“In simple terms, this means that a 50 basis point increase will be among the choices on the table when we next meet,” said BOE Gov. Andrew Bailey in a speech Tuesday. “50 basis points is not locked in, and anyone who predicts that is doing so based on their own view.”Mr. Bailey also said the BOE would lay out a plan for selling some of the government bonds it bought under a series of stimulus programs known as quantitative easing. He said sales could start as early as September, and total between £50 billion and £100 billion in the first year, equivalent to $60 billion and $120 billion.

Economists expect the annual rate of consumer-price inflation to increase further. The Bank of England has said it should top out at around 11% in the final months of the year. The U.K. sets a ceiling on home energy prices twice yearly, and the next adjustment is due in October, when a further rise of 50% is expected.“The inflation outlook remains grim,” said Sanjay Raja, an economist at Deutsche Bank. “Our updated projections now show CPI peaking at 11.3%.”

Potential government measures include taking tariffs on imports off, lowering pharmaceutical prices, improving energy policies and lowering the budget deficit, he said.“There’s a lot we can do to contain or control inflation,” he said. “But if we continue with the kind of ostrich policies we had in 2021, there’s going to be much, much more pain later.”

Investors, though, have typically been cautious about anticipating such a pivot. In the mid-1990s, when the Fed last tightened policy at something close to its current pace, the central bank raised rates by 3 percentage points in total. But investors were ready for it to go much further than that, said Mr. Caron, who was trading at the time.The Fed, in that episode, raised rates for the last time in February 1995 and then lowered them in July. But it wasn’t until May that short-term Treasury yields suggested investors were preparing for a cut.

The Affordable New York tax provision, commonly known as 421a, offered a property tax exemption for housing projects in New York City that include a percentage of units earmarked for lower-income renters. Nearly 70% of rental housing built over the past decade used the tax abatement, according to New York University’s Furman Center. But the 51-year-old program expired in June when state lawmakers ended their session without renewing or replacing it. That has left plenty of New York City developers in a bind, scrambling to complete rental projects they started before the provision lapsed or switching gears and building other types of properties.

A weaker euro makes Europe’s exports cheaper while helping to lure overseas tourists to the beaches and resorts of Greece and Spain. That export-boosting effect is being eaten up by a large increase in the price of the continent’s imports, especially energy and raw materials, many of which are priced in dollars, analysts say. Those price increases are driving up inflation across the currency bloc. (function () { var adOptions = {"options":{"adActivate":true,"adId":"wsj-body-AD_UNRULY","adRequestOnRemount":true,"adSize":[[2,2]],"adSizeMap":{"at4units":[[2,2]],"at8units":[[2,2]],"at12units":[[2,2]],"at16units":[[2,2]]},"adTargeting":{"adlocation":"UNRULY","circ":"","msrc":"","news_id":"","psg":""},"adUnitPath":"/2/interactive.wsj.com/markets_foreignexchange_story","checkIfRendered":false,"collapseAdBeforeFetch":true,"hideAd":false,"isMetaTag":false,"isObserve":true,"isTemplate":false,"isUtagData":true,"label":"","labelPosition":"top","moatEnabled":true,"noWrapper":false,"reserveInitialHeight":false,"rootMargin":"0px 0px 500px 0px","shouldUpdate":true,"staticHeight":{},"threshold":0,"triggerAdBidding":true,"triggerApstag":true,"triggerPrebid":true,"labelClasses":"","location":"L","responsiveContainer":false,"adLocation":"UNRULY","pageId":"markets_foreignexchange_story","params":{},"trackingKey":"interactive.wsj.com/markets_foreignexchange_story","wrapperStyles":{"width":"100%"},"observeFromUAC":true},"content":{}}; window.adslots = window.adslots || {}; (window.adslots.adIds = window.adslots.adIds || []).push('wsj-body-AD_UNRULY'); window.__ace('uac', 'renderAd', [adOptions]); })(); “The extreme price increases in import and producer prices overshadow any profit that exporters can book for themselves due to a weaker currency,” said Sonja Marten, head of foreign exchange and monetary policy research at DZ Bank in Frankfurt.

To be sure, if gasoline prices stay at elevated levels but don’t rise further, eventually that will translate to lower annual inflation. “What we’re really trying to do is just get [commodity prices] to stop going up. If it leveled off…then the inflationary effects go away. We don’t need them to actually fall back down,” Fed Gov. Christopher Waller said last week.

According to the PCE index, consumer prices rose 6.3% in May from a year earlier. Core PCE prices rose 4.7% in May from a year earlier, down from a peak of 5.3% over the 12 months ended in February. Core PCE inflation has slowed to a 4% annualized rate over the February to May period, the lowest four-month rate since March 2021.

In Somalia, Ethiopia, South Sudan, Yemen and Afghanistan, nearly 900,000 people already face starvation and death. That is a more than 10-fold increase from 2019—and, by some estimates, could result in more people dying from hunger in 2022 and 2023 than in any years since the 1960s and China’s disastrous Great Leap Forward agricultural policies.

