Today’s top stories
The UK and the EU agreed a deal on post-Brexit trading rules for Northern Ireland. The British Chambers of Commerce welcomed the deal, dubbed the Windsor framework, but it is not yet clear whether it will be acceptable to Northern Ireland’s Democratic Unionist Party and hardline Tory Brexiters.
Andrew Griffith, the UK’s City of London minister, raised concerns that reforms to stop consumers being ripped off by financial services companies could damage the sector and trigger spurious lawsuits.
A US congressional panel focusing on threats from Beijing has begun its work, looking at the role of private equity, venture capital and Wall Street firms in China. Back in China, EY staff are being encouraged to wear Communist party badges to show their political loyalty.
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Good evening.
Don’t bet on interest rate cuts anytime soon. That was the message today from the Bank for International Settlements, which warned investors that borrowing costs needed to stay high to make sure inflation was brought to heel.
The BIS — often referred to as “the central bankers’ bank” — highlighted the discrepancy, until recently, between investors’ beliefs that rates would stop rising this year and start falling next year and policymakers’ signals that “gave no indication that easing was on the horizon”.
That message was given credence by higher than expected US inflation figures and strong jobs data. Today’s figures on durable goods orders, excluding transportation, were also better than expected.
Investment expert Mohamed El-Erian, writing in the FT today, welcomed the growing acceptance that US inflation was “stickier” than many had presumed, but urged Congress to do more by enhancing Fed accountability and helping it improve its policy procedures.
Recent data across the Atlantic has also been better than expected, ending expectations that the European Central Bank was similarly close to winning its battle with inflation. Investors are now betting that the ECB will raise interest rates to all-time highs as more evidence emerges of the eurozone’s resilience and signs that inflation could prove tougher to rein in than expected.
The “reality check” has brought the global rally in bond markets to an end while US stocks have just suffered their biggest weekly fall in more than two months.
Hyun Song Shin, the BIS’s head of research, said the lesson from the 1970s was that inflation could return if policymakers didn’t squeeze it out of the economy.
“The reason central banks have been emphasising [the importance of] going the last mile on bringing inflation down is that, if you are not fully back to target and relax too early, you will undo all the work you have done before,” he said.
Need to know: UK and Europe economy
Analysts are now forecasting a smaller contraction in UK output because of falling energy prices and better than expected business and consumer sentiment. The average GDP forecast for 2023 now shows a drop of 0.6 per cent, compared with previous estimates of 1 per cent.
UK regulator Ofgem lowered the household price cap on energy bills, reflecting the significant decline in wholesale gas and electricity prices. The cap will fall from £4,279 to £3,280 from April. Wind farm developers are demanding UK tax breaks to offset the rising costs of turbines.
Need to know: Global economy
New FT analysis delves into the battle of the Asia hubs: Hong Kong versus Singapore. Real estate prices, air traffic and other indicators suggest the Chinese territory has been losing ground. In Shanghai, China’s financial hub has begun to revive — but not to the outside world.
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Big US employers are reporting a strong improvement in hiring conditions despite unemployment being at its lowest level in decades.
Six months into his tenure as Colombian president, Gustavo Petro has cast aside any notions of moderation, denouncing “neoliberalism” for causing war, Covid-19, hunger and the climate crisis and railing against businesspeople whom he said were plotting to frustrate his reforms.
Mexican president Andrés Manuel López Obrador’s erratic and egocentric political style has now reached a truly dangerous stage, writes chief foreign affairs commentator Gideon Rachman, with a new law that will gut funding for the body which runs the country’s elections.
If you’re a Brit looking for a good value holiday, try Egypt, where sterling is up 72 per cent year-on-year against the Egyptian pound. Tourist numbers have gradually recovered in the region after security concerns and the pandemic, with arrivals likely to be welcomed in an economy struggling with 26 per cent inflation.
Need to know: business
Australia’s Recharge Industries completed a deal to buy most of Britishvolt, the UK battery start-up that collapsed into administration last month after running out of cash. Recharge has been given until the end of next month to close a deal to buy the failed start-up’s site in Northumberland, according to two people close to the process.
Associated British Foods, which owns the Primark clothing chain as well as assorted food brands, said profits this year would be bigger than expected as shoppers hunt for bargains.
Woodside, Australia’s largest oil and gas group, said Europe and China held the keys for the energy market this year as it reported a trebling of profits. Australian companies including BHP, Rio Tinto as well as Woodside are seen as good indicators for global demand given the significance of the country’s mining and energy exports.
Twitter chief Elon Musk axed more senior staff at the weekend as he continued his efforts to bring costs under control.
Big Tech lay-offs are however music to the ears of Japanese conglomerate Hitachi, which is planning a hiring spree in the US to expand its digital services.
Manchester United owners have put the football club up for sale with a potentially record-breaking target price of $6bn-$7bn. FT calculations however suggest the real value is around $1.6bn. Author Sachin Khajuria explores what private equity means for football.
The World of Work
Some 2mn people in the UK are suffering from Long Covid, a strain of the disease in which symptoms persist for more than four weeks. Experts argue that employers need to offer more time and flexibility compared with other illnesses. Read more in our special report: Health at Work.
A sharp rise in diagnoses of neurodiversity among adults means many more workers, including senior leaders, will need to consider the potential impact on their jobs — and their bosses may have to adapt.
Lockdowns are over but many people are still working from home in what some economists have called “Long Social Distancing”. The reasons are three-fold, argues columnist Tim Harford: it works better than we expected, we’ve invested in home kit, and the stigma of working from home has disappeared, reducing the benefits of commuting.
Columnist Janan Ganesh argues we should stop making fun of managers. Britain is struggling in part because it stigmatises those who run things, or as he puts it: “There is grandeur in ownership. There is dignity in labour. It is the tier in between that has to plead for its reputation.”
Some good news
A charity helping Ukrainian refugees in Swindon has launched a beer with a local brewery to mark the first anniversary of the war and raise funds for its activities. The Hop Kettle Brewery hopes to make the brew — called Volya or “Freedom” in Ukrainian — available online nationally.
Source: Economy - ft.com
