Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.World Trade Organization members clinched a deal on Friday night to continue to exempt ecommerce from tariffs for another two years after India and South Africa dropped their opposition following five days of talks.The moratorium, which is traditionally renewed every two years, was backed by almost all governments and businesses.The deal at a biennial ministerial conference is a boost to the WTO, which has struggled to contain rising protectionism and the use of subsidies by the US, China and other global powers.But ministers are under pressure to complete work to classify which transactions could be covered by customs duties and end the ban at the next ministerial meeting in 2026.“We agree to maintain the current practice of not imposing customs duties on electronic transmissions until the 14th session of the ministerial conference. The moratorium . . . will expire on that date,” a WTO document said.It would require unanimity to continue a ban covering trillions of dollars of trade.Piyush Goyal, India’s commerce minister, had argued that the ecommerce moratorium favoured big tech companies and prevented competitors in developing countries from growing.But he told reporters he had dropped his opposition to the extension at the request of Thani bin Ahmed Al Zeyoudi, the trade minister for the United Arab Emirates who was chairing the conference.Governments say they are missing out on customs revenue as goods such as DVDs are replaced by digital services. But a study by the OECD said low-income countries would suffer a bigger drop in imports and exports of digital goods than richer ones with tariffs.“It’s a relief to see the moratorium survive by the skin of its teeth,” said Tiffany Smith vice-president of the National Foreign Trade Council, a Washington-based business lobby group. “Its collapse would be a significant blow to the rules-based trading system. But it’s incredibly frustrating to see the WTO unable to move forward from this Groundhog Day rut that has been dug on the issue.” “The endless brinkmanship over the moratorium crowds out the ability to make progress on a broader agenda and undermines the viability of the WTO as a useful forum for trade ministers,” she said.But negotiators from more than 160 countries failed to agree to limit subsidies for overfishing and decided to continue talks to address state support for farmers at future meetings.Brazil and India clashed over agriculture policy, with Brasília demanding lower tariffs while New Delhi defended its system of public stockholding, with the government buying food to smooth price volatility and ensure supply.The Thai ambassador to the WTO, Pimchanok Vonkorpon Pitfield, attacked India for driving up global grain prices with its stockpiling, to applause from some diplomats, officials briefed on the matter said.But she was recalled after New Delhi lodged a strong protest and Indian officials boycotted sessions where Thai officials were present.Governments also failed to agree to curb subsidies for overfishing, a key demand for Pacific island states and those in Africa. Industrial fleets are hoovering up stocks on the high seas and putting small-scale fishers out of business.Ernesto Fernández Monge, a senior officer for conservation support at The Pew Charitable Trusts said: “This is a setback to more comprehensively restoring the health of fisheries and the communities that rely on them.”Looking back on how the gathering had gone, an EU official said: “There was clearly a lack of a spirit of co-operation . . . the spirit in the meeting was everyone for themselves, a zero-sum game.” They added that the US had disengaged from the talks. Katherine Tai, US trade representative, left on Friday morning as talks reached their climax. Washington has hamstrung the WTO’s binding dispute settlement mechanism by refusing to allow judges to be appointed to its appeals panel.It blocked any progress, with the conference agreeing just to “accelerate discussions” on a reformed system by the end of the year.“Very often the attitude of the US was, ‘We don’t need this, we don’t care’,” the official said. “The WTO . . . requires that you really care about what other countries need.”Director-general Ngozi Okonjo-Iweala said in closing remarks that “The beauty of the WTO is that each member has an equal voice but that also comes at a cost. Let’s keep going so we can make our voices heard.” More

