Aurelia Butler

They said that due to slower growth at the end of 2023 and a weak outlook for the first half of this year, the government would have to lower its full-year 1.4% GDP growth forecast and announce new cuts in state spending.Online paper La Tribune reported that the 2024 forecast will be cut to around 1% and that Le Maire will announce spending cuts of 20 billion euros over two years. Le Figaro reported that he will lower the forecast to 0.9% and would announce a 10 billion euro savings plan. The finance ministry declined to comment on the reports. It said on Saturday that Le Maire would speak on the 8 pm TF1 news.The European Commission on Feb. 15 cut its 2024 GDP growth forecast for France to 0.9% from the 1.2% seen in November, and it cut its forecast for Germany – the EU’s biggest economy – to 0.3% from 0.8%.Earlier this month, the Paris-based Organisation for Economic Cooperation and Development cut its 2024 French growth forecast to 0.6% from 0.8% previously.France’s official statistics agency INSEE on Feb. 7 forecast that the euro zone’s second-biggest economy was set to expand just 0.2% in the first quarter from the previous three months, when it flatlined, and that it would maintain that rate in the second quarter. More

By Leika KiharaTOKYO (Reuters) – The Bank of Japan is on track to end negative interest rates in coming months despite the economy’s fall into recession, say sources familiar with its thinking, though weak domestic demand means they may seek more clues on wages growth before acting.Japan shocked analysts on Thursday when data showed gross domestic product unexpectedly contracting for two straight quarters, the technical definition of a recession, and losing its place as the world’s third-largest economy to Germany.While the GDP headlines were startling, the focus for BOJ policymakers is on whether the bumper wage hikes set for 2024 will be repeated next year, a condition the central bank believes is necessary for Japan to emerge from decades of tepid household consumption.For that reason, this spring’s annual wage negotiations that set pay levels for 2025 remain a more important economic indicator for the BOJ than the fourth-quarter GDP, which is backward looking.At the same time, the consumer-sector weakness seen in the GDP figures means an end to negative rates is now more likely at the BOJ’s April meeting rather than its March gathering, giving the bank more time to get a read on the health of the economy.”It’s true domestic demand lacks momentum. But GDP is only among many data points the BOJ looks at,” said one source. “What’s important is the economy’s broader trend and the outlook,” another source said, a view echoed by third source.BOJ governor Kazuo Ueda, who took office last year, has been laying the groundwork to shift away from the radical monetary stimulus introduced by his predecessor Haruhiko Kuroda, which has been blamed for heavy financial market distortions.On Friday, Ueda stuck to the script that tweaks to various monetary easing measures, including negative rates, were still options despite the GDP data.DELAY NOT WITHOUT RISKIntensifying labour shortages have prodded many firms to signal significant pay hikes, heightening hopes of broad-based wage gains that would give households purchasing power to weather steady price rises.The BOJ hopes higher wages and weakening cost-push pressure will underpin consumption and the broader economy, thereby keeping inflation sustainably around its 2% target and allowing it to normalise monetary policy. Last week, Deputy Governor Shinichi Uchida explained in depth the BOJ’s plan for dismantling its complex policies, which included a pledge to avoid hiking borrowing costs rapidly upon ending negative rates.The carefully telegraphed signals have led most market players to project an end to negative rates either at the BOJ’s policy meeting on March 18-19 or April 25-26. A Reuters poll conducted after the release of GDP data showed all 10 economists predicting an end to negative rates by April.Delaying an exit from negative rates could accelerate the yen’s recent declines, hurting already soft consumption by pushing up import costs.”Markets are already fully pricing in the chance of action either in March or April,” a fourth source said. “If the BOJ forgoes action, that could be a huge shock to markets.”While sticking to its plan for a near-term exit, the BOJ may prefer to act in April rather than March to gauge more data given uncertainty over the economic outlook.Some analysts expect the economy to contract again in the current quarter due to sluggish consumption and delays in capital expenditure caused by labour shortages.Key data points BOJ policymakers will likely look at ahead of their March meeting include the conclusion of big firms’ wage negotiations with