(Reuters) -Russian energy giant Gazprom is looking at options for halting gas supplies to “unfriendly” countries and evaluating the possible consequences, Russian daily Kommersant reported on Thursday citing unnamed sources.

President Vladimir Putin has said Russia will soon require “unfriendly” countries to pay for fuel in roubles, raising alarm about a possible gas supply crunch in Europe.

Putin has ordered the Russian central bank and Gazprom to prepare the payment scheme by March 31 amid Western sanctions against Russia for its “special military operation” in Ukraine.

Countries in the European Union, where Gazprom accounts for about 40% of gas supplies, have stated their refusal to pay for Russian gas in roubles.

“Gazprom … is indeed working on an option of a complete stoppage of gas supplies to ‘unfriendly countries’ and is evaluating the consequences of such measures,” the newspaper wrote.

Kommersant said Gazprom had declined to discuss the issue with the newspaper. Gazprom did not immediately respond to a Reuters request for comment.

The Kremlin’s spokesman said on Wednesday that customers will not be obliged to switch to roubles as soon as Thursday as “payments and delivery is a time-consuming process”.

Germany, Russia’s largest gas client, will continue to pay in euros or dollars, a government spokesman said on Wednesday, adding that Putin had told the German chancellor that nothing would change for European partners, despite his plan for rouble payments.

(Reporting by Reuters; Editing by David Clarke)

By Lisa Pauline Mattackal

(Reuters) – The United States is unlikely to face an economic recession in the next two years despite bond markets flashing warning signs, inflation at its highest in decades and rising geopolitical risks, portfolio managers at PIMCO and Amundi said.

A closely monitored part of the U.S. Treasury yield curve briefly inverted on Tuesday, a sign that investors were concerned the U.S. Federal Reserve’s aggressive rate hikes to tame inflation could tip the economy into recession.

“We see low probability of a recession this year or next. Our models show the risk is slightly higher than the historical average, but not at a level that is concerning,” Erin Browne, multi-asset portfolio manager at bond giant PIMCO, told the Reuters Global Markets Forum on Wednesday.

Browne’s view was echoed by Ken Monaghan, co-head of high yield at the U.S. arm of Europe’s largest asset manager Amundi, who told the forum he does not expect a recession in 2022 and reckons it is unlikely in 2023 despite some elevated risks.

The last time this part of the yield curve, which compares yields on two-year Treasury with 10-year notes, inverted was in 2019 and the following year, the United States entered a recession – albeit one caused by the global pandemic.

Stocks, however, shrugged off the ominous sign earlier this week, with the S&P 500 closing up 1.2% on the day the curve inverted momentarily.

For a related graphic on U.S. yield curve inverts, click https://tmsnrt.rs/3uChSFu

“I am not dismissing that a recession is possible. However, if we look at the fundamentals of the high-yield (bond) market and at the savings that the consumer – especially in the U.S. – has socked away … we don’t see a recession in the near-term,” said Monaghan.

The portfolio manager cited low default rates on junk bonds and signs that investors were staying put despite the risks for his optimism.

Aided by the pandemic, U.S. household wealth rose to a record $150.3 trillion in the final quarter of last year, a financial cushion that may keep consumers spending and limit the economic damage from Russia’s invasion of Ukraine.

Browne said PIMCO, which manages about $2.2 trillion in assets, is currently “keeping powder dry” as markets digest multiple risk factors. The money manager prefers equities – particularly U.S. large-cap stocks – over high-yield (HY) corporate credit, she said.

She also likes investment-grade company debt relative to rates, given widening spreads over Treasuries, and is cautious on longer-dated U.S. bonds until inflation expectations are clearer.

For a related graphic on U.S. Corporate Credit yields, spreads, click https://tmsnrt.rs/3tT0ld9

While Browne expects further yield curve inversions, she thinks its reliability as a recession indicator has decreased, particularly as the U.S. Federal Reserve’s massive bond-buying purchases are keeping long-dated yields suppressed.

“Arguably we would not be experiencing the same flatness of the curve without quantitative easing,” said Browne, adding that the “real” or inflation-adjusted yield curve was a better indicator of growth risks.

(These interviews were conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Sign up here to join GMF: https://refini.tv/33uoFoQ); Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)

By James Davey

ROYDON, England – In a small corner of south-east England, vast glasshouses stand empty, the soaring cost of energy preventing their owner from using heat to grow cucumbers for the British market.

