Aurelia Butler

March futures on the S&P/TSX index were down 0.3% at 7:18 a.m. ET (1218 GMT).Following favorable U.S. inflation data last week, labor market reports in the country, including nonfarm payrolls, are expected to guide expectations from the Federal Reserve on interest rate cuts during the year.Back home, Bank of Canada’s (BoC) decision on borrowing costs is due on Wednesday, where it is widely expected to keep interest rates on hold at the current level of 5%.Markets, however, will watch for clues regarding a rate cut, with money market pricing in about 73% chance of at least a 25-basis-point (bps) reduction in June. [#BOCWATCH]Oil prices edged down on Monday as traders indulged in some profit taking a day after the widely expected extension of voluntary output cuts by the OPEC+ producer group. [O/R]Gold lingered close to a two-month high, while copper prices rose ahead of a key political meeting in China that could pave the way for growth stimulus in the top consumer. [GOL/] [MET/L]The Toronto Stock Exchange’s S&P/TSX composite index on Friday closed at its highest level since April 2022, led by gains in resources and technology shares. (TO)Fuel retailer Parkland Corp’s biggest shareholder Simpson Oil said on Sunday it would evaluate options to protect its rights after Parkland advanced its annual meeting, limiting Simpson’s ability to nominate directors. COMMODITIES AT 7:18 a.m. ETGold futures: $2,090.9; -0.2% [GOL/]US crude: $79.43; -0.7% [O/R]Brent crude: $83.14; -0.5% [O/R] More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Trade Secrets newsletter. Sign up here to get the newsletter sent straight to your inbox every MondayWell, you can’t blame me for the multiple things that went wrong at the WTO ministerial in Abu Dhabi last week. As you may recall, in last week’s newsletter I temporarily ditched Grouchy WTO-Bashing Alan for Perky WTO-Cheerleading Alan, a move which had several long-standing friends and contacts asking me if I was quite all right as I wandered around the conference centre. Today, I revert to something closer to type and look at the aftermath of the talks. IMHO the only substantial positive was a grudging continuation of the moratorium on ecommerce tariffs — aka countries promising not to punch themselves in the face for another two years — plus the talks not actually collapsing. Today’s main piece is on what ought to be discussed in the WTO right now and isn’t. Charted waters is on Brexit still being a bad idea.Get in touch. Email me at [email protected] gap where green trade should beThe main missing subject in Abu Dhabi, of course, was the environment in general and climate change in particular. It was a real shame that the agreement restraining fisheries subsidies made in 2022 didn’t expand further at this meeting. (I’m not just saying that because the fisheries campaigners are among the sparkier ones you’ll meet on the trade policy circuit and have a great line in piscine lapel pins, pictured.) Protecting fish stocks was a new and promising development, a WTO deal that focused on environmental global public goods rather than just increasing commercial market access. The main blockage continued to be — you’ll never guess — India, arguing for large loopholes in the rules for its fishers. There were some pretty chaotic and poignant scenes towards the end of the meeting. A group of Pacific island nations (their position eloquently articulated by Manoa Kamikamica, Fiji’s deputy prime minister) were visibly distraught that the fisheries deal did not progress. Kamikamica thanked a long list of advanced and lower-income economies for supporting the extension of the deal, including the US, EU and China, but pointedly not India.New Delhi continues to obstruct large parts of the WTO agenda. Piyush Goyal, India’s ebullient commerce minister, was quoted by India’s Financial Express yesterday pretty bluntly saying India didn’t actually have any offensive (that is, export) interests in the WTO.I would say this of course, since I was part of it, but I found the FT’s interview with Goyal (mainly conducted by my colleague Andy Bounds) particularly striking. A mini-industry of bureaucrats and think-tank pointy-heads has been working for years on how to use the WTO to tackle climate change. (A particular shout-out here to the work of the diligent and much-admired WTO deputy director-general Jean-Marie Paugam.) But India has said a flat no to the whole idea, even blocking the suggestion of non-binding deliberative discussions at the WTO on the environment.A bunch of other low and middle-income countries had the courage to make a statement calling for the WTO to address the environment, but it’s unlikely to shift the Indian veto. India is pretty brutal about protecting its interests. Last week it forced Thailand to withdraw its ambassador after comments she made about Indian grain stockpiling driving up international food prices. Soi-disant Global South solidarity (told you so) at its finest there: I wonder if Thailand will be invited to India’s next Voices of the Global South summit. Goyal is obviously right that there’s a lot of hypocrisy from rich countries, particularly not delivering the climate finance promised as part of the 2015 Paris agreement. But we are where we are. Tackling climate change and the environment more generally should be an imperative that multilateral trade policy is nonetheless apparently going to ignore.Businesses are doing it for themselvesEvidently bureaucrats aren’t going to do much to help world trade survive, at