Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The new government in Warsaw has won a concession from the EU in its battle to limit Ukrainian food exports, with the bloc’s top trade official saying Brussels would control the influx of farm products if they risked depressing prices in Poland and other neighbouring countries. Poland and Hungary introduced unilateral import bans on Ukrainian produce in April 2023, following widespread protests from farmers about cheap exports from Ukraine resulting in grain gluts on their domestic market. The ban was in defiance of EU common trade law. Now the European Commission is set to offer additional safeguards to countries that border Ukraine when it extends its tariff-free, quota-free access from June.Valdis Dombrovskis, trade commissioner, told the Financial Times that the proposal should come this week and would likely include “country specific safeguards” allowing Brussels to block imports if a particular country’s market was flooded. Currently, the impact on the EU market as a whole is assessed, reducing the likelihood of action. “We will be looking at how we can provide additional assurances to Poland and other member states and one way of doing this is introducing country-specific safeguards,” he said.“We see that this regional impact of trade or exports of Ukrainian agricultural products is very unevenly distributed. It’s primarily felt by immediate neighbouring countries whereas [it] doesn’t create much disruption for the EU market as a whole.”The tighter safeguards would be a boost for Polish prime minister Donald Tusk, who is trying to protect domestic economic interests while meeting his pledge to put Poland back at the heart of EU policymaking. This follows years of feuding between the previous administration of the Law and Justice (PiS) party and Brussels, mostly over Poland’s eroding rule of law. The Polish agriculture ministry did not respond immediately to a request for comment about the EU’s plan. After taking office last month, Tusk disappointed Brussels by maintaining the PiS-introduced grain ban, as well as vowing to defend the interests of Polish truckers who had blockaded some border crossings with Ukraine to protest against cheaper competition from Ukrainian hauliers. The drivers agreed last week to suspend their blockade, which will also facilitate a visit by Tusk to Kyiv. Dombrovskis said the extension would cover the year to June 2025. The proposal must be approved by the European parliament and a majority of member states.He also said he would open talks on mutual trade liberalisation, pressing Ukraine to reduce some of its own trade barriers to boost EU exports as it starts negotiations to join the bloc.The unilateral concession was granted to Kyiv in June 2022 in the wake of Russia’s full-scale invasion, which reduced Ukraine’s ability to send food through the Black Sea to its traditional markets in Africa and Asia.EU officials confirmed they are also considering export quotas on sensitive products such as poultry meat, sugar and eggs from Ukraine. Poultry and egg imports have doubled since the war began. A person familiar with the situation cautioned that no decision has been taken.Farmers and truckers have also mounted sporadic protests in Romania this month, demanding mostly domestic economic measures but also voicing concerns about Ukrainian competition and the lack of adequate regulation of Ukrainian imports and services.Romania’s main farmers’ organisation on Sunday asked the country’s leaders to push for a national safeguard clause and tighter restrictions on imports when the measures are renewed. Additional reporting by Marton Dunai in Budapest More

Central bankers and Biden administration officials are concerned that the reluctance of companies to lower price rises to pre-pandemic levels risks undermining efforts to cool inflation. While the shocks triggered by the shutdown of the global economy because of the coronavirus are long gone, economic officials worry businesses have become accustomed to passing on large and frequent price rises to their customers. Thomas Barkin, the president of the Richmond Fed who will vote on the US central bank’s policy deliberations this year, is looking closely at whether retailers regain their ability to force manufacturers of household staples to offer discounts, which they can pass on to US shoppers.“For 30 years before Covid, inflation had gotten so grounded that companies had gotten conditioned into thinking that they didn’t have any pricing power,” Barkin told the Financial Times in an interview that took place on Tuesday. “You had globalisation, favourable demographics. No one wanted to go into Home Depot and table a price increase.” But now the producers had the upper hand, he said. “Big box retailers are pushing back on manufacturers to try to encourage them to begin to do more discounting. But their bargaining power is less than pre-Covid because we still have a lot of back and forth with suppliers on freight costs, on labour costs, on deglobalisation,” Barkin said.