Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The US and China have agreed to a framework that restores a truce in their trade war after two days of marathon negotiations in London.The breakthrough late on Tuesday followed an agreement in Geneva last month aimed at easing trade tensions between the world’s two economic superpowers, which had faltered over differences regarding Chinese rare earth exports and US export controls.US President Donald Trump said on Wednesday that “our deal with China is done”, adding that the agreement would lead to China supplying rare earths “up front”.As part of the deal, the US would meet its commitments, including “Chinese students using our colleges and universities”, Trump said in a post on Truth Social, but made no mention of export controls on chips.Trump’s comments come after the US negotiating team, which included commerce secretary Howard Lutnick and US trade representative Jamieson Greer, concluded two days of talks in the UK capital.Lutnick said late on Tuesday that he expected that “the topic of rare earth minerals and magnets . . . will be resolved in this framework”.He added that export restrictions applied by the US “when those rare earths were not coming” would also be lifted, “as President Trump said, in a balanced way”.A senior White House official indicated earlier in the week that Trump could ease restrictions on selling chips to China if Beijing agreed to speed up the export of rare earths. That would amount to a significant policy shift from former president Joe Biden’s administration, which implemented what it called a “small yard, high fence” approach to restrict Beijing’s ability to obtain US technology that could be used to help its military.Li Chenggang, China’s vice-minister of commerce, described the London talks as “rational, in-depth and candid”, and said the sides had agreed to implement the consensus reached in Geneva and in a phone call between Trump and Chinese President Xi Jinping last week, according to state news agency Xinhua.He expressed hope that the progress made in London “will be conducive to strengthening trust between China and the United States”.China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks closed up 0.8 per cent on Wednesday. Futures tracking the S&P 500 were down 0.2 per cent. Show video infoBoth countries agreed in Geneva last month to slash their respective tariffs by 115 percentage points and provided a 90-day window to resolve the trade war. But the ceasefire came under pressure after Washington accused Beijing of reneging on an agreement to speed up the export of rare earths, while China criticised new US export controls.The US team, which also included Treasury secretary Scott Bessent, had held two days of talks with the Chinese delegation, led by He Lifeng, a vice-premier responsible for the economy. The talks were held in the historic Lancaster House mansion in central London, a short walk from Buckingham Palace, which was provided by the British government as a neutral ground for the talks.Chinese vice-premier He Lifeng outside Lancaster House in London More
This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and welcome back to FirstFT. On today’s agenda: The US and China have agreed a framework that restores a truce in their trade war after two days of negotiations. Here’s what you need to know.What have the US and China agreed? The two economic superpowers have agreed a framework that restores a truce in their trade war after two days of marathon negotiations in London. The breakthrough came late last night but few details of the new framework were shared. Li Chenggang, China’s vice-minister of commerce, said the sides had agreed to implement the consensus reached in Geneva, according to state news agency Xinhua. That included an agreement by both countries to slash their respective tariffs by 115 percentage points and provided a 90-day window to resolve the trade war.What happens now? The US negotiating team, including commerce secretary Howard Lutnick, Treasury secretary Scott Bessent and US trade representative Jamieson Greer, returned to Washington overnight to present the deal to President Donald Trump. The Chinese delegation, led by He Lifeng, a vice-premier responsible for the economy, returned to Beijing. The negotiations were launched to ensure Chinese exports of rare earths to the US and American technology export controls on China did not derail broader talks between the sides. Here’s the full readout from the talks.Emerging markets: Trump’s trade war will depress growth in almost two-thirds of developing economies this year, the World Bank has warned. Global economy: The tariff war brings with it unpredictability and a consequent loss of confidence, writes Martin Wolf.EU-China trade: Brussels has imposed anti-dumping duties on Chinese plywood imports, days after Beijing tried to ease trade tensions.Here’s what else we’re keeping tabs on today:US inflation: Figures released today are expected to show an acceleration in consumer price growth last month. Companies: Oracle is expected to report an increase in fourth-quarter revenue, helped by robust demand for its cloud services. Canada’s Dollarama reports first-quarter results.Economic data: Mexico’s national statistics agency is expected to report industrial output. Its central bank publishes its twice yearly