Aurelia Butler

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesGood evening.Upbeat rhetoric on the UK’s economic recovery and a $10bn personal tax cut took centre stage in Jeremy Hunt’s spring Budget this afternoon as the chancellor drew the battle lines for the forthcoming general election.In a speech short on surprises, Hunt announced a range of tax-raising measures, including the abolition of “non-dom” status and an extended windfall levy on oil and gas companies, to pay for the well-trailed reduction of 2p in national insurance, a move that will benefit 27mn workers, replicating the move made in his Autumn statement.Other announcements included a tinkering in thresholds affecting the taper of child benefit, a new British Isa to encourage investment in UK equities and new taxes on tobacco, vapes and business-class flights. Hunt also announced a “landmark public sector productivity plan”, including funding to update NHS IT systems.  Apart from some help for children’s social care placements, there was little solace for cash-strapped local councils, although Hunt did announce some new devolution deals. There was also help for the creative industries, including a tax credit for low-budget independent films.The chancellor was bolstered by slightly better than expected economic forecasts from the Office for Budget Responsibility, which said the UK would expand 0.8 per cent this year, up from its previous forecast of 0.7 per cent, and that growth for next year would hit 1.9 per cent rather than its previous estimate of 1.4 per cent. This was balanced by confirmation that the country’s tax burden would continue to climb, rising gradually to 37.1 per cent of GDP in 2028-29, the highest level since 1948. Government borrowing would also be higher than expected, although the detail caused little more than a flutter in bond markets.The big question for the government is whether today’s measures will move the dial politically ahead of the general election, with recent opinion polls showing the Tories trailing the opposition Labour party by some 20 points. “A payday loan of a budget designed to get a hand-to-mouth government from here to the election” was how the FT’s UK chief political commentator Robert Shrimsley characterised it.Labour leader Sir Keir Starmer described the speech as a “last desperate act of a party that has failed” and while his party has criticised the Tories’ “scorched earth” approach to the public finances, Starmer said his party would support the cut in national insurance.Hunt’s decision to stick with his existing post-election public spending plans of a 1 per cent rise in real terms, instead of cuts that had been floated, may be helpful to Starmer, but the chancellor’s appropriation of Labour’s signature policy of abolishing non-dom status poses fresh questions of how Labour would pay for its programme. The move, reckons Inside Politics writer Stephen Bush, could turn out to be the most significant announcement of the day.Need to know: UK and Europe economyUK construction activity stabilised in February as demand improved on the back of falling inflation and the prospect of interest rate cuts, according to new PMI survey data. Although it was the sector’s best performance since August 2023, contractors are still feeling the effect of “a protracted downturn in activity”.Ukraine is set to accept restrictions on its trade with the EU to defuse a political row with Poland, but in turn wants Brussels to ban Russian grain imports, the Ukrainian trade minister told the Financial Times.French finance minister Bruno Le Maire said the country’s budget deficit for 2023 would be “significantly” above target and that further spending cuts would be needed.Last week’s higher than expected inflation data for February, especially in services, means the European Central Bank is likely to resist calls for an imminent cut in interest rates. The ECB has also got a staff revolt on its hands over the bank’s “disrespectful” approach to climate change.Need to know: global economyChina set an ambitious target for economic growth of 5 per cent this year as premier Li Qiang promised to tackle the property crisis, high local debt and troublesome deflation. Military spending is also set to grow.The FT revealed that academics at Imperial College London had worked with scientists at Chinese institutions linked to Beijing’s armed forces and defence sector on research with potential military applications. Venezuela announced its presidential poll for July 28 with strongman President Nicolás Maduro expected to seek re-election. It is unclear who he will run against since opposition candidate María Corina Machado — who overwhelmingly won an October primary — has been disqualified.Haiti’s Prime Minister Ariel Henry pitched up in Puerto Rico after his whereabouts were unknown for days, leaving behind a country in chaos with violent gangs demanding his ousting. Gold prices hit a new record high, driven by hopes of US rate cuts and “phenomenal” buying by Chinese investors. Bitcoin also briefly hit a new record price of $69,200 yesterday. The world’s largest cryptocurrency has surged since US regulators in January approved spot bitcoin exchange traded funds issued by Wall Street stalwarts.Need to know: businessLong-awaited — albeit watered down — rules from the US securities regulator will for the first time require company disclosures on climate risks. France’s Dassault Aviation warned that Europe’s defence industry would take decades to build up arms production, despite