Aurelia Butler

1. Futures tread waterU.S. stock futures mostly held around the flatline on Monday, as investors geared up for a week of key economic data releases and a slew of quarterly corporate earnings.By 04:27 ET (09:27 GMT), the Dow futures contract had shed 47 points or 0.1%, while S&P 500 futures were broadly unchanged and Nasdaq 100 futures had inched up 11 points or 0.1%.The benchmark S&P 500 closed above 5,000 for the first time ever to end the prior trading week thanks in part to a surge in megacap groups like Microsoft (NASDAQ:MSFT) and Amazon.com (NASDAQ:AMZN). Artificial intelligence chipmaker Nvidia (NASDAQ:NVDA) also jumped to a record high following a Reuters report that it was building a new division that will aim to provide bespoke chips for cloud computing businesses and others.On Friday, the tech-heavy Nasdaq Composite added 1.3% and the blue-chip Dow Jones Industrial Average dipped by 0.1%. All of the main indices on Wall Street posted their fifth consecutive winning week.2. Inflation data, earnings slew aheadHighlighting the economic calendar this week will be the latest publication of the monthly U.S. consumer price index (CPI), a major gauge of inflation that could factor heavily into how the Federal Reserve approaches future interest rate decisions.The measure is expected to show that headline price growth in the world’s largest economy slowed on both an annual and monthly basis in January. The core reading, which strips out volatile items like food and energy, is seen decelerating year-on-year and remaining unchanged versus December.Despite widespread expectations late last year that the Fed would soon begin to start bringing borrowing costs down from more than 2-decade highs, several policymakers have flagged lingering concerns that a recently strong U.S. economy could fuel a rebound in inflation. For that reason, officials at the central bank have said that they want to see more signs that prices are moderating before rolling out cuts.Meanwhile, earnings season marches on, with more than 60 firms in the S&P 500 due to unveil results this week.Some of these names, including Coca-Cola (NYSE:KO), Shopify (NYSE:SHOP) and Kraft Heinz (NASDAQ:KHC), may provide some insight into the health of the U.S. consumer. Analysts will be keen to parse through second-quarter figures from Cisco Systems (NASDAQ:CSCO), which is pushing to capitalize on the AI boom. Cryptocurrency exchange Coinbase (NASDAQ:COIN) will also post its fourth-quarter numbers following a recent spike in volatility in the market for digital coins.3. Fed speakers on deckMarkets may receive fresh interest rate commentary from at least eight scheduled Fed speakers this week.On Monday, Fed Presidents Michelle Bowman, Thomas Barkin and Neel Kashkari are all scheduled to make statements. Later in the week, Federal Open Market Committee voting members Christopher Waller, Mary Daly and Michael Barr will deliver comments.Hopes are rapidly fading that policymakers could slash rates as soon as March, particularly after Fed Chair Jerome Powell noted last month that inflation is still running above the central bank’s 2% target. Powell later reiterated this cautious stance, telling the CBS news show “60 Minutes” that the Fed can take a “prudent” approach to possible cuts.Even still, he said that the U.S. economy seems to be on course for a so-called “soft landing,” a scenario in which the Fed successfully cools inflation without sparking an economic meltdown. However, Powell said, the Fed must now find a way to balance the twin risks “moving too soon…or too late.”4. Diamondback, Endeavor agree to merger valued at $26 billionDiamondback Energy (NASDAQ:FANG) and Endeavor Energy Resources have agreed to merge in a transaction valued at approximately $26 billion, the firms announced on Monday.The tie-up gives the new entity a huge stake in the all-important Permian Basin, a prolific oil and gas producing region that stretches across Texas and New Mexico. Combined, the companies would become the top solely Permian producer, Reuters has reported.“Diamondback has proven itself to be a premier low-cost operator in the Permian Basin over the last twelve years, and this combination allows us to bring this cost structure to a larger asset,” Stice added.The merger will consist of about 117.3 million shares of Diamondback common stock and $8B in cash. Following the deal, which is expected to close in the fourth quarter of this year, Diamondback shareholders are projected to own about 60.5% of the combined business. Endeavor’s stakeholders will hold about 39.5% of the entity.5. Oil prices slipOil prices fell in European trade on Monday as investors locked in some profits after stellar gains over the prior week.Brent oil futures expiring in April had fallen 0.7% to $81.63 a barrel, while West Texas Intermediate crude futures dropped 0.6% to $76.29 per barrel by 04:28 ET.Both contracts surged about 5% to 6% in the past week, supported in part by Israel rejecting a ceasefire proposal from Hamas and continuing deadly air strikes on the Gaza Strip. The move pointed to little de-escalation in the conflict, which, along with attacks by Iran-aligned Houthis in the Red Sea, have spurred on concerns over disruptions in global oil supplies.On Tuesday, the Organization of the Petroleum Exporting Countries and International Energy Agency are both set to release their monthly reports. Uncertainty hovers around whether the two will maintain their oil demand forecasts for 2024 and 2025 now that U.S. interest rates seem likely to remain higher for longer this year. More

