Aurelia Butler

US policy uncertainty has rippled through rate-setting meetings across the world, as central bankers try to work out what a global trade war means for monetary policy. Stagflation fears are rising on the back of Donald Trump’s tariffs. And threats to central bank independence abound. Economics commentator Chris Giles, writer of the Central Banks newsletter, will join the FT’s Monetary Policy Radar reporters Elettra Ardissino, Joel Suss and Andrew Whiffin for a live Q&A on Wednesday May 7 at 10am ET/3pm BST.To take part, leave your questions in the comments section below this story. You can also endorse queries you would most like the experts to tackle. They will respond to readers in the comment field when the Q&A goes live. Add the event to your calendar here. More

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This article is an on-site version of our Unhedged newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGood morning. Warren Buffett announced over the weekend that he will step down as CEO of Berkshire Hathaway at the end of this year. Unhedged has plenty of thoughts on Buffett’s legacy, and will share them in the coming days. For now, let’s just raise a glass (or a mug, if you’re reading this at publication time) to the Oracle of Omaha. Email me: [email protected]. US jobs and market recoveryAfter a (deceptively) negative GDP print and a string of dire sentiment readings, there was a lot of market anxiety surrounding Friday’s jobs report. If the April numbers came in below expectations, it would be the hardest evidence yet that uncertainty and tariffs are taking their toll on the US economy. Didn’t happen: 177,000 jobs were added, well above the consensus forecast of 138,000, and the unemployment rate held steady at 4.2 per cent. The market rejoiced, with the S&P 500 up over 2 per cent. The 10-year Treasury yield bumped up 10 basis points as investors paired back expectations for Fed cuts.Indeed, the monetary policy implications are key. On Friday, markets went from betting on four 25 basis point cuts by year’s end to just three, as it looks like the labour market is not wilting in the current rate environment. That gives the Fed room to focus on inflation. The jobs report’s wage growth reading came in lighter than expected, too, only rising 0.2 per cent month-on-month. Standing pat on rates looks like the right decision. In this uncertain climate, it is tempting to be a bear about every single economic reading. And, in all honesty, there was a lot in the report to dislike. March and February’s readings were downgraded by 58,000 jobs in total. That brings the three month average down to 133,000. This may seem strong enough, but remember that the US labour market has grown a lot in recent years, and as such we may be below break-even jobs growth. Also, according to David Rosenberg at Rosenberg Research, around 40 per cent of the headline increase came from the “birth-death” model, the estimate of jobs created by new business formations and jobs eliminated by firm closures. The birth-death model has been a little off since 2020 — and was responsible for a historically large revision last year. Rosenberg reckons that, accounting for a birth-death skew and the downward revisions, April’s payroll report actually showed a decline of 11,000 jobs. But it is very hard to know how off the birth-death model is. But there were some real bright spots in the report, too. Over half of the job growth came from cyclical industries (private, excluding healthcare) — particularly warehousing, which could be a side effect of the recent surge in imports. 518,000 people entered the labour force, even with low migration. That suggests optimism about work prospects. And, despite concerns over Doge’s impact on the federal government, the rate of federal job losses slowed last month, and was revised down for March:On balance, Friday’s report was good news. Like the GDP report, it shows the US economy is standing strong. Yet, we are still on the precipice. The worst of the tariffs have not hit yet, and still could. Until they do, employers seem to be OK with growing their work force. That could change.ChinaChina is apparently open to trade talks with the US, and Trump is signalling flexibility on tariffs, too. If the signals reflect genuine intent, this is undoubtedly good news. But Unhedged is a bit sceptical on both fronts. Despite appearing open to negotiations earlier this year, ever since “liberation day” the Chinese government and the Chinese people have expressed determination to stand their ground; Trump and his trade adviser Peter Navarro have explicitly signalled unwillingness to negotiate with China in the past. But if China is softening its position, the most likely reason is that its economy is wobbling, while the US enters the tariff fight on the front foot (see above). According to official statistics, China’s economy grew 5.4 per cent year-over-year last quarter — above expectations and higher than China’s goal of 5 per cent. Chinese macroeconomic data should be taken with a grain of salt, however. Other indicators suggest softness. The Li Keqiang index, a popular proxy for China’s GDP that uses indicators ranging from train schedules to bank lending, expanded at 4.3 per cent year-over-year last month. Another alternative (and our favourite), the Capital Economics China Activity Index, put the growth rate