(Reuters) – Last week, artificial intelligence server maker Super Micro Computer (NASDAQ:SMCI) achieved something not seen since 2021: It paid 0% interest rate on a $1.7 billion capital raise. Its secret: it issued a bond that can convert to shares.The offering shows how the market for such convertible bonds is getting a second wind, as investors adjust to the idea that the Federal Reserve will keep rates higher than they expected this year and a benign growth environment drives up stocks.In just the last two weeks, eight U.S. companies, including Global Payments (NYSE:GPN), NextEra Energy (NYSE:NEE), Lyft (NASDAQ:LYFT) and Sunrun (NASDAQ:RUN), have raised nearly $7 billion through convertible bonds, making it the busiest period for the hybrid securities in over two years.To make convertibles more attractive to companies, banks are selling insurance and other services to reduce the risk that they give away shares at a discount to the market price. While the services add to the costs of issuance, the savings on interest are higher. Companies can save on average 3% to 4% in interest costs, according to an investor and an analyst said.”There are significant coupon savings that a company can get in a convertible bond versus a regular bond,” said Santosh Sreenivasan, head of the equity-linked and private capital markets business in the Americas at JPMorgan, the top underwriter of such bondsBofA Global analysts expect $90 billion to $100 billion of global convertible bond issuance this year, a 20% increase from a year earlier. Some $60 billion to $65 billion is expected in the United States.David Clott, portfolio manager at Wellesley Asset Management, said he expects volumes to get a boost from companies looking to refinance a wall of maturities in the next few years. LOWERING DILUTIONLike a regular bond, convertibles pay a coupon and their yields change with interest rates. But their value also depends on the company’s stock price, as they can convert to shares.The risk of diluting existing shareholders through convertible bonds had kept many companies away, but bankers are offering other products to reduce that impact.Of the deals done in the last two weeks, many included an option called net share settlement, which allows the company to settle bonds converting to stock primarily in cash – and only some stock.In all the deals, companies also bought a capped call, a derivative used to increase the share price at which the bonds are converted to stock.Global Payments’ new $1.75 billion bond, for instance, was set to convert into shares at a 20% premium to the current share price. But the capped call raised the conversion premium to 75%. Global Payments spent $222.3 million on buying the capped call.Super Micro also increased the conversion premium on its deal from 37.5% to 100% by buying the derivative. Companies typically pay about 10% of their issuance proceeds to buy the capped call, according to JPM’s Sreenivasan.COUNTERING HEDGES Typically, investors in convertible bonds tend to simultaneously place bets that the stock of the company would fall, a strategy called hedging. In a short bet, they borrow stock and sell it, looking to buy it back later at a lower price. The short bets can put pressure on the stock. To counter that in the recent deals, many issuers used proceeds to buy back their own stock from bond buyers entering into such short bets. Global Payments, for example, bought back $185 million of stock concurrently with the convertible bond. These ways to eliminate dilution risk have been around for years but more companies are showing commitment to use them now, JPMorgan’s Sreenivasan said.”Companies want to clearly signal to their shareholders that while they have selected a product that has some dilutive effect, they have managed that risk appropriately,” he said. More

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 storiesFirebrand left-wing politician George Galloway has won the Rochdale by-election, claiming in his victory speech that he’ll be Starmer’s “worst nightmare”.Global carbon dioxide emissions from energy surged to a record high in 2023, hitting 37.4bn tonnes, according to the International Energy Agency.Germany and France called for an international investigation into the deaths of dozens of Gazans seeking humanitarian aid after Israeli troops opened fire close to an aid convoy.For up-to-the-minute news updates, visit our live blogGood evening.Inflation in the United States and the 20-country eurozone is easing, fuelling speculation that central banks may cut interest rates later this year after record-high rates since the Covid-19 pandemic and Russia’s full-scale invasion of Ukraine in February 2022. US inflation eased to 2.4 per cent in the year to January, according