financial stability report.Israel: Prime Minister Benjamin Netanyahu’s coalition is bracing for a crunch vote today in the Knesset. Here’s why. Five more top stories1. The mayor of Los Angeles has announced a curfew for the downtown area that has been at the centre of four days of protests marked by conflicts with police and vandalism. The move comes as Trump defended his decision to deploy hundreds of marines and vowed to “liberate” California’s largest city.The ‘enemy within’: Sending the National Guard into LA is the clearest step yet towards authoritarianism, writes Edward Luce.2. Elon Musk has said he “regrets” some of the posts he made about Donald Trump on his social media platform X last week, “they went too far”. Allies of the two have urged the US president and his billionaire backer to repair their relationship which imploded last week. Supporters fear the damaging spat could impact the administration’s plans for tax cuts and deregulation. Here’s more on Musk’s overnight comments.3. Private market funds have underperformed large-cap US stocks over commonly measured time horizons for the first time in nearly a quarter of a century. The data, which measures private funds based on actual cash flows and does not depend on voluntary reporting, comes after a number of years in which the global buyout industry has struggled to purchase and sell companies.4. Meta plans to invest about $15bn in data-labelling start-up Scale AI and hire the group’s co-founder and top researchers, in one of the biggest deals of its kind. The agreement would give Meta a 49 per cent stake and value the start-up at roughly $28bn, according to people with knowledge of the matter. The deal could be announced as soon as today.Snap’s ‘Specs’: The social media company plans to relaunch its smart glasses as it rejoins a costly battle over AI-powered wearable devices with Meta, OpenAI and Apple. 5. US oil production will fall next year for the first time since the Covid-19 pandemic, according to a government forecast. The report highlights the stresses facing the sector, with rising supply from the Opec+ cartel and anxiety over Trump’s trade war pushing down crude prices.Visual investigationIn March, Mexican authorities seized a 46,000-tonne vessel suspected of illegally importing fuel from the US. A subsequent raid on nearby storage facilities uncovered weapons, tanker trucks and 10mn litres of diesel. But this was no isolated case. The FT has uncovered dozens of suspicious shipments, with millions of barrels of fuel falsely declared as industrial lubricant. Our latest visual investigation explores how the sophisticated smuggling operations fund Mexico’s cartels.We’re also reading . . . CEO pay and perks: Executives may find the idea of disclosing less about their packages attractive, but this carries its own risks, writes Brooke Masters. WPP: Outgoing chief Mark Read pushed to adopt AI but, for an ad agency that still bills some clients by the hour, the disruption of its own business has unsettled investors. MathGPT: New AI models could soon pose a threat to the world’s top mathematicians, writes Anjana Ahuja. Chart of the day The world’s ocean temperatures reached the second-highest level on record for May, capping an “alarming” two-year streak of rapid warming, according to the EU’s earth observation service Copernicus. Oceans have historically helped absorb higher land temperatures but scientists say this expectation is increasingly being challenged. Read more on the growing number of “marine heatwaves”. Take a break from the newsWhen Nadya Tolokonnikova started “Police State”, a 10-day performance piece at the Museum of Contemporary Art in Los Angeles last week, she could not have known the city would soon be plunged into unrest. “They always pick the scapegoat,” the founding member of Pussy Riot tells the FT. “In Russia it’s people who speak out against the regime. In America and Los Angeles, it’s migrants.”Russian artist Nadya Tolokonnikova in a mock prison cell for her 10-day performance piece ‘Police State’ More
Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Gold has overtaken the euro as the world’s second most important reserve asset for central banks, driven by record purchases and soaring prices, according to the European Central Bank.Bullion accounted for 20 per cent of global official reserves last year, outstripping the euro’s 16 per cent and second only to the US dollar at 46 per cent, data from an ECB report published on Wednesday showed. “Central banks continued to accumulate gold at a record pace,” the ECB wrote, adding that central banks for the third year in a row acquired more than 1,000 tonnes of gold in 2024, a fifth of the total global annual production and twice the annual amount in the decade of the 2010s.The stock of gold held by central banks worldwide is approaching the historic highs of the postwar Bretton Woods era. Until 1971, global exchange rates were fixed to the US dollar, which in turn could be converted into gold at a fixed exchange rate.Central bank gold reserves, which peaked at 38,000 tonnes in the mid-1960s, rose again to reach 36,000 tonnes in 2024, according to the latest ECB numbers. “Central banks worldwide now hold almost as much gold as they did in 1965,” the ECB report said.Large buyers last year included India, China, Turkey and Poland, according to the World Gold