LONDON (Reuters) – Investments to new hedge funds in 2023 fell to new lows, while established hedge funds hiked fees to the highest on record, said a client report by Goldman Sachs dated Friday and seen by Reuters on Monday. This illustrates a growing bias towards established and bigger hedge funds that average higher returns for their investors, said Goldman Sachs. Hedge fund launches fell in Europe and the Asia Pacific region by 6% and 8% while rising 14% in the U.S. But Goldman Sachs still maintained that 2023 marked a second consecutive record low for new launches by hedge funds that it tracks. However, management fees, where the investor pays back a proportion of the winnings a hedge fund makes, rose to their highest since 2012, Goldman Sachs said. Investors, less focused on fee reduction, have concentrated on agreeing better terms with hedge funds, Goldman said, which based its findings on 358 interviews in December 2023 that accounted for over $1 trillion in assets allocated to hedge funds. One such suggestion was having fees fall as AUM rises.Separately, around a quarter of those surveyed agreed with their hedge funds that performance would have to surpass a certain threshold – or hurdle rate – before the application of fees. Almost half said they planned to ask for this in 2024.Almost a fifth said they would try for a loyalty discount. And 11% said in exchange for a fee reduction they would agree to lock up their money with their hedge funds for longer, the report said. Despite this, hedge fund investors did not end 2023 consistently happy with how their hedge funds performed. The $3.9 trillion industry underperformed traditional stock and bond portfolios by 9%, the worst result in nearly three decades. This year, investors expect them to do better, the bank said. If hedge funds can’t manage a 7.5% positive result, what was the point of taking fees, the complex investments and locked away money, said one unnamed allocator quoted in the report. At the end of 2023, 15% of allocators said they planned to decrease their hedge fund holdings, while 31% said they would add more exposure. Despite any optimism expressed in 2022, the bank noted that over the course of 2023, only 28% of allocators increased their money in hedge funds versus 42% that said they would at the end of 2022. 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 MondayIt’s a couple of weeks now until the WTO ministerial meeting in the United Arab Emirates (Abu Dhabi, to be precise). The mood among delegates is currently sober, bordering on sombre, bordering on sepulchral. This good rundown of the issues with an appropriately dark tinge, published by the Hinrich Foundation think-tank, comes from Keith Rockwell, legendary former WTO spokesperson and comms director. Today we chat to Thani bin Ahmed Al Zeyoudi, the UAE minister of state for trade, who has the unenviable task of compèring proceedings and trying to get stuff done. Charted waters is on EU agriculture and climate change.Get in touch. Email me at [email protected] ambitions make senseIt’s an interesting time to be gathering the world’s trade ministers in the Middle East. The continued blockage of the Red Sea and Suez Canal by the Iran-backed Houthi rebels is a pretty graphic illustration of how supply chains can be interrupted.UAE is trying to portray itself as what Zeyoudi calls a “natural mediator”, having also hosted the World Expo in 2021-22 and the COP climate change meeting late last year, the latter somewhat overshadowed by allegations that the meeting was being used to strike fossil fuel deals. On that front, UAE has a somewhat better story to tell on trade, having successfully made itself into a data and digital hub to diversify from hydrocarbon exports.Zeyoudi predictably doesn’t think the precarious political and military situation in the Red Sea will overshadow the ministerial, noting reasonably enough that the previous meeting in 2022 came a few months after the Russia-Ukraine conflict and yet managed to get a few things done. His definition of success for the conference, though, is realistically modest: “A successful ministerial meeting is one where we’re going to bring back trust to the organisation.” For example, one of the conclusions of the previous ministerial in 2022 was the aim of having a “fully and well-functioning dispute settlement system accessible to all members by 2024”, which will presumably mean undoing the US block on the system’s appellate body. But that’s clearly not going to happen this early in 2024. Zeyoudi says that a road map for future reform of dispute settlement would count as a success.: “It’s a very long process . . . but we’re going to draw timelines with the steps we should be taking.” Maintaining trust in the system by keeping it going, coming up with road maps: these are modest outcomes. But as Zeyoudi points out, businesses themselves have adapted to a variety of shocks, from previous blockages in the Suez Canal to the Covid-19 pandemic, and have adjusted their supply chains. The situation in the Red Sea is just another problem. “This is the beauty of life,” he says. “It’s full of challenges and we have to be more and more resilient.” Hoping the WTO can advance policy at the meeting, but having companies and businesses be prepared to absorb shocks in any case, is a realistic conclusion, if not a spectacular one.The missing champions of the multilateral However energetic the leadership of the WTO itself is, and however many good blue-sky ideas are proposed to improve its functioning, it remains the case that it needs the member countries to keep the world trading system going.This doesn’t just mean being active in the WTO, either. Moan about US intransigence in the organisation