Today’s top stories
Russia has offered to swap western investors’ stranded assets for some Russian assets frozen by the west following President Vladimir Putin’s invasion of Ukraine, according to its central bank.
Some of private equity’s biggest names such as KKR and Bain are handing over companies they own to the lending arms of rivals, as they struggle against higher interest rates, inflation and supply chain issues.
An India spacecraft made a historic landing near the Moon’s unexplored South Pole, a milestone in the country’s efforts to become an international power in space exploration.
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Good evening.
Disappointing results from a closely watched set of surveys have added a new layer of gloom to the outlook for business and raised doubts about the next steps for central banks on interest rates.
In the UK, economic activity unexpectedly fell for the first time since the start of the year, according to initial “flash” data from the purchasing managers survey.
The PMI score fell from 50.8 to 47.9 in August, where 50 marks the dividing line between business activity expanding and shrinking. It contrasts sharply with a run of more positive data, including yesterday’s better than expected public finances figures, which had prompted calls from Tory MPs for tax cuts.
Chris Williamson, chief business economist at publishers S&P Global Market Intelligence, said: “A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.” He added: “Barring pandemic lockdown months, this is one of the steepest contractions since the global financial crisis.”
The PMI survey will be closely scrutinised by the Bank of England as it contemplates its next policy tightening move. The pound fell against the dollar on the news, with investors scaling back their forecasts of peak interest rates. However, some argue that the data could encourage the BoE “that higher rates are working” and that GDP would soon contract, triggering “a mild recession”.
Yesterday, the BoE itself acknowledged the impact of elevated interest rates — currently at a 15-year high of 5.25 per cent — on British companies, raising the risk of corporate defaults and threatening investment and employment.
The eurozone PMI result was also worse than expected, falling to a 33-month low of 47.0 from last month’s 48.6, with sharp falls in output and new orders and inflation measures nudging higher. Services activity shrank suddenly, while manufacturing continued its decline. German companies suffered the steepest decline in activity for more than three years.
German bond yields and the euro fell on the data as traders bet that a slowing economy would force the European Central Bank to halt its programme of rate rises.
Business activity also looks to be teetering near stagnation in the US, where the flash PMI reading dropped from 52.0 to 50.4 in August, a six-month low. Manufacturing fell back into contraction, while services had their slowest growth since February. The near-stalling of activity “raises doubts over the strength of US economic growth in the third quarter,” said S&P Global’s Williamson.
All of which is food for thought for Fed officials and other central bankers gathered at Jackson Hole in Wyoming for their annual get-together. After pushing up interest rates to multi-decade highs they now face another arduous task: how to fine-tune policy to get inflation under control, without causing undue hardship and job losses — all while still dealing with the effects of the pandemic and war in Ukraine.
Need to know: UK and Europe economy
A lack of power grid capacity is holding back UK economic growth and jeopardising plans for decarbonisation, a process that is expected to double electricity consumption by 2050.
The UK and India are making slow progress on a trade deal. Britain hopes to open up trade in whisky and cars to India as well as services and investment opportunities, while New Delhi wants better access for manufactured goods, services and work visas.
Spain’s king gave the conservative opposition first shot at forming a government after an inconclusive general election, even though Alberto Núñez Feijóo’s People’s party does not currently have enough support to succeed. If not successful, acting Socialist prime minister Pedro Sánchez will get a chance in late November.
A new FT series examines Europe’s rental crisis. As buying a home becomes increasingly unfeasible, many people are joining an already overheated rental market with prices in several cities at their highest rates ever.
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Need to know: Global economy
Chinese president Xi Jinping called for faster expansion of the Brics emerging-market group at its summit in Johannesburg. The development bank set up by member states plans to begin lending in South African and Brazilian currencies to cut reliance on the dollar and promote a more multipolar international financial system. Vladimir Putin said Russia would host next year’s summit.
The FT series on the rise of the “middle powers” continues with a look at China’s blueprint for an alternative world order and how oil-rich Gulf states are forging new alliances in Asia.
Cryptocurrency assets have amplified rather than reduced financial risks in less developed economies, some of the world’s most powerful central banks warned, adding that the appeal of crypto was “illusionary”.
A S$1bn (US$737mn) money laundering investigation in Singapore is being widened as prosecutors seek documents from at least 10 banks. The operation has spanned the city-state and led to the seizure of luxury homes, cars, designer handbags and wads of cash and gold bars.
Economics editor Chris Giles says it’s far too early to declare the end of inflation, although some of the world’s largest consumer goods companies have signalled they might be ready to ease up on price increases.
Need to know: business
Global stock markets are heading for their worst month in almost a year thanks to a “witches’ brew” of gloomy Chinese economic data and surging US borrowing costs.
The UK energy market regulator fined Morgan Stanley £5.4mn for failing to keep records of WhatsApp communications among its traders, the latest sanction in the global crackdown on bankers’ use of personal phones.
Arm, the UK-based chip designer, owned by Japan’s SoftBank, unveiled plans for the biggest initial public offering in the US for nearly two years. The Lex column (for Premium subscribers) casts doubt on its valuation.
Microsoft dramatically changed the terms of its $75bn acquisition of Activision Blizzard after the UK regulator quashed the original deal over competition concerns in the cloud gaming market.
The World of Work
Columnist Sarah O’Connor praises the effectiveness of the minimum wage in the UK and elsewhere as a policy instrument. It may not have boosted productivity but has been successful in reducing pay inequality without damaging employment, she says.
Leadership skills have been neglected for too long, according to the UK’s Chartered Management Institute. The need for more highly skilled managers to improve public services and boost economic growth has been “dangerously overlooked” by ministers for two decades, it said.
British workers, it appears, are angrier on average than their counterparts in the EU and US. The Working It podcast discusses the best way for managers to deal with workplaces running high on emotion.
Some good news
Cargill, one of the world’s largest marine freight operators, has launched a carrier using wind power via 37.5 metre-high sails in a test voyage that will be closely watched by the shipping industry after a fractious debate over how to decarbonise the sector.
Source: Economy - ft.com