to data published yesterday on personal consumption expenditures, slipping from December’s rate of 2.6 per cent. The core rate for PCE, which excludes changes in food and energy prices and is the Fed’s preferred measure of underlying inflation, was also in line with expectations at 2.8 per cent.In the eurozone, inflation eased to 2.6 per cent in February. The figure was higher than the 2.5 per cent expected by economists as the cost of living for consumers continued to rise at persistently strong rates.In the US, rate setters remain cautious. The Federal Reserve is unwilling to lower borrowing costs from current levels of 5.25 per cent to 5.5 per cent until it is confident price pressures have sustainably returned to its 2 per cent target.Meanwhile, the European Central Bank is set to meet next week to discuss the future direction of interest rates amid signs the economy remains mired in stagnation. “The ECB is concerned about persistence in domestically generated inflation,” said Tomasz Wieladek, an economist at investor T Rowe Price, adding that services inflation was “clearly too strong”.Senior ECB policymakers have played down the likelihood of an imminent rate cut while they assess if wage pressures are moderating enough to push inflation towards its 2 per cent target.The inflation data lifted investor confidence in Europe, with the pan-European Stoxx 600 up 0.5 per cent and close to a record high. Shares in New York were higher in late-morning trading, with the S&P 500 up 0.2 per cent and the tech-heavy Nasdaq 0.4 per cent higher.Need to know: UK and Europe economyUK house prices rose more than expected in February, posting their first annual increase in more than a year, according to mortgage lender Nationwide.A total of 117 MPs across all major political parties have written to the chancellor Jeremy Hunt urging him to allocate funding to compensate victims of the infected blood scandal in his spring Budget next week.Thomas Jordan, the long-standing chair of the Swiss National Bank, has announced his resignation, bringing to an end a turbulent tenure of unorthodox policymaking. Jordan, who is the longest-serving governor of any major central bank, will step down in September. Tech mania has gripped Turkey’s stock market with equities gaining 20 per cent in dollar terms as runaway inflation sends local savers piling into shares.Need to know: global economyEconomic growth in Brazil stalled in the fourth quarter as consumer spending and agricultural production declined, signalling a slowdown in Latin America’s largest economy. Annual GDP growth was 2.1 per cent in the three months to December 31, down 0.1 percentage points from the previous quarter, the government statistics agency said earlier today.China’s manufacturing activity has slowed for the fifth consecutive month with the country’s manufacturing purchasing managers’ index slipping to 49.1 in February from 49.2 in January.The cobalt market has been overwhelmed by a record glut as Chinese companies boost their output, with the surplus of the key electric car battery metal set to last until 2028, according to an influential market report.A US-born former Hollywood financier Philip Adkins is supplying Russia’s liquefied natural gas station in the Arctic Circle. The project, which is heavily sanctioned by the US in an attempt to curb Moscow’s influence on global energy markets, could significantly increase Russia’s share in the global LNG market.Need to know: businessElon Musk has sued OpenAI and its chief executive Sam Altman for breach of contract, alleging they have compromised the start-up’s original mission of building artificial intelligence systems for the benefit of humanity.Figure AI aims to introduce artificial intelligence-powered humanoid robots to the workforce More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK goods trade has suffered its steepest five-year fall on record, highlighting how Brexit has reduced flows both into and out of Britain, say economists.The volume of UK goods imports and exports was 7.4 per cent smaller in 2023 than in 2018, the largest five-year decline in goods trade since comparable records began in 1997, according to FT calculations of data published by the Office for National Statistics on Friday. The ONS reported that the volume of imports fell 7.4 per cent compared with 2022 and was down 3.8 per cent compared with 2018. Meanwhile, exports fell 4.6 per cent year on year, with substantial drops in exports to both EU and non-EU countries. Over five years, export volumes fell 12.4 per cent.Emily Fry, economist at the Resolution