Aurelia Butler

This article is an onsite version of our Disrupted Times newsletter. Subscribers can sign up here to get the newsletter delivered three times a week. Explore all of our newsletters hereToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.Did the coronavirus shock usher in permanent changes to the business landscape or are traditional models reasserting themselves?We reveal today how 50 corporate winners from the pandemic have lost roughly $1.5tn in market value since the end of 2020, as investors ditch the ecommerce, home entertainment and pharmaceutical stocks that rocketed during early lockdowns.The losses come as the sharp acceleration of trends such as videoconferencing and online shopping during lockdown proves less durable than expected, as more workers go back to the office and high interest rates and living costs hit ecommerce demand. “Some companies probably thought that shock was going to be permanent,” said one economist. “Now they’re getting a painful bounceback from that.”Video-conferencing company Zoom for example, whose shares soared as much as 765 per cent in 2020 as businesses switched to remote working, has been one of the biggest losers. Its stock has fallen 80 per cent since the end of that year.Ecommerce groups Shopify, JD.com and Chewy, which initially thrived as online spending ballooned, have also suffered big losses. Shares in Shopify today dived 16 per cent after it swung to an unexpected loss in the first quarter, while Boohoo, the fast-fashion retailer behind brands such as Karen Millen and Debenhams, reported widening losses from “difficult market conditions, caused by high levels of inflation and weakened consumer demand”. The company has struggled as people return to in-store shopping. Luxury ecommerce is also affected and is undergoing serious consolidation.Exercise-bike maker Peloton is another big loser, with shares down more than 97 per cent since the end of 2020. The company last week said chief executive Barry McCarthy would step down and it would cut 15 per cent of its workforce, the latest in a series of cost-saving measures.TV streaming is another trend supercharged by the pandemic but now enjoying mixed fortunes. Netflix continues to thrive and Disney’s streaming business has turned its first profit since launching in 2019 but the outlook for the rest of the sector remains uncertain. The likely sale of Paramount Global marks it out as the streaming wars’ first big casualty, says the FT editorial board. Need to know: UK and Europe economyUK construction activity grew in April at its fastest rate in more than a year, according to PMI survey data.The UK suspects China was behind a cyber attack targeting the names and bank details of up to 270,000 current and former British military personnel.John Swinney became the new first minister of Scotland after the resignation of former Scottish National party leader Humza Yousaf.The US crackdown on banks financing trade in goods for Moscow’s war efforts is bearing fruit, making it much more difficult to move money in and out of Russia.Does Germany bear some of the blame for Brexit? The head of the country’s Christian Democrat party blames the unwillingness of Berlin (and Brussels) to offer the UK real concessions on social policy before its pivotal EU referendum in 2016. Will the European parliamentary elections change the EU? Join FT journalists for a subscriber Q&A on June 12 1200-1300 (GMT+1)Need to know: global economyGlobal trade growth is set to more than double this year as inflation eases and a booming US helps to drive activity, according to the OECD, IMF and World Trade Organization. Higher prices, surging interest rates and sluggish demand had led to a widespread slowdown in 2023.Argentina’s central bank has put the country’s first 10,000-peso notes into circulation as it tries to streamline the nation’s cumbersome use of large heaps of cash following the collapse of its currency. Donald Trump’s plans for a second term are those of a dictator, says chief economics commentator Martin Wolf. President Joe Biden’s only hope for re-election, Wolf argues, is to persuade American voters of his impressive record on the US economy. Authorities are still “shooting in the dark” when it comes to counting the costs of long Covid. The condition — defined as symptoms that continue or develop three months after an initial infection, and last at least two months — has dealt a severe blow to health systems, with ripple effects on the wider workforce. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Need to know: businessToyota, the world’s largest carmaker, forecast a 20 per cent drop in annual profit as it increases spending in electric vehicles and artificial intelligence to create a “game changer” to compete against Chinese rivals. VW brand chief Thomas Schäfer told the FT’s Future of the Car Summit that Brussels should not raise tariffs on Chinese cars imported into Europe, and doing so would risk “retaliation” against international brands in the country. Chinese car dealers are ditching foreign brands slow to respond to the electric transition, while turning to domestic EV makers that are expanding at pace. Dealers are also adjusting to new ways of selling them.Uber’s results were hit by costs from the ride-hailing company’s decade-long battle with global regulators. The San Francisco-based company reported operating profit of $172mn for the first three months of the year, compared with analysts’ forecasts for more than $600mn.Italy is sending in troops to hunt wild boar in a new offensive to protect its €8.2bn prosciutto and sausage industry from swine fever. An estimated 1mn-1.5mn of the animals roam freely through the country, causing about €120mn of damage in rural areas from 2015 to 2021.An estimated 1mn-1.5mn wild boars roam freely through Italy, where they have long been regarded as a public nuisance More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Traders have boosted their bets on a rise in European gas prices to the highest level in more than two years, indicating growing concerns about potential disruption to supplies.Net long positions held by investment funds in futures contracts linked to Europe’s main gas benchmark have soared to 96.4 terawatt hours, worth about €3bn at current prices, according