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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A landmark global tax deal targeting the world’s largest companies is struggling to come into force as political support in the US and other key jurisdictions falters.The enactment of the first “pillar” of the OECD-brokered reforms, which would make big tech groups and multinationals pay more tax in the place they do business, has stalled in the US amid opposition from Republicans. Developing countries have meanwhile attempted to shift international tax negotiations from the OECD to the UN, where they would wield more influence, further complicating the talks over implementation. These factors, plus difficulties finalising the treaty text, are imperilling efforts to meet a June deadline for its signing and have spurred a European push to find a way to revive the agreement when G20 finance ministers meet in São Paulo in Brazil this week. “It’s something like a perfect storm. The OECD is stuck in a project with no real chance of success,” said one person with knowledge of the negotiations. “Pillar one is in a dead end because the US is not likely to ratify . . . and therefore you have an agreement which cannot be implemented.”In 2021 over 135 countries signed up to a two-legged political agreement that represented the biggest corporate tax reform in more than a century. The second pillar introduces a global minimum 15 per cent corporate tax rate and started to take effect this year. However the first leg of the deal has proved harder to implement.While US President Joe Biden’s administration has backed the reform, international tax treaties require a two-thirds majority — 67 votes — in the US Senate for ratification. Biden’s Democratic caucus, which holds a razor-thin lead in the chamber with its 51 seats, does not have the votes to overcome bitter opposition from rival Republicans. Without US ratification, the required minimum tax base for the deal to enter into force would not be met.Janet Yellen, US Treasury secretary, speaks ahead of the G20 finance ministers meeting on range of issues including tax More

BENGALURU (Reuters) – Property analysts continue to forecast a 5.0% rise in Australian home prices in 2024, a Reuters poll showed, brushing off central bank comments since the last poll three months ago that leave open the possibility of an interest rate hike before year-end.After a 25% surge during the pandemic, average house prices tumbled 9% from their peak but clawed back almost all of that last year even though the Reserve Bank of Australia hiked the cash rate to a 12-year high of 4.35%. The bank is widely expected to hold there well into the second half of this year. The average price of a home is too expensive for many first-time buyers. A low jobless rate, high wage growth and spike in immigration are likely to continue driving prices up, though by less than in recent years.Since the 2008 financial crisis, home prices have nearly doubled.Average home prices are likely to rise 5.0% this year, showed the median forecast of a Feb. 16-28 Reuters survey of 14 property analysts, unchanged from a December poll. Prices are forecast to increase 5.0% in 2025, versus 3.9% in the previous poll.”The housing market in Australia seems to be cooling. There was a very strong year in 2023 with 9.1% price growth in capital cities, but we don’t expect that to be repeated. The interest rate staying at 4.35% for most of the year … will put a limit on housing price growth in 2024,” said ANZ senior economist Adelaide Timbrell.”Housing prices will still grow because people will have more borrowing capacity through the year due to tax cuts and rate cuts. And there’s still strong population growth and a backlog of building homes that needs to be filled.”Under an amendment effective July 1, high-income earners will have to pay more tax while low-income households battling a rising cost of living will pay less.Rock-bottom interest rates during the pandemic and a scarcity of housing supply fuelled already-expensive housing prices and compelled aspiring first-time home buyers to surrender to the rental market.When asked about affordability for first-time homebuyers over the coming year, six of 10 analysts said it will worsen. The remaining four said affordability will improve.”Housing has increasingly become a luxury good, with household affordability around record low levels. This will put a downward force on homeownership rates,” said Barrenjoey senior economist Johnathan McMenamin.”Prior to the pandemic, you had a situation where you still had to earn more than the median income to enter the housing market. But now it’s shifted further up that income distribution. The pool of potential buyers has narrowed in the current cycle and that narrowing will likely lead the pool of rentals increasing as well.”Five of eight respondents said the proportion of home ownership to renters would decrease over the coming year, while three predicted an increase.Analysts who said the gap between demand and supply of affordable homes would widen over the coming 2-3 years outnumbered by two to one those saying it would stay the same or narrow modestly.”Every time housing prices go up more than wages and salaries, the share of homes that are affordable goes down. And we will continue to see that unless there is a huge increase in social housing,” ANZ’s Timbrell added.(For other stories from the Reuters quarterly housing market polls, click here.) More

