Global markets in record-breaking start to year

Today’s top stories

• Joe Biden unveiled a $7.3tn budget plan which would push US debt over 100 per cent of gross domestic product in 2025, as the president laid out a fiscal agenda that boosts spending but plans to save $3tn through higher taxes over 10 years. Americans are getting happier about the economy but are still reluctant to give Biden the credit, according to the latest FT-Michigan Ross poll. Here’s our explainer on what might be happening.

• Telegram, the secretive Dubai-based messaging app, has 900mn users and is nearing profitability, its owner told the FT in a rare interview, as it moves closer to a potential blockbuster stock market listing.

• Oppenheimer won best picture and six other prizes at the Academy Awards, giving Christopher Nolan his first Oscar for best director and Cillian Murphy the top award for actor.

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

Good evening.

Are the animal spirits back? 

Global stocks from the US and Europe to Japan have touched record levels in the first part of this year, with signs of life in the markets for initial public offerings and new highs in everything from gold to Bitcoin.

As we report this morning, Europe’s market for IPOs is currently enjoying its strongest start to a year since the pandemic, with companies raising $3.2bn since January, more than double the amount over the same period last year. 

Shares in two of the biggest European IPOs this year — German defence contractor Renk and Athens International Airport — have climbed since the companies listed last month and several high-profile companies are lining up to follow should the wider European stock market continue to rise, an outcome analysts have said is more likely if the European Central Bank starts cutting interest rates. 

Across the Atlantic, analysts see the forthcoming listing of social media site Reddit as a litmus test of how aggressive or cautious banks will be in a hitherto jittery US IPO market. Groups that have managed to go public recently have had to offer investors significant valuation discounts to attract interest, even as US equity markets enjoy what my colleague FT columnist Katie Martin describes as a “vibes shift, boosted in particular by chip giant Nvidia, the third American stock after Apple and Microsoft to hit a valuation above $2tn. 

There are also hopes that wider optimism could bring dealmaking out of the doldrums. As we report today, the slowdown has left private equity groups sitting on a record 28,000 unsold companies, worth more than $3tn. 

Analysts are also starting to model the impact of the US presidential election in November, and in particular what might happen should Donald Trump return to the White House. 

“There are multiple scenarios,” says one fund executive. “If it is Trump, history or animal spirits will say that short-term it is good for companies, for some sectors like defence [and] it’s good for lower taxes.” Others have expressed concern at the potential ratcheting up of tensions with China and the ditching of Federal Reserve chair Jay Powell.

Inevitably, talk of stock markets firing on all cylinders brings the question of whether it might all come crashing down again. 

One important difference from the tech stock rally of the dotcom boom and bust era is that the current share price surge was sparked not by fantasy projections (Microsoft is no Pets.com) but hard figures, in this case a 265 increase in quarterly revenues from Nvidia.

“Despite all the unsettling signs and the irrational exuberance chatter, the onus is still on the doubters to prove the case for a crash,” writes Katie Martin.

Need to know: UK and Europe economy

Former British prime ministers Sir John Major and Gordon Brown launched a report from the Institute for Government think-tank calling for reform of the machinery of state, branding it “weak” and “not capable” of holding Whitehall’s civil service accountable for delivery.

Labour’s would-be chancellor Rachel Reeves warned of the scale of the challenge facing her party should it win the general election after the government appropriated two of its policies to fund tax cuts. Lobbyists are scrambling for access to Labour ahead of what polling suggests could be a once-in-a-generation shift in political power.

Portugal’s centre-right Democratic Alliance won Sunday’s parliamentary elections but fell far short of a majority, leaving the far-right Chega party a potential kingmaker. Chega itself is peeved by its exclusion by the mainstream parties manoeuvring against it.

Moscow has set terms for a proposed swap of Russian and western investors’ frozen assets so that each side can claw back lost value after sanctions were imposed over its war in Ukraine.