Elsewhere in the country growers have also failed to plant peppers, aubergines and tomatoes after a surge in natural gas prices late last year was exacerbated by Russia’s invasion of Ukraine, making the crops economically unviable.

The hit to UK farms, which need gas to counter the country’s inclement weather, is one of the myriad ways the energy crisis and invasion have hit food supplies around the world, with global grain production and edible oils also under threat.

In Britain it is likely to push food prices higher at a time of historic inflation, and threaten the availability of goods such as the quintessentially British cucumber sandwich served at the Wimbledon tennis tournament and big London hotels.

While last year it cost about 25 pence to produce a cucumber in Britain, that has now doubled and is set to hit 70 pence when higher energy prices fully kick in, trade body British Growers says.

Regular sized cucumbers were selling for as little as 43 pence at Britain’s biggest supermarket chains on Tuesday.

“Gas prices being so sky high, it’s a worrying time,” grower Tony Montalbano told Reuters, while standing in an empty glasshouse at Roydon in the Lea Valley where for 54 years three generations of his family have farmed cucumbers.

“All the years of us working hard to get to where we are, and then one year it could just all finish,” he said.

All 30,000 square metres of glasshouse at his Green Acre Salads business, which supplies supermarket groups including market leader Tesco, Sainsbury’s and Morrisons, are currently empty.

Montalbano, whose grandfather emigrated from Sicily in 1968 and started a nursery to provide local stores with fresh cucumbers, decided not to plant the first of the year’s three cycles in January.

SOARING COSTS

Last year he paid 40-50 pence a therm for natural gas. Last week it was 2.25 pounds a therm, having briefly hit a record 8 pounds in the wake of Russia’s invasion.

Fertiliser prices have tripled versus last year, while the cost of carbon dioxide – used both to aid growing and in packaging – and hard-to-attain labour have also shot up.

“We are now in an unprecedented situation where the cost increases have far outstripped a grower’s ability to do anything about them,” said Jack Ward, head of British Growers.

It means a massive contraction for the industry, threatening Britain’s future food security, and further price rises for UK consumers already facing a bigger inflation hit than other countries in Europe following Brexit.

UK inflation hit a 30-year high of 6.2% in February and is forecast to approach 9% in late 2022, contributing to the biggest fall in living standards since at least the 1950s.

The National Farmers’ Union says the UK is sleepwalking into a food security crisis. It warns that UK production of peppers could fall from 100 million last year to 50 million this year, with cucumbers down from 80 million to 35 million.

In winter, the UK has typically imported around 90% of crops like cucumbers and tomatoes, but has been nearly self-sufficient in the summer.

The Lea Valley Growers Association, whose members produce about three-quarters of Britain’s cucumber and sweet pepper crop, said about 90% did not plant in January, while half have still not planted and will not plant if gas prices remain high.

“There’s definitely going to be a lack of British produce in the supermarkets,” association secretary Lee Stiles said. “Whether there’s a lack of produce overall depends on where and how far away the retailers are prepared to source it from.”

Growers in the Netherlands, one of Britain’s key salad suppliers, face similar challenges and have reduced exports.

Spain and Morocco do not heat their glasshouses to a large extent, but delivery to the UK in chilled lorries adds time and cost.

Joe Shepherdson of the UK’s Cucumber Growers Association said those growers that have planted are using less heat, but that reduces production and increases the risk of disease.

PRESSURE ON PRICES

Britain’s biggest supermarket groups, including Tesco, Sainsbury’s, Asda and Marks & Spencer, acknowledge the pressures in the market but say they are confident about supply, stressing their long-term partnerships with growers.

How far the increase in production costs will translate to higher prices on the shelf depends largely on whether supermarkets opt to absorb the difference themselves, or pass it on to consumers.

Smaller retailers buying from the market may struggle.

“Any cut in production from suppliers would undoubtedly put further pressure on prices,” said Andrew Opie, director of food and sustainability at retail industry lobby group the British Retail Consortium.

Growers want help from the government. They have lobbied for tax and levies on gas to be removed, but finance minister Rishi Sunak did not mention it in his spring budget last week.

Despite the dismal backdrop and after much soul-searching, Montalbano will plant a crop next month, fearing the loss of future contracts if he does not. He may gamble on the British weather, and grow his plants “cold”, with little or no heat.

