Today’s top stories
An EU watchdog said the European Central Bank had been too lax in supervising Europe’s biggest banks. Bundesbank chief and ECB policymaker Joachim Nagel said eurozone rate rises could continue beyond the summer as underlying inflation was yet to be defeated.
Elon Musk is in talks to hire Linda Yaccarino, NBCUniversal’s head of advertising, as Twitter’s new chief executive. Musk in December said he would resign from the role as soon as he found someone “foolish enough to take the job”.
Mike Lynch, founder of UK software group Autonomy, was extradited to the US to face trial over multiple allegations including conspiracy to commit wire fraud and securities fraud, charges he has strongly contested. The case centres on claims that Autonomy’s accounts were manipulated, leading Hewlett-Packard to pay an extra $5bn when it acquired Autonomy in an $11bn takeover in 2011.
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Good evening.
UK prime minister Rishi Sunak, 43 today, can take some birthday cheer from news that the economy is showing greater resilience than forecast a few months ago, albeit tempered by signs that high levels of inflation could be here for longer than expected.
This morning’s official data showed GDP rose 0.1 per cent in the first quarter, boosted by upwardly revised growth in January. Output in March, however, was much worse than expected as the services sector stuttered. The quarterly increase follows a similarly anaemic 0.1 per cent rise in the final three months of last year but means at least that the economy has (just) avoided recession.
GDP is still 0.5 per cent below pre-pandemic levels, compared with a 5.3 per cent increase in the US and 2.5 per cent in the eurozone, leaving the UK stuck at the bottom of the G7 league table.
The Bank of England, which yesterday increased its key interest rate to 4.5 per cent, the highest level in almost 15 years, said growth would accelerate later in the year thanks to lower energy prices, a stronger global economy and growing business and consumer confidence. This compares with its February forecast of a recession lasting throughout 2023 and into the first quarter of next year.
The BoE warned, however, that it would not hit its inflation target until 2025. It now expects CPI to fall from the current 10.1 per cent to 5.1 per cent in the fourth quarter of 2023, instead of its previous forecast of 3.9 per cent. Any further downgrading would leave Sunak missing his pledge to halve inflation by the end of the year.
The BoE for its part insists it is still winning the fight to get inflation back to its 2 per cent target, but governor Andrew Bailey accepted that higher interest rates were bad news for households struggling with the cost of living crisis.
Families are being hit particularly hard by food inflation at its highest level in 45 years. The government last week rejected calls for intervention and an inquiry into supermarket “profiteering”. France, by contrast, has reached an agreement with food retailers to set the “lowest possible price” on certain products for three months.
New retail sector data this week showed inflation was also holding back demand, but retailers hope to see a boost from May’s glut of bank holidays and extra spending around the King’s coronation.
Need to know: UK and Europe economy
The UK pulled back from its plan to ditch all EU-derived laws by the end of this year, a move welcomed by business groups but criticised by Tory Brexiters.
More than $1bn of EU exports targeted by sanctions have disappeared in transit to Russia’s economic partners, according to FT analysis. The flow of “ghost trade” is believed to be helping sustain Vladimir Putin’s wartime economy.
The EU is planning an undersea internet cable to improve connectivity and reduce dependence on lines running through Russia as concerns grow about vulnerable infrastructure. The €45mn cable will link up EU member states to the Caucasus via international waters in the Black Sea.
Need to know: Global economy
China said it would send a special envoy to seek a “political settlement” to the war in Ukraine. It has been holding talks with the US to try to defuse recent tensions between the two countries. The EU’s chief diplomat warned, however, that China would “take advantage” of a Russian defeat in Ukraine and that Brussels needed to respond to Beijing’s global ambitions.
At the same time, US Treasury secretary Janet Yellen is calling for “co-ordinated action” by G7 nations against Beijing’s use of “economic coercion” ahead of next week’s summit in Hiroshima, Japan. Yellen said new US investment restrictions would be “targeted at technologies where there are clear national security implications”.
Federal Reserve policymaker Michelle Bowman cast doubt over the notion that the Fed was about to pause its interest rate rise programme, citing a lack of “consistent evidence” that inflation was under control.
The South African rand fell to a record low against the dollar after the US accused Cyril Ramaphosa’s government of covertly supplying arms to Russia, jeopardising trade links with South Africa’s second-largest trading partner.
The FT Magazine uncovers the harrowing story of the South African gangs risking their lives to supply cartels with scrap copper. The world’s third most-used metal is a smuggler’s dream: malleable, recyclable and easy to melt down, making its origin untraceable.
Need to know: Business
PwC is caught up in an Australian leak scandal after it emerged that the firm used confidential government tax plans to advise tech clients.
A regulator will hit the biggest US banks — those with more than $50bn in assets — with a $16bn bill for clean-up costs in the rescue of Silicon Valley Bank and Signature Bank in March. JPMorgan Chase chief Jamie Dimon called for a probe into investors betting against bank stocks as part of official efforts to “finish” the turmoil in the sector.
Switzerland’s Richemont followed other luxury groups such as France’s LVMH and Hermès with bullish earnings after sales picked up in Asia and in particular in China. The owner of jewellers Cartier and Van Cleef & Arpels reported record annual sales of €20bn and operating profits of €5bn.
China’s largest contract chipmaker, Semiconductor Manufacturing International Corp, reported its sharpest revenue fall in more than 10 years amid weak demand for consumer electronics. Our Big Read looks into Germany’s new chip factories. The government is spending billions subsidising the industry — but some argue it does not make economic sense.
Germany is also offering state support for Northvolt, Europe’s main battery maker, to build a factory in the country. The company had earlier indicated it might concentrate solely on the US unless the EU matched Joe Biden’s green tech subsidies.
Science round-up
One in five articles published in scientific journals may contain faked data from unauthorised “paper mills” that are paid to fabricate submissions, according to a study by German researchers who used new techniques to “red flag” problematic papers.
The UK is haggling with the EU over the cost of rejoining Horizon, the bloc’s flagship scientific research programme. The €95.5bn scheme is seen by many UK scientists as vital but they have been excluded since 2020 over disagreements about post-Brexit trading relationships.
The World Health Organization said mpox, previously known as monkeypox, is no longer a global health emergency after causing 87,000 infections and 140 deaths.
The pharma industry has high hopes for the new class of drugs being developed to treat Alzheimer’s. In clinical trials, the medications slowed the progress of the degenerative disease that affects 50mn worldwide.
Join CEOs from Amgen, Roche, Pfizer and more in New York from May 16-17 at the US Pharma and Biotech Summit. Register here today.
The development of defence technologies such as sensors, robotics and unmanned systems — has been supercharged by the war in Ukraine.
And finally, historian and FT contributing editor Simon Schama reflects on how mankind’s primitive impulses and conspiratorial suspicion have always managed to get in the way of science.
Some good news
An expanded “pan-genome” database of the biochemical letters that form individuals’ DNA has raised the prospect of improved diagnosis and treatment of genetic diseases and offering new insights into human diversity.
Something for the weekend
Try your hand at the range of FT Weekend and daily cryptic crosswords.
Source: Economy - ft.com
