Today’s top stories
Italy partially backtracked on surprise plans for a 40 per cent bank windfall tax after shares in the country’s biggest lenders such as Intesa Sanpaolo and UniCredit took a dive. It will now be capped at 0.1 per cent of risk-weighted assets, a fifth of the level that some analysts had earlier estimated. Analysts say Prime Minister Giorgia Meloni’s first brush with markets undermines Italy’s credibility.
Amazon is being sought as an anchor investor in the upcoming initial public offering of Arm, the UK-based chip designer. SoftBank, Arm’s owner, had initially focused on other top chip companies, but has since expanded its search to heavy users of semiconductors such as Amazon and will probably include car and factory automation companies.
Northern Ireland’s police chief vowed to stay on after officers were put at risk of being targeted by paramilitaries after their personal details were published accidentally online. In another data breach, the UK electoral register was revealed to have been hacked by “hostile actors”.
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Good evening.
The world’s second-largest economy has slipped into deflation, prompting calls for more stimulus measures from the government as Beijing grapples with a trade slump that is fuelling concerns about the strength of its economic recovery.
Consumer prices declined in July for the first time since early 2021, according to new data this morning, falling 0.3 per cent year on year and highlighting the struggle to revive consumption after the country’s strict pandemic controls were lifted. Factory gate prices were down 4.4 per cent, while core inflation, which strips out volatile food and energy prices, was up 0.8 per cent.
China over the past few years has bucked the global inflation trend of other large economies, which introduced significant stimulus packages during the pandemic, relying instead on its zero-Covid policies to get through. (You can read more in this explainer.)
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Today’s data follows yesterday’s trade stats showing the country’s exports experienced their worst fall since the start of the pandemic with a 14.5 per cent year-on-year drop in dollar terms. Imports fell 12.4 per cent.
The flagging demand for exports was highlighted by survey data last week showing Chinese manufacturing activity contracting for a fourth consecutive month. The sector, one of the main drivers of economic growth during the pandemic, is facing some of its strongest challenges for years as falling demand takes its toll.
The disappointing run of data puts more pressure on the country’s economists who have been told by authorities not to be negative, making the job of parsing China’s often opaque official statistics even more difficult at a time when its recovery is seen as crucial for global growth, highlighted in today’s fall in oil prices on the deflation news.
And while the west may have recalibrated its policies towards China, from “decoupling” to “de-risking,” political tensions are still running high. Chinese deal activity in the US is at its lowest level in 17 years while demand is growing for investment products that exclude China.
There are still reasons to be positive about the country’s long-term economic future. It has cornered the market for green tech and is a leader in the electric vehicle boom, notwithstanding Beijing’s recent throttling back on issuance of production licences.
The focus now shifts back to policymakers and a potential new stimulus package to revive growth.
Asia editor Robin Harding, pointing to China’s position as one of the least indebted in the world, says there is one obvious way to secure the country’s economic future: it needs to start spending.
Need to know: UK and Europe economy
UK lenders Nationwide, HSBC and TSB cut mortgage rates for the second time in three weeks as competition in the home loan market increased after better than expected inflation data.
Huw Pill, Bank of England chief economist, warned that high food prices could be here to stay and would still be rising much faster at the end of the year than overall inflation. UK consumer spending slowed in July as wet weather hit demand for summer clothing.
Investor expectations of eurozone inflation have hit a 13-year high, suggesting a lack of confidence in the European Central Bank’s plan to get back to its 2 per cent target. The ECB said its press conferences, a vital tool for guiding investors’ expectations, affected financial markets more than those of the US Federal Reserve.
Need to know: Global economy
The World Bank said it would freeze new lending to Uganda in response to an LGBT+ crackdown that has introduced some of the most punitive anti-gay bills in the world. Analysts say other institutions could follow suit.
Orange juice futures have surged to a new all time-high as hurricanes and an incurable disease devastate citrus crops in the US. Overall orange juice production is the lowest in “over 100 years”, according to a trade association.
A Big Read series examines how the shift to renewables is transforming the economics and geopolitics of energy. The first part looks at the new commodity superpowers that produce the metals central to the green transition. The second details how China has come to dominate the clean tech market, presenting a huge threat to western manufacturing but also giving it significant geopolitical leverage.
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Another FT deep dive looks at the challenges facing the wind farm industry as the long-held assumption of falling costs goes into reverse, putting pressure on governments to respond. Turbine maker Vestas today warned of supply chain problems.
Need to know: business
The FT revealed that Google and Universal Music are in talks to license artists’ melodies and voices for songs generated by artificial intelligence. The rise of generative AI has led to a surge in “deepfake” songs that can convincingly mimic established artists, often without their consent.
Tui, the world’s biggest tour operator, forecasts a strong summer despite wildfires in southern Europe (and suggested taking more holidays in Belgium). It recorded its first profitable third quarter since the pandemic, with demand and prices rising. Cathay Pacific reported its biggest first-half profit since 2010 even though the Hong Kong flag carrier is only operating at half of its pre-pandemic passenger capacity.
The indirect costs for companies of Russia’s war on Ukraine from soaring energy and raw material prices or supply chain disruptions will be long-lasting, says international business editor Peggy Hollinger, but could help drive efficiency and competitiveness.
Russian companies are turning to Hong Kong for dispute arbitration services as sanctions lock them out of western courts. The UK yesterday unveiled 25 new sanctions targeting Russia’s access to foreign military supplies.
Taiwan’s TSMC, the world’s largest contract chipmaker, is to go ahead with a €10bn plant in Germany alongside car parts supplier Bosch and chipmakers Infineon and NXB. Half the cost of the project is being subsidised by the German government.
The World of Work
Innovation without investment in people to put it into use won’t be enough to boost productivity, writes columnist Sarah O’Connor in praise of the “techies” who make companies more efficient.
Ping-pong tables and beer on tap are out and privacy is in. The Working It podcast discusses the future of co-working with the head of global design and development at WeWork.
And finally, guess which company has joined the ranks of businesses ordering their employees back to the office. Yes, that’s right — it’s Zoom.
Some good news
Once on the brink of extinction, there are now more golden lion tamarin monkeys in the Brazilian rainforest than at any time since efforts to save the species started in the 1970s, according to a survey.
Source: Economy - ft.com