“It’s going to take a while for them to negotiate price increases out of the system.” Procter & Gamble, the biggest US consumer goods manufacturer, said on its earnings call in October that “labour inflation continues throughout the supply chain and in our costs”. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Research from the Richmond Fed and Duke University showed almost 60 per cent of companies planned to raise prices this year by more than they did before 2020. “There’s a softening in the intensity and they only plan to raise prices once, not multiple times,” Barkin said. “But it’s still there.”Barkin is watching whether consumers respond to those price increases by cutting back on purchases. If they continue to spend, he will be more reluctant to start cutting rates from their current 23-year high of between 5.25 per cent and 5.5 per cent. The latest edition of the Fed’s Beige Book survey said shoppers were becoming more sensitive to changes in prices. That trend, the publication said, “had forced retailers to narrow their profit margins and to push back in turn on their suppliers’ efforts to raise prices”. Grocery sector specialists cite the rise of German discount chains Aldi and Lidl as a sign of consumers’ focus on value. Still, Barkin’s fears speak to a broader concern among global central bankers that the world has shifted to what the Bank for International Settlements has labelled a high-inflation regime, in which price rises become so pervasive that they beget more of the same. Data show that products such as fizzy drinks, where competition and the market power of big retailers had kept prices more or less on hold, have now become susceptible to inflation. “You had a generation trained by two decades of falling goods prices, where globalisation just kept increasing,” said Vincent Reinhart, a former Federal Reserve economist who is now at Dreyfus and Mellon. “With the pandemic, you’ve lost that innocence. And once it’s lost, then I don’t think you can easily go back.”Jon Hauptman, founder of consultancy Price Dimensions, has noticed a shift away from a model where big producers offered credit to retailers in return for discounts. “Historically, consumer goods companies offered trade funding to retailers in return for discounts. But that’s no longer happening to the same extent,” Hauptman said, adding that the companies were also only willing to offer discounts to specific types of shoppers. “We’re seeing more and more that the money they are spending is targeted in a laser-focused way.” As the presidential race heats up, persistent price pressures are an increasing concern for Biden’s economics team, especially for groceries, the prices of which have risen sharply over his four-year term. The January edition of the FT Michigan Ross poll showed that, when it came to inflation, 72 per cent of respondents cited higher food prices as having a big impact on their finances, with 51 per cent of those polled also concerned about the rise in cost of everyday necessities. The prices of some staples, such as milk and eggs, have fallen from 2022 highs. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Retailers are also managing to regain some of their power by expanding the range of own-brand products they offer. “They’re coming out with new tiers of private brands,” Hauptman said, predicting that this would push manufacturers to provide more trade funding for discounts than they were today. Walmart, the US’s mega-retailer, has said in recent earnings calls that it is seeing inflation returning to more normal levels. Discount chain Dollar Tree, which made headlines when it raised its prices from $1 to $1.25 in 2021, has reintroduced a $1 range on a limited number of products. A big question is whether change will come soon enough ahead of the November to rectify the public perception that the president is not doing a good job on the US economy. The January edition of the FT Michigan Ross poll showed that more than half of voters believe they have become worse off under Biden. More than 40 per cent of respondents see Democratic policies as one of the three main reasons why prices are still rising — the second biggest factor after large corporations, which 57 per cent of respondents believe are taking advantage of high inflation. The US Treasury has repeatedly emphasised that wages are now rising at a faster pace than prices for the average American. But Barkin’s counterpart at the Atlanta Fed, Raphael Bostic, told the Financial Times in an interview earlier this month that he believed the soaring cost of items such as food was still weighing on the nation’s mood. “Everybody noticed that when you went to the grocery store, the same amount of money wasn’t getting the same amount of stuff,” Bostic said.“Now that inflation has slowed, the escalation of the crisis is not as extreme. But prices are still higher than in many instances and they were at the beginning of the pandemic and that is still weighing on folks.” Barkin agreed that the higher cost of goods that are frequently bought was lingering in shoppers’ memories. “If there’s a dramatic rise in prices over a short period of time, people remember that.” More

