Australia’s prime minister joked he would huddle with top officials Thursday to discuss the soaring cost of lettuce and local KFCs’ decision to replace the verdant leaf with a cabbage mix on their Zinger Burgers.
Dubbing the fast-food chain’s decision “crazy”, centre-left leader Anthony Albanese quipped the situation had become a national “crisis”.
Lettuce prices have soared by as much as 300 percent in Australian cities thanks to recent flooding and high global fuel prices.
A single head of iceberg lettuce that once sold for about $2 now goes for close to $8 in Sydney and Melbourne.
As a result, KFC told Australian customers it would reduce the lettuce in its products in favour of a 50-50 lettuce-cabbage mix.
“Cabbage isn’t the same as lettuce. That’s just wrong,” Albanese told Sydney’s KIIS FM radio.
“I’ll put it on the list for the Cabinet meeting today. Cabbage-gate.”
Asian markets drop as oil rises and inflation fears ramp up
Asian markets fell Thursday as a rally in oil ramped up inflation fears, with top officials warning of more pain to come as the Ukraine war continues to push prices up and put further pressure on the global economy.
Buyers on Wall Street were in retreat again after data showed US crude and gasoline stockpiles sank, just as the summer driving season begins and leading OPEC member demand would surge further as China reopens.
Adding to the gloom was the OECD’s sharp downward revision of its global growth outlook and doubling of its inflation forecast.
The glum mood was only slightly offset by ongoing optimism that Beijing’s tech crackdown was close to an end.
Both main crude contracts jumped more than two percent Wednesday to three month highs after figures showed the biggest US storage depot had seen a big fall in reserves last week, suggesting elevated prices were not deterring people from driving.
Meanwhile, White House Press Secretary Karine Jean-Pierre said officials expect Friday’s keenly awaited consumer price index will be “elevated”.
The comment lifted expectations that the Federal Reserve will stick to its hawkish path and hike interest rates by half a point for at least three more meetings this year as it tries to bring down inflation from four-decade highs.
Analysts said investors were unlikely to get any reprieve until crude — a key driver of inflation since Russia’s invasion of Ukraine — was brought under control.
“A pullback in crude would be crucial for any prolonged risk rally, given implications for inflation expectations,” said SPI Asset Management’s Stephen Innes.
“And for the central bank fraternity intent on frontloading rates, chapter two of the current playbook reads that aggressive tightening risks a material decline in housing, consumer confidence, and consumption that will eventually drive their respective economies into recession and send stocks tumbling.
“So until we reach peak inflation, which will trigger a less hawkish Fed and lower recession odds, it could be a gloomy summer for global stock pickers.”
He added that prices were expected to rise further for now as China emerges from months of lockdown, a sentiment that United Arab Emirates Energy Minister Suhail Al-Mazrouei agreed with.
“With the pace of consumption we have, we are nowhere near the peak because China is not back yet,” he told a conference Wednesday. “China will come with more consumption.”
The unease about rising prices and rates saw all three main indexes on Wall Street drop along with European markets, with focus on the European Central Bank’s policy meeting later Thursday.
The ECB is expected to begin winding down its massive bond-buying programme and signal a rate hike was in the pipeline.
Asian traders followed suit Thursday.
Hong Kong dropped, even as tech firms continued to benefit from hopes that China’s crackdown was almost over, while Shanghai, Sydney, Seoul, Singapore, Taipei, Manila and Wellington were also in the red.
Tokyo, however, edged up as the yen sat at two-decade lows owing to widening the monetary policies of the hawkish United States and Japan, which shows no signs of lifting rates.
Investors were jarred by a report from the Organisation for Economic Co-operation and Development, which said it had cut its 2022 growth outlook to three percent — from 4.5 percent predicted in December — owing to the Ukraine war.
It also doubled its inflation estimate to 8.5 percent, a 34-year high.
“The world is set to pay a hefty price for Russia’s war against Ukraine,” wrote the OECD’s chief economist and deputy secretary-general, Laurence Boone.
And Anna Han, at Wells Fargo Securities, told Bloomberg Television: “Our view is that the chance of recession by the end of 2023 is 40 percent or so.”
– Key figures at around 0230 GMT –
Tokyo – Nikkei 225: UP 0.2 percent at 28,278.45 (break)
Hong Kong – Hang Seng Index: DOWN 0.7 percent at 21,851.49
Shanghai – Composite: DOWN 0.6 percent at 3,245.66
Brent North Sea crude: UP 0.1 percent at $123.72 per barrel
West Texas Intermediate: UP 0.1 percent at $122.20 per barrel
Dollar/yen: UP at 134.36 yen from 134.29 yen late Tuesday
Euro/dollar: DOWN at $1.0717 from $1.0720
Pound/dollar: DOWN at $1.2524 from $1.2535
Euro/pound: UP at 85.57 pence from 85.54 pence
New York – Dow: DOWN 0.8 percent to 32,910.90 (close)
London – FTSE 100: DOWN 0.1 percent at 7,593.00 (close)
With inflation on rise, ECB readies tougher action
The European Central Bank is set to announce the end date to its bond-buying stimulus on Thursday, as concerns over the accelerating pace of inflation in the eurozone grip policymakers.