The World Food Program says that increases in the cost of food and fuel since March have pushed an additional 47 million people into acute food insecurity, when a person is no longer able to consume enough calories to sustain her life and livelihood, taking the total to 345 million people world-wide. Of those, some 50 million are living on the edge of famine.

The United States was once a global leader in both solar innovation and manufacturing — we invented photovoltaic technology in the 1950s to power satellites and spacecraft. And we retained our undisputed leadership in solar for decades. But lately we have seen our solar industry get crushed as a direct consequence of China’s huge state subsidies to its manufacturers beginning in the 2000s.Since then the U.S. share of solar component shipments worldwide fell to less than 1 percent in 2021 from 13 percent in 2004. China’s share of the production of solar components has increased over the past two decades from virtually nothing to nearly 85 percent today. For some solar components, that could rise to 95 percent in the coming years, according to a report this week from the International Energy Agency. Simply put, the United States did not provide enough support to its solar companies, which could not compete in the face of China’s state-directed strategy to control the market.

Inflation is the biggest reason for the diverging positions of the two countries’ central banks. In April, overall consumer prices in Japan rose 2.5% from a year earlier. The index excluding volatile fresh-food and energy prices rose just 0.8%. In the U.S., meanwhile, consumer inflation reached an 8.6% annual rate in May as energy and food prices surged.

A cheap yen is typically a boon for the Japanese economy, which is driven by exports such as automobiles. Japan’s exporters, however, are starting to show concern over the yen’s latest slide because it is happening at the same time as rises in commodity prices and supply shortages.

The South Asian nation’s wilting economy has seen Sri Lankans endure months of double-digit inflation, rolling power blackouts and severe shortages of fuel and medicine. Sri Lanka’s foreign reserves are depleted to the point that it can no longer afford to pay for essential imports and the country defaulted on its debt for the first time in its history in May.

Government employers were the only category to report a decline in payrolls, with a seasonally adjusted loss of 9,000 jobs in June.

The continued strength in the labor market was led by employers in the category of professional and business services, a broad group of white-collar industries that added 74,000 jobs last month, the Labor Department said Friday. Those gains were concentrated in management roles, software development and office administrative services.Such white-collar employers had 880,000 more jobs on their payrolls in June than in February 2020, before the Covid-19 pandemic hit the U.S. economy, despite a series of recent high-profile layoffs at companies such as Redfin Corp. and Robinhood Markets Inc.

Fed researchers updated the index in April to include additional indicators of inflation expectations. In a June 15 note to clients, Goldman Sachs economist Ronnie Walker said the revised measure puts greater weight on short-term inflation expectations and on households’ attitudes to prices than previously. That tilts the index higher, he wrote. 

“The index of common inflation expectations at the board has moved up after being pretty flat for a long time, so we’re watching that, and we’re thinking, ‘This is something we need to take seriously,’” Powell told reporters on June 15 after the Fed raised interest rates by 75 basis points, the biggest increase since 1994.

The Royal United Services Institute report noted that Ukraine’s paucity of skilled infantry and armored-vehicle operators limit its abilities to launch serious counteroffensives. Russia’s artillery is also successfully targeting the Ukrainian military so that it is unable to mount attacks, the report said.

In a report this week, the U.K.’s Royal United Services Institute think tank said Ukraine needs long-range artillery systems and electronic warfare equipment to counter Russia’s own advanced systems.The report said that Ukraine’s allies are capable of making up the shortfalls. But, in a nod to the complications of operating too many different weapons systems, the report said success “cannot be achieved through the piecemeal delivery of a large number of different fleets of equipment, each with separate training, maintenance and logistical needs.”

Moscow’s success in the east recalls some of Russia’s previous wars. As in Chechnya in the 1990s, Russia is offsetting the shortcomings of its ground forces by using massed firepower.Ukraine is trying to impose high costs on the advancing Russians with fierce resistance, while also preserving troop strength by slowly falling back to more defensible positions as it awaits flows of heavy weapons from the West. It took Russia two months to take the city of Severodonetsk.

Yet, much of this year’s selloff wasn’t about recession risk. To see this we need to distinguish the direct and indirect effects the Fed has on prices of stocks and bonds.The direct effect is to push up bond yields and push down valuations of stocks with profits far in the future, which means those with high valuations such as Big Tech. This is what dominated until June, with bond yields soaring and growth stocks crashing, while cheap “value” stocks were basically fine. Exclude the technology sector to strip out the bulk of this effect and economically-sensitive cyclical sectors of the stock market had only slightly underperformed defensives by June 7.

While investors are at last focused on recession uncertainty, risks elsewhere in the world could hit U.S. investors, too. Japan might finally be forced to relent and allow bond yields to rise, which would suck back cash the country’s investors had poured overseas. In Europe, the central bank has promised a new plan to support Italy—but we’ve seen this show before. If it follows the pattern of too little, too late, we could see a return of the eurozone debt crisis, something markets are not prepared for.

“We would have expected major rebalancing flows by now to help equities” after a bad second quarter, El Erian said, and wondered whether markets “are being upset by outflows? Or is it that investors are less willing to rebalance in favor of risk assets?”