at just 3.9 per cent. Whatever strength there was may have come from a surge in exports, as buyers in the US rushed to import Chinese goods ahead of tariffs. But to replace US demand in the coming months, China will need to find new buyers at home and abroad. That will be hard. Europe might erect its own trade barriers, and Chinese domestic consumption has not shown signs of life. Low foreign demand risks adding to China’s deflationary woes, too. China’s inflation looked better last month, with core CPI jumping above 0 after a month in negative territory. But if the manufacturing sector cannot find new buyers, domestic supply will increase and prices will drop further.Recent soft data has been even weaker. Consumer confidence is in the dumps. And China’s Caixin manufacturing PMI, out last week, showed that manufacturing contracted in March, driven by a collapse in the new orders reading, particularly new export orders. Inventory levels fell, too, in a sign that businesses are not feeling optimistic:For the past 9 months or so, China boosters have waved away these concerns, buoyed by the promise of economic stimulus. But the stimulus has been more of a pop gun than a bazooka. And it looks like even the pop gun could go silent soon. According to Zichun Huang and Leah Fahy at Capital Economics, the budget deficit grew by 40 per cent annualised in the first quarter. That is double the planned rate of fiscal expansion for this year, they write. In other words, China will need to borrow more — much more — than planned to keep the current level of stimulus, and even that has not been particularly effective. Given the government’s reluctance to expand borrowing in the past, more stimulus could be a step too far.Unhedged and various other commentators have observed that China may be in a better political position than the US for prolonged negotiations. Economically, however, it holds fewer cards. One Good ReadChinese diversification.FT Unhedged podcastCan’t get enough of Unhedged? Listen to our new podcast, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here.Recommended newsletters for youDue Diligence — Top stories from the world of corporate finance. Sign up hereFree Lunch — Your guide to the global economic policy debate. Sign up here More

Welcome to FT Asset Management, our weekly newsletter on the movers and shakers behind a multitrillion-dollar global industry. This article is an on-site version of the newsletter. Subscribers can sign up here to get it delivered every Monday. Explore all of our newsletters here.Does the format, content and tone work for you? Let me know: [email protected] One thing to start: Consultant BCG has published its latest annual report on the state of the global asset management industry. Global assets under management grew 12 per cent year-on-year to a record $128tn in 2024. But the report also exposed the vulnerability of the industry: market performance drove 70 per cent of the $58bn in global revenue growth last year — versus 30 per cent from net inflows.In today’s newsletter:Warren Buffett to step down from Berkshire HathawayTrump’s top economic adviser struggles to assuage investors’ nerves US economy contracts in the first quarter Warren Buffett to retire from Berkshire HathawayWarren Buffett, the world’s most famous investor, is stepping down from the helm of Berkshire Hathaway after six decades.The 94-year-old — known as the “Oracle of Omaha” — said he would propose that Greg Abel take over the leadership of Berkshire at the end of this year, write Amelia Pollard and Stephen Foley.The death of his longtime friend and business partner Charlie Munger in 2023 increased speculation about when Buffett might step down. On Saturday afternoon in Omaha, the answer finally arrived.Abel, 62, whom Buffett had previously named as his eventual successor, is vice-chair of Berkshire’s non-insurance operations.Buffett said he had not given Abel or Berkshire’s other directors any advance notice, making the announcement at the very end of a historic 60th annual shareholder meeting in Omaha, Nebraska.Although Buffett is among the country’s richest individuals with an estimated net worth of about $168bn, he has maintained a folksy aura, attracting shareholders annually to Omaha for a weekend of festivities. He still only takes home a nominal salary of $100,000, as he has done for more than 40 years.Buffett has amassed thousands of devotees over the years for his investment prowess. According to research by LCH Investments, gains made by Berkshire Hathaway under Buffett’s leadership were 7.8 times greater than that made by the highest-ranked hedge fund manager. Berkshire’s annual general meetings tend to attract tens of thousands of people from around the world eager to hear his advice. Shareholders who return year after year develop friendships and networks, making the annual event a sort of reunion.Buffett’s decision to step down from the financial juggernaut certainly marks the end of an era, leading him to quip at the AGM: “That’s the news hook for the day.”Investors meet Trump’s top economic adviser Investors dislike uncertainty. The tariff flip-flopping in the US is a case in point, causing a sharp market sell-off that has left investors rattled.But when hedge funds and major asset managers recently met Stephen Miran, the top economic adviser to US President Donald Trump, nerves were hardly soothed, write