Foundation think-tank, said after years of data being affected by the pandemic and the energy price shock, the 2023 figures were a real “big sign” of the impact of Brexit. “A clear implication of this [data] is that the new trade barriers that were put in place by Brexit are having an effect on trade,” she said. Economists point out that the performance of the UK goods trade has been worse than that of other advanced countries. “The UK’s weak trade performance is unusual among advanced economies,” said John Springford, deputy director of the Centre for European Reform think-tank. He added that most countries saw an increase in goods trade after the pandemic, but “the UK did not participate in the boom thanks to the trade barriers that it imposed upon itself”. “The obvious culprit is Brexit,” he said. In its latest economic and fiscal outlook, the Office for Budget Responsibility, the spending watchdog, noted in 2023, UK trade intensity — exports and imports as share of the economy — was 1.7 per cent below its 2019 level, driven by poor goods performance. This contrasted with an average increase of 1.9 per cent across other G7 economies. “This may suggest that Brexit frictions and post-pandemic disruptions have weighed more on trade in goods than on services,” the OBR concluded.Jonathan Portes, professor of economics and public policy at King’s College London, said that while UK goods exports have performed “poorly” over recent years compared to other economies, Britain’s services exports have “grown strongly”. But he added that it was “unclear how much of the underperformance in goods trade related to Brexit”. “Goods exports have been weak for both EU and non-EU countries — although Brexit is almost certainly partly responsible,” he said.Springford said the weakness of UK trade with both EU and non-EU countries may have been because Britain had missed out on the strong growth of intra-EU trade in recent years. “We can infer that the UK’s goods exports to the EU would have grown more than its exports to the rest of the world if Brexit hadn’t happened,” he said.Fry said it was “particularly concerning” to see exports of key high-value manufacturing sectors shrink after the ONS data showed the real value of chemical exports had dropped 15 per cent compared with 2018.The data “implies that those industries aren’t performing particularly well after Brexit and that could have kind of longer term implications for poor national productivity”, she added. More

SAO PAULO (Reuters) -Brazil ended 2023 with economic growth of 2.9%, official data showed on Friday, way above what economists expected for most of last year but maintaining in the fourth quarter a slowing trend that should cripple its expansion in 2024.In a boost for President Luiz Inacio Lula da Silva in his first year in office, gross domestic product (GDP) in Latin America’s No.1 economy defied gloomy forecasts that in early 2023 pointed to a mere 0.8% calendar-year growth amid stiflingly high interest rates.Activity in the country got a boost from agriculture in early 2023, with booming exports of commodities like soybeans, while a resilient job market and the positive impact of welfare programs on consumption helped it for most of the year.Economists expect that to change in 2024 as Brazil faces a drop in agricultural output and borrowing costs remain high, with the central bank’s benchmark interest rate now at 11.25% even after a total 250 basis points of cuts since August.In the fourth quarter of 2023, according to statistics agency IBGE, Brazil’s GDP was flat, in line with the previous quarter but slightly missing the 0.1% growth expected by economists polled by Reuters.On an annual basis, growth in the October-December quarter came in at 2.1%, also below the 2.2% rise economists had expected.”The stagnation in Brazil’s GDP in the fourth quarter and the decline in household consumption confirmed that the economy lost momentum sharply,” Capital Economics’ chief emerging markets economist William Jackson said.”While we expect a pick-up in growth in the coming quarters, we’re now more confident in our below-consensus 2024 GDP growth forecast of 1.3%.”The Brazilian government, meanwhile, reaffirmed on Friday it expects 2024 growth of 2.2%, saying in a statement that the latest figures were “compatible” with its forecast of an increased activity expansion in the first quarter.Lula is even more optimistic and has been saying he is convinced the country will manage to post economic growth of at least 3% this year, once again overshooting market expectations that currently stand at around 1.75%.The fourth quarter results reflected a faster expansion in Brazil’s industrial sector, led by extractive segments like mining and oil, which offset a further deceleration of agricultural output. Services were up moderately. More