“On my radar screens are three sets of potential -- I want to stress, potential -- liquidity strain,” he said. “One is in peripheral markets that somehow contaminate the main markets. So far crypto hasn’t, so far EM hasn’t. The second part of risk is simply the inability to raise funding at any cost. We’ve seen high yield go through this but high yield is less important than if it migrates up the quality ladder.”

Junk-bond issuance dropped to $25 billion in the last quarter, the lowest second-quarter supply since at least 2006, according to data compiled by Bloomberg. June volume was $10 billion, the slowest for the month since 2010, the data show.“We need to look at issuance and make sure that that doesn’t freeze up,” El-Erian said.

“The one risk I’m really worried about is liquidity risk,” El-Erian told Bloomberg Television’s The Open on Friday. “We’re starting to see markets locked out of funding. Issuance in June was very low. Companies either were unwilling or unable to refinance themselves.”

Some Ukrainian officials have said that Ukraine is currently losing from 100 to 200 men a day, while other Ukrainian officials say that figure is exaggerated.

“This is a case where GDP revisions alters the view of the first quarter,” said Alex Pelle, US economist at Mizuho Financial Group Inc. “Instead of accelerating in the first quarter versus the prior two quarters, consumption actually moderated.” window.__bloomberg__.ads.enqueue("box-TM6cTNG"); {"contentId":"RE8O87T0AFB401","position":"box","dimensions":{"mobile":[[300,250],[3,3],[1,1],"fluid"]},"type":"Mobile Body Box Ad","positionIncrement":1,"targeting":{"position":"box1","positionIncrement":1,"url":"/news/articles/2022-06-29/us-personal-consumption-revised-sharply-lower-in-first-quarter"},"containerId":"box-TM6cTNG"} By the time the government releases its third estimate of GDP and the underlying components, the numbers don’t typically change much. The large downward revision to consumer spending -- paired with a sizable upward revision to inventories -- is quite unusual.

This is bad news for the big companies in the S&P 500, whose foreign earnings will now be worth less in dollars. But a strong US currency also tends to inhibit earnings for everyone else. Over time, as this Absolute Strategy chart shows, surges in the dollar tend to be followed by falls in global earnings. The pressure a stronger dollar exerts on all those who need to buy dollar-denominated commodities or repay debt denominated in the currency makes this an inevitability

From the top-down point of view of the asset allocators who take BofA’s survey, then, it seems obvious that profits are coming down. Higher prices will eat into demand and revenues, higher rates will increase financing costs, wage demands will tighten margins, and so on. However, that is not the view of the brokers’ analysts who Bloomberg surveys to produce profit estimates. S&P 500 earnings expectations have risen 3% so far this year. Admittedly, this is mostly thanks to energy companies. Exclude them and forecasts are down minimally.

Valuations could certainly go lower still, but the bulk of the valuation-led part of the selloff is over. Now, the question is whether the earnings expectations on which those multiples are based are accurate. If expectations are over-optimistic and need to be cut, then there is room for share prices to fall further without much multiple compression. The BofA survey found serious bearishness about the profit outlook. Only in the immediate aftermath of the Lehman Brothers bankruptcy in 2008 has a greater proportion of fund managers expected global profits to fall

Traders are monitoring a summit of the Group of Seven leaders, who are discussing the viability of a price cap on Russian oil and adopted a declaration pledging to support Ukraine “for as long as it takes.” President Volodymyr Zelenskiy joined the summit by video link from Kyiv and said he wants the war to be over by the end of the year, according to officials familiar with his remarks.

Canada is among the world’s largest producers of natural gas but it lacks export infrastructure on its eastern coast. Building a new LNG terminal could take a decade to get through the regulatory process and would likely face fierce opposition from environmental groups.However, there is an import terminal owned by Spanish firm Repsol SA that could be converted to an export terminal relatively quickly. If the company decides to proceed, Canada’s Natural Resources Minister Jonathan Wilkinson has said the terminal could start shipping gas in three to four years.

“We could switch some production from gas to oil if needed, but it would be five-times less efficient,” Hagen Pfundner, head of the German operations of Swiss drugmaker Roche Holding AG. “That would not be a durable solution.”

Europe’s increased demand for liquefied natural gas will also hit poorer nations around the world as they struggle to compete for cargoes. 

Germany’s vice chancellor drew a parallel between the gas squeeze and the role of Lehman Brothers in triggering the financial crisis. If energy suppliers continue to pile up losses by being forced to cover missing Russian supplies at high prices, there’s a risk of a broader collapse.

The latest figures show that it would take 115 days to reach the government’s target of filling gas reserves to 90% capacity by November. That time frame assumes flows remain at the current level, which is unlikely given the Kremlin’s increasingly aggressive posture toward Europe in retaliation for sanctions imposed over Russia’s war in Ukraine. 

“Companies will move production to where there’s competitive pipeline gas, and this won’t be in Germany,” said Wolfgang Hahn, managing director of Energy Consulting Group GmbH. “You can’t correct 20 years of policy errors in two or three years.”

