Aurelia Butler

WARSAW (Reuters) -Poland will gain access to up to 137 billion euros ($148 billion) in European Union funds, the head of the EU executive said on Friday, after the new government in Warsaw began implementing reforms it says will restore judicial independence in the country.Unblocking the cash was a promise made by Prime Minister Donald Tusk’s pro-European coalition government, and gaining access to it will provide an investment boost for an economy that has been buffeted by the fallout of the war in Ukraine and is weighed down by weakness in big trading partner Germany.”I have good news,” European Commission President Ursula von der Leyen told a press conference in Warsaw. “Next week the college will come forward with two decisions on European funds that are currently blocked for Poland. These decisions will lead to up to 137 billion euros for Poland.”Poland will gain access to around 60 billion euros in funds designed to help countries bounce back from the COVID-19 pandemic and transition away from fossil fuels.Warsaw will also be able to tap around 76.5 billion euros in cohesion funds designed to help raise living standards in the European Union’s poorest members.”It’s a ton of money, we will use it well,” Tusk said.’INVESTMENT REBOUND’The Polish zloty was 0.14% firmer on the day following the announcement, reversing losses from earlier in the session.”The actual spending of the funds will take several months (we won’t see an investment rebound until 2025), but they will help finance this year’s deficit,” ING economists wrote on social media platform X.The previous government under the nationalist Law and Justice (PiS) party was embroiled in a long-running spat with the EU over reforms that critics said increased political influence over the courts.Brussels blocked Warsaw’s access to the funds as a result of the row and said Poland had to meet milestones on judicial independence to unfreeze it.Poland has already accessed 5 billion euros that were not dependent on rule-of-law conditions.The new government’s task has been complicated by the fact that President Andrzej Duda, who can veto laws, is a PiS ally and the fact that the party has loyalists in important positions in the judicial system.However, EU officials have welcomed Poland’s action plan on restoring the rule of law.($1 = 0.9240 euros) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.I popped into Sainsbury’s this week to buy tea bags. It took some time out of my working day, but I had read of potential shortages and my family hates to run out of tea. It turned out to be a false alarm: the supermarket’s shelves were packed with boxes of the stuff, from PG Tips to Twinings and Tetley Tea.Tetley admitted last week that its stock of tea was “much tighter than we would like it to be” because vessels sailing through the Red Sea are being attacked by Houthi rebels protesting the Israel-Hamas war in Gaza. There is little problem of production in India or Kenya, but tea is taking longer to arrive as container ships are diverted away from the Suez Canal and around the Cape of Good Hope.My trip was self-defeating, given that supermarkets tend to run out of stock more when shoppers panic than because of endemic shortages. But we have been made jumpy by the pandemic and the supply chain inflation that followed. I used to be confident that tea, coffee, rice and cereals would be there without fail but it now takes discipline to remain calm.Cocoa could be next. The price of cocoa powder and hot chocolate in UK shops rose 25 per cent in the year to January (more than confectionery). Cocoa futures are at record levels because West Africa, from where most cocoa comes, has been affected by extreme weather and crop disease. Many of the 6mn small farmers who tend cacao trees globally face hardship.The cost of food and drink has increased sharply in general but the disruption to cocoa, coffee and tea is especially instructive. These beverages were early products of empire and the trade routes established by the British East India Company and other merchant adventurers. They were first enjoyed as exotic luxuries in the 17th century, then gradually became part of everyday life at home and work.The strains are emblematic of the fragility of globalisation and the smooth production and transport of consumer products from the global south to Europe and the US. Arabica coffee is back in surplus after a price spike in 2021 due to drought and frost in Brazil, but lower grade robusta beans from Vietnam are in short supply, not helped by the troubles in the Red Sea.There is an irony in tea being transported the long way around Africa, rather than via the Suez Canal. It was the opening of the canal in 1869 that put an end to the “tea races” of clipper sailing ships such as the Cutty Sark to bring tea supplies from China to the west as rapidly as possible. As soon as steam ships could cut thousands of miles off the journey, sailing became redundant.Victorians used to celebrate the arrival of new tea from Shanghai in London and prices would drop as the clippers docked. There is less excitement about refreshment now: a tea bag is a tea bag and it is easy to forget how far processed leaves in branded packets have come. What was an adventure has turned into a routine bit of logistics.But it is time to wake up and smell the coffee. The Suez Canal will probably be able to resume normal operations in time, but a vital trade route will remain a tempting target for attackers. The Panama Canal has also had to limit passages, in its case because of drought. It is getting hard to ensure safe and easy navigation for ships that have been loaded with products for our consumption.It is also more difficult to fill up those vessels without fail. Agricultural commodities were always volatile, with good growing seasons one year and failures the next. But