unions on March 13.Revised October-December GDP data, due on March 11, may also be important given the large revisions seen in past releases, especially around capital expenditure, which could sway the view on the economy.Waiting until the April meeting will allow policymakers to scrutinise the BOJ’s quarterly “tankan” survey, due on April 1, for clues on whether companies are maintaining their upbeat capital expenditure plans.”If the tankan underscores the resilience of capital expenditure, that could offset the weak GDP outcome,” said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley Securities, who predicts an end to negative rates in April.The BOJ’s quarterly regional branch managers meeting, to be held in mid-April, will also give board members a fresh glimpse of whether wage hikes are broadening nationwide.Mindful of the need to appease politicians worried about the risk of a deeper recession, the BOJ will likely keep signalling an end to negative rates won’t be followed by the kind of aggressive rate hikes seen in the United States, analysts say.”The BOJ will probably keep explaining that ending negative rate isn’t tantamount to monetary tightening,” said Koichi Fujishiro, chief economist at Dai-ichi Life Research Institute. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.South Africa must continue to fight inflation even as central banks in other emerging markets move to cut interest rates, the country’s central bank governor has said.South African Reserve Bank chief Lesetja Kganyago told the Financial Times in an interview that “the job of taming inflation is not yet done” in Africa’s most industrial economy, despite central bank peers elsewhere signalling that they believe the worst of price rises are over.Chile and Brazil are among the emerging-market central banks that have increased the pace of rate cuts, after generally being ahead of advanced economies in tightening monetary policy in recent years as global inflation began to surge.But policymakers in other developing economies, including the Philippines and India, have so far held back amid worries about potential upward pressures on inflation, such as the trade disruption in the Red Sea following a spate of attacks by Yemen’s Houthi rebels on commercial shipping. The caution reflects similar uncertainty in the US Federal Reserve and other developed-world central banks.Policymakers in South Africa, which has held rates in recent meetings after a series of increases from late 2021 onwards, needed to see more data showing inflation was moving closer to the middle of an official 3 per cent to 6 per cent target before changing tack, Kganyago said.Inflation in the country — currently at 5.1 per cent — had previously seemed to be falling, only to rise again, he said, adding: “The arrival of one swallow does not make a summer.”It was “not surprising” that Brazil was the first emerging market to start cutting because the Latin American nation’s rates remained relatively high in real terms, giving the country’s central bank “policy space”, Kganyago said.Even after several reductions, Brazil’s benchmark rate is 11.25 per cent, with inflation at 4.5 per cent in January. In South Africa, by contrast, “our real repo rate is just about 300 basis points” given the current inflation rate, Kganyago added.The central bank has forecast that the economy will grow barely 1 per cent this year and it is under pressure to loosen policy.South Africa has been hit hard by years of rolling power blackouts and port and rail blockages imposed by the troubled Eskom and Transnet power and freight state monopolies.“The growth challenges that South Africa is facing are nothing to do with the demand side” but instead reflected supply-side and structural problems, Kganyago said. As the economy struggles, polls suggest President Cyril Ramaphosa’s African National Congress will battle to retain its three-decade electoral majority in upcoming polls. The vote is due as soon as April or May, although no firm date has been set.The central bank chief also said discussions were continuing with South Africa’s treasury on whether and how to tap a government gold and foreign exchange account held at the bank that has swelled to about R500bn (over $25bn) because of the rand’s drop against leading currencies in recent years.But he cautioned that any such transfer would need to preserve the central bank’s operational independence. Some investors have called on South Africa to use part of the account’s profits to pay down government debt. Because these profits are mostly unrealised on assets that are hard to sell, they have suggested funding the transfers through printing equivalent sums of money. These would then have to be mopped up to prevent the liquidity stoking inflation.If the reserve bank bore the cost of mopping up by paying interest to banks to hold on to money, it would soon run out of its available capital of more than R20bn, Kganyago said.“Our law does not allow us to run negative equity, which means we would need to be capitalised,” he said. That could involve the treasury setting conditions on the bank, which prized its independence, he added.David Omojomolo, Africa economist at Capital Economics, said: “Other central banks have been able to operate with negative equity positions, but it’s not clear investors would look kindly on this in South Africa given the fiscal constraints.” Video: Eskom: how corruption and crime turned the lights off in South Africa | FT Film More