to data from Intercontinental Exchange released on Wednesday. That represents the largest bullish bet since February 2022, days before Russia started its full-scale invasion of Ukraine and made deep cuts to its pipeline gas supplies to Europe, sending prices soaring. Prices have since fallen dramatically as European economies reduced their gas usage and found alternatives to Russian imports, helping to fill storage facilities close to record levels. But those efforts have left the continent more reliant on the often volatile global market for liquefied natural gas.Already in recent months, there have been disruptions at exporting facilities in the US and Australia, two big LNG producers. Investment funds have been building up their long positions since the start of Israel’s war in Gaza in October, which led to concerns about the transport of LNG through the Red Sea, where 13 per cent of Europe’s LNG supply passed last year, and other Middle Eastern waters.“Funds are taking into consideration a possible reduction in LNG flows passing through two key straits” of Bab al-Mandab and the Strait of Hormuz, said Tom Marzec-Manser, head of gas analytics at ICIS, a consultancy. “There is upside risk and therefore a rationale for taking a long position.”The European gas benchmark traded at about €30 per megawatt hour on Wednesday. While that is far below the peak of more than €300/MWh in the summer of 2022, it remains higher than about the €10 to €20/MWh typically seen before the gas crisis started in 2021.Bullish bets by speculators come despite the EU’s gas storage being 63.8 per cent full as of Monday, the second-highest level on record for this time of year.Most traders and analysts believe the EU will not have a problem refilling its gas storage facilities ahead of winter when demand rises. But they do not rule out further big price swings, particularly with gas demand rebounding recently, having remained subdued during the energy crisis.Analysts at Morgan Stanley said “underlying gas demand” in April was up 8 per cent on the same month a year earlier.There is also uncertainty over the future of the remaining Russian pipeline gas that reaches the EU via Ukraine. A deal between Kyiv and Moscow to allow for the transit, which accounts for about 5 per cent of the bloc’s supplies, expires at the end of this year. Ukraine has expressed its intention to not renew the deal. More

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The ECB all but promised a rate cut on June 6 but sent few signals about subsequent moves given high services inflation and worries that a delay in monetary policy easing by the U.S. Federal Reserve could also force it to take its time.Wunsch, Belgium’s central bank governor, however, made the case for further moves, arguing that staying tight for too long was now a bigger risk than easing too early.”Although the outlook remains foggy, I see a path for initiating rate cuts this year,” Wunsch said in a lecture in Frankfurt.”With no sign of de-anchoring (of expectations) in the longer term, the costs of remaining tight for too long seem to outweigh those of a premature loosening,” Wunsch, one of the first policymakers to warn about the recent inflation surge, said. Commenting on the broader policy direction, Wunsch took issue with how the ECB forecasts inflation, given the poor accuracy of its projection models, especially during periods of economic volatility. “Models may not always be the reliable compass on which we should rely,” Wunsch said. “We were led to believe that inflation was transitory, only to find out it was not.””This underscores the need for a critical re-evaluation of our modelling frameworks and of the role of model-based projections in policymaking,” he said. STRUGGLE WITH EXTREME EVENTSModels miss large economic shifts, struggle with extreme events and emphasize inflation further out over short-term developments, Wunsch said.While the ECB targets inflation over the “medium term”, short-term trends are still crucial because workers and companies set wage demands and price expectations based on them, so overlooking them could send the ECB in the wrong direction, like in 2022 when it raised rates relatively late, Wunsch added.Thus, the ECB should place greater emphasis on short-term inflation expectations and wage dynamics, especially in the current climate of unusual volatility, he said.The ECB should also become less fixated on a single-point inflation target and could exercise more flexibility, especially when small deviations from the target would require extraordinary effort to correct.The ECB could introduce alternative scenarios when making projections to signal the uncertainty and it could also declare its flexibility in interpreting target when inflation expectations remain “reasonably well-anchored”, Wunsch said.”Where does this leave us? Probably with a humbler form of monetary policy. One that tolerates some more deviation from our target when economic conditions are benign and when risks of larger deviations are contained. This is more art than science,” he added. More

BEIJING/HONG KONG (Reuters) -After three decades selling homemade buns on the streets of the Chinese city of Xian, 67-year-old Hu Dexi would have liked to slow down.Instead, Hu and his older wife have moved to the edge of Beijing, where they wake at 4 a.m. every day to cook their packed lunch, then commute for more than an hour to a downtown shopping mall, where they each earn 4,000 yuan ($552) monthly, working 13-hour shifts as cleaners.The alternative for them and many of the 100 million rural migrants reaching retirement age in China over the next 10 years is to return to their village and live off a small farm and monthly pensions of 123 yuan ($17).”No one can look after us,” said Hu, still mopping the floor. “I don’t want to be a burden on my two children and our country isn’t giving us a penny.”The generation that flocked to China’s cities at the end of last century, building the infrastructure and manning the factories that made the country the world’s biggest exporter, now risks a sharp late-life drop in living standards.Reuters interviewed more than a dozen people, including rural migrant workers, demographers, economists and a government adviser, who described a social security system unfit for