorating the Schuman declaration in 1950. President Emmanuel Macron will give a speech to mark the occasion in Strasbourg, where he is attending an EU conference on the future of Europe. France will also publish its latest trade balance figures. Though its inflation is lower than the eurozone average, soaring raw material prices and energy costs have hit builders, car manufacturers and aviation companies.
Russia: The country will commemorate the Soviet Union’s role in the second world war with a parade in Moscow’s Red Square, in an event known as Victory Day, despite its ongoing war in Ukraine.
Infineon Technologies: Europe’s largest chipmaker will publish second-quarter results. In February, Infineon raised its forecast for revenues, underlining the German group’s status as a beneficiary from the global shortage of semiconductors. Revenues for its current fiscal year are €13bn, roughly €300mn more than its previous projection.
Markets: Futures for the Euro Stoxx 50 and the FTSE 100 were down 1.3 per cent and 0.7 per cent, respectively, after a day of declines across Asia as investors responded to gloomy trade data from China.
Japan says plan to phase out Russian oil will ‘take time’
Japan has joined other G7 countries in pledging to ban or phase out Russian oil imports but it warned that the move would “take time” to materialise.
Tokyo has been forced to reduce its reliance on Russian energy in the wake of president Vladimir Putin’s war in Ukraine and has already committed to banning coal imports.
While the latest pledge marks another shift over energy for Japan, prime minister Fumio Kishida acknowledged that the phaseout of Russian oil would be gradual. He again rejected calls to pull out of two major energy projects with Russia.
“For a country largely dependent on imports of energy such as oil, this is a very difficult decision, but it is critical to take unified action with the G7,” Kishida said on Monday.
“In terms of the timing of reducing or halting oil imports, we will consider it in line with the actual situation. That is, we would take time to move towards a phaseout,” he said, adding that Japan will maintain its stakes in the oil and LNG projects on the Russian island of Sakhalin.
Russia accounted for almost 4 per cent of Japan’s overall oil imports last year.
Marcos Jr leads polls in Philippines presidential election
Filipinos began voting on Monday in a national election that pitted the offspring of two of their leading political dynasties against a progressive candidate promising a break with the country’s increasingly authoritarian governance.
Presidential candidate Ferdinand (“Bongbong”) Marcos Jr and his running mate Sara Duterte, president Rodrigo Duterte’s daughter, held a commanding lead over their rival Leni Robredo, incumbent vice-president, who is running alongside Kiko Pagilinan, a senator.
A poll by Pulse Asia published last week showed Marcos with 56 per cent popular support, double the 23 per cent for Robredo. Sara Duterte held an even larger lead over Pangilinan under an electoral system that allows voters to vote for presidents and vice presidents from different parties.
More than 67m of the country’s almost 110m population have registered to vote.
A win for Marcos, 64, would mark the political rehabilitation of a family that presided over one of Asia’s most notorious dictatorships. It would also lift the fortunes of Sara Duterte, 43, who outpolled all rivals including Marcos for the presidency earlier this year, before deciding to run alongside him.
Robredo, 57, narrowly defeated Marcos in the race for the vice presidency that brought Rodrigo Duterte to power six years ago. She has won enthusiastic grassroots support on a platform of restoring trust in government and lifting the economy.
Japan services sector posts first expansion in 4 months
Japan’s services sector grew for the first time in four months despite declining new orders, as the government eased coronavirus restrictions.
The final au Jibun Bank Flash Japan Manufacturing purchasing managers’ index rose to 50.7 in April from 49.4 in March, after a preliminary reading of 50.5.
The headline figure was pulled down by weaker growth in total new orders amid uncertainty over the impact on demand of Russia’s invasion of Ukraine and lockdowns in China.
“The easing of Covid-19 restrictions allowed customer-facing businesses to operate more freely in April,” said Usamah Bhatti, an economist at S&P Global, which compiled the index using survey responses from about 400 companies in the sector.
“Private sector firms commented on a stagnation in new order growth, however . . . demand conditions eased at both goods and services firms”, he added.
The world’s third-largest economy also recorded its strongest rise in exports in two and a half years, and the first rise in export sales since December, as orders increased, particularly from outside China.
Japanese services providers were also increasingly confident about the outlook for business activity, with optimism climbing to its highest level in five months, according to the index.
What to watch in Asia today
Philippine presidential election: The son and namesake of late dictator Ferdinand Marcos is the frontrunner, with his running mate Sara Duterte, daughter of incumbent president Rodrigo Duterte, likely to clinch the vice presidency, according to opinion surveys. A total of 18,100 legislative, regional, provincial and municipal seats are up for grabs.