In Germany, some industrial furnaces have been running without interruption for decades. If they cool down suddenly, the molten materials harden and the system breaks. That’s the kind of concern sweeping through Europe’s largest economy as it faces an unprecedented energy crisis.What started as vague foreboding over reduced supplies of Russian gas is now very real. After President Vladimir Putin slashed flows on the main link to Europe by 60%, experts in Chancellor Olaf Scholz’s administration this week worked out the scenarios and none of them led to sufficient reserves to make it through the winter.  

Supplies could fall further as the Nord Stream pipeline linking Russia to Germany is due for a scheduled maintenance closure on July 11. The closure would normally be for just over 10 days but analysts and officials are concerned the pipeline may not reopen at all this time.

Under German law, strategic gas reserves must be 80% full by October and 90% by November—a scenario now becoming very unlikely to be met. When the government triggers the third level of the plan, known as the “emergency phase,” the country’s energy regulator can begin to ration gas.

Berlin triggered the second of its three-step plan to deal with gas shortages after the Kremlin-controlled energy giant Gazprom, the country’s biggest gas exporter, throttled delivery via the Nord Stream pipeline by around 60% last week. Germany’s gas reserves are at 58% capacity, and the government now expects a gas shortage by December if supplies don’t pick up, Economy Minister Robert Habeck said.The second step, dubbed the “alarm level” is a prerequisite for the government to enforce some of the gas-saving measures it announced at the weekend, including substituting coal to gas for power generation and creating financial incentives for companies that consume less gas.Rationing, which would come in the third step, would focus on industry and could severely impact companies that use gas as fuel or as a raw material for production, likely pushing Europe’s biggest economy into recession, economists and company executives have warned.

The World Bank, in a 2019 report, noted that governments also ban exports when prices are high and encourage exports when prices are low, amplifying price swings in both directions. In 2010-11, such policies contributed to a jump in wheat and maize prices that tipped 8.3 million people into poverty, it estimates.

But governments today are often doing the opposite, according to the World Bank. Their “policies so far have taken the form of tax cuts and fuel subsidies, especially for gasoline…Such measures actually increase demand and put further upward pressure on the prices of crude oil and other petroleum products.”

Managers figure that if gas supply stays above 50% of Ludwigshafen’s maximum demand, they can continue to operate by reducing the load and using substitutes. If gas supply falls significantly below that over a sustained period, they would have to stop production, the company said. The threat of gas rationing is growing and Russia is likely to continue to curtail gas deliveries, German officials and analysts say.

“To put it plainly: There is no short-term solution to replace natural gas from Russia,” BASF Chief Executive Martin Brudermüller said in April.

At BASF’s Ludwigshafen site—a city within a city with over 60 miles of roads, some eight restaurants and a wine cellar—natural gas is fed into an intricate system of pipes and spigots to reach plants making ammonia and acetylene, a compound used in plastics and pharmaceuticals. The site is responsible for as much as 4% of German gas demand.

The threat isn’t just to BASF and its 39,000 employees in Germany. Because BASF and other chemicals companies sit at the beginning of most industrial supply chains, their disruption would reverberate well beyond the sector, threatening Europe’s economy at a time of high inflation and slowing growth. A throttling of BASF’s ammonia output, a key ingredient in fertilizers, could exacerbate the world’s growing food crisis, analysts say.

Today, dwindling Russian gas supplies are proving a threat to the company’s vast manufacturing hub here—the world’s largest integrated chemical complex spanning some 200 plants. Earlier this month, Russia started throttling back its supply of gas to Germany and other European countries. In response, company executives are doing what was unthinkable just a few months ago: considering how to potentially shut down the complex if gas supplies fall further.

Moscow envisions sending up to an additional 50 billion cubic meters annually to China through a second pipeline that is being negotiated. Russia’s need to pivot to Asia is likely to give it a weaker hand in those negotiations.

During Mr. Putin’s visit to China this year, China agreed to buy another 10 billion cubic meters of gas annually from Russia.Even so, those numbers are dwarfed by the 155 billion cubic meters of gas that the European Union bought from Russia in 2021—representing 40% of its gas consumption.

China won’t completely stop buying LNG from the U.S. Most of its purchases of U.S. LNG have until now come from the spot market. Going forward, more will come from fixed contracts that are just starting to kick in. Even as fighting rages in Ukraine, some Chinese firms have continued negotiating such deals with U.S. producers.

For now, U.S. LNG exporters are protected from the Chinese shortfall by the plentiful demand from Europe. Down the line, competition from Russia for China’s market poses potentially big complications for billions of dollars of planned LNG infrastructure on the U.S. Gulf Coast, investments that assume China will be a huge buyer of America’s gas for many years to come.

The changes haven’t been limited to gas markets. China’s imports of Russian oil surged 55% in May compared with a year earlier, with Russia overtaking Saudi Arabia as China’s top supplier. Russian oil has been selling at a steep discount as some countries have cut imports because of the war.

Between February and April, China’s imports of LNG from the U.S. dwindled by 95% from the same time a year earlier, Chinese customs data showed, while its buying of Russian LNG grew by 50%. Data for May indicated a moderate rebound in China’s demand for America’s LNG, but it was still far below last year’s levels.