least at a multilateral level. (I was right about that too.) It will have to rely on the momentum from (1) international businesses and (2) free-trading countries doing what they can.As it happens, the business folks’ conversations were among the livelier and more interesting at the ministerial. They were pretty despairing of governments but actually quite optimistic that value networks would cope with geopolitical stress pretty well. There was, of course, an example, handily sited just across the Arabian peninsula. The Red Sea blockages have been occurring for nearly three months now and yet global trade has signally failed to grind to a halt.One of Trade Secrets’ favourite doomsayer-defiers, University of St Gallen professor Simon Evenett, has just published a paper based on conversations with 13 senior executives from international businesses. Apart from noting that execs define “geopolitics” in a bunch of ways, some of them less existential than the typical media usage, it also found they had discovered a variety of ways to combat it and could improve their performance further.With regard to governments, it’s true that not much can get much done at the WTO so long as too few big countries are committing to it. It’s not just India. The US’s focus on the institution is accurately summed up by Katherine Tai, the US trade representative, leaving the ministerial meeting early.But the US is an outlier in its gut dislike of globalisation, despite what you hear in Washington about the widespread international backlash against free trade. Even India has signed some bilateral deals, albeit pretty thin ones.A lot of Asia-Pacific countries really want the US to be driving liberalisation in the region. But in its absence they will do it themselves, signing up to deals with China or agreements such as CPTPP, and continuing to encourage foreign direct investment.While in Abu Dhabi I talked to Tengku Zafrul Abdul Aziz, the Malaysian trade minister, about whether the anti-globalisation backlash had reached the politics of small open economies such as his. (The Malaysian prime minister Anwar Ibrahim told the FT recently that his country would not be forced to choose between good relations with China and with the US.)Zafrul said: “In parliament, I think there are more questions on this. So if you want to use that as a reflection or barometer of people raising concerns, the answer is yes. Whether it’s big enough an issue that it can bring down government or change our policy direction from being an open economy, the answer is no.”My conclusion: hard-nosed transactionalism from companies and smaller free-trading countries is what’s keeping globalisation alive. That’s just as well, because someone has to do it.Charted watersDoes it keep needing to be explained that Brexit was a bad idea for trade? Apparently it does, to some. So: the FT has calculated that UK goods trade has had its fastest five-year fall on record, and is heavily underperforming other advanced economies. Brexit was a bad idea for trade.Trade linksThe St Louis Federal Reserve looks at the effect of the Red Sea disruptions on the world economy.The European Centre for International Political Economy examines how Huawei has weathered the storm of US sanctions and other challenges.The Wall Street Journal looks at how it’s harder than it looks for Asian manufacturers to onshore high-tech production in the US.The FT’s Unhedged newsletter interviews the Peterson Institute’s Adam Posen about how resilient the world economy has been.Joe Biden has warned that Chinese smart cars could be a security threat if they control large parts of the US market.Trade Secrets is edited by Jonathan MoulesRecommended newsletters for youBritain after Brexit — Keep up to date with the latest developments as the UK economy adjusts to life outside the EU. Sign up hereFree Lunch — Your guide to the global economic policy debate. Sign up here More

BEIJING (Reuters) – China’s Premier Li Qiang will not hold a press conference after the close of this year’s annual parliamentary meeting, an official said on Monday, ending a tradition maintained for three decades.Moreover, barring special circumstances, there will also be no such press conferences by Li after each year’s meeting for the remaining term of China’s parliament ending in 2027, National People’s Congress (NPC) spokesman Lou Qinjian added. Since 1993, China’s premiers have met the media after the annual NPC gathering, taking wide-ranging questions from Chinese and foreign journalists in news conferences broadcast live globally. Throughout the 1990s and 2000s when China was opening up its economy to the rest of the world, it had actively sought to elucidate its politics and policies in a bid to attract foreign investment and boost trade.Political observers say the surprise decision to not hold such news conferences is a sign of the diminishing authority of the premier with Xi Jinping as China’s president, and a further indication that the world’s second-largest economy could be headed towards “an era of isolation”.”China was heading towards an era of opening up. Now it is heading towards an era of isolation, as shown by the cancelled premier news conference,” said Chen Daoyin, a independent political commentator who formerly taught at Shanghai University of Political Science and Law.The decision to cancel the premier’s news conference was made because there would be more briefings on diplomacy, the economy and the livelihoods of the people by government ministers during the week-long