climate change increases the risks and is making it difficult for farmers and farm workers to earn a consistent living. They have less capital to invest in trees and bushes, and less reason to carry on trying.Cocoa is suffering the effects. It was originally consumed as a drink in England until the 19th century turn to solid chocolate. Higher cocoa prices presage the same impact on confectionery later this year. Growing conditions have been so problematic in countries such as Ghana and Nigeria that farmers cannot harvest enough cocoa pods from their trees to be processed into butter for chocolate makers. Hedge funds have not been helping by speculating on even higher cocoa prices, but the underlying crisis is real. Even well-meaning measures can have unintended effects: a new EU law meant to discourage deforestation could lead to the destruction of coffee and cocoa being stored in European warehouses. The intention is laudable but the consequences may be perverse for vulnerable African growers.Few brands that sell these products now ignore such things: every box of tea bags in Sainsbury’s bore a logo from an organisation such as Fairtrade or the Rainforest Alliance. They make more effort than before to ensure that life is sustainable for growers and plantation workers on whose efforts they, and we shoppers, depend.But the old empires of coffee, cocoa and tea are getting fragile amid climate change and the interruption of global trade routes. The price of their weakness is already becoming obvious, and the supermarket shelves may not always stay [email protected] More

WASHINGTON (Reuters) – U.S. officials continue to discuss with allies what to do with Russian assets immobilized after Moscow’s invasion of Ukraine two years ago, a senior U.S. official said, as Treasury Secretary Janet Yellen heads to Brazil on Sunday to meet Group of 20 counterparts, some of whom continue to trade with Russia.A senior U.S. administration official said Yellen had been clear that it was “both appropriate but also urgent for us to consider ways that Russian assets can be used to benefit Ukraine consistent with international and domestic law.”U.S. President Joe Biden remains locked at loggerheads over efforts to approve some $61 billion in further aid to Ukraine with the leader of the Republican-led U.S. House of Representatives.The U.S. official gave no details how Russian assets could be used and said he did not expect any specific outcome on the Russia asset issue from next week’s Group of Seven (G7) advanced economies in Sao Paolo, Brazil, but stressed that the issue remained top of mind for Treasury.Deputy Treasury Secretary Wally Adeyemo told Reuters in a separate interview on Thursday that Washington plans to hit over 500 targets with fresh sanctions on Friday, and will be joined by allies, marking the second anniversary of Russia’s invasion.Russian assets frozen by countries after Moscow’s invasion of Ukraine will be a key topic for G7 officials meeting during the G20 gathering, the Treasury official said, as some European countries fret that seizing those assets could set dangerous precedents.In Brazil, Yellen will hold a news conference on Tuesday and participate in a public event with Brazilian Finance Minister Fernando Haddad, as well as a bilateral meeting with her Brazilian counterpart.She will also hold bilateral meetings with her counterparts from Germany, France, Saudi Arabia and Argentina, in addition to taking part in plenary sessions on the global economy and debt and financing for sustainable development.On Thursday, she will travel on to Chile, with a goal of continuing to strengthen bilateral ties with a country rich in critical minerals needed to underpin global efforts to build more electric vehicles, Treasury said.In Chile, Yellen plans to meet Chilean officials, women economists and local business leaders, and take part in a press conference with her Chilean counterpart on Friday, March 1.Yellen will also tour a lithium processing facility operated by U.S.-based Albemarle (NYSE:ALB) Corp in Antofagasta (LON:ANTO), Chile, where she plans to underscore the Biden administration’s commitment to bolstering global energy security, developing resilient clean energy supply chains, and working on a green transition.”We think developing more diversified, secure supply chains with key trusted partners is an important part of securing our energy future. And I think Chile probably represents this about as well as anybody,” the senior official said. More

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The ECB has kept interest rates at a record high since last September and consistently pushes back on rate cut talk, arguing that wage growth is still too quick for it to sound the all-clear and start unwinding restrictive policy.”Even though it may be very tempting, it is too early to cut interest rates,” Nagel said in a speech. “We will only receive a more detailed picture of how domestic price pressures are unfolding during the second quarter. Then we can contemplate a cut in interest rates.”Isabel Schnabel, the other German on the 26-member Governing Council and another influential voice, was also cautious in her assessment on Friday, arguing that the final phase of getting inflation under control may be more difficult than some anticipate. “We need to be cautious .. there are reasons for the last mile to actually be more difficult than the first phase,” she told a university lecture in Milan. She also argued that, with markets already anticipating rate cuts, financial conditions had already loosened substantially, unwinding some of the ECB’s efforts and adding to the need for caution. Market bets on rate cuts have been extremely volatile in recent weeks. Investors were betting on 150 basis points of easing in 2024 just a few weeks ago, but expectations have receded and now stand