The European Union announced a ban on insurance for ships carrying Russian oil, which will come into effect in December. About 80% of ships carrying the crude to Indian ports belong to EU shipowners, according to analysis from the Helsinki-based Centre for Research on Energy and Clean Air.

India’s decision is a commercial one: The price of Russian crude tumbled after the Ukraine invasion, with a popular grade known as Urals falling as low as $37 below the Brent benchmark. It edged up in recent days to a discount of just below $34 by Monday, signaling a recovery in demand, according to analysts. 

India has increased imports of Russian oil by more than 25-fold since the start of the war, buying an average of 1 million barrels a day in June, compared with 30,000 in February, according to Kpler data. That is equal to more than a quarter of Europe’s imports of Russian crude and crude products, according to International Energy Agency data. 

Tom Marzec-Manser, gas analyst at commodities data firm ICIS, said Europe would be left with a 13.5 billion-cubic-meter hole in supplies to fill if Russia keeps pumping about 67 million cubic meters of gas each day through Nord Stream, below the previously planned level of 167 million. That represents about 17% of the gas the EU aims to have stocked up by November.

Higher gasoline prices tend to reduce consumption as people adjust their driving patterns, economists say. In the short term, a 10% rise in gasoline prices results in a 2% to 3% decline in gasoline consumption, said Lucas Davis, an economist at the University of California, Berkeley.

Adding to the complexity, higher commodity prices and supply-chain issues have raised the cost of wind and solar farms, which face lengthy regulatory approval processes, lawyers and investors said. In a recent research note, Deutsche Bank AG senior economist Eric Heymann cited skilled-labor and material shortages as well as community opposition to wind farms as some of the obstacles.

The U.S. now plans to boost liquefied natural gas shipments to Europe, aiming to ship 50 billion or more cubic meters a year through at least 2030, to help meet the continent’s demand.

The impact on the Saudi economy would likely depend on the quantity of oil sales involved and the price of oil. Some economists said moving away from dollar-denominated oil sales would diversify the kingdom’s revenue base and could eventually lead it to repeg the riyal to a basket of currencies, similar to Kuwait’s dinar.

It is possible the Saudis could back off. Switching millions of barrels of oil trades from dollars to yuan every day could rattle the Saudi economy, which has a currency, the riyal, pegged to the dollar. Prince Mohammed’s aides have been warning him of unpredictable economic damage if he moves ahead with the plan hastily.

It also comes as the U.S. economic relationship with the Saudis is diminishing. The U.S. is now among the top oil producers in the world. It once imported 2 million barrels of Saudi crude a day in the early 1990s but those numbers have fallen to less than 500,000 barrels a day in December 2021, according to the U.S. Energy Information Administration.By contrast, China’s oil imports have swelled over the last three decades, in line with its expanding economy. Saudi Arabia was China’s top crude supplier in 2021, selling at 1.76 million barrels a day, followed by Russia at 1.6 million barrels a day, according to data from China’s General Administration of Customs.

Meanwhile the Saudi relationship with the U.S. has deteriorated under President Biden, who said in the 2020 campaign that the kingdom should be a “pariah” for the killing of Saudi journalist Jamal Khashoggi in 2018. Prince Mohammed, who U.S. intelligence authorities say ordered Mr. Khashoggi’s killing, refused to sit in on a call between Mr. Biden and the Saudi ruler, King Salman, last month.

It would be a profound shift for Saudi Arabia to price even some of its roughly 6.2 million barrels of day of crude exports in anything other than dollars. The majority of global oil sales—around 80%—are done in dollars, and the Saudis have traded oil exclusively in dollars since 1974, in a deal with the Nixon administration that included security guarantees for the kingdom.

Germany hasn’t sent tanks to Ukraine and agreed to ship seven pieces of heavy artillery. So far, Europe’s largest economy, with a population exceeding 83 million, has sent military aid worth about €200 million, according to government estimates—less than Estonia, with a population of just over one million. France has sent 12 howitzer-type cannons to Kyiv and no tanks or aerial defenses.

“I knew it was coming,” Knighton told NBC Sports, “but I didn’t know it was coming this early into the season. I also didn’t know that it was going to come this early in my career, either. I thought I was going to run 19.4 when I’m like, 20 or something, like when I get stronger and older.”

Ato Boldon, the Trinidadian former 200-meter world champion and NBC Sports analyst, calls Knighton’s feat the junior equivalent of Bob Beamon breaking the long jump world record by nearly two feet.“If one junior in history, who is considered the greatest sprinter of all time, has broken 20 (seconds), and now this kid is half a second—which is a lifetime in the sprints—faster, then yes. It’s not an exaggeration to say that this is the most Beamon-esque junior performance

The IMF has pointed to high debt levels in emerging markets as a sign that many economies would be vulnerable as central banks in advanced economies begin raising rates to tame inflation. Average government debts in emerging markets had reached 64% of GDP at the end of 2021, up almost 10 percentage points since 2019, the IMF said in February.