parliament meeting, Lou said.The premier’s annual meet-the-press session used to be the highlight of the parliamentary meeting, because as the head of the State Council and the main person tasked to run the economy, his answers to reporters’ questions on the economy were seen as more authoritative and having a more big-picture perspective than cabinet ministers.At the close of the annual parliament last year, Li sought to reassure the country’s private sector in his first media conference as premier. While premiers generally toe the Communist Party line in their answers, some have in the past used the news conference to express views that struck a different tone.Li Qiang’s predecessor, Li Keqiang, said in 2020 that 600 million people earned less than $140 per month, a revelation that stood in stark contrast with the rosy picture the party painted about having eradicated rural poverty.Wen-Ti Sung, a political scientist at the Australian National University, said that scraping the premier’s news conference is Beijing’s effort to further control the narrative about the state of China.This does not mean that Xi distrusts Li Qiang, the current premier, Sung said. “This is consistent with their relations with Xi playing policy architect and Li playing Xi’s faithful policy implementer.””Willingly stepping away from the limelight is an act of loyalty,” Sung said. More

LONDON (Reuters) – Central banks are on the brink of victory in the fight to bring the global surge in inflation back under control, the Bank for International Settlements said on Monday.There was cause for “cautious optimism”, according to the latest quarterly report from the BIS, which is often dubbed the central bankers’ central bank due to its regular behind-closed-doors meetings of the world’s top monetary policymakers.”Central banks have taken decisive action and thus prevented inflation from becoming entrenched,” the BIS’s Monetary and Economic Department head Claudio Borio told reporters. “At the same time, economic activity has been remarkably resilient and the financial system has held up well.”The BIS has been gradually becoming more hopeful about the outlook. At the end of last year it said progress in beating back inflation had been encouraging, but stressed at that point that central banks were not out of the woods.While there was the usual caution that risks remain, Borio noted this time how the “daylight” had narrowed significantly between when markets expect interest rates to start falling again and what the big central banks have been signalling. “The fact that financial markets have converged on central bank views suggests that, on this occasion at least, central banks had a better appreciation of the risks,” Borio said.The report also looked at the stubbornness of inflation and what neutral borrowing rates where they are neither too loose or too restrictive – or “r*” in economist speak – were likely to be in the wake of the COVID-19 pandemic and as deglobalisation and aging populations reshape economies.It concluded that inflationary pressures could become more stubborn as services industries increase their weight in economies, while r* could now be higher, although gauging it was fraught with uncertainty. It was such a “blurry guidepost” in the current context that “it is going to be very difficult to utilize it in a very concrete way when we conduct monetary policy,” Hyun Song Shin, the BIS’s Head of Research, added.There was a partial warning too about the turbo-charged rise in heavyweight tech stocks, especially those linked with the rise of artificial intelligence. U.S.-listed Nvidia (NASDAQ:NVDA), which makes the chips that power AI software, has seen its shares surge another 66% this year following a near 240% leap in 2023. Meta, which owns Facebook (NASDAQ:META), is up nearly 140% over the last 15 months too.”Whenever you have big changes or prospective changes in technology you get these huge runs of enthusiasm that propel the market to extreme height. We may be seeing that again,” Borio said.With many other markets also rallying sharply this year, though, investors were seeing “a very, very soft landing ahead” for the big economies, he added. More

BANGKOK (Reuters) -Thailand’s economy is in a “critical situation” that requires urgent stimulus measures and a potential rate cut, officials from the prime minister’s office said on Monday, as the country pushes to draw new investments from the likes of EV maker Tesla (NASDAQ:TSLA).Prime Minister Srettha Thavisin, who took power last August, has been pushing to revive Southeast Asia’s second-biggest economy, which has suffered from weak exports and a slow recovery from the pandemic compared with regional peers.”Figures show we are not in good shape,” Prommin Lertsuridej, chief of staff to the prime minister, told reporters, outlining a series of challenges ranging from low industrial capacity utilisation to ballooning household debt.The economy unexpectedly contracted in the fourth quarter of 2023 and policymakers have downgraded the growth outlook for this year, adding to pressure on the central bank to give in to the prime minister’s near-daily demands for an interest rate cut.Prommin, a veteran political strategist, said there was room to reduce rates, which would help struggling households by putting more money in their hands, but said the government would not intervene in the central bank’s decision making.Srettha has outlined ambitions to make Thailand a regional hub for several sectors including electric vehicles (EVs), aviation, finance