Council.A 30 per cent rise in the gold price last year was one factor behind the surge in gold’s share of global foreign reserves. Since the start of the year, the gold price has surged by another 27 per cent, hitting a historic high of $3,500 per troy ounce. “This stockpile, together with high prices, made gold the second-largest global reserve asset at market prices in 2024 — after the US dollar,” the ECB said. While gold does not bear interest and is costly to store, it is seen by investors globally as the ultimate safe asset that is highly liquid, and neither exposed to counterparty risk nor sanctions. In recent years, central banks have also been trying to diversify away from the US dollar amid concerns about geopolitical instability and US debt levels. The de-dollarisation trend accelerated, particularly among developing countries, after the Russian invasion of Ukraine, when the US targeted Russia’s access to financial markets.“Gold demand for monetary reserves surged sharply in the wake of Russia’s full-scale invasion of Ukraine in 2022 and has remained high,” the ECB report said, adding that gold purchases appeared to be seen as a hedge against sanctions such as the freezing of financial assets.“In five of the 10 largest annual increases in the share of gold in foreign reserves since 1999, the countries involved faced sanctions in the same year or the previous year,” the central bank’s analysis showed, adding that “countries that are geopolitically close to China and Russia” bulked up on gold more than others over the past three years. A survey among 57 central banks that were holding gold last year also revealed that concerns about sanctions, expected changes in the global monetary system and the desire to become less dependent on the US dollar were drivers in emerging markets and developing countries.Moreover, while gold historically became cheaper when real yields of other assets rose, this long-standing correlation has broken down since early 2022, with investors drawn to gold as a hedge against political risk more than as a hedge against inflation. The ECB noted that the supply of gold in recent decades increased during times of high prices: “If history is any guide, further increases in the official demand for gold reserves may also support further growth in global gold supply.”Data visualisation by Keith FrayVideo: Why governments are ‘addicted’ to debt | FT Film More
Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Citigroup is poised to increase provisions for potential bad loans by hundreds of millions of dollars for the second quarter, in a sign of growing financial stress among US consumers and businesses. “Given the macro environment [and] cost of credit compared to last quarter, we expect to be up a few hundred million dollars,” Citi’s head of banking Vis Raghavan told investors at a Morgan Stanley conference on Tuesday.The increase comes amid concerns that Donald Trump’s tariffs will slow US economic growth or even cause a recession. The US president’s levies may also raise the prices of some products — notably on imported goods from China, hitting consumers. Consumer sentiment has darkened in the US as an increasing number of Americans worry about their financial wellbeing. It has, however, stabilised as the world’s two largest economies, the US and China, work to draw up a deal to resolve their trade war.A Conference Board measure of consumer confidence rose to 98 in May, up from 85.7 in April, although it remained below the 110 reading from when Trump won November’s presidential election.JPMorgan Chase chief executive Jamie Dimon said on Tuesday that the biggest US bank by assets experienced “a teeny deterioration” in consumer finances due to the impact of higher tariffs, but he said it would take several months before the full effect became clear.“I think there is a chance real numbers will deteriorate soon,” Dimon said at the Morgan Stanley conference. “Employment will come down a little. Inflation will go up a little bit.” He added that consumers were still “feeling pretty good” and their behaviour would be driven by the labour market. “If you look at consumers — their real behaviour follows unemployment.”Raghavan said he was reassured by the fact that Citi’s credit card loan book was geared towards customers with higher credit scores. Citi is one of the largest retail lenders in the US and took a $2.7bn provision for credit losses in the previous quarter.Raghavan added that he was “incredibly reassured” by the credit quality of the bank’s corporate clients, with 80 per cent of its exposure being to high-grade issuers.Executives at some other banks have said US consumer activity seems to be holding up surprisingly well despite the uncertainty created by Trump’s threat to impose high tariffs on imports from many countries.“It’s quite possible that there will be some kind of slowdown, but we hope it’s not too meaningful,” Wells Fargo chief executive Charlie Scharf told the Bernstein conference in New York two weeks ago. “Both businesses and consumers go into that period relatively strong. So it’s a very, very odd time. It’s very hard to see any kind of trend either way.”At the end of the last quarter, the industry-wide rate of credit card charge-offs, the proportion of loans deemed to be unrecoverable, rose above the level before the Covid-19 outbreak. More