There has been limited market reaction as the January release is heavily weighted toward goods prices that have been falling faster than services, and thus suggest some scope for a downside surprise.Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 3.4% in January, unchanged from December and under market forecasts of 3.6%.A closely watched measure of core inflation, the trimmed mean, rose an annual 3.8%, down from 4.0% in December. Inflation excluding volatile items and holiday travel slowed to 4.1% from 4.2%.For January alone, CPI fell 0.3% from the previous month, driven by declines in holiday travel, clothes and garments and petrol. Holiday travel slumped 5.2% from a month earlier. The Reserve Bank of Australia has raised interest rates by 425 basis points since May 2022 to a 12-year top of 4.35%, and has not ruled out the risk of another hike if necessary to bring inflation back to the bank’s target band of 2-3%. Financial markets are confident the RBA is done tightening. Swaps imply about a 60% chance of a first rate cut in August and a total easing of 38 basis points by the end of the year, little changed from before.The Australian dollar was little changed at $0.6547, and three year bond futures held at 96.26. More

The RBNZ kept the official cash rate at 5.5%- its fifth straight meeting of keeping interest rates steady. While the bank had warned of a potential increase in rates over the near-term, markets widely expected no changes in its February meeting. While the bank noted that overall risks to the outlook for inflation had turned more positive in recent months, it still saw little chances of inflation coming within its 1% to 3% annual target range in the near-term.This notion is expected to keep rates higher for longer in New Zealand. The RBNZ said it expects annual consumer price index inflation to fall within its annual target range by the third quarter of 2024. “These ongoing restrictive monetary policy settings are necessary to guard against the risk of a rise in inflation expectations, while avoiding unnecessary instability in output, employment, interest rates and the exchange rate,” the RBNZ said in a statement. The central bank also noted that high interest rates, sticky inflation and weak offshore demand were exerting continued pressure on the New Zealand economy, which was also factoring into cooler inflationary conditions. The New Zealand dollar slid 0.8% after the RBNZ’s decision, given that it struck a less hawkish chord than markets were expecting. The RBNZ did not flag any further increases in interest rates on Wednesday. The RBNZ had hiked its official cash rate by a cumulative 525 basis points between August 2021 and May 2023, being one of the first major central banks to act against a post-COVID spike in inflation.But a series of major cyclones in early-2023 somewhat disrupted its plans to curb inflation, as price pressures shot up in the wake of rebuilding efforts after the disasters. More

LONDON (Reuters) – Luxury residential property bucked the trend of falling prices in 2023 and rose 3.1%, as double-digit gains in the likes of Manila and Dubai offset falls in New York and London, Knight Frank said on Wednesday.A jump in borrowing costs, inflation and economic uncertainty hit property markets last year, causing a significant drop in transaction volumes.That helped support prices of luxury properties, along with a rise in the portfolios of the rich as stock markets rebounded, according to property agents Knight Frank.The Philippine capital, Manila, topped the list of 100 markets Knight Frank tracks, with prices jumping 26%, followed by Dubai at 15% and the Bahamas at 15%. Luxury prices in New York and London declined 2% in 2023 and are now 8% and 17% lower than their most recent peaks respectively, Knight Frank said in its flagship The Wealth Report.”As wealth portfolios recovered in 2023, affluent buyers targeted residential property in the world’s luxury markets,” Liam Bailey, global head of research at Knight Frank, said in a statement.Kate Everett-Allen, head of international residential and country research, noted that while “the pandemic-fuelled property boom was set to end in tears as borrowing costs hit 15-year highs”, there had been “a much softer landing” for prices.Unlike residential markets, commercial real estate is having a tougher downturn, as the working from home trend pushes up vacancy rates and high borrowing costs hit the value of office blocks.Global commercial real estate investment tumbled 46% in 2023 to $698 billion, driven by a pullback from U.S. investors, Knight Frank found.Industrial and logistics beat offices to become the most invested sector for the first time on record, winning a share of a quarter of all global investment while the office market shrunk to a 22% share from 25% in 2022, Knight Frank said.Private real estate investors, the most active buyers in 2023, look set to increase their buying activity in 2024 as they seek to take advantage of “dislocation” in the market, the London-based agents said. More