Populism is a potent form of democratic politics. Unfortunately, it is also a destructive one, weakening institutions, damaging debate, and worsening policy. It can threaten liberal democracy itself. The Brexit saga is an object lesson in the dangers: it has damaged what was long thought to be among the world’s most stable democracies.The recent book, What Went Wrong With Brexit: And What We Can Do About It, by my colleague, Peter Foster, lays out the story superbly. It shows how a classic populist alliance of fanatics and opportunists mixed simplistic analysis with heated rhetoric and outright lies to weaken the UK’s most important economic relationship and threaten its domestic stability. Happily, there exists an opportunity to learn from this experience and start putting things right. Brexit was in fact certain to go wrong, because it was based on false premises. Countries cannot be fully sovereign in trade, since it involves at least one counterpart. Thus, the rules of the single market were created because the alternative was multiple different regulatory regimes and so costlier (and smaller) trade. An institution also had to decide whether countries were abiding by the rules they had agreed. That has been the indispensable role of the European Court of Justice.Creating the single market, then, was an act of regulatory simplification. Leaving it would increase regulation for any business trying to sell in both the UK and the EU. Such business would necessarily be discouraged. So, indeed, it has proved. As Foster shows, smaller businesses suffer most under these burdens.In the short term, existing businesses enjoyed sunk costs — their capital, knowledge and relationships. The costs of creating such assets anew is far higher than those of using what they already had. So, suppose a business is considering entering the EU market today. Other things being equal, would it make sense to locate in the UK rather than in any of its 27 members? Of course not. Over time, then, the separation will grow.This is also true for personal relationships, education, work experience, or work as a creative person, consultant or lawyer. In sum, this supposed liberation has greatly curtailed the freedom of many millions of people on both sides.Whose freedom has it increased? That of British politicians. They can act more freely than they could when bound by EU rules. What have they done with this freedom? They have lied about (or, worse, failed to understand) what they agreed over the Northern Ireland Protocol. They have threatened to break international law. They even proposed eliminating thousands of pieces of legislation inherited from EU membership, regardless of the consequences. These people have, in sum, destroyed the country’s reputation for good sense, moderation and decency. All this is a natural result of the classic populist blend of paranoia, ignorance, xenophobia, intolerance of opposition and hostility to constraining institutions. Yet all is not lost. For some good things have emerged, at least for now. The governing party rid itself of two terrible prime ministers, Boris Johnson and Liz Truss, peacefully. Their successor, Rishi Sunak, is not a fantasist. Neither is the leader of the opposition, Keir Starmer. This is cheering.Many surely now know that the challenges confronting the country — inadequate infrastructure, sluggish innovation, low investment, poor corporate performance, huge regional inequalities and high income inequality — had nothing to do with the UK’s EU membership. Moreover, the opportunities for transformative global trade deals have proved a “will-o’-the-wisp”. In Foster’s phrase, Brexit is “a colossal distraction”. It is performative politics, full of sound and fury signifying nothing sensible. Other EU members have at least learned that.I have argued that attempting to rejoin the EU now would be a mistake. But it is possible to seek improvements in the UK’s relationship with it, notably over movement of people and workers and over regulatory standards, especially in food and manufactures. There is no good case for divergence from the latter. For that matter, would UK-specific regulation of artificial intelligence or a carbon-border adjustment mechanism make any sense? More boldly, the case for rejoining the customs union and so eliminating the difficulties now created by rules of origin is strong.The UK must try to mend its fences with the EU. Its government must also act to improve its economic performance. If the next government fails to improve the economic trajectory, this populism could return in worse form. Nothing less than that is now at [email protected] Martin Wolf with myFT and on XVideo: The Brexit effect: how leaving the EU hit the UK More

