Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is European Commissioner for the EconomyThe coming new year will mark a new dawn for the taxation of large multinationals. Rules setting a minimum level of taxation for these businesses will start applying in jurisdictions across the world. This major development will finally put a floor under the harmful competition that, over the past four decades, has created a relentless downward spiral in statutory corporate tax rates worldwide. Since 1980, these have decreased from an average of 40 to 23 per cent; in Europe the fall has been even greater, from 45 to just under 20 per cent. In many cases, additional sweeteners, preferential rates and unacceptable loopholes allowing profits to be shifted to zero or low-tax jurisdictions have resulted in effective tax rates well below those headline figures. As the extent of such practices has come to light, the general public and owners of smaller businesses have become increasingly indignant.The reform that is about to take effect is one of the two elements (or ‘Pillar 2’) at the basis of a historic breakthrough achieved in 2021 in the OECD’s so-called “inclusive framework”. This agreement was the outcome of years of painstaking international negotiations and an important victory for multilateralism. It establishes a global minimum corporate effective tax rate of 15 per cent for multinational companies with annual revenues of more than €750mn. There are more than 140 countries on board — almost three quarters of all UN members, representing over 90 per cent of the global corporate tax base. The EU has played a crucial role in spearheading this effort. And we are now leading the way in turning the 2021 agreement into reality. One year ago, we were among the first jurisdictions in the world to approve legislation implementing the global minimum tax. Today, almost all EU member states are ready to apply the new rules from the start of 2024. The European Commission will continue to monitor the timely and full implementation of this crucial reform. We stand ready to take action if needed to address any delays or inconsistencies.The EU’s rapid move to enact the global minimum tax is spurring others to align their own laws. It is the responsibility of all governments to step up the pace of these efforts. We have also seen some zero or low-tax jurisdictions introducing or raising corporate income taxes and I trust that in 2024 we will see further — and where necessary, more ambitious — moves in this sense.We will work with our partners around the world to encourage as swift and wide an application as possible of the new framework. This includes assisting developing countries in their implementation efforts with technical, financial, and capacity-building support.  At a time when public budgets are strained and the need to invest in the green, digital and social transitions is more pressing than ever, the global minimum tax rate will allow governments to raise much-needed additional revenues. The OECD estimates the annual gains for treasuries around the world at $220bn, or 9 per cent of global corporate tax revenues. EU countries where the new framework is now set to come in to force will also enjoy the possibility of applying a top-up tax to companies that are part of the same group — if other jurisdictions in which they operate do not apply the minimum 15 per cent rate. More than 4,000 large multinationals fall within the scope of this potential future top-up tax in the EU — an additional incentive for jurisdictions elsewhere to comply with the new rules. Looking ahead, no less important is the other half (or ‘Pillar 1’) of the 2021 agreement, covering the reallocation between jurisdictions of taxing rights of the largest multinationals. This is about ensuring that these mega-firms pay tax wherever they generate their profits. Last October, the OECD inclusive framework published a text of the multilateral convention needed to implement Pillar 1, reflecting the broad consensus achieved so far among members. It’s essential that — in line with the agreed, updated timeline — 2024 also sees a successful conclusion to the discussions on the few remaining open issues and the signature of this convention. This will allow us to move forward and to deliver the full benefits of this common path towards fair taxation. More

ISTANBUL (Reuters) – Turkey’s larger-than-expected minimum wage hike, which impacts some 7 million workers, is expected to push already elevated inflation even higher in the coming months, economists and sector officials said.Labour Minister Vedat Isikhan said on Wednesday the monthly minimum wage will be 17,002 lira ($578) in 2024, a 49% increase from the level determined in July and a 100% hike from January.Economists said the wage hike was set to cause a medium-term deterioration in the outlook for inflation, which was already expected to hit around 70%-75% in the first half of 2024. “A two step increase in the minimum wage would have been better both for employees and employers and would not cause a sudden spike in inflation. Prices will increase by at least 25%-30%. This will be reflected in retail prices,” said Berke Icten, the head of Turkey’s Shoes Manufacturers Association.The minimum wage is usually revised once a year but due to high inflation and a depreciating currency, the government raised it every six months in the last two years.Sector officials said the support provided to employers to ease the cost impact of the minimum wage hike on production was less than expected and would strain businesses.The central bank said in the minutes of last week’s monetary policy committee meeting that monthly inflation would rise in January, particularly due to the increase in minimum wage, but it is expected to slow in February and beyond.The central bank has raised its policy rate