“I feel like I have no choice, because if I don’t, then I lose my place,” he said, in a glasshouse that in a normal March would be packed with bushy green cucumber plants.

“Am I going to make anything out of it? I’ll be quite happy to break even this year,” he said.

(Reporting by James Davey; Editing by Kate Holton and Jan Harvey)

By Bhanvi Satija and Manas Mishra

(Reuters) -Walgreens Boots Alliance Inc kept its 2022 earnings forecast unchanged even as it beat estimates for second-quarter results, sending the drugstore chain’s shares down 7% on fears of slower-than-expected growth for the rest of the year.

An Omicron-led surge in COVID-19 cases during the second quarter had boosted demand for vaccines and testing at Walgreens. But testing has slowed since January, Walgreens executives said, adding it remains a steady source of business as travel resumes.

Despite the rise of the highly transmissible Omicron sub-variant BA.2, health experts in the United States believe a new wave of infections appears unlikely as overall cases are declining from January’s record highs.

Walgreens expects low-single digit growth in profit for 2022, implying it would earn between $1.69 and $1.79 per share in the second half of the year versus consensus estimates of $1.97, according to Evercore ISI.

The company said its cautious forecast was due to increasing investments in its Walgreens Health unit, which it created earlier in fiscal year 2022.

“These new investments, paired with tough sales and profit comparisons from last year’s COVID-19 activities, could keep sales and profit growth muted for a while, assuming no pandemic resurgence,” said Edward Jones analyst John Boylan.

Walgreens has forecast 30 million vaccinations this year at its sites. In the second quarter ended Feb. 28, it administered about 11.8 million doses of vaccine and sold 6.6 million tests.

Total sales rose 3% to $33.77 billion in the quarter, beating estimates of $33.40 billion.

Excluding items, the company earned $1.59 per share, compared with Refinitiv IBES estimates of $1.40.

Walgreens said the strategic review of its UK-based Boots business, which began in January this year, was progressing well and it would pursue outcomes that potentially maximize value.

Shares of the Dow component fell 6.9% to $44.17 in early trading.

(Reporting by Bhanvi Satija and Manas Mishra in Bengaluru; Editing by Shinjini Ganguli)

By Julie Gordon

OTTAWA -The Canadian economy likely gathered momentum in February, growing for a ninth consecutive month after a January gain, data from Statistics Canada showed on Thursday, prompting economists to revise up first quarter projections.

Real gross domestic product probably grew 0.8% in February, led by increases in manufacturing and resources, Statscan said in a flash estimate. The economy expanded 0.2% in January – matching expectations – despite increased pandemic restrictions.

The robust start to the year sets the stage for first quarter GDP to come in well ahead of the Bank of Canada’s current forecast of 2.0%, said economists.

“Heading into the year, some slowdown in activity was expected due to the pandemic restrictions, but, unlike in past waves, that wasn’t the case,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Market Economics, in a note.

“Accordingly, it looks like Q1 GDP growth will clock in at around a 4% annualized rate.”

With February’s gain, Canada’s economy is now 1.2% above pre-pandemic levels, Statscan said. That may add to pressure on the Bank of Canada to move aggressively on rate hikes when it meets in mid-April.

“The Bank may follow through with the recent pledge … that it will be forceful in combating inflation, potentially by hiking interest rates by 50 bp,” said Stephen Brown, senior Canada economist at Capital Economics, in a note.

Inflation has surged to 5.7% and money markets see a 50% chance of a 50-basis point hike, to 1.0%, on April 13.[BOCWATCH]

In January, activity among goods-producing industries jumped, led by a strong rebound in construction and a surge in demand for utilities.

Services were flat as the spread of the Omicron coronavirus variant led to more restrictions, though the February flash estimate suggested a partial reversal for accommodation and food services.

Statistics Canada also revised upwards the December GDP growth rate to 0.1% from flat.

The Canadian dollar was trading 0.3% lower at 1.2517 to the greenback, or 79.89 U.S. cents, as oil fell and the U.S. dollar jumped on waning hopes of progress at Russia-Ukraine peace talks.

(Reporting by Julie Gordon in Ottawa, additional reporting by Dale Smith in Ottawa and Fergal Smith in Toronto;Editing by Bernadette Baum and John Stonestreet)

(Reuters) – Russian President Vladimir Putin said on Thursday that he had signed a decree saying foreign buyers must pay in roubles for Russian gas from April 1, and contracts would be halted if these payments were not made.

