Countries strike a ‘historic’ deal at COP28

Today’s top stories

• The Federal Reserve is widely expected to hold rates steady at a 22-year high when it announces its latest monetary policy decision at 2pm EST.

• German media group Axel Springer will allow OpenAI to train artificial intelligence models using content from its titles in a landmark deal for the global media industry.

• Mark Drakeford, the first minister of Wales, announced his resignation as leader of the country’s ruling Labour party, sparking a leadership contest ahead of the UK general election expected next year.

For up-to-the-minute news updates, visit our live blog

Good evening and welcome. I’m taking a turn in the DT chair while Darren continues a well-deserved end-of-year break.

A deal was finally reached between this month’s COP28 attendee countries (albeit a day after an agreement was due), and it was a momentous one, pledging to transition away from fossil fuels to keep the 2050 net-zero target alive.

The “global stocktake” text was no mean feat given that summit host United Arab Emirates is one of the biggest oil and gas-producing nations — COP28 president Sultan al-Jaber’s description of the deal as “historic” felt for once like an official giving a measured description of events. Now the really hard work begins.

Countries will now be tasked with setting “ambitious, economy-wide” targets for emission cuts for all greenhouse gases over the next two years, taking into account the agreement on fossil fuels.

A previous draft document caused outrage among European, Latin American and vulnerable island states after it dropped all references to phasing out fossil fuels and offered an “à la carte menu” of options countries “could” take.

The final text was still not to the approval of Anne Rasmussen, lead negotiator for Samoa. “We see a litany of loopholes,” she said. “We cannot afford to return to our islands with the message that this process has failed us.” The FT’s reporters in Dubai round up the reaction to the deal.

Developed nations will need to offer more support to help everyone meet their climate-related obligations. Simon Mundy notes in his Moral Money newsletter (sign up here if you are a Premium subscriber) that the final text made clear that climate finance — both to restrain climate change, and to respond to its impacts — will “need to increase manyfold”.

Western governments also need to make it easier for industry to cut its carbon footprint. The Biden administration should untangle the red tape US companies face when trying to decarbonise their operations, writes US financial editor Brooke Masters.

So a moment of relief, but perhaps save the champagne for Christmas. The FT view is that the COP28 deal is better than feared, but less than needed.

Need to know: UK and Europe economy

Stagnation nation fears have resurfaced for the UK following a surprise drop in economic activity in the latest monthly GDP figures. The official report makes for grim reading, with declines in all three main sectors of the economy, fuelling concerns about the impact of recent sharp increases in the cost of living.

The figures come a day after official numbers pointed to a softening labour market. Average pay growth grew 7.3 per cent excluding bonuses, or 7.2 per cent including them — a bigger than expected fall from a summer peak of 8.5 per cent.

Britain desperately needs a growth strategy, writes chief economics commentator Martin Wolf, since the country is suffering from a poisonous combination of stalled productivity and high inequality.

Paul Dales, chief UK economist at Capital Economics, said the surprisingly bad GDP numbers “may nudge the Bank of England a little closer to cutting interest rates”, though the BoE is expected to stick with the current 15-year high of 5.25 per cent when it announces its last interest rate decision of the year tomorrow. However, asset managers are snapping up sterling as expectations grow that the UK will be slower than other countries at easing up on the monetary policy pedal.

Talking of rate movements, the European Central Bank will also make its last monetary policy decision of the year tomorrow. Doves looking for the start of a rate-cutting cycle now that inflation is at last falling will probably be disappointed here too. As FT economics commentator Chris Giles writes in his latest (Premium subscriber) central banks newsletter, the last mile is the hardest.

Need to know: Global economy

High interest rates and record debt levels risk ramping up debt servicing costs among some of the world’s poorest nations to “crisis” levels, according to the World Bank. Indermit Gill, the World Bank Group’s chief economist, said: “Every quarter that interest rates stay high results in more developing countries becoming distressed — and facing the difficult choice of servicing their public debts or investing in public health, education and infrastructure.”

Meanwhile, US mortgage rates have fallen to their lowest level since July, in a sign that the economy is cooling. The 30-year fixed-rate mortgage fell to 7.07 per cent during the week ending December 8, from 7.17 per cent the previous week, the Mortgage Bankers Association said today. The 30-year rate was last at 7.07 per cent in early July.

Argentina’s new libertarian government has announced that it will devalue the peso by about half, slash public spending and reduce energy and transport subsidies to contain the country’s economic crisis and spiralling inflation.

Need to know: Business

Tesla has announced it will fix software for more than 2mn cars to improve safeguards in its Autopilot driver-assistance system after an investigation by US safety regulators following a series of fatal accidents.

The shoe dropped for Zara owner Inditex, which reported a slowdown in sales growth, underscoring worries about weakening consumer spending in the fashion sector. Climate change may also have played a part, with analysts expressing concern that sales had been hampered by warm weather in the company’s key southern Europe region, meaning people were less likely to switch to winter purchases.

Entain’s chief executive Jette Nygaard-Andersen has stepped down with immediate effect. It follows Financial Times reports that the UK bookmaker had three US activist funds among its top-20 shareholders and there was internal unrest over the Danish executive’s management of the company.

British regulators plan to reintroduce a cap on card fees imposed on transactions between the UK and EU, in a blow to the Visa and Mastercard duopoly that raised charges on businesses more than fivefold since Brexit.

Metro Bank has quietly shelved plans for risk models that it said previously would turbo-charge its profitability. The challenger had planned to lobby the Bank of England to use its own internal calculations to model for risk, but has halted this strategy, according to people familiar with the situation.

Concerns have increased further about the financial health of Thames Water, with revelations that more than £1bn in debt repayments will come due during the next year, according to financial accounts filed last month.

And is the party over for the world’s most profitable law firm? Read the Big Read about Kirkland & Ellis to find out.

The World of Work

Nobody joins the hospitality sector for a 9 to 5 work schedule, high pay or a stress-free life. But since the double shock of Brexit and the pandemic, the industry has had to become more flexible, both to recruit and retain good staff and raise morale. The FT’s Caroline Bullock asked several hospitality bosses to share their tips.

More than 485,000 American workers went on strike in 2023 as US unions launched an estimated 317 work stoppages, more than any time in the past two decades, according to an analysis by Bloomberg Law. Labour organisers believe the political momentum has shifted in their direction after years of decline. But are they overplaying their hand?

Some good news

Bangladeshi women have for the first time been allowed to join the nation’s fire service. Out of nearly 3,000 applicants, 15 women were selected to train as firefighters, passing exams as well as physical screening, according to a report by Arab News.

Source: Economy - ft.com