Kate Duguid, Costas Mourselas, Katie Martin and Demetri Sevastopulo.Miran, chair of the Council of Economic Advisers, convened with top hedge funds and other major investors at the White House during which tariffs and markets were discussed. Two people in the meeting described Miran’s comments on the topics as “incoherent” or incomplete.Others, though, were more optimistic. Another person familiar with the event was encouraged by the administration’s approach to tax cuts and deregulation. About 15 people attended the gathering, including representatives from hedge funds Balyasny, Tudor and Citadel, as well as asset managers PGIM and BlackRock.The White House said the “administration officials maintain regular contact with business leaders and industry groups about our trade and economic policies.” It added that “the only interest guiding the administration and President Trump’s decision-making, however, is the best interest of the American people”.Trump’s trade policies have triggered intense volatility in US equity and debt markets, with US government bonds selling off sharply after the president’s April 2 announcement of steep “reciprocal” tariffs.Other countries are now baring their teeth. On Friday, Japan’s finance minister publicly identified the country’s more than $1tn holdings of US Treasuries as a “card” in its trade negotiations with the Trump administration. China is also quietly diversifying from US Treasuries, as investors become increasingly anxious about US government bonds.Chart of the weekThe US economy contracted by an annualised 0.3 per cent over the first quarter, as companies in the world’s largest economy responded to Donald Trump’s trade war by rushing to import goods, writes Claire Jones.The fall in the GDP reading — the first since 2022 — was worse than economists’ most recent forecasts and compared with the 2.4 per cent rise for the fourth quarter.It was largely the result of companies’ rush to buy goods from abroad ahead of the US president’s sweeping tariffs, with imports rising at an annualised rate of 41 per cent.Many analysts argued that the headline GDP number was principally brought down by an extraordinary increase in the US trade deficit, rather than reflecting underlying trends.Morgan Stanley economists said the surge of imports ultimately contributed to inventories, consumption and investment — positive factors in calculating GDP that were not fully reflected in Wednesday’s data.“In effect, the imports don’t fully appear in the spending parts of the GDP accounts and therefore exaggerate GDP weakness,” they said.Some economists focus instead on other measures, such as investment and consumer spending.Wednesday’s figures showed that the sum of consumer spending and gross private fixed investment increased 3 per cent in the first quarter, up on the previous rate of 2.9 per cent.In a post on his Truth Social network, Trump suggested the figures had “NOTHING TO DO WITH TARIFFS”.Blaming former president Joe Biden, he added: “I didn’t take over until January 20th . . . When the boom begins, it will be like no other. BE PATIENT!!!”Five unmissable stories this weekBlackRock’s shareholders are being urged by proxy adviser Institutional Shareholder Services to vote against chief executive Larry Fink’s pay at the group’s upcoming annual meeting.Capital Group and KKR are aiming to launch new funds spanning private loans, corporate buyouts, and infrastructure and property deals in the latest tie-up between big traditional asset managers and private capital firms.Ministers in the UK are using strong-arm tactics to pressure pension funds to honour a proposed “voluntary” commitment to invest more in UK assets, according to industry figures. The Conservatives say the move smacks of “desperation”.Franklin Templeton is aiming to list $1.7bn of Uzbekistan’s state assets on international markets within a year, as part of a plan by the US investment group to put the central Asian country on the map for global investors. The late Pope Francis grappled with the opaque finances of the Vatican, a significant task that leaves a forbidding challenge for his successor.And finallySelf-Portrait, 1882-83 by Edvard Munch More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The head of the world’s biggest diamond company has expressed his confidence that the US will remove tariffs on the precious stones that he believes are of “no benefit” to the country.Al Cook, chief executive of De Beers, told the Financial Times there were “no US diamond mining jobs to protect” and that the company had held discussions with several governments about the matter.Tariffs were of “no benefit” to the US and “would purely be a consumption tax on the American consumer,” he said. “There would be no jobs created.”The US is the world’s largest market for diamond jewellery, accounting for about half of global demand, but has no domestic mining or known commercial deposits of the stones.The tariffs announced last month by President Donald Trump have thrown the diamond industry into turmoil and briefly brought trade in the gems to a “standstill”, according to market participants.The World Diamond Council, an industry group, warned today that $117bn in annual revenues as well as 200,000 American jobs in the jewellery sector would be at risk if the US did not remove tariffs on the stones.“Tariffs on diamonds would function as a consumption tax, raising prices on engagement rings, anniversary gifts, and other jewellery,” the group said in a statement on Monday that urged the White House to exempt the gems from the new import duties.Diamonds entering the US are subject to the 10 per cent tariff on all imported goods, and face a variable country-based levy that has been suspended for 90 days.Many raw materials were excluded from the tariffs, but diamonds were not — adding to the pain for an industry grappling with a downturn in demand and competition from synthetic diamonds, which can be manufactured at a fraction of the cost.De Beers chief executive Al Cook said: ‘People are confident enough that in the long term, diamonds will be exempted from tariffs’ More