by 3,400 basis points since June and said it is committed to reining in inflation, which stood at 62% in November.An economist who spoke on condition of anonymity said the large minimum wage hike caused the market to question the government’s commitment to the disinflation programme.”A 40% to 50% increase in the minimum wage was expected, but the increase was at the upper limit. It is not possible to give a clear figure, but we are talking about a level that may have a significant impact on inflation,” the economist said.”This increase will distort the medium-term outlook for inflation. Since inflation will hit 70% in H1, if there is no other increase in the middle of the year, wages will be decreasing in real terms.”According to the median of a Reuters poll, inflation is seen falling to around 43% by the end of next year, declining slowly despite the tight monetary policy.($1 = 29.4430 liras) More

SINGAPORE/LONDON (Reuters) -The dollar fell across the board on Thursday with the Japanese yen, euro, and pound at their strongest against the U.S. currency in five months as bets the Federal Reserve will cut rates sharply in 2024 while avoiding a recession drove markets. The dollar index, which measures the U.S. currency against six rivals, fell to a fresh five-month low of 100.61. The index is on course for a 2.7% decline this year, snapping two straight years of strong gains. “With little news to trade over the holidays, markets have just continued doing what they were doing previously – taking Treasury yields lower, equities higher – and in effect pricing the kindest of soft landings that has consequently seen the dollar continue to sell-off,” said Nick Rees, FX analyst at Monex Europe. The day’s bigger mover was the Japanese yen. The dollar dropped as much as 0.82% to 140.66 yen, its lowest since July. The yen is particularly sensitive to moves in U.S. rates and the yield on the benchmark 10-year U.S. Treasury dropped nearly 10 basis points on Wednesday to its lowest since July. [US/] Because of moves earlier in the year, however, the dollar is still up over 7% on the yen in 2023. Public broadcaster NHK reported on Wednesday that Bank of Japan Governor Kazuo Ueda said he was in no rush to unwind ultra-loose monetary policy as the risk of inflation running well above 2% and accelerating was small. Markets are pricing in an 88% chance of a U.S. rate cut in March 2024, according to the CME FedWatch tool. Futures imply more than 150 basis points of Fed easing next year, though the route to that may be bumpy.”Markets are now looking for more than six full rate cuts from the Fed and no U.S. recession, which seems optimistic to us,” said Rees. “Though we could ultimately end up there, it would be very surprising if we did not see at least some hiccups in the process that aren’t currently priced in, something which should see the dollar snap back when markets pick up again in January.” While the Fed took an unexpectedly dovish stance in its December meeting, opening the door to rate cuts next year, other major central banks, including European Central Bank, retained their stance of needing to keep rates higher for longer. Markets though are still pricing in as much as 165 basis points of rate cuts from the ECB next year.The euro was last up 0.15% at $1.121, having touched a five-month peak of $1.11395 earlier in the session. The single currency is heading for a yearly gain of 3.7%, its strongest performance since 2020.Sterling rose to $1.2825, its highest since August. The pound is on track for a near 6% gain in the year, its biggest since 2017.The Swiss franc firmed to 0.8339 per dollar, its strongest level since January 2015, when the Swiss National Bank discontinued its policy of having a minimum exchange rate against the euro. The dollar’s weakness has also lifted emerging markets currencies. MSCI’s emerging market currency index touched a 20-month high and was on track for its strongest year since 2017 with yearly gains of 5%. More

Gains in megacap stocks in premarket trading kept the Nasdaq futures higher, while those tied to the S&P 500 remained subdued. Wall Street managed to eke out some gains on Wednesday as all three indexes oscillated between modest gains and losses throughout the session, but finished higher for the day. All the indexes are on course for monthly, quarterly, and annual gains. Focus will now be on the S&P 500. A closing above the January record close of 4796.56 would confirm the bellwether index entered a bull market after it hit the bear market closing trough in October 2022.Traders will be closely monitoring the weekly jobless claims due at 8:30 a.m. ET as it is the last catalyst to influence the direction of markets before the end of 2023.Optimism around early rate cuts with a possible soft landing for the American economy next year, and the artificial intelligence frenzy powered a rally in U.S. stocks in 2023, but fears of the economy slowing more sharply still persist as the full effect of higher borrowing costs filters through. “Goldilocks is being counted on to make an appearance next year, with inflation cooling but the US economy staying warm enough, though there is still a risk that the bears return to prowl again,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.Money markets have priced in an 86% probability that policymakers will reduce the Fed funds target rate by at least 25 basis points at the conclusion of their March policy meeting, according to CME’s FedWatch tool.At 6:13 a.m. ET, Dow e-minis were down 49 points, or 0.13%, S&P 500 e-minis were up 0.75 points, or 0.02%, and Nasdaq 100 e-minis were up 37.75 points, or 0.22%.Among individual stocks, U.S.-listed shares of Chinese companies rose in premarket trading as China’s blue-chip stocks staged their biggest jump in five months on Thursday on strong foreign inflows. Shares of Alibaba (NYSE:BABA) Holdings, PDD Holdings and JD (NASDAQ:JD).Com Inc advanced between 1.4% and 3.7%. More