The most important planned project is a roughly 1,600-mile pipeline connecting Russia’s Yamal peninsula to China, called Power of Siberia 2. The first Power of Siberia project cost more than $50 billion and took more than five years to build. It will send nearly 40 bcm a year to China at full capacity and the second could send as much as 50 bcm.When the two countries agreed to terms on the first pipeline in 2014, China extracted relatively cheap gas prices. “Our Chinese friends drive a hard bargain as negotiators,” Russian President Vladimir Putin remarked at the time.

“The kingdom finds it laughable that last year, several countries, including the United States, have been pressuring them to stick to [plans to zero out carbon emissions by 2050] but now are asking them for more oil,” said a Saudi official.

European leaders will find it more difficult to wean themselves off Russian natural gas, which typically accounts for more than 30% of the EU’s supply and mostly comes via pipeline. JPMorgan Chase estimates that by the end of the year Europe will still receive between 81% and 94% of the amount of Russian gas it took in 2021. The EU has said it would stop using Russian oil and gas by 2027, but ending its reliance on Russian energy could come at a heavy cost.

A German embargo of Russian crude would likely mean that instead of Russian oil reaching Hamburg in a week or two, it would take several months to travel to China, he noted. Conversely for Middle Eastern oil, the embargo would trigger a longer voyage to Europe for crude that would have ordinarily gone to Asia. Such inefficiencies will drive up the costs of shipping, insurance, and financing that underpin the energy trade, he said.

Critics say the Kremlin has succeeded on other fronts over the past 100 days, such as stifling dissent and opposition to the war and pushing a pro-invasion narrative. Both state and independent polls show Mr. Putin has the support of most Russians.A poll conducted by the Moscow-based independent Levada Center during the last week of May found that “support for Russian armed forces in Ukraine remains high,” with 73% saying they believed that the so-called “special military operation” is progressing successfully, up from 68% in April.“The West doesn’t understand the mentality of the Russian people,” Mr. Ivanov said. “It doesn’t understand that for a Russian person, using the language of sanctions, ultimatums, etc., is completely useless. This is the most serious mistake of the West.”

There are two new risks that history doesn’t help with. The first is the unprecedented amount of liquidity that has been pumped into finance by central banks buying bonds. A lack of liquidity is what usually creates financial problems, as it prevents debts being rolled over. As the Fed and other central banks drain liquidity, problems might reveal themselves. The second is that there’s a massive, and unknown, amount of private debt issued by lightly regulated shadow banks. My worry isn’t mainly that the lending turns sour (although it might). Rather, the danger is that the private-debt boom turns out to be a function of easy money. If investors prove less willing to lock up their money in private-debt funds as interest rates make mainstream investments more attractive, there will be a steady withdrawal of lending capacity. That could hold back the economy and make it harder for companies to refinance loans. These sorts of knock-on effects could take years to feed through into financial trouble.

In 1994 and 1997-1998, it took more than a year for emerging-market crises—in 1994 Mexico’s “Tequila crisis,” in 1997 the Asian devaluations followed by Russia’s domestic-debt default—to feed back to Wall Street. When they did, Wall Street’s financial stability wobbled. More worryingly, the loss for investors in benchmark 10-year Treasurys from their peak is already much bigger than the shock of 1994.

Long before Mr. Buffett discussed naked swimmers, economist John Kenneth Galbraith invented the “bezzle”—fraudulent losses accumulated in the good times that are only discovered when the economy weakens. After a decadelong bull market with only the briefest of interruptions in 2020, there could be plenty of bezzles yet to emerge. The biggest bezzles in recent history took painfully long to emerge. After the bursting of the dot-com bubble in March 2000, it was 18 months before accounting fraud took down power company and leveraged energy trader Enron in what was then the biggest-ever bankruptcy. After the 2008 financial crisis, scandals continued for years across both finance and real-economy businesses.

Russian officials have said that oil production this year could decline by as much as 17% because of Western sanctions. This presents a longer-term issue for Russia since much of its oil infrastructure isn’t geared to quick and deep production cuts. The frigid Siberian climate means pipelines can burst without oil in them and low-yielding Soviet-era fields are expensive to maintain and restart. Analysts say that much of the production that Russia closes now would be permanently lost.  Another downside for the Kremlin is that the EU embargo is likely to push the prices of Russian crude further down, reducing Moscow’s revenues from those barrels it is able to sell. Longer distances to ship crude to Asia mean that Russia’s margins will be reduced even further, said Simone Tagliapietra, a senior fellow at Bruegel.

The pipeline exemption won’t provide much respite for Moscow. Before the war, the EU imported about 2.5 million barrels of Russian crude each day of which 800,000 barrels was via the Druzhba pipeline, the world’s longest pipeline network at 5,500-kilometers-long. By year end, Russian crude oil flows into the EU will be 500,000 barrels a day, 20% of prewar levels, said Amrita Sen, founder of Energy Aspects, a consulting firm. That equals roughly $170 million a day in lost revenue for Russia, at the current discounted prices for Russian crude.

Home prices continued to surge in virtually every corner of the U.S. during the first quarter as mortgage rates rose rapidly, according to a Tuesday report from the National Association of Realtors. Many buyers rushed to lock in purchases in the first quarter before rates climbed even higher, according to real-estate agents.