a worsening demographic crisis, which Beijing is patching rather than overhauling as it pursues growth through industrial modernisation. At the same time, demand for social services is growing rapidly as the population ages.”The elderly in China will live a long and miserable life,” said Fuxian Yi, a demographer who is also a senior scientist at University of Wisconsin-Madison. “More and more migrant workers are returning to the countryside, and some are taking low-paid jobs, which is a desperate way for them to save themselves.”If these migrants were to rely solely on China’s basic rural pension, they would live on less than the World Bank’s poverty threshold of $3.65 a day, though many supplement their earnings by labouring in the cities or by selling some of their crop.China’s National Development and Reform Commission, the human resources and civil affairs ministries and the State Council did not respond to faxed requests for comment. China’s latest statistics showed some 94 million working people – around 12.8% of China’s 734 million labour force – were older than 60 in 2022, up from 8.8% in 2020. That share, while lower than in wealthier Japan and South Korea, is set to skyrocket as 300 million more Chinese reach their 60s in the coming decade.A third of this cohort are rural migrants, who typically lack the professional skills for an economy aspiring to move up the value chain.The main reason China has not built a stronger safety net for them is that policymakers, fearing the economy might fall into the middle-income trap, prioritise growing the pie rather than sharing it, the government adviser told Reuters.To achieve that, China is directing economic resources and credit flows towards new productive forces, a catch-all term for President Xi Jinping’s latest policy push for innovation and development in advanced industries such as green energy, high-end chips and quantum technology.U.S. and European officials say this policy is unfair to Western firms competing with Chinese producers. They have warned Beijing that it stokes trade tensions, and that it diverts resources away from households, suppressing domestic demand and China’s future growth potential.China, which has rejected those assessments, has instead focused on upgrading production, rather than consumption, as its desired path toward prosperity.”It would be easier to solve the equality problem if we could first solve the productivity growth problem,” said the adviser, granted anonymity to speak freely about pension-policy debates happening behind closed doors.”People have different views” on whether China can make that leap in productivity, the adviser said. “Mine is that it may be difficult if we do not reform further and remain at odds with the international community.”‘VESTED INTERESTS’Pensions in China are based on an internal passport system known as hukou, which divides the population along urban-rural lines, creating vast differences in incomes and access to social services.Monthly urban pensions range from roughly 3,000 yuan in less-developed provinces to about 6,000 yuan in Beijing and Shanghai. Rural pensions, introduced nationwide in 2009, are meagre.In March, China increased the minimum pension by 20 yuan, to 123 yuan per month, benefitting 170 million people.Economists at Nomura say transferring resources to the poorest Chinese households is the most efficient way to boost domestic consumption.But the rural pension hike amounts to an annual effort of less than 0.001% of China’s $18 trillion GDP.China’s Academy of Social Sciences (CASS) estimates the pension system will run out of money by 2035.Beijing has introduced private retirement schemes and is transferring funds to provinces with pension budget deficits which they cannot replenish themselves due to high debts. Other countries have tried to increase pension funding by lifting the retirement age. In China, it is among the lowest in the world at 60 for men and 50-55 for women depending on their line of work.Beijing has said it plans to raise the retirement age gradually, without giving a timeline.Government concerns that the population would perceive raising the threshold as benefiting “vested interests” at the expense of ordinary citizens are holding up the implementation of those plans, the adviser said.Chinese think “officials want to retire later to fatten up their own pensions,” he said.POVERTY THREATCASS surveys show the level of healthcare funding for urban workers was in some cases about four times higher than for those with a rural hukou.”There aren’t enough social services to solve the problems of these people, who are prone to falling back into poverty,” said Dan Wang, chief China economist at Hang Seng Bank. More than 16% of rural residents older than 60 were “unhealthy”, compared with 9.9% in the cities, according to an October article by Cai Fang, a CASS economist and former central bank adviser, published in the Chinese Cadres Tribune, a Communist Party magazine.Sixty-year-old Yang Chengrong and her 58-year-old husband Wu Yonghou spend their days collecting piles of cardboard and plastic for a recycling station in Beijing, earning less than one yuan per kilogram. Yang said she has heart issues, while Wu has gout, but they can’t afford treatment. They fear their 4,000 yuan monthly income is unsustainable as “people consume and waste less.””Villagers like us work ourselves to near-death, but we must keep working,” said Yang, her shoulders covered in snow after a day of scavenging.Wu, next to her, said they do not dare to retire.”I only feel secure if I have work, even if it’s dirty work,” he said.Traditionally in China, children had been expected to support the elderly.But most of those retiring in the coming decade, a group almost as large as the entire U.S. population, only had one child due to birth limits enforced from 1980 to 2015.High youth unemployment compounds the problem.”Relying on families for elderly care is no longer feasible,” Cai wrote in his article.The silver lining for some of the elderly is that younger Chinese, despite struggling to find the services jobs they went to university for, reject hard labour.”The mall can’t find younger people,” said Hu, the cleaner. “As long as I can still move, I’ll keep working.”($1 = 7.2448 Chinese yuan renminbi) More