The stop is a prelude to the ECB hiking rates for the first time in over a decade in the weeks that follow, turning the page on an era of ultra-loose monetary policy.
Inflation in the eurozone rose to 8.1 percent in May, the highest level in the history of the currency club and well above the ECB’s own two-percent target.
The surge has largely been driven by the war in Ukraine, which has decisively pushed up the cost of energy, food and raw materials.
Persistent price pressures have forced the ECB into an “enormous U-turn” since December, said Carsten Brzeski, head of macro at ING bank.
From saying inflation would be “temporary” and warding off interest rate hikes in 2022, the ECB is now racing to catch up with other major central banks in the United States and Britain.
With inflation picking up, “the only really interesting question is why they don’t start hiking rates immediately instead of waiting until July”, Brzeski said.
– ‘Lift off’ –
Under pressure to show the ECB was responding to inflation, President Christine Lagarde set out the likely next steps for the central bank in a blog post in late May.
The unusually clear statement foresaw an end to the ECB’s crisis-era stimulus programme “very early in the third quarter”.
The so-called asset purchase programme, or APP, is the last in a series of debt-purchasing measures worth a total of around five trillion euros ($5.4 trillion) deployed by the ECB since 2014.
Lagarde then went on to reveal ECB policy through the second half of the year, predicting a “lift off” in rates at the governing council’s next meeting in July, with the central bank bringing an end to negative interest rates by the end of September.
Of the ECB’s three main interest rates, the so-called deposit rate — which is normally the interest commercial banks would receive for parking their cash with the ECB overnight — has been negative since 2014.
– ‘Benchmark pace’ –
Still up for discussion in Amsterdam, where the governing council is meeting instead of at its usual venue in Frankfurt, is the size of the first step.
Some members have called on the ECB to follow the US Federal Reserve and bring the curtain down on negative interest rates with a single half-point hike.
The head of the Dutch central bank, Klaas Knot, said in May that such a move was “clearly not off the table”.
But the ECB’s chief economist, Philip Lane, pushed back against suggestions of a big hike, calling 25 basis points — or a quarter of a percentage point — the “benchmark pace”.
ECB followers will be listening carefully to Lagarde’s press conference at 2:30 pm (1230 GMT) for some indication of the prevailing thinking among policymakers.
Lagarde could “give a nod to the hardliners” by leaving the door open to a steeper rise, said Franck Dixmier, head of fixed income at Allianz Global Investors.
The decision will depend to a large extent on how the outlook for the economy changes.
The ECB is scheduled to publish new economic forecasts alongside its policy decisions on Thursday.
Its previous estimates — published in the immediate aftermath of Russia’s invasion of Ukraine — cut projected growth in the eurozone in 2022 to 3.7 percent and saw inflation rising to 5.1 percent.
Looking ahead, the ECB will be keeping a particularly close eye on any serious divergence in borrowing costs across the eurozone, as measured by the difference between yields on individual countries’ bonds and those of Germany — seen as a benchmark of stability.
Currently, the spread between Italian and German 10-year bonds is at its widest since the early stages of the coronavirus pandemic.
Lagarde has previously vowed to act “promptly” if needed, raising the possibility of designing a new instrument “in short order”.
Zuckerberg staying at Meta helm for years ‘makes sense’: Clegg
Mark Zuckerberg’s presence at the helm of Facebook parent Meta for “many, many years” would be perfectly natural, his global affairs director has told AFP, even as the founders of many tech companies hand off to fresh blood.
Succession at the mega company has been in the headlines in recent weeks with the announcement of the departure of Sheryl Sandberg after 14 years as the firm’s number two.
But while the founders of companies like Amazon, Twitter and Google have all moved on, Zuckerberg has shown no sign of giving up the reins — despite raging criticism over privacy scandals and the rampant spread of misinformation across Facebook.
Now as Meta rolls out its plans for the metaverse — the immersive virtual world that it considers the future of the internet — there’s no reason for the 38-year-old to go anywhere anytime soon, said Nick Clegg, the company’s director of global affairs.
“It’s a multi-year project. It would make sense to me that Mark Zuckerberg would want to continue, to build this new chapter of the company, and that’s going to last for many years, many years,” Clegg told AFP on the sidelines of the Summit of the Americas in Los Angeles.
“He is the founder of the company, of Meta, but he is also the architect of the new chapter, of this construction, of these augmented reality and virtual reality technologies.”
Facebook bought virtual reality headset maker Oculus in 2014 and launched a social VR platform.
The technology has taken off in the gaming industry, and become popular among players of Fortnite and Roblox.
But Clegg, a former British deputy prime minister, said the metaverse promised great opportunities in the fields of education and medicine, as well as entertainment.
For example, he said, teachers can take their students on a virtual trip through ancient Greece, and medics can learn sophisticated surgical techniques.
And, he said, as hardware improves, the need for specialist equipment will diminish.
“In years to come, people will be able to access these new technologies through their phones,” he said.
“We are exploring how we can increase access to everyone and not just people who can afford the new and latest hardware.”
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