Beijing is striking a delicate balancing act to support the economy at a time when signs of persistent deflationary pressure call for more stimulus measures. But any aggressive monetary movement risks reviving depreciation pressure on the Chinese currency and capital outflows.With investors now pushing back the start of the Fed monetary easing to at least the middle of the year from March, following the latest U.S. data, traders and analysts expect China could hold back rolling out imminent stimulus.The People’s Bank of China (PBOC) said it was keeping the rate on 500 billion yuan ($69.51 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.50% from the previous operation.Sunday’s operation was meant to “maintain banking system liquidity reasonably ample,” the central bank said in an online statement.In a Reuters poll of 31 market watchers, 22, or 71%, of all respondents expected the central bank to keep the borrowing cost of the one-year MLF loans unchanged on Feb. 18. With 499 billion yuan worth of MLF loans set to expire this month, the operation resulted a net 1 billion yuan fresh fund injection into the banking system.Chang Wei Liang, FX & credit strategist at DBS, said the steady MLF rate comes as “policymakers’ preference to anchor the yuan and limit negative rate differentials with the U.S. dollar.”Still, some investors and market watchers have ramped up their bets of more monetary easing measures in coming months to support the world’s second largest economy after the central bank delivered a deep cut to bank reserves earlier this month.The PBOC said in its latest monetary policy implementation report that it would keep policy flexible to boost domestic demand, while maintaining price stability.”We continue to expect two rounds of rate cuts in Q1 and Q2, with 15 basis points each to both the open market operations (OMO) and MLF rates,” Ting Lu, chief China economist at Nomura, said in a note ahead of the loan operation.He added that the latest round of easing measures, including an earlier-than-expected reserve requirement ratio (RRR) cut, “failed to stabilise market sentiment”.The central bank-backed Financial News, reported on Sunday citing market watchers that the benchmark loan prime rate (LPR) could fall in coming days, with five-year tenor more likely to be reduced.”Lowering five-year LPR will help stabilise confidence, promote investment and consumption, and also help support the stable and healthy developments of the real estate market,” the newspaper said on its official WeChat account soon after the MLF rate decision.Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. The monthly fixing of the LPRs is due on Feb. 20.($1 = 7.1929 Chinese yuan) More

Chinese companies across the electric vehicle supply chain said lower costs and technological leadership would help them secure western deals despite geopolitical tensions and security concerns.Companies producing everything from EV chassis and autonomous driving software to the cobalt and nickel used in batteries are hoping to find overseas partners, despite US and European angst over the rise of China as a technological superpower. Paul Li, founder of Chinese electric vehicle parts supplier U-Power, claims working with the country’s EV sector, which is by far the world’s biggest, can mean foreign companies developing cars years faster than they have traditionally and reducing costs by as much as half. As evidence that foreign carmakers are realising the advantages, he points to Volkswagen’s $700mn tie-up with Chinese rival Xpeng last year. That deal was soon followed by a €1.5bn investment in Chinese EV start-up Leapmotor by Stellantis, which makes Jeep cars in the US and owns the Fiat and Citroën brands in Europe.