all you want (I have and I will), but it’s principally the Americans making serious efforts to resist the Houthis’ attacks in the Red Sea. It looks quite bad for the Middle Eastern countries to talk about their role in catalysing trade but then not even contribute meaningfully, even when the blockage materially affects countries in the region such as Egypt, Yemen and Sudan. (I put this to Zeyoudi: he said that all governments were contributing to peace in their own way.)The US hobbling of the WTO dispute settlement system, an impasse now entering its fifth year, will continue at least until November’s presidential election. But the malcontent-in-chief by a long way is India, often backed by South Africa. New Delhi is still the holdout in a bunch of issues, some of which I’ll discuss between now and the ministerial (fisheries subsidies, agriculture, the very idea of plurilateral agreements and indeed the whole principle of holding environmental negotiations at the WTO). Partly, it seems, multilateral intransigence plays well at home, even if Narendra Modi’s government is simultaneously sneaking through a bit of preferential liberalisation, and partly as leverage over issues it does care about.Of the other big powers, China enjoys being ostentatiously active in WTO discussions because it gets to look all multilateral without actually having to make any concessions. The EU does have a more genuine commitment to the process, but in the absence of anything meaningful happening on issues such as the environment is pressing ahead with its own measures including the carbon border adjustment mechanism. Some smaller countries such as Australia are competent and active, but don’t have the heft to get the show moving on their own. The UK is discovering that being a leader in the WTO is a lot harder than the Brexiters promised.Until the big powers decide collectively to unstick the WTO, it will stay largely stuck. It’s as simple as that.Charted watersThe farmers’ protests across the EU have resulted in environmental targets being watered down (see story in Trade links below), but the measures that were being contemplated wouldn’t have reduced emissions in agriculture that much.Trade linksTaking a short break from lecturing the rest of the world about green policy and using trade deals to enforce it, the European Commission is backing off from environmental targets for agriculture because farmers are complaining.As the South China Morning Post reports, the EU member states are also divided about how tough to get with China. NOBODY COULD HAVE PREDICTED THIS.Investors expect China to export more deflation to the world in 2024.The New York Fed’s index of supply chain pressure has returned to its pre-pandemic range for both December and January, after the huge upward surge in 2021 and 2022 was followed by a slump below the long-run average during most of last year.Deforestation in the Amazon may be causing the Panama Canal to dry up, threatening one of the world’s big chokepoints for goods trade.My FT colleague Martin Sandbu interviews Enrico Letta, the former Italian prime minister tasked with producing plans to protect and extend the EU single 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

(Reuters) – North American companies ordered about a third fewer robots last year as worries about a slowing economy and higher interest rates made it harder to justify buying the advanced machines, the first hiccup in five years in what has been a steady progression of the robot invasion of the region’s workforce.”When the economy isn’t great, it’s easier to delay purchases,” said Jeff Burnstein, president of the Association for Advancing Automation, an industry group that tracks robot orders.Companies bought 31,159 robots in 2023, a decrease of 30% over the year before, the largest drop in percentage terms since 2006 and largest drop ever in net units, according to the group, known as A3. The pullback occurred in automotive-related industries – which made up about half of the market last year – as well as other sectors such as food and metals manufacturing.Orders in the fourth quarter hit 7,683, an 8% drop from the same period a year earlier.Slowing robot orders came even as some companies announced initiatives to develop more advanced versions of the machines. Robotics startup Figure said last month it forged a partnership with Germany’s BMW (ETR:BMWG) to deploy humanoid robots in the carmaker’s South Carolina factory to take on certain physical tasks. Electric-vehicle maker Tesla (NASDAQ:TSLA) also has a humanoid robot in development.But for many robot makers, selling existing machines has been hampered by worries about a softening economy and the excess inventories built up during the COVID-19 pandemic. Universal Robots, a Danish maker of small, flexible robots, recently reported its revenue fell 7% last year, to $304 million.Universal’s president, Kim Povlsen, told investors: “2023 was characterized by a difficult economic and business environment for many of our core customers with global industrial activity slowing in the first half of the year.”COMING OFF A RECORD YEAR Robot sales boomed during the COVID-19 pandemic – as producers scrambled to use the machines to churn out goods amid a dire labor shortage. Indeed, 2022 marked a record year for orders, according to A3’s data.To be sure, robots are just one type of equipment companies need, and other gauges of spending have held up better in the U.S. Orders for non-defense capital goods excluding aircraft – a measure closely watched by economists to track trends in business spending – rose 1.7% last year, according to the Commerce Department, suggesting