at just 88 basis points with the first move seen in June.HOPEFUL SIGNAL The ECB has long argued that crucial figures on 2024 wage settlements will only come out in May, so the June meeting will be the first occasion policymakers will have evidence if rapid wage growth is slowing. Sending a hopeful signal, Schnabel said that the ECB was already receiving some evidence that firms were starting to absorb some of the rapid wage growth, a potential piece of good news because it suggests that not all of the wage growth is translating into higher prices. This would be a reversal from the early stage of rapid inflation when firms enjoyed strong pricing power and raised prices sharply to enjoy some of their best margins in years. Inflation projections are also likely to come down because of lower energy prices and benign food prices, but that does not necessarily lower underlying price pressures. Indeed, an early rate cut runs the risk of missing the inflation target and could, in an extreme case, force the ECB to raise rates again, a costly blunder, Nagel argued.Nagel appeared especially worried about underlying price growth, which reflects broader price pressures in the economy, including wages and the crucial services sector. “Inflation rates – especially the ‘hard core’ – will still remain markedly higher than 2% in the coming months,” Nagel said. The period of rapid decline in inflation was now over and setbacks were also possible, Nagel said, partly due to statistical effects, including the timing of holidays such as Easter, which impact how businesses price products and services. More

LONDON (Reuters) -Record peaks, pricey valuations, narrow markets, frenzied tech bandwagons and even punchy alternatives in bonds – all surely gnaw at U.S. household savers to lighten up on stocks. Yet, not a bit of it.In a sort of strange long-term momentum play, U.S. households lucky enough to have substantial savings find themselves shacked up with equities like never before.JPMorgan long-term strategists Jan Loeys and Alexander Wise unpick what they dubbed the American “love affair” with equity and show how the share of stocks held by households and non-profit funds, such as university endowments, had quadrupled over 40 years to record levels of more than 40%.While that may seem a modest share of total savings, it’s actually grown steadily since a nadir of around 10% in the 1980s, far exceeds equivalent equity holdings in other major countries and seems at odds with an ageing population that might reasonably be minded to “de-risk” investments into retirement.The equivalent stock share among savings of Japanese and German households, for example, is only 13% and 16%, respectively, and it’s about 26% in France, the JPMorgan team estimate. And, more pointedly, these have not increased at all in about 30 to 40 years.Despite all the whys and wherefores of that behaviour, one key reason revolves around inertia, some satisfaction and not a little hope about the future.Using data from the Federal Reserve’s U.S. financial accounts report, Loeys and Wise posit that the 40-year rise in the share of equity in household savings may simply be down to passive outperformance of stocks over that period. In other words, savers just sat tight rather than actively chasing markets either way.’GO WITH THE FLOW’Unlike professional fund managers, who tend to ‘mean revert’ or retain target weightings by selling when outperformance of one asset class inflates the relative share of holdings in portfolios, households have closed their eyes and crossed their fingers.For the past 40 years at least, it’s hard to argue with it as a strategy.”One possibility, contrary to how we all like to think of strategic asset allocation, is that end investors may not really have a strong view, or even a vague one, on how much they want to allocate to different asset classes and simply go with the flow,” the JPMorgan strategists wrote.Given that U.S. equities earned almost 11% per annum over the past 35 years – more than twice the annual return on bonds – simply compounding those returns over the period without chopping and changing would have led to that steady quadrupling of the stocks share of their investments.That’s not to say it’s necessarily about indifference – more an extrapolation of past performance and confidence that it can continue. And in a circular feedback loop, that very confidence to hold ever larger shares has seeded at least half the outperformance of U.S. equity versus the rest of the world – with the rest coming in the way of faster earnings growth.There are other reasons of course – low economic volatility and interest rates over those decades encouraged more risk-taking and the rise of cheaper passive investment vehicles and direct equity-buying tools drew many into the equity space.What’s more, Loeys and Wise reckon we may have hit a high watermark that leads to some change of behaviour as macro volatility climbs over the coming decade, higher yields make bonds more attractive and demographic ageing eventually demands that at least some risk gets taken off the table.However, don’t hold your breath. They conclude: “The move toward lower equity allocations by U.S. households and non-profits is not imminent as return expectations are probably still quite bullish and households do not change allocations that fast.”DAMAGING TO YOUR WEALTHThat said, fear of a narrowly-led, overvalued stock market at all-time highs surely creates some nervousness. After all, the S&P 500 and Nasdaq Composite indexes have roughly doubled from pre-pandemic levels and forward price/earnings multiples – while below historic peaks – are 20%-30% above long-term averages.Time to lighten up? Hold your horses, says Duncan Lamont, head of strategic research at Schroders (LON:SDR).With a deep dive into 100 years of market returns, Lamont reckoned