NEW YORK (Reuters) – When Ted Pick takes over as the new CEO of Morgan Stanley next week, the three-decade bank veteran’s frank manner and steady hand will help him steer the firm through a dealmaking slump.Pick’s cool head in difficult situations is an asset, said Tom Glocer, Morgan Stanley’s independent lead director since 2017 and former Reuters CEO.”The great sin that gets people into super trouble at banks is the trader’s instinct to hold on (to losing positions)… Ted has that ability to be disciplined” and take action, Glocer said.Over a frenetic weekend in 2021, Pick worked with a team into the night to cut Morgan Stanley’s exposure to Archegos Capital Management, said Glocer. The family office’s collapse triggered huge losses at global banks.Morgan Stanley lost more than $900 million in the Archegos ordeal, in what was otherwise a bumper year for the firm. Credit Suisse and Nomura took hits of $5.5 billion and $2.9 billion, respectively, while Goldman Sachs and Deutsche Bank exited their positions relatively unscathed.Pick, 55, will be elevated at a time of heightened economic uncertainty and geopolitical tensions. Dealmaking conditions are improving, but activity remains dismal, posing challenges for the banking industry.  “He goes from boom to bust easily,” said a close friend, referring to Pick’s career navigating market cycles. The executive worked alongside Pick for more than 20 years and declined to be identified discussing internal Morgan Stanley business. Pick declined to comment for this story.The executive’s success on initial public offerings won him support from private equity investors, which helped when he handled Morgan Stanley’s stock buyback program during the global financial crisis.”He got along well with some shareholders and was also smart playing poker with the market when the firm did not have a lot of liquidity,” the former executive said.Morgan Stanley was saved in 2008 by a U.S. government bailout and emergency investment from Mitsubishi UFJ (NYSE:MUFG). As the tumult spread through the financial system, Pick convinced Roberto Mignone, founder of hedge fund Bridger Capital, to keep his money at the bank as a sign of confidence. The two have been close friends ever since.”Ted never forgot that,” Mignone said. “He’s an old school Wall Street guy that cares about long-term relationships.”Years later, Mignone gifted Pick a replica of the Titanic as a joking reminder of potential disasters.Billionaire and former Blackstone (NYSE:BX) executive Hamilton “Tony” James said the private equity giant chose Morgan Stanley to lead its 2007 IPO mainly because of Pick. The banker later advised Blackstone as its stock dove to $3 after the financial crisis, from a debut of more than $30.”He’s a truth teller, I was very impressed by that,” said James. “He tells you straight out when something is not going to work.”The banker once joined James for fly fishing in the Brazilian Amazon (NASDAQ:AMZN) in search of Peacock bass, even though he had never fished, nor met James’ dozen other friends on the trip.”He threw himself into it and was the life of the party,” James said.While Pick gained prominence for turning Morgan Stanley’s equities business into a global leader, he also tackled its challenges. The executive turned around its fixed income division, cutting 25% of employees, and helped raise capital when the bank was on the brink of collapse in 2008.He inherits a company that current CEO James Gorman, 65, built into a wealth management juggernaut since taking the helm in 2010. Australian-born Gorman will become executive chairman for a transitional period after Pick is elevated, and will also join the board of Disney next year.Steady revenue from the wealth unit has fueled a 214% climb for Morgan Stanley’s stock under Gorman’s leadership, compared with 126% at rival Goldman Sachs and 304% at JPMorgan Chase (NYSE:JPM) in the same period. At $152 billion, Morgan Stanley’s market capitalization exceeds Goldman’s by $28 billion.Pick “has a broad range of experience, and appreciates the value of wealth management,” said Colm Kelleher, the chairman of UBS Group, who preceded Pick as president of Morgan Stanley and left in 2019.The new CEO will present his first quarterly earnings in mid-January and give a strategy update that will be closely scrutinized by investors. His debut as CEO follows a 27% decline in investment banking revenue for the third quarter.LOW PROFILEWhile Pick holds one of the biggest jobs in finance, he keeps a low profile. He tends to celebrate birthdays privately with his wife and two daughters, ducking plans for larger gatherings, said Mignone.Despite his busy schedule, Pick enjoys attending his daughters’ school events and sports matches, his friends said. The incoming CEO is also known to be a foodie who is always willing to try new cuisines.A fan of the New York Rangers ice hockey team, Pick prefers to buy his own tickets and attend games with family instead of entertaining clients. The executive lives in New York’s Upper East Side and spends vacations at his house in Martha’s Vineyard.In a break with Wall Street tradition, Pick’s competitors for the top job — executives Andy Saperstein and Dan Simkowitz — will stay on with expanded roles. Both will get $20 million bonuses if they stick around for at least three more years.Gorman, meanwhile, may remain for up to a year to help with the transition. Rob Kindler, the global chair of mergers and acquisitions (M&A) at law firm Paul, Weiss, Rifkind, Wharton & Garrison, welcomed the arrangement.”James is there because employees and stockholders wanted him to be there,” said Kindler, who previously ran M&A at Morgan Stanley. “But I really don’t think Ted needs any handholding. He is ready.” More