As Donald Trump launched his trade war on April 2, billionaire Republican donor Ken Langone knew it would decimate Home Depot, the company he helped build into America’s best-known DIY store. His gloom deepened as Trump followed up his “liberation day” with a tariff regime on China so steep that many experts said it would amount to a de facto embargo on goods from the world’s biggest exporter. The reaction was twofold. First, capital markets delivered a withering verdict, with a sharp sell-off in US Treasuries, the dollar, and global equities wiping out trillions of dollars of market value and raising fears of a financial crisis. The bond market moves alarmed Trump, who appeared to be on the cusp of a crisis like the one that toppled Liz Truss after a month-and-a-half as UK prime minister. Then corporate America swung into action. From Silicon Valley to the shale oilfields, from JPMorgan’s boss Jamie Dimon to Apple’s Tim Cook, some of the world’s most powerful business leaders launched an urgent campaign — sometimes in public, but mostly in private — to pull Trump back from the brink. It worked — in part. In recent weeks, Trump has caved in on some reciprocal tariffs, exempted most of Canada’s and Mexico’s goods from duties, offered huge carve-outs for carmakers, and signalled that he would bail out America’s agricultural producers. Equity markets have recouped their losses.Brian Ballard, a top GOP lobbyist, described a “whirlwind” in the US capital as companies rushed to influence the right people close to Trump. Some executives played on the personal relationship they struck with Trump after his election win, during trips to Mar-a-Lago or to his lavish Washington inauguration in January — which many of them personally funded.“A lot of the tariff carve-outs, like the one for electronics, didn’t come from broad industry lobbying campaigns. It seemed more like Trump was hearing directly from executives, like Tim Cook,” said a Washington corporate adviser.Langone suggested Trump’s tariff war had awoken some of corporate America powerful beasts, who now had demands.“He’s rattled cages,” Langone told the Financial Times last month. “Now he’s got to go feed the gorilla.”Among the lessons of that lobbying campaign is that private persuasion is more effective than public coercion — and the president cares what Main Street thinks. Global auto executives learned quickly. “Liberation day” hit their sector hard, as Trump hammered tariffs not just on adversaries such as China, but also key allies including Germany and Britain.Even after Trump announced a 90-day reprieve for most countries — China excluded — foreign-made car imports to the US still faced a 25 per cent levy. Export powerhouses BMW, Mercedes and VW decided they could no longer rely on German diplomats or European politicians and needed to take matters into their own hands.On April 18, senior executives from the three German automakers met Trump at the White House in a private meeting to seek relief. Bosses at the Big Three — Ford, Stellantis, and GM — also stepped up their own lobbying efforts. Stellantis chair John Elkann warned that “American and European car industries are being put at risk” by Trump’s trade policy — a rare public intervention. On Tuesday, Trump granted some relief to the automakers, sparing car parts from multiple tariffs and offering rebates to offset the cost of some of the levies that remained. It was a partial victory — but it also allowed Trump to visit Michigan last week to tout his rescue package for the auto sector, even though some tariffs remain. “We give them a little time before we slaughter them if they don’t do this right,” Trump told supporters.Other Trump allies from corporate America, meanwhile, were also urging him to step back from the brink, warning of a catastrophic impact on sectors the president had vowed to defend. Harold Hamm: ‘I did talk to Trump about what it would do to [oil] prices, particularly in different parts of the country’ More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.It has long been an EU aspiration that the euro would rival the US dollar for global dominance, or at least for monetary sovereignty at home. Now, the self-sabotage of Donald Trump’s Washington is a golden opportunity to realise the dream — if European leaders can overcome their political timidity over doing what it takes to grasp it.True, as in many areas of economic policy, it is unclear what the Trump administration’s goals are for the greenback. Some of its members think the dollar’s attraction — the “exorbitant privilege” of guaranteed cheap credit from the rest of the world — is in fact an exorbitant burden that, by driving up the