TOKYO (Reuters) – The U.S. dollar held steady as traders brushed off durable goods data overnight and awaited the Federal Reserve’s preferred measure of inflation due Thursday for clues on when the U.S. central bank may start cutting interest rates.The Reserve Bank of New Zealand’s (RBNZ) interest rate decision later in the Asian morning also has market participants on edge, with the New Zealand dollar calm ahead of what could turn out to be a significant policy meeting.In the U.S., the Commerce Department’s Census Bureau said orders for durable goods fell 6.1% last month, exceeding the 4.5% decline forecast by economists polled by Reuters.The data did not seem to faze the market, with all eyes on the U.S. core personal consumption expenditures (PCE) price index due on Thursday. Forecasts are for a rise of 0.4%.”FX markets appear to be taking a nap in the run up to the core PCE print later in the week,” said Charu Chanana, head of currency strategy at Saxo.Markets have largely priced out a rate cut at both the Fed’s March and May meeting, CME’s FedWatch Tool showed, following strong U.S. consumer and producer price data. The chance of a cut in June sits around 51%.The U.S. dollar index, which measures the currency against a basket of peers, hovered around 103.82.With market expectations more closely aligned with the Fed’s latest projections and comments, traders would only respond if they see a trend break in tier one data, “particularly hinting at growth weakness,” said Chanana.”Meanwhile, the focus will be outside the U.S., particularly RBNZ meeting today or Eurozone inflation on Friday, to revive some level of volatility in the FX markets.” The euro consolidated as Europe awaited its own slew of inflation reports, with German states, France and Spain scheduled to release inflation data on Thursday ahead of the euro area’s figures due on Friday.The euro was mostly unchanged versus the greenback at $1.0844. It has been rising since mid-February, when it hit its lowest since Nov. 14.Elsewhere, the kiwi held firm at $0.6171, as traders braced for the RBNZ’s decision.Markets are pricing in a one-in-three chance the RBNZ will raise its 5.5% official cash rate to combat stubborn inflation, and all but one of the 28 economists polled by Reuters expect the RBNZ to keep its cash rate at a 15-year high of 5.50%.The Australian dollar was mostly unchanged at $0.65455 ahead of monthly consumer price data due at 0030 GMT. Annual inflation is expected to accelerate to 3.6% from 3.4%.The yen, meanwhile, was holding around 150.52 per dollar after strengthening as much as 150.08 against the greenback overnight.Inflation data on Tuesday showed Japan’s core consumer inflation exceeded forecasts and kept alive some expectations that the Bank of Japan might end negative interest rates by April.In cryptocurrencies, bitcoin was last up 0.54% at $57,035.76 as it continued to surge after jumping to a more than two-year high above $57,000 on Tuesday. More

SAO PAULO (Reuters) – With just seven months to go in Kristalina Georgieva’s term as head of the International Monetary Fund, she said on Tuesday that she isn’t focused on whether to seek a second one.Georgieva, whose five-year term ends in October, told Reuters she was focused on the work at hand as the IMF managing director.”Look, I have work to do right now,” she told Reuters in an interview on the sidelines of the a meeting of finance officials from the Group of 20 major economies.”I have always been of the view that you do the job you have – not some hypothetical in the future. So let me do my job.”Georgieva, a gregarious economist from Bulgaria, is the second woman to head the IMF and the first person from an emerging market economy.Keeping Georgieva on for a second term would answer longstanding concerns raised by emerging market and developing countries over the U.S.-European duopoly at the two global financial institutions, the IMF and World Bank.A self-described “eternal optimist”, Georgieva has weathered huge shocks to the global economy ranging from the outbreak of the global COVID-19 pandemic just months after she took office to the February 2022 Russian invasion of Ukraine. She is focused on bolstering prospects for medium-term growth which is lagging historical levels, managing the ongoing sovereign debt challenges and guiding the IMF through a complicated quota revamp.Georgieva drew criticism inside and outside the Fund early on for her push to include climate change as a factor in surveillance reports on member countries’ economies and her great interest in emerging market and developing economies.She’s been instrumental in securing large loans for Ukraine, helping to catalyze additional funds to help its economy weather the strains of the two-year war against Russia’s invasion, overseen a revamp of Argentina’s massive loan program and worked steadily to help China embrace sovereign debt restructurings.She also survived a big personal challenge in 2021 when the IMF’s executive board expressed its full confidence in her after reviewing allegations that she pressured World Bank staff to alter data to favor China while serving in a top role at that institution.U.S. Treasury Secretary Janet Yellen put Georgieva on notice at the time that she would closely monitor the IMF’s follow-up and evaluate any new facts or findings, but the two have developed a good relationship since that time, according to sources familiar with both officials.Under a longstanding agreement, European countries traditionally nominate a candidate to lead the IMF, while the U.S. nominates a candidate to head the World Bank. Both jobs are ultimately decided by the institutions’ board of directors.Georgieva herself was a compromise candidate for European leaders who were divided between a former Dutch finance minister and a Spanish economy minister in 2019 to replace outgoing IMF chief Christine Lagarde. Sources familiar with the process said the selection could go quickly once Europe unites around a candidate. While Georgieva’s term won’t end for months, some say it makes sense to make decisions before the April spring meetings of the IMF and World Bank, so the leadership issue does not overshadow the already full agenda for the meetings. More