“Those global corporates already proved that even the biggest automotive [manufacturers] today have to purchase China’s solutions in order to save time as well as get a lot more competitive products,” Li said. Li’s company, which has offices in Hefei, near Shanghai, as well as in Silicon Valley, designs and sells EV chassis — known as skateboards. U-Power last month signed a deal to supply New York-based EV start-up Olympian Motors with its skateboards. The company is also working with Singapore-based FEST Auto to sell EVs to the European logistics market. In another example, Shenzhen-based Appotronics, which provides laser projectors for nearly half of China’s cinemas, will supply BMW with laser technology for some of the German group’s latest in-car displays. And Shenzhen-based DeepRoute.ai, which already has a US office, is now setting up one in Europe to sell its mapping technology for driverless cars.The trend highlights Chinese confidence that trade tensions and decoupling moves will be trumped by Europe and the US needing help to build up their local EV industries, after being slower than their Chinese counterparts to adapt to the transformation to smarter, cleaner vehicles.“Even the US is aware there needs to be some level of potential for Chinese involvement — it can be very controlled, but there needs to be some level,” said Cory Combs, associate director at the Beijing-based Trivium China consultancy. Chinese companies are also developing new approaches to gain a foothold in foreign markets, rather than just exporting products from China. That includes setting up factories and research centres in Europe and North America, as well as forming joint ventures with European and US companies.BYD, the world’s biggest electric-vehicle manufacturer and key Tesla rival, has announced plans to build a factory in Hungary and is looking at production sites in Mexico, as it eyes sales in Europe and the US. The potential investments come in the face of an EU trade investigation into the Chinese EV industry and the Biden administration’s Inflation Reduction Act (IRA), which does not allow Chinese companies to benefit from generous subsidies on American soil. Some Chinese producers of EV battery materials are taking an even more circuitous route to western markets by setting up joint ventures with South Korean industrial groups. They include Zhejiang Huayou Cobalt, China’s biggest producer of the key battery material, and Shanghai-listed Ronbay Technology, which dominates the global market for high-nickel cathode electrodes, as well as smaller battery material groups CNGR Advanced Material and GME Resources. Experts say that the Biden administration has not yet made clear whether such arrangements will be allowed under the IRA’s foreign entities of concern rules. “The best we can tell is if you’re a non-state actor or non-state owned . . . you can create a subsidiary that is not domiciled in China and actually get around [the IRA],” said Combs of Trivium.Marina Zhang, an expert in Chinese industry and innovation at the University of Technology Sydney, said western reticence about “locking into” China-dependent supply chains had intensified in recent years.“Any investment from China, especially state-owned or state-backed companies, or even companies perceived to be associated with a state, are raising alerts immediately. Before we were talking about the military, telecommunications, now we’re talking about critical minerals, energy,” she said.However, Matt Sheehan, an expert on US-China technology co-operation and competition for the Carnegie Endowment for International Peace, a Washington think-tank, argues that the US needs to recognise where it can learn from China in low-carbon technologies as it builds its own cleantech industry. That should include forging deeper ties between the state of California, which has existing climate-focused co-operation with China, and Chinese counterparts, as well as research collaboration and cross-border venture capital flows, he wrote last year, while noting: “Doing this will take courage and creativity.”Li, of U-Power, is among Chinese EV executives who want their companies to be seen as “global”. To that end, his company’s US unit is a separate legal entity, with an independent share structure, rather than having the status of being a subsidiary of the Chinese business. “I don’t know how the regulators will see this, but I label [the company] as a global operation,” he said.Additional reporting by William Langley in Hong Kong More