Need to know: global economy

China’s local governments, which have accumulated huge liabilities over a decade-long, debt-fuelled building spree, are stepping up efforts to renegotiate debt repayments that are threatening to constrain growth in the world’s second-biggest economy. Meanwhile, centralisation of authority under Xi Jinping, China’s most powerful leader since Mao Zedong, appears to be increasing.

Demand is soaring for moving goods from Asia to Europe by train via Russia following the Red Sea crisis, boosting the finances of the country’s state-owned rail monopoly. There is a near-ban on movements of road freight to and from Russia and Belarus under EU sanctions, but no ban on moving goods by rail through the country.

Agriculture has become the key driver of Brazil’s economy, the largest in Latin America, and the country leads the world in production of a vast number of food stuffs from beef and chicken to coffee, orange juice and many fruits and vegetables. The “agro” boom is most visible in the state of Mato Grasso as our Big Read details.

The Behshad, a mysterious Iranian ship in the Gulf of Aden, is raising concern among maritime experts that it is helping Houthi rebels target commercial sea traffic.

The US has widened its productivity lead over Europe, sparking fears that the two economies are diverging further. New fourth quarter data showed it fell 1.2 per cent in the eurozone but rose 2.6 per cent in the US, thanks to green fiscal stimulus, frenzied rehiring and a surge in new businesses.

The US airlifted staff from its embassy out of Haiti as violence engulfs the Caribbean country and gangs attack government buildings in the capital, Port-au-Prince. The protesters want the resignation of Prime Minister Ariel Henry, who assumed power with US support following the assassination of president Jovenel Moïse in July 2021 but has not held an election.

Need to know: business

Austrian supermarket chain Spar accused Hungary of breaking EU law in its attempts to bring down food prices. Prime Minister Viktor Orbán’s government has introduced a 4.5 per cent tax targeting the revenues of foreign-owned retailers and a requirement to lower prices across a range of staples.

US miners of uranium, the radioactive ore that powers nuclear reactors, are enjoying a revival, sparked by renewed interest in nuclear power and US moves to cut its dependence on Russian imports. Tech giants are also embracing atomic energy: Amazon has quietly acquired a nuclear-powered data centre in Pennsylvania.

UK importers are increasingly concerned that the government has failed to prepare the ground adequately for the introduction of a new post-Brexit border. Businesses will now undergo similar checks to those that British exporters to the EU have faced since 2021.

Food and energy prices may be easing but British restaurant owners are struggling to stay afloat after the shocks of pandemic shutdowns and the cost of living crisis. Roughly 40 per cent are operating at or below break-even point and up to 30 per cent have closed since Covid struck.

Tensions between the US and China over access to sensitive technology have prompted many companies to open factories in south-east Asia. One of the surprising winners is Malaysia, as our Big Read explains.

The Belfast plant of Short Brothers, the company that claims to be the world’s first aircraft manufacturer, could become an unexpected victim of the crisis surrounding US aerospace giant Boeing.

The World of Work

Can a chief happiness officer improve workplace morale? Research on positive psychology and employee performance shows the role of CHO, a coming together of wellbeing manager, entertainment organiser and unofficial corporate counsellor, could have a positive effect on productivity.

On a similar note, could kindness be a leadership superpower? Working It editor Isabel Berwick talks to the author of a new book on how it can win talent, earn loyalty and build successful companies.

One type of worker it’s perhaps difficult to feel kindly towards is the motormouth who sabotages meetings with unnecessary or sidetracking blather. FT columnist Pilita Clark offers some tips on containment.

Are legal challenges to US diversity schemes starting to bite? New data shows leading law firms hired hundreds fewer ethnic minority candidates last year.

Some good news

A town in Finland is set to benefit from the world’s biggest sand battery. The power cell, capable of storing 100 MWh of thermal energy from solar and wind sources, will enable residents to eliminate oil from their local heating network, cutting emissions by nearly 70 per cent.

Source: Economy - ft.com