talk from Brussels about urgently rebooting the sector.UBS chief Sergio Ermotti hit out at European politicians and regulators for deliberately suppressing the continent’s banks by stopping their growth and allowing US rivals to dominate.The ding-dong between OpenAI and Elon Musk, one of its founders, continued as the company released emails that showed Musk had supported its plan to create a for-profit entity, contrary to allegations in his recent lawsuit against the AI start-up. Musk is also under fire from former Twitter executives over severance payments.This week is the deadline for large online platforms to comply with new EU regulations on competition. As our Big Read elaborates, some say it is too little too late. In the US, lawmakers have introduced legislation that would ban app stores from distributing TikTok unless ByteDance, its Chinese owner, divests control.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The luxury industry is starting to moderate its price rises after sales slowed for much of 2023. Though its well-heeled customers are less sensitive to pricing, they are not immune, writes Adrienne Klasa. The beauty sector is doing remarkably well however, as illustrated by the success of French retailer Sephora.Japan is set to become the undisputed home of games hardware again after Microsoft signalled it was easing off its 23-year competition with Sony and Nintendo. The World of WorkMuch of the business world has made its peace with remote working but in banking and financial services it’s still a battlefield. Several lenders have upset employees by demanding they return to the office more days a week. Workers complain of draconian measures, such as monitoring their attendance and threats of disciplinary action for non-compliance. More than 25 years since big names on Wall Street started being hit by huge sex discrimination claims, its top brass are still overwhelmingly male, says US financial editor Brooke Masters.A group of American unions ended its campaign for board seats at Starbucks after progress on collective bargaining agreements for the company’s workers.Mastering the art of producing a CV can be a fretful task, especially for younger workers: can employers come up with a better way to hire? Listen to the new Working It podcast. Some good newsWhile most species’ populations are declining, populations of elephants in southern Africa are booming thanks to conservation efforts.© REUTERSRecommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The chair of the Federal Reserve said it was likely to make “broad and material changes” to proposals to rewrite banks’ capital rules, as Republicans called for the existing interpretation of the so-called Basel III endgame package to be scrapped.Jay Powell told lawmakers on Wednesday that he did “hear the concerns” from lenders over the US interpretation of capital standards crafted by global regulators that form the Basel Committee on Banking Supervision.“I do expect that there will be broad and material changes to the proposal,” he said, as he gave his semi-annual testimony on monetary policy to Congress.The Fed, together with other US regulators, has faced strong criticism from the banking industry over what would constitute the biggest change to capital requirements since the Dodd-Frank act was introduced in the wake of the global financial crisis.The current proposals would require the biggest US banks to hold a greater amount of capital, which can absorb losses, against their assets. Banks have argued that this would constrain their ability to lend without making the financial system significantly safer.They also complain the US interpretation is stricter than that of other countries, for example by requiring lenders to phase out any use of internal models to calculate risk weights.Powell said he had never seen a regulatory proposal elicit so much criticism, adding that there were “real concerns” the plans could increase risks to the banking system and undermine market competition.  He said that while the Fed had not yet decided what changes to make to the proposal, it would not “hesitate” to make them if needed.Advocacy groups for banks have taken the unusual step of broadcasting TV adverts against the Basel III endgame during high-profile American football games, and have also raised the prospect of suing the Fed should the central bank refuse to make big changes. Banks have won allies from regular users of hedging products like farming groups as well as from the renewable power industry, which warned that the changes could hamper clean-energy projects.They have also garnered the support of Republicans in the House, who called on the heads of the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency in a letter on Wednesday to “withdraw this flawed proposal”. The Fed chair said he welcomed the industry’s “voluminous and very substantive” response to the proposals, which the central bank received by January when the window for feedback closed. The letter from House Republicans claimed 97 per cent of those responses were negative.“This broad-based opposition makes clear that it is not just the banking industry crying wolf against heightened capital requirements,” the letter said. “As issued, the proposal lacks justification, lacks rigorous quantitative analysis, and is procedurally flawed.” In prepared remarks to lawmakers on the topic of the economy, Powell acknowledged “considerable progress” and said interest rates, currently at a 23-year high in a range of 5.25 to 5.5 per cent, were unlikely to rise again. However, he told lawmakers that progress towards reaching the US Federal Reserve’s 2 per cent inflation goal was not “assured” and that rate cuts would have to wait until officials were more confident of hitting their target.“Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2 per cent,” Powell said. “At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.” The Federal Open Market Committee next votes on March 20, and its members have repeatedly said they want to gain “greater confidence” that inflation can sustainably hit 2 per cent.Headline personal consumption expenditures inflation, the measure the Fed targets, rose 2.4 per cent in the year to January, down from 2.6 per cent in December. However, the month-on-month rate edged up slightly, sparking concern that the deceleration in price pressures could soon come to a halt.Month-on-month core PCE, the Fed’s preferred gauge of underlying inflation, also rose between January and December.Markets have trimmed their expectations of Fed cuts this year. Investors now expect three or four quarter-point moves beginning in the summer — a shift from earlier this year when they expected six cuts starting this month. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Egypt secured a deal to more than double its IMF bailout to $8bn after the country allowed its currency to drop to a record low against the US dollar, unlocking support to avert its worst economic crisis in decades.The fund said on Wednesday that Cairo had taken “decisive steps to move towards a credible flexible exchange rate regime” after Egypt’s central bank devalued the pound by 40 per cent and massively raised interest rates to relieve a foreign currency shortage.Floating the currency and allowing market forces to set the value of the pound was a key condition for the heavily indebted country to access more IMF funds as a condition of a $3bn bailout in 2022.The pound fell beyond 50 against the dollar on Wednesday, after being officially held at about 31 to the dollar for almost a year while it reached more than twice that figure on the black market.With an inflation rate of close to 30 per cent in January, Egyptian authorities have been wary of allowing the pound to fall further and piling additional hardship on families. But the recent move by ADQ, an Abu Dhabi investment vehicle, to inject $35bn into Egypt, the biggest single investment in the country’s history, provided the central bank with the buffer it needed to prevent the currency from going into freefall once controls had been lifted.The increased IMF support for Cairo comes as Egypt faces mounting social and economic pressures that have been exacerbated by Israel’s war against Hamas in Gaza. Egypt borders the besieged strip and plays a critical role in supporting the delivery of aid into Gaza and facilitating negotiations with Hamas. Meanwhile, Cairo’s foreign currency revenue from shipping transiting the Suez Canal has been hit by attacks on vessels in the Red Sea by Houthi rebels in Yemen.Charlie Robertson, head of macro strategy at fund manager FIM Partners, said the investment from ADQ had been vital to the IMF deal. “The currency is going to be at a defensible level and reserves will be booming as a result of the UAE inflows, and IMF money. Default risk has collapsed over the last two weeks,” he said. “I think the crisis is over.”The magnitude of the Abu Dhabi investment to develop 170mn square metres on Egypt’s Mediterranean coast, and the quick disbursement schedule, was in effect a bailout from the Gulf state intended to help ease Egypt’s foreign currency crisis and bring its IMF deal over the line.The deal included an investment of $24bn of fresh money in addition to the conversion of $11bn of UAE deposits in the central bank to local currency to be used in projects in Egypt. The first tranche of $10bn had already reached Cairo. The rest should arrive in six weeks, according to a schedule announced by the Egyptian authorities. Egypt has been forced to go to the IMF for multiple loans since 2016 and is the fund’s second-biggest debtor after Argentina. Under the $3bn support package with the fund in October 2022, Egypt agreed to move to a flexible exchange rate and privatise state assets, including entities owned by the military. But it has held back from allowing further devaluations of the pound.The Central Bank of Egypt said the move to float the currency would lead to a unified exchange rate and close the gap between the official and black market rates, as it also increased interest rates by 600 basis points, bringing the overnight lending rate to 28.25 per cent and the overnight deposit rate to 27.25 per cent.The central bank said it was committed to “continue to target inflation . . . [and] allowing the exchange rate to be determined by market forces”. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer was one of the EU’s top trade negotiators and a former head of the EU delegation to the World Trade Organization and UNAs well as bringing significant elections around the world, 2024 will be a year of many international trade negotiations — the UK with the US and EU, the EU with India, US, Australia and others, China with Latin America, Africa with Europe and China? — as countries seek to diversify their trading arrangements.Some agreements will be reached but there will also be failures and miscalculations. Trade negotiations are easy to start but hard to finish.With that in mind, here are my 10 golden rules for any minister preparing to negotiate with the EU, US, China or anyone else.First, apply the “Goldilocks” principle: ensure your negotiating mandate is neither too easy nor impossibly ambitious. If it’s too easy, you will be lazy and produce a poor agreement. Too ambitious and you will fail. Oh, and ensure your mandate gives you some wiggle room — don’t accept anything overly prescriptive.Next, remember that, as my former boss and head of the WTO Pascal Lamy used to say, God is in the details (though you need the big picture too). Who can forget the famous photo of then UK Brexit secretary David Davis and Michel Barnier, the EU’s chief negotiator, opening the first round of Brexit negotiations? Barnier, a bulging well-tagged file before him, Davis with . . . nothing! Assuming he could wing it? The gifted amateur holding all the cards? He was wrong. Third, keep your stakeholders happy. Another error of the British side in the Brexit negotiations was its failure to consult systematically its stakeholders — particularly parliament and business. The result? An agreement that both surprised and disappointed, and received scant support.It is fatal to lose one’s constituency. Negotiators dub this the “champignons de Paris” approach — consign them to a dark cellar and shovel shit on them from time to time. Contrast this with Barnier’s method: he drew EU member states into his confidence at every step, with two consequences. They trusted him even when he entered the “tunnel”, the secret stage of final negotiations where publicity can jeopardise the outcome. And the agreement contained few surprises so it got unanimous support from European decision makers.Fourth, never lie: it will come back to bite you and you will lose forever your credibility as a negotiator. That does not mean you have to tell the whole truth — it’s not a court of law — so you can, as the UK Conservative politician Alan Clark once infamously put it, be “economical with the actualité”.Fifth, regard the other side as your counterpart, not your enemy. You have both been tasked with solving a problem, so let’s help each other to solve it shall we? A fatal blunder of the UK negotiators was to regard the EU as the enemy. Be like Michael Jackson, a “lover not a fighter”.Next, recall the Chinese saying “cross the river by feeling the stones”. In other words, don’t rush, play the long game. If you are in a hurry, your counterpart will smell blood and exploit it. Take your time, build your agreement piece by piece with patience. And for heaven’s sake never tell them what plane you have to catch.Seventh, it doesn’t matter if the cat is black or white, provided it catches mice. More Chinese wisdom. Be flexible and pragmatic. From the outset identify “must haves” and things that can be jettisoned en route if necessary. Of course, pretend that it hurts to drop those points so as to get some payback for your flexibility.Eighth, never get angry (unless it is carefully choreographed in advance), never raise your voice, wag your finger, and never walk out of the room. It doesn’t work.Ninth, don’t forget that the most important moment in any negotiation is knowing when to stop. Recognise when you have got enough and it may not get better. And finally, discard Abba’s advice: the winner doesn’t take it all. An agreement will only last if it benefits both sides. No zero-sum game, but “win-win” in the jargon. Former US president Donald Trump is a rare remaining proponent of this “I win, you lose, get it?” approach, first set out in his book The Art of the Deal. The problem is that it is doomed to failure. Look at his famous trade deal with China, now in tatters. Inspired by the great Nigel Tufnel in the film This Is Spinal Tap, I offer an 11th commandment. Every negotiation is different, every negotiator different and has his or her own recipe. So be creative, be flexible, be reasonable, and enjoy yourself. I certainly did! More

Apparel retailers such as Abercrombie and Lululemon Athletica (NASDAQ:LULU) have benefited from their efforts to trim inventories and introduce fresh styles on their racks during the holiday shopping season.This also enabled Abercrombie to tone down discounts for its brands over the holiday period, which is typically skewed towards higher markdowns and promotions.Net sales growth at its Abercrombie brand improved sequentially to 35% in the holiday quarter, from 30% in the third-quarter. However, net sales growth for its Hollister brand was 9%, slower than the 11% reported in the prior quarter.In January, Abercrombie joined Lululemon, and peer American Eagle (NYSE:AEO) Outfitter in raising its fourth-quarter sales targets, in a move that pointed towards resilience among bargain-hunting customers.The Gilly Hicks parent expects net sales growth between 4% to 6% for fiscal year 2024, compared with the LSEG estimate of 4% growth to $4.43 billion. The company’s forecast comes in contrast to weak forecasts from department store retailers such as Nordstrom (NYSE:JWN) and Macy’s (NYSE:M) , who have cautioned about another year of strain on discretionary spend amid choppy macro economic conditions.Abercrombie’s revenue rose 21% to $1.45 billion in the fourth quarter ended Feb. 3, topping analysts’ expectations of 19% growth to $1.43 billion.Excluding items, the Ohio-based company earned $2.97 per share, ahead of estimates of $2.83 per share.Shares of the retailer, which nearly quadrupled last year, are up about 60% so far this year. They were down about 3% in volatile premarket trade. More