BERLIN (Reuters) – A former German spy chief who was sacked after being accused of averting his eyes to the threat posed by the far-right founded a new right-wing party on Saturday, holding an inaugural party congress on a boat near Germany’s old capital Bonn.The party is the third to be founded this year in Germany, further fragmenting the political landscape and making electoral predictions tricky ahead of European parliamentary polls and votes in half the country’s municipalities and three states.The Werteunion, or Values Union, is headed by Hans-Georg Maassen, who was dismissed as head of Germany’s Office for the Protection of the Constitution (BfV) in 2018.Maassen was forced to resign after initially questioning the authenticity of a video showing far-right extremists chasing migrants in the eastern city of Chemnitz, saying it might have been faked. He later toned this down, saying the interpretation of the video was open to question, not its authenticity, but this was not enough to quell the outcry that led to his departure.The lawyer has since become known for his increasingly radical commentary on immigration, becoming a hero to far-right activists including some in the circles surrounding Heinrich XIII Prince Reuss, the aristocrat who led a foiled coup in 2022.A former member of the opposition Christian Democrats, Maassen is himself now being monitored by the security agency he ran, he said last month. The BfV said privacy law meant it could not comment on individual cases.”12:32 o’clock. Done!” Maassen said on social media platform X, posting a photo of himself and colleagues in front of a German flag on the boat.With Germany’s mainstream parties well down in polls compared to their 1980s heyday when the Christian Democrats and the Social Democrats regularly polled near 50%, many new parties have sought to capitalize on frustration with the establishment.Earlier this year, leftist politician Sahra Wagenknecht founded a new left populist party. The Werteunion, once a pressure group aligned with the Christian Democrats, will now jostle for space with the far-right Alternative for Germany (AfD), which tops polls in some eastern states.While all other parties have ruled out working with the AfD, Maassen recently said he would be prepared to back their legislative proposals if they made sense – though he ruled out a coalition with the party. More

“The Bank of Japan holds jurisdiction over monetary policy. But there will be a phase when interest rates go up,” Suzuki was quoted as saying in the interview.On the yen, Suzuki said there were pros and cons to its moves that have varying effects on Japan’s exporters and firms reliant on imports. He declined to comment on whether a weak yen, or a strong yen, was desirable for the economy.With inflation having exceeded the Bank of Japan’s 2% target for some time, many market players expect the central bank to end its negative interest rate policy by April.Sources have told Reuters the BOJ is on track to end negative rates in coming months despite recent data showing the economy slipped into recession, though weak domestic demand means it may seek more clues on wages growth before acting.As part of efforts to reflate growth and fire up inflation to its 2% target, the BOJ has been keeping short-term interest rates at -0.1% and the 10-year bond yield around 0% since 2016. More

By David RandallNEW YORK (Reuters) – Several well-known funds jumped into shares of chipmaker Nvidia (NASDAQ:NVDA) at the end of last year, securities filings showed on Wednesday, potentially setting themselves up to benefit from the nearly 50% gain the stock has notched so far in 2024. Nvidia has been a top beneficiary of technology companies’ race to build artificial intelligence into their products and services, with investor excitement over the new technology sending the stock up nearly 240% last year. The chipmaker overtook Alphabet (NASDAQ:GOOGL) as the third most valuable U.S. company on Wednesday, with a market capitalization of $1.78 trillion.Among the funds adding new stakes in Nvidia were Rokos Capital Management, which bought more than 254,000 shares, a stake worth more than $126 million as of the end of December.Bridgewater Associates, the hedge fund founded by billionaire Ray Dalio, increased its stake in Nvidia by 458% to more than 268,000 shares. The position was valued at $133 million at the end of December. Arrowstreet Capital, meanwhile, added 3.9 million shares to its previous small position, leaving it with a $2.1 billion position.Some funds, meanwhile, sold all or part of their stakes.Greg Poole’s Echo Street Capital Management sold all of its more than 355,000 shares. D1 Capital Partners sold nearly 147,000 shares, closing out its position, while Discovery (NASDAQ:WBD) Capital Management sold its about 119,000 shares, which had been 9.2% of its prior portfolio. The positions were revealed in securities filings known as 13Fs that hedge funds and other institutional investors file at the end of each quarter. While they are backward-looking and do not reveal current holdings or short positions, the filings are one of the few ways to gain insight into the portfolios of often-secretive funds. Nvidia will release its quarterly earnings results on Feb. 21. Analysts, on average, see the company’s January fiscal quarter revenue more than tripling to $20.37 billion, fueled by demand for its top-shelf AI chips, according to LSEG data.Analysts see its adjusted net profit surging more than 400% to $11.38 billion. More