cashing out of stocks at record highs – where they’ve been at almost a third of 1,176 months since 1926 – would have been very costly over time. Average inflation-adjusted stock returns in the 12 months after hitting new records are superior to those from any other month – 10.3% versus 8.6%. And that stacks up over the long run.Put another way, $100 invested in U.S. stocks in 1926 would be worth $85,000 in inflation-adjusted terms at the end of last year – annual growth of 7.1%.However, cashing out of stocks in a month when they hit a new record and only returning when they were not would have meant that final figure was just $8,780 – some 90% less, with an annual “real” return of 4.7%. “It is normal to feel nervous about investing when the stock market is at an all-time high, but history suggests that giving in to that feeling would have been very damaging for your wealth,” Lamont concluded. “There may be valid reasons for you to dislike stocks, but the market being at an all-time high should not be one of them.”The opinions expressed here are those of the author, a columnist for Reuters. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Turns out, Donald Trump still likes tariffs. In his bid for a second term, he is promising a 10 percentage point tariff increase on all America’s trading partners, and dangling a tariff on Chinese imports of at least 60 per cent. All that might sound similar in tone to his first term, but trade watchers should quell any sense of nostalgia. His return could be quite different.To recap, Trump’s first term started with his critics dismissing his threats as bluster. His tweets railing against bilateral trade deficits sent pundits into a frenzy, as they frothed that such figures didn’t matter. Then came the tariffs, on imported steel and aluminium, as well as hundreds of billions of dollars of imported Chinese goods. Some countries secured carve outs; others negotiated deals.Trump’s second term would have echoes of his first. Some old disputes are still simmering: a fight over subsidies to Airbus and Boeing; a spat over digital services taxes; tension over trade in steel and aluminium. Concerns about China’s economic practices have only become more intense, as the Biden administration has maintained Trump’s tariffs and tightened restrictions on supplies of advanced chips.But a second term would be different in at least three ways, starting with the scope of the threatened measures. During Trump’s first term, tariffs on China reshuffled activity, creating winners and losers, but with only muted macroeconomic effects. One study found that while importers bore most of the cost, retailers rather than consumers swallowed the bulk of it, limiting the effects on inflation.Tariffs of 10 per cent on imports from everywhere and 60 per cent on goods from China would have more obvious macroeconomic effects. (They would almost certainly face legal challenges, but I’ll leave the lawyers to argue about that.)Capital Economics, a consultancy, estimates that as an upper bound the 10 per cent tariff could lift inflation to between 3 and 4 per cent by the end of 2025. Bigger exchange rate movements seem likely. And retaliation seems inevitable, particularly now the European Commission has new powers to hit back outside of the World Trade Organization’s hobbled system of solving disputes.A second difference would be in the nature of the debate. Screeching about America’s bilateral trade deficit with China can now be informed by the experience of the first batch of tariffs. That reduced the bilateral trade deficit with China by a bit, but was more than offset by increasing trade deficits with other countries including Mexico, some of which are closely tied to China’s supply chains. The discussion around a 10 per cent tariff should be more interesting, though controversial. Former US trade representative Robert Lighthizer, who seems likely to serve in the next administration, has argued that America’s problem is not necessarily bilateral trade deficits (absent unfair practices), nor even a trade deficit in any single year. Rather, a broader import tax is supposed to tackle America’s pattern of consistent trade deficits, year after year. A third difference between Trump’s first and second term reflects the evolving position of China. On top of the cemented concerns about China’s chip production, the Biden administration recently issued a public warning for it not to solve its domestic economic weakness by pumping out manufactured goods to sell overseas.A glance at official data suggests that China’s current account surplus isn’t much different from 2016. But Brad Setser of the Council on Foreign Relations says there is something fishy about the figures. Other indicators suggest sharply rising Chinese manufacturing exports. Setser’s work with Volkmar Baur of Union Investment, an asset manager, suggests that in 2022 China’s surplus in manufacturing goods grew to record highs, of almost 2 per cent of world gross domestic product. During Trump’s first term the European Commission did not apply broad measures to deter the trade diverted from America, beyond those on steel. And between 2018 and 2020, the trend in its aggregate imports from China did not obviously change. But since the pandemic, the EU’s trade deficit with China has risen sharply, to the point of becoming a source of political tension.If Trump follows through with new restrictions on America’s trading partners in general and China in particular, the pressure on European producers would grow. Their access to the US market would be restricted. And they would also face stiffer competition in other markets, including their own, due to other trade being diverted away from America. In that context, it seems easier to imagine Trump’s taste for tariffs catching on. [email protected] Soumaya Keynes with myFT and on X More