that investments in more basic types of equipment remained close to steady as the economy defied expectations of a sharper slowdown.Dave Fox, president of CIM Systems Inc, a Noblesville, Indiana, company known as an integrator that assembles robotic systems for customers, said his business started off strong last year but then slumped.”Several big projects got pushed into this year,” said Fox. “There were definitely a few customers who brought up their concern about where the economy is headed. And interest rates probably didn’t help.” Fox estimates his business volume fell 30% in 2023, compared with the year before. Fox said some customers who delayed orders are now asking for updated quotes, which is a good sign for business in the months ahead. But he said it is too early to say whether business will return to lofty pandemic levels. A3’s Burnstein said most robot producers he speaks with are optimistic that business will pick up during the second half of this year.Burnstein said the industry has largely worked its way through the distortions caused by the pandemic.During the crisis, many companies put in extra orders for robots because they worried about receiving deliveries amid production delays and a breakdown in global supply chains. “There’s still this feeling that companies were buying in advance of their needs (in 2022),” said Burnstein, “so a lot of companies now have inventory to work through before they order a lot of new robots again.”Joe Gemma, chief revenue officer of Wauseon Machine, a systems integrator in Ohio, agreed there was an inventory glut that distorted the business.”A lot of us were ordering extra inventory,” he said. “Our customers were too.”Gemma said an ongoing shortage of labor in the U.S. means the robot business will continue to thrive. “I was at a plant recently that normally has 600 people working in production – and they have 140 open positions,” he said. “Almost every place we go, there’s still a workforce challenge.” More

NEW DELHI (Reuters) -India’s retail inflation rate touched a three-month low of 5.10% in January as prices of some food items rose more slowly, data showed on Monday, although the central bank is expected to wait before cutting rates as inflation remains above its target rate.Annual retail inflation eased in January from 5.69% in December, government data showed, and was in line with a 5.09% forecast by a Reuters poll of 44 economists.Last week, Reserve Bank of India (RBI) left interest rates unchanged, signalling that cuts may be some time away as it focuses on getting inflation to 4% on a sustainable basis.Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.30% in January, compared with a 9.53% rise in December.Prices of cereals rose 7.83% year-on-year in January compared to 9.93% in the previous month, while vegetable prices rose 27.03% compared to 27.64% in December, the data showed.”CPI inflation came in slightly softer than our expectations,” said Upasna Bhardwaj, chief economist at Mumbai-based Kotak Mahindra Bank.But uncertainties about food inflation are likely to keep the central bank “cautious in the near term”, she said.The central bank forecasts retail inflation at an average of 5.4% in the current fiscal year ending in March, and at 4.5% for the next fiscal year.Core inflation, which strips out volatile food and energy prices, is estimated at 3.6% in January, compared with 3.8%-3.89% in December, according to two economists.”Housing inflation remains weaker than expected, despite strong urban demand,” said Gaura Sen Gupta, economist at IDFC First Bank (NASDAQ:FRBA).The Indian government does not release core inflation figures.Core inflation has fallen despite strong growth in the economy.India posted faster-than-expected economic growth of 7.6% in the July-September quarter compared to a year earlier, after growing 7.8% in the previous quarter. The government forecasts annual growth of 7.3% in the fiscal year ending in March.VOLATILE FOOD PRICESFood price shocks have been the main driver of inflation in the past year, due to climate vagaries and supply shocks due to geopolitical tensions.Last week, the RBI said large and repetitive food price shocks were interrupting the pace of disinflation. India lowered the stock limit of wheat that traders can hold to increase the grain’s availability and moderate prices. It has banned exports of wheat, some grades of rice and onions to contain inflation.Some economists expect moderating food prices could help ease pressure on retail inflation. “Price pressures are easing in earnest, and we think rate cuts will come onto the agenda in the second half of the year,” Shilan Shah, deputy chief emerging markets economist at Capital Economics, said. More

The central bank is widely expected to keep interest rates on hold at 16% at its rate-setting meeting on Feb. 16, after hiking rates by 850 basis points since July in the face of stubborn inflation pressure from labour shortages, rouble weakness and high budget spending.”Of course, special attention should be paid to inflation, its containment,” Putin said in a televised meeting at which Central Bank Governor Elvira Nabiullina also appeared following a weeks-long, unexplained public absence.Putin noted the central bank and government’s actions when pointing out that inflation was now trending lower. He said annual inflation in January was 7.2%, down from 7.4% at the end of 2023.Russia’s economy rebounded sharply from a slump in 2022, annual data showed on Wednesday, but the growth relies heavily on state-funded arms and ammunition production and masks problems that are hampering an improvement in Russians’ living standards. More