That implies that investors still aren’t panicking. It also suggests that stocks could have farther to fall. During the Covid-19 stock-market selloff of 2020, for example, investors yanked out $61 for every $100 invested, Bank of America analysts found. During the financial crisis, it was even worse: Investors redeemed $113 for every $100 they invested.

A recent analysis from Bank of America Corp. shows outflows from stock funds have been relatively minuscule. The bank estimates that for every $100 poured into the stock market since the start of 2021, so far only $4 has been pulled out. That is based on data through Wednesday from EPFR, which tracks retail and institutional investors’ movement in exchange-traded and mutual funds.

Forward multiples climbed as high as 26.2 times earnings in March 2000. In the selloff that followed, they plummeted. By 2002, the S&P 500 traded at a low of 14.2 times its next year’s earnings. In 2008, when the country was in a severe recession, that figure hit 8.8.

The Treasury Department has said that current U.S. sanctions don’t prohibit Russia from making debt payments. Prices on the bonds rallied Thursday on hopes that the payments would go through. Russia’s bonds maturing in 2023 were quoted around 41 cents on the dollar Thursday, compared with 27 cents Wednesday, according to AdvantageData. Those maturing in 2043 were bought and sold for around 32 cents Thursday, up from about 22 cents Wednesday. They traded above 100 cents on the dollar before the war. Russian credit default swaps, which would pay out a windfall if Russia defaults, also rallied on news of the payments. The cost of a five year CDS contract dropped to 41% of the total value of the debt to be insured, compared to as high as 60% as of Tuesday, according to data from ICE Data Services. The last time Russia reneged on its foreign debts was after the Bolshevik Revolution in 1918. Russia defaulted on its local-government debt in 1998 as the post-Soviet economy struggled to find its feet.

In Japan, companies are raising prices not because consumers are eager to buy their products and willing to pay more, but because they say the cost of their materials leaves them no choice.

Policy makers have distinguished Japan’s situation from the U.S., where strong consumer demand has helped drive inflation above 8% and triggered rate increases by the Federal Reserve. Japan’s economy shrank slightly in the first quarter of this year and the central bank says it isn’t planning to raise interest rates.

The People’s Bank of China on Friday cut its benchmark rate for loans of five years or more to 4.45% from 4.6%, the biggest single reduction since the rate entered the bank’s policy armory in 2019. It had made a 0.1 percentage-point cut in early 2020.

The latest move “is an even stronger signal that instead of opting for a broad-based monetary easing they want to do more-targeted easing,” said Tommy Wu, lead China economist at Oxford Economics in Hong Kong.“We shouldn’t expect large-scale stimulus of the kind that we saw in 2020,” Julian Evans-Pritchard, senior China economist at Capital Economics in Singapore, said in a note to clients.

The venture-capital pullback is a correction from extraordinary heights. Investors poured $1.3 trillion into startups over a decade, producing hundreds of companies annually that attained billion-dollar-plus valuations, attracting interest from foreign governments and top-tier hedge funds. Venture-capital funds raised $132 billion to invest in startups in 2021, nearly double the amount from 2019 and six times the total raised a decade ago, when the number of funds was about a third of what it is today. In last year’s fourth quarter, venture capital investments reached a record $95 billion, according to PitchBook Data Inc.

Guessing the final destination of interest rates is extremely difficult, he said, but one sign that the Fed might need to do more than currently expected is that stocks, as a whole, have only experienced modest declines, with the S&P 500 down 7.8% year-to-date. Right now interest-rate derivatives show that investors expect the Fed to raise its benchmark federal-funds rate from its current level between 0.25% and 0.5% to just above 3% next year. If the market starts pricing in a 3.5% fed-funds rate and stocks fall another 10%, that might suggest that the Fed will stop at 3.5%. But if stocks barely budge, “That tells you [Fed officials] have to do more,” Mr. Ren said.

European countries such as Germany might need to resort to rationing and closing factories if Russian gas deliveries are cut off, other energy analysts have said. Germany would enter a sharp recession if Russian natural-gas deliveries are cut off, the country’s leading economic think tanks said in a report earlier in April.

The action sets a worrisome precedent for the broader Europe Union, which before the war in Ukraine sourced as much as 40% of its gas from Russia. That gas heats European homes and powers factories, especially in Germany and Austria, which source more than half of their supplies from Moscow.

The move marks a major escalation by Russia, which has tried to bolster its currency by insisting customers pay for gas in rubles, and introduces the possibility that more economies in Europe, deeply dependent on Russian gas, could be targeted. Gas prices in Europe rose by more than 10% late Tuesday as traders weighed risks to already tight supplies.

Coinbase, under co-founder and chief executive Brian Armstrong, on Tuesday posted a first-quarter loss of $429.7 million, or $1.98 a share, on revenue of $1.2 billion. That compared with earnings of $387.7 million, or $3.05 a share, on $1.8 billion in revenue a year earlier. Analysts had projected a loss of 1 cent a share on revenue of $1.5 billion, according to FactSet.

“It’s important we have a good crop for food prices,” he said. “We need to have a good crop especially with what’s happening in Ukraine.”