“In order to purchase Russian natural gas, they must open rouble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow,” Putin said in televised remarks.

“If such payments are not made, we will consider this a default on the part of buyers, with all the ensuing consequences. Nobody sells us anything for free, and we are not going to do charity either – that is, existing contracts will be stopped.”

Russia supplies about a third of Europe’s gas, so energy is the most powerful lever at Putin’s disposal as he tries to hit back against sweeping Western sanctions over his invasion of Ukraine.

His decision to enforce rouble payments has boosted the Russian currency, which fell to historic lows after the Feb. 24 invasion but has since recovered.

Western companies and governments have rejected the move as a breach of existing contracts, which are set in euros or dollars. France’s economy minister said France and Germany were preparing for a possible scenario that Russian gas flows could be halted – something that would plunge Europe into a full-blown energy crisis.

An order signed by Putin set out a mechanism for buyers to transfer foreign currency to a special account at a Russian bank, which would then send roubles back to the foreign buyer to make payment for the gas.

He said the switch was meant to strengthen Russia’s sovereignty, and it would stick to its obligations on all contracts.

(Reporting by Reuters; writing by Mark Trevelyan, editing by Guy Faulconbridge, Gareth Jones, Alexandra Hudson)

By Anthony Deutsch and Toby Sterling

THE HAGUE -Dutch lawmakers demanded of Prime Minister Mark Rutte’s government on Thursday that it speed up the implementation of sanctions against Russia, saying the Netherlands was “shamefully behind” other countries in freezing targeted assets.

The debate came after Ukrainian President Volodymyr Zelenskiy appealed to the Dutch parliament by video link earlier on Thursday, the first time a foreign head of state has addressed the 150-member Dutch lower house, with Rutte and the chairman of the Senate also attending.

“Stronger sanctions are needed so that Russia doesn’t have a chance to pursue this war further in Europe,” Zelenskiy said, adding that the Dutch should stop energy imports from Russia, which make up around 20% of the country’s natural gas supply.

Zelenskiy received a standing ovation, but discussions then turned to the government’s lack of progress in freezing or seizing much of an estimated 27 billion euros ($30 billion) in Russian assets registered in the Netherlands, often in shell companies.

Sanctions were “agreed weeks ago and the Netherlands is shamefully behind,” said opposition Labour Party leader Lilianne Ploumen, who submitted a motion asking Rutte’s coalition government to urgently target the assets.

Foreign Minister Wopke Hoekstra responded that the government was working as quickly as it could, but legal hurdles and privacy laws were hindering progress.

Rutte told parliament on March 23 that assets linked to sanctioned Russian entities seized so far — 392 million euros ($431.24 million) worth — included only bank assets and not property or real estate.

His government promised to update parliament on progress on implementing sanctions later on Thursday.

In Zelenskiy’s address he also thanked the Dutch for military support to date and as hosts of several international courts in The Hague, including the International Criminal Court that is investigating possible war crimes in Ukraine.

The Netherlands has supplied Ukrainian forces with anti-tank rockets and is also supporting NATO’s increased presence along the military alliance’s eastern flank with Patriot air defence systems.

“Those who gave the orders (to bombard and shell Ukraine) must be called to account. In The Hague, city of tribunals, people know that,” Zelenskiy said.

(Reporting by Anthony Deutsch, Toby Sterliung and Benoit Van Overstraeten; Editing by Alex Richardson, Gareth Jones and Raissa Kasolowsky)

BERLIN -Volkswagen Group will have to recall more than 100,000 plug-in hybrid vehicles globally due to the risk of fire, said a spokesperson for the German carmaker.

Some 42,300 owners of Volkswagen Passats, Golfs, Tiguans and Arteons worldwide will be notified. Volkswagen brand Audi has to recall 24,400 vehicles, while Seat and Skoda are also affected.

There is a risk of fire in vehicles that connect a conventional combustion engine to an electric drive and are charged through a socket due to an insufficiently insulated high-voltage battery, added the spokesperson on Thursday.

German daily Bild cited the KBA regulator as saying “inadequate fastening of the engine design cover can lead to contact with hot parts and subsequently to fire”, adding that 16 such cases had been reported in Germany.

The recall affects Volkswagen brands VW, Audi, Seat and Skoda, Bild said.

(Writing by Maria Sheahan and Miranda MurrayEditing by Madeline Chambers)