Inflation remains a concern, particularly with rising food costs, and is shaping central bank policies in the region. Initially, central banks plan to maintain steady policy rates, with potential reductions later in the year. Currency stability is also anticipated, with the Philippine peso expected to hold at 55.2 against the dollar and the Malaysian ringgit projected at 4.55 against the dollar by year-end.Disinflation trends across Asia are expected to align with central bank targets, which could lead to policy rate cuts in countries like China. This scenario is anticipated to be favorable for bond markets in the region. Reflecting this outlook, HSBC’s investment strategy favors bonds, with a recommended overweight position in US Treasuries and global investment-grade bonds.Furthermore, HSBC anticipates that anticipated rate cuts by the Federal Reserve starting in June 2024 will enhance global investment sentiment, which should have positive effects on both equity and bond markets. The recovery of the global electronics sector, along with the resumption of international tourism, are additional factors that are expected to support Malaysia’s economic expansion.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

The one-year loan prime rate (LPR) was kept at 3.45%, and the five-year LPR was unchanged at 4.20%.In a Reuters poll of 27 market watchers conducted last week, all but one participant predicted both LPRs would stay unchanged. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. More

The PBOC left its one-year LPR at 3.45%, while the five-year LPR, which is used to determine mortgage rates, was left unchanged at 4.20% in the PBOC’s first rate decision of 2024.Both LPR rates were at historic lows after a series of cuts over the past four years, as the PBOC loosened monetary policy in the face of slowing economic growth.Monday’s move was largely in line with market expectations after the central bank unexpectedly kept its medium-term lending rates on hold earlier in January, although it also maintained its near record-high pace of liquidity injections.The LPR is determined by the PBOC based on considerations from 18 designated commercial banks, and is used as a benchmark for lending rates in the country.The PBOC had cut the rate further into record-low territory over the past two years, as it struggled to further stimulate Chinese lending conditions and support an economic rebound. But its measures have had little effect so far, with recent data confirming that a post-COVID economic rebound largely failed to materialize in 2023.China’s gross domestic product grew less than expected in the fourth quarter, and also barely edged past a 5% government target for the year, as weakening export demand added to economic pressure from sluggish domestic spending and investment.The PBOC has also repeatedly signaled reluctance towards cutting the LPR further, stating that such a move could cause more weakness in the yuan and also destabilize the banking sector.With the central bank’s liquidity measures providing little support to the economy, investors have ramped up calls for more targeted, fiscal measures from Beijing. But such measures also appear unlikely as China grapples with high levels of government debt.Upgrade your investing with our groundbreaking, AI-powered InvestingPro+ stock picks. Use coupon INVSPRO2024 to avail a limited time discount on our Pro and Pro+ subscription plans. Click here to know more, and don’t forget to use the discount code when checking out! More

SYDNEY (Reuters) – Asian shares followed Tokyo higher on Monday as AI hype helped the tech sector ahead of a week brimming with central bank meetings, major economic data and corporate earnings. Chip stocks have been on a roll since Taiwan Semiconductor Manufacturing (TSMC) upgraded its profit outlook last week on booming demand for high-end chips used in AI applications, sending the Nikkei to a fresh 34-year peak. The index climbed another 0.8% early on Monday, to be up 8.3% so far in January.Chipmakers, including Nvidia (NASDAQ:NVDA) and Advanced MicroDevices, were among the beneficiaries of the AI-driven rally.That should sharpen attention on results from Intel (NASDAQ:INTC) and IBM (NYSE:IBM) this week, along with Tesla (NASDAQ:TSLA), Netflix (NASDAQ:NFLX), Lockheed Martin (NYSE:LMT) and a host of others. S&P 500 futures edged up 0.1%, after notching a record close on Friday, while Nasdaq futures added 0.3%.MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.3%, after