March futures on the S&P/TSX index were up 0.4% at 7:05 a.m. ET (12:05 GMT), while their Wall Street peers were subdued. [.N]Energy shares were poised to extend gains to a fifth session on a 1% rise in oil prices as markets awaited an OPEC+ decision on supply agreements for the second quarter. [O/R]Gold prices hit a one-month high after data suggested easing U.S. price pressures, while copper prices slid. [GOL/] [MET/L]The Toronto Stock Exchange’s S&P/TSX composite index ended up 0.6% on Thursday and 1.6% higher for the month, its fourth straight monthly gain, marking its longest monthly winning streak since 2021.Favorable inflation data from the U.S. and domestic gross domestic product (GDP) data on Thursday revived some hopes of an interest cut by the Federal Reserve and the Bank of Canada in the early half of the year.Earnings from Canadian Natural (NYSE:CNQ) Resources, TD Bank Group and Canadian Imperial Bank of Commerce, which beat quarterly profit estimates also added to the rally on the TSX in the previous session.Looking forward, a monthly reading of manufacturing activity is due in the United States and in Canada after the opening bell on Friday.Meanwhile, Canadian Western Bank (TSX:CWB) reported its first-quarter profit above analysts’ estimates.COMMODITIES AT 7:05 a.m. ETGold futures: $2,063.5; +0.4% [GOL/]US crude: $79.51; +1.6% [O/R]Brent crude: $83.16; +1.5% [O/R] More

(Reuters) -U.S. stock index futures were muted on Friday after a rally in the previous session, driven by enthusiasm about the potential for artificial intelligence and an inflation reading that strengthened bets of interest rate cuts by June this year.The tech-heavy Nasdaq closed at a record high on Thursday, spurred by gains in AI-linked stocks such as heavyweight chip designer Nvidia (NASDAQ:NVDA) and its rival Advanced Micro Devices (NASDAQ:AMD), which hit an all-time peak.Shares of Nvidia, the key driver of the AI-led rally on Wall Street this year, were up 0.9% in premarket trade, while those of Advanced Micro Devices climbed 2.6% after a 9% surge in the previous session.The Wall Street rally found further support as the personal consumption expenditures (PCE) report came in-line with expectations on Thursday and showed annual inflation growth was the smallest in three years.Still, some analysts pointed to signs of stubborn price pressures posing a threat to prospects of rate cuts in the first half of the year.”Inflation is still sticky and bumpy. We know that the Federal Reserve won’t be able to cut the interest rate anytime before summer,” said Ipek Ozkardeskaya, a senior market analyst at Swissquote Bank.Adding to the risk-off mood on Friday, New York Community Bancorp (NYSE:NYCB) slumped 25.5% after the regional lender said it had found “material weaknesses” in internal controls related to its loan review and revised its fourth-quarter loss 10 times above the previously stated numbers. Shares of other regional banks Zions Bancorp and Keycorp fell 2.0% and 1.3%, respectively.At 7:05 a.m. ET, Dow e-minis were down 41 points, or 0.11%, S&P 500 e-minis were down 4 points, or 0.08%, and Nasdaq 100 e-minis were up 3.25 points, or 0.02%.All three indexes clocked their fourth straight monthly gains on Thursday, while the S&P 500 notched a fresh closing high as euphoria around AI and a strong fourth-quarter earnings season propelled stocks to new heights in February.Investors now await data on manufacturing activity and consumer sentiment as well as remarks from Fed officials including Fed Bank of San Francisco President Mary Daly later in the day for further clues on the interest rate path.Among other stocks, cybersecurity firm Zscaler (NASDAQ:ZS) shed 7.5% as the company reported higher operating expenses in the second quarter.Dell Technologies (NYSE:DELL) jumped 22.3% after the personal computer maker forecast annual revenue and profit above Wall Street estimates, betting on demand for its AI servers.Autodesk (NASDAQ:ADSK) gained 8.7% as the company’s annual revenue forecast exceeded expectations on resilient demand for its design software products.Apple (NASDAQ:AAPL) slipped 0.8% after brokerage Goldman Sachs removed the iPhone maker’s stock from its conviction list.Everbridge (NASDAQ:EVBG) surged 24.1% after private equity firm Thoma Bravo increased its offer price for the software firm, valuing it at about $1.8 billion. More