Over 68% of the winter-wheat crop in the U.S. is in a severe drought, while spring-wheat states are stuck with excessive moisture, said Chandler Goule, chief executive of the National Association of Wheat Growers. In Minnesota, one of the largest spring-wheat growing states, 2% of the spring wheat is planted compared with 93% last year.“The lack of moisture in the winter wheat and excessive moisture in the spring will affect yields and quality if we don’t see an immediate change in the weather,” he said.

Some corn-producing states—such as Illinois, Indiana, Minnesota and North Dakota—have seen above-average precipitation over the past three months, according to data from the U.S. National Oceanic and Atmospheric Administration. Wet soils in Corn Belt states have prevented farmers from getting their machinery into their fields.

On Monday, the U.S. Department of Agriculture said 22% of corn was planted, compared with 50% for the previous-five-year average. For soybeans, 12% was planted, compared with the previous-five-year average of 24%, and 27% of spring wheat was in the ground compared with a typical 47%, according to the USDA.

About 40 million people owe roughly $1.6 trillion in federal student debt. But because student-loan rates are generally fixed, higher rates won’t affect much of the existing debt.

The most common kind of federal student loan, known as a direct loan, is offered at a new interest rate every July. The rate is calculated by adding the yield on the 10-year Treasury note in the May auction to a fixed premium, set by Congress, of 2.05 percentage points. Last year, the May auction resulted in 10-year yields of 1.684%, setting a student-loan rate of 3.73% through this June. That rate could move above 5% starting in July. If the rate tops 5.05%, it would be the highest since 2013, according to Education Department data.

For many, the companies they work for have closed down in the lockdown, including boarding up worker dormitories. Some have chosen to join the tens of thousands who zip around Shanghai on bikes or scooters for food-delivery platforms like Alibaba Group Holding Ltd.’s Ele.me and Meituan’s namesake service.But with the income comes the stigma of a higher Covid risk. While the Shanghai government has granted special lockdown exemption for food-delivery workers, residential compounds have their own rules barring them from returning to their apartments for fear they will bring the virus back with them.

Lenders issued about $859 billion in mortgages in the first quarter, down 25% from the previous year, according to data released by the Federal Reserve Bank of New York on Tuesday. The quarter also marked the first time since early 2020 that originations fell below $1 trillion The main cause was a sizable drop in refinancings, which fell about 40% from a year ago. Purchase mortgages were roughly flat, a turnaround from two years of double-digit gains.

The combination of higher rates plus continually rising home prices has pushed monthly mortgage payments to their least affordable level since 2008, according to the Federal Reserve Bank of Atlanta. A median American household needed 34.9% of its income to cover payments on a median-priced home in February, up from 29.2% a year earlier.

With the climate turning, SoftBank has turned to debt to fuel the fund—a risky strategy that venture firms usually avoid—while slowing down its overall pace of new bets.  As SoftBank has sold its older investments, the company has increasingly become dependent on profits from the funds, as well as growing debt tied to other holdings, to fund the broader company.  It is a formula that has caused increasing anxiety over SoftBank’s rising debt levels compared with the value of its holdings for analysts and some investors.  The bull case for SoftBank “relies on one basic premise, and that is that the stock market always goes up,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors who advises short sellers to bet against SoftBank’s stock. 

Small investors plowed $114 billion into U.S. stock funds through March as the S&P 500 tumbled into a correction, falling at least 10% from its high, according to Goldman Sachs Group. That marks a sharp shift in the group’s strategy for much of the past two decades. Typically, individual investors have sold about $10 billion in the 12 weeks after a market peak when the S&P 500 has tumbled that much.

Predicting the effect of these headwinds is complicated by the unusual nature of this cycle. Much of the surge in demand and inflation in the last two years has been concentrated on goods. Some of that might reflect a once-only spending spree as consumers equipped home offices, bought exercise equipment or replaced appliances. This could leave businesses vulnerable to the “Peloton effect,” a sudden drop off in orders as consumers conclude they have enough stuff, as Peloton Interactive, which sells web-connected exercise bikes, experienced last year.

But since December 2021, the Fed has been pivoting hard, revising up how much rates will rise and laying plans to shed its bondholdings. The two-year Treasury yield, a proxy for how much the markets expect the Fed to raise interest rates, is still relatively low, at 2.4%. But its two-percentage point rise in the last six months is the steepest since 1994. The 30-year mortgage rate has reached 5.13%, the Mortgage Bankers Association reported Wednesday, up 2.1 points in the past six months—also the fastest since 1994. This translates into an even sharper rise in monthly mortgage payments: The National Association of Realtors’ housing affordability index was at a 13-year low in February, before the latest leg up in mortgage rates.

Even after recent drawdowns, though, the S&P 500 still looks expensive relative to its valuations over the past decade. The S&P 500 traded last week at 17.7 times its projected earnings over the next 12 months, according to FactSet, above its 10-year average of 17.1 times earnings. With the Fed poised to continue tightening monetary conditions, many investors say stocks still don’t look cheap. Created with Highcharts 9.0.1S&P 500 price/earnings, next 12 monthsSource: FactSetCreated with Highcharts 9.0.1.highcharts-tooltip-3{filter:url(#drop-shadow-3)}