China: April trade balance figures are expected to reflect the disruption caused by coronavirus lockdowns on factory output and supply chains.
Economic data: Indonesia is due to release gross domestic product figures for the first quarter and consumer price index data. Japan issues its April composite and services purchasing managers’ index, while its central bank is due to release the minutes of its March meeting, in which policymakers voted to stand pat on low interest rates.
Markets: Japan’s Topix and Australia’s S&P/ASX 200 opened 0.9 per cent and 0.8 per cent lower, respectively. Asian markets elsewhere likely to follow suit, with futures for South Korea’s tech-heavy Kospi index down 0.04 per cent. Hong Kong is closed for a holiday.
US hits Gazprombank executives with sanctions for first time
The US sought to tighten sanctions on Russia on Sunday by blacklisting a swath of financial executives and restricting the provision of professional services, even as the EU struggled to finalise its latest package of penalties.
The US targeted executives at Gazprombank for the first time, while also barring companies from providing Russia with corporate services such as accounting and consulting.
However, diplomats said Hungary continued to hold back progress in Brussels on the EU’s proposed sixth package of sanctions, which will include a phased-in oil embargo aimed at squeezing Moscow’s sources of cash.
With Russia preparing for Victory Day celebrations on Monday, the G7 and its allies are seeking to harden the economic pressure on president Vladimir Putin’s regime. Joe Biden, the US president, on Sunday met his G7 counterparts and Ukraine’s leader Volodymyr Zelensky as part of a co-ordinated show of support for the war-torn country.
A senior Biden administration official said the new US sanctions targeted 27 executives of Gazprombank, Russia’s third-largest lender and a subsidiary of state-owned energy company Gazprom. But the measures did not freeze the company’s assets or prohibit transactions with it since it is the main way Russia sells gas to Europe.
“We’re sanctioning some of their top business executives, they’re the people who sit at the top of the organisation, to create a chilling effect . . . we don’t want Gazprombank to be seen as a safe haven,” the senior Biden administration official said.
Read more on the sanctions here.
Morrisons and EG make last-ditch bids for McColl’s
Wm Morrison has mounted a last-ditch rescue bid for McColl’s, prompting petrol station operator EG Group to improve its offer to buy the struggling UK convenience store chain out of administration.
Just hours before a court was expected to formally appoint an administrator, supermarket operator Morrisons tabled an improved offer to win over McColl’s lenders, who had rejected its earlier proposal.
EG, whose owners also control grocery chain Asda, has in turn offered to take on the funding of McColl’s pension scheme. The move attempts to assuage fears it would use a controversial insolvency procedure to break promises made to 2,000 retirement plan members.
The offers on Sunday marked the final hours of a two-way battle over McColl’s, with people close to the process expecting Morrisons and EG to submit best and final bids before a decision is taken on Monday.
McColl’s operates more than 1,200 convenience stores, including more than 200 outlets operating under the Morrisons Daily brand. Any sale might protect some of the 16,000 jobs that would be at risk if the company were to collapse. The convenience store group has debts of about £145mn.
Ministers are watching developments closely, with senior Conservative party figures saying the priority would be protecting jobs and livelihoods. But one government official said the choice between “overleveraged EG and US private equity” was not an especially appealing one.
Morrisons is owned by US buyout group Clayton, Dubilier & Rice.
Read more on the offer here.
Scholz vows to continue sending heavy weapons to Ukraine
Chancellor Olaf Scholz said Germany would continue to send heavy weapons to Ukraine, saying it was its historical responsibility to help the government in Kyiv defend itself against Russian aggression.
He made the comments during a speech to mark the 77th anniversary of the Allied victory in the second world war.
“We have learned a central lesson from the disastrous history of our country between 1933 and 1945,” he said in the televised address. “No more war. No more genocide. No more tyranny.”
“In the present situation that can mean only one thing: we defend justice and freedom — at the side of the victim. We support Ukraine in its fight against the aggressor.” Not doing so, he added, would be like “capitulating to brute force”.
Scholz’s speech reflected the shift in his thinking on arming Ukraine. He had initially ruled out providing Kyiv with heavy weapons such as tanks and armoured vehicles, saying this could make Germany a party to the war and trigger a nuclear conflict with Russia.
But in recent days he changed his tune. On Friday, the government announced it would be providing Ukraine with seven self-propelled howitzers, a type of artillery piece known as the PzH 2000. That followed a decision to give Kyiv around 50 Gepard (“Cheetah”) anti-aircraft guns.
Read more on Scholz’s comments here.
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