taking a drubbing last week. The index has been pressured by weakness in China’s markets, which hit five-year lows last week and sparked speculation state funds were having to support stocks.Beijing still seems reluctant to deliver aggressive stimulus and the central bank is expected to again skip on a rate cut in its market operations on Monday.The Bank of Japan is also expected to keep policy super-easyat a meeting on Tuesday, helped by a second month of slowdown in consumer prices. The general assumption among analysts is the central bank will want to see if the spring wage rounds deliver strong growth before deciding whether to nudge toward tightening.”Drawing on the first ‘shunto’ results released mid-March and the April branch managers’ meeting, the BoJ will be able to confirm the sustainability of wages and exit negative interest rate policy in April,” wrote analysts at Barclays in a note.”Thereafter, we expect gradual rate hikes from H2 24, but policy rates should remain well below neutral.” ECB IN NO RUSHThe European Central Bank (ECB) meets on Thursday and is considered certain to hold steady, given recent hawkish commentary from top officials.”A March cut still makes sense, but the push back from ECB officials has been potent in recent days, making a June cut more likely,” said Giovanni Zanni, an economist at NatWest Markets.”Data have continued to support our long-held view that the ECB probably went too far in its rate rising cycle,” he added. “We believe that a delay will likely imply the need for a bolder first move, with a 50bp cut more likely than a 25bp one.” Futures have priced in 40 basis points of easing by June, with a first cut in May implied at a 76% chance.Central banks in Canada and Norway also meet this week and no change to rates is expected.Hawkish talk has also seen markets scale back the probability of a March cut from the Federal Reserve to 49%, from around 75% a couple of weeks ago. Yet, a first easing of 25 basis points in May is more than fully priced.Fed officials are in blackout this week ahead of the next meeting on Jan. 30-31.Prospects for an early easing could be affected by data on U.S. economic growth and core inflation due later this week.Gross domestic product is seen running at an annualised 2% pace in the fourth quarter, while the core personal consumption price index is seen slowing to an annual 3.0% in December, down from 3.2% the previous month and the lowest since early 2021.Recent data has tended to surprise on the high side, one reason yields on 10-year Treasuries climbed almost 20 basis points last week to last stand at 4.13%.That shift underpinned the dollar, which hit a five-week high on a basket of currencies. It was up at 148.13 yen, having jumped 2.2% last week, while the euro was idling at $1.0893 after easing 0.5% for the week. All of this left non-yielding gold looking unattractive at $2,028 an ounce. In the oil market, worries about global demand has so far offset the threat to supply from tensions in the Middle East.Brent was off 23 cents at $78.33 a barrel, while U.S. crude for January eased 9 cents to $73.16 per barrel. More

Australia is the world’s fifth biggest producer of mined and refined nickel, with output led by BHP Group (NYSE:BHP).Following are moves by nickel producers and developers to cope with the slump:* Wyloo Metals, a private investment company owned by iron ore billionaire Andrew Forrest, said on Monday it will put its Australian Kambalda nickel operations on care and maintenance at the end of May as a result of low nickel prices.* Diversified miner South32 (OTC:SOUHY) said on Monday it had commenced a strategic review of its nickel operation Cerro Matoso in Colombia to evaluate options to improve its competitive position amid a sharp downturn in the nickel market.* BHP, the world’s biggest listed miner, said on Jan. 18 it was reevaluating its nickel business. Analysts said it may need to write down its $1.2 billion West Musgrave project and could potentially delay it. It will provide more detail at its half year earnings on Feb 20.BHP signed a deal to supply nickel to Tesla (NASDAQ:TSLA) in 2021. * Canada’s First Quantum Minerals (OTC:FQVLF) said on Jan. 15 it will cut jobs and production at its Ravensthorpe mine in Australia due to a “significant” downturn in prices that it expects to last three years.* Panoramic Resources went into voluntary administration in December. On Jan. 8, its administrators said operations at its Savannah nickel project would be suspended as the “prospect of achieving a near-term turnaround of operations and finances is low”. The project remains up for sale.* Battery materials producer IGO flagged in December it expects to book a further impairment to its Cosmos nickel project when it reports on Jan. 31, adding to an almost A$1 billion writedown in the 2023 financial year. More