and the digital economy. He has also urged lawmakers to boost Thailand as a food, wellness and tourism hub.”We are doing everything we can,” Prommin said, referring to measures including visa-free tourism, policies to address household debt, and support for the critical agriculture sector.A key election promise to give away 10,000 Thai baht ($279) to 50 million Thais to spend in their local communities was still in the pipeline, with implementation likely by late May, he said.Critics have cautioned that the government’s raft of measures – especially a $14 billion “digital wallet” handout scheme – may not be fiscally viable and could stoke inflation.TALKS WITH TESLAThailand is continuing talks with auto major Tesla for a potential investment in the country, an official from the prime minister’s office said.The government has offered the EV maker access to 100% clean energy for a facility in Thailand that could encompass EVs and battery production.”It is up to Tesla right now,” Supakorn Congsomjit said, declining to provide further details.Late last year, Tesla surveyed potential locations in the country, he added.Long dominated by Japanese carmakers such as Toyota Motor (NYSE:TM) and Honda (NYSE:HMC) Motor, Thailand has seen a wave of investment by Chinese EV makers, including BYD (SZ:002594) and Great Wall Motor, amounting to more than $1.44 billion.In a bid to draw more foreign investment, Prommin said the government was working on multiple fronts, including easing visa regulations, amending laws for improving ease of doing business and upgrading physical and digital infrastructure. ($1 = 35.8100 baht) More

NEW YORK (Reuters) – Seemingly endless demand for U.S. top-rated corporate debt has created unease among some investors who think a selloff could be on the cards if liquidity conditions worsen later this year.Expectations of a benign outcome for the U.S. economy despite high interest rates have fuelled a search for yields and supported demand for credit. So far this year investment-grade rated companies have raised record amounts of debt while credit spreads, or the premium companies pay over U.S. Treasuries for issuing bonds, are at their tightest in years.Yet some in the market suspect optimism around the asset class could make it vulnerable to a repricing once the Federal Reserve’s efforts to tighten financial conditions start biting into bank reserves left so far unscathed because of excess liquidity in the financial sector.Inflows into the Fed’s overnight reverse repo facility, a proxy for excess cash in the financial system, have been declining sharply over the past year. Once cash drains from the reverse repo facility, bank reserves at the Fed are expected to start falling, tightening overall financial system liquidity and potentially hitting demand for risk assets such as stocks and credit.Daniel Krieter, director of fixed income strategy at BMO Capital Markets, said he has observed a strong relationship between the level of excess bank reserves and investment-grade credit spreads, which tend to tighten when reserves rise.”The level of excess reserves in the system, we think, matters for risk,” said Matt Smith, investment director at Ruffer. “Liquidity is going to tighten from here, and on top of that everything is very expensive … a sharp selloff is something we expect and are positioned for,” he said.Estimates vary as to when the reverse repo facility will be depleted. Some analysts expect it to happen between May and July this year, even though benign market conditions in U.S. funding markets in recent weeks suggest the process may take longer. ‘FROTHY’ MARKETSTo be sure, expectations that demand for credit would wane have been proven wrong over the past few years, with the risk of corporate debt defaults fading as the economy showed surprising resilience despite interest rates at their highest in decades.Investment-grade rated companies have raised a record $395 billion so far this year, and order books on new bonds have been on average three to four times oversubscribed, allowing companies to pay little to no spread premium on any new bonds, according to Informa Global Markets data.”The combination of Treasury yields still at relatively high levels and conservatively managed corporate balance sheets, is driving liquidity into high quality bonds,” said Jonathan Fine, head of investment-grade syndicate at Goldman Sachs.Barring any unexpected event, credit spreads could widen should the economy slow down but that is likely to happen gradually. “Risks on the horizon are in fact incentivizing corporate issuers to raise debt now rather than later,” he said.For Mark Rieder, CEO at La Mar Assets, a credit hedge fund, “frothy” credit markets did not mean exiting credit completely.”Just build a margin of safety at a time when tight credit spreads make future returns more challenging,” he said, adding investors should put on interest rate hedges, upgrade the quality of their portfolio and build cash.Still, even in case of continued economic strength, lower liquidity when interest rates remain high could accelerate a decline in bank reserves as investors have more incentive to park money in high-yielding cash, worsening a possible selloff, said Smith at Ruffer.He said he saw the potential for a “1987-style market crash, so it’s not one where we think there are big problems in the economy, it’s more like an endogenous event.””It could be quite quick, but that doesn’t seem impossible to us.” More

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