currency, depresses American manufacturing. Others, notably Treasury secretary Scott Bessent, insist the US is committed to a strong dollar policy.There is also a push to corner the nascent market for cross-border payments via dollar stablecoins, creating another captive source of US Treasury holdings.The administration may not have made its mind up, but investors are increasingly making up theirs. Trump’s “liberation day” tariffs were followed by a highly unusual market reaction to a rise in global risk: a sell-off in both US Treasuries and in the dollar more broadly. At least for now, global money managers are no longer treating the greenback as the ultimate haven.Confidence in the dollar has taken a knock from Trump’s tariff policy, but also from his team’s airing of bizarre financial policy ideas. These include forced conversion of Treasury bonds or charging fees for the privilege of lending to the US government. The administration’s aggression against the rule of law makes all legal claims uncertain, including financial ones.Can European leaders hear the markets’ scream for help in the form of an alternative asset? If ever the time was ripe for a “Hamiltonian moment”, in which Eurozone countries issued a large and permanent stock of common debt to gradually replace the fragmented landscape of national sovereign bonds, this is it. Global investors would lap up a large-scale and liquid Eurozone safe asset.The politics for this, needless to say, are not in place. But simpler steps could be taken in short order to exploit US errors as a European opportunity. First, put off the scheduled paying down of pan-EU debt taken out to bankroll the post-pandemic “Next Generation EU” fund. This debt stock, meant to decline over the 30 years to 2058, should be rolled over indefinitely instead.Second, consolidate the various stocks of debt already issued with the joint backing of EU member states. A single issuer and set of bonds could over time replace the jigsaw of national bonds, as well as cover all new ones, such as those for the mooted pooling of €150bn in defence spending.Third, the EU could pre-fund future spending. Over the next two years, member states will negotiate a seven-year budget of well over €1tn. Borrowing ahead of time could be calibrated to maintain a stable, large total EU debt stock. Such initiatives would help satisfy demand for holding large amounts safely in euros and give assurance that the EU was committed to a deep and liquid euro asset market for the long run. That should lower European borrowing costs just as member states gear up for more investment in defence and industrial policy.The change in relative safety of the dollar and euro assets is not the only driver favouring the latter. Historically, global businesses’ choice of invoicing and funding currencies in international trade have preceded countries’ choice of reserves denominations. Ask yourself this: if you stopped trading with the US, would you need to hold its currency? And if Trump eliminates everyone’s bilateral surplus with the US, how would they keep accumulating net claims on US assets? In other words, the global trade outlook matters for currency questions, too. Europe can use its agenda to deepen trade with the rest of the world to boost the euro’s attractiveness. That requires not just taking the agenda seriously — passing the trade deal with the Mercosur bloc, for example. It also demands offering financial tools to encourage trading in euros, from swap lines with trade partners to a digital currency designed to work for cross-border corporate trade. Unifying stock markets and a pan-EU so-called “28th regime” of corporate law should help boost risk capital in euros.These measures are mostly well known, but political impetus has been lacking. What is needed is for leaders to see their connection to the geopolitical goal of autonomy from US caprice, to understand the urgency [email protected] More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is founder and chief investment officer at Gramercy Funds ManagementTariff disputes, geopolitical tensions and now a potential US recession. It hardly seems the time to seek out investments in emerging markets given the risks of collateral damage to more vulnerable economies. Yet this uncertainty isn’t a reason to flee but one to lean in when the asset class is approached properly. Emerging market credit offers one of the best ways to capitalise on volatility rather than be scuppered by it. The key is not to fall for the “index trap” in public credit markets by eschewing the passive following of benchmarks.For years, emerging markets have frustrated investors. Why? Because conventional index-based strategies are blunt instruments in an era that demands precision. Not all emerging markets — or sectors — are created equal. A bet on Mexico’s auto parts industry carries entirely different risks from a collateralised loan in dollars to a Turkish corporate.Yet indices bundle winners and losers together, often with disastrous timing. Consider the impact of sharp falls in the value of Russian and Ukrainian debt in 2022 after the invasion of the latter. Or Argentina’s nearly 20 per cent weighting in 2001 in the JPMorgan Emerging Market Bond Index prior to the country’s debt default later that year. Argentine bonds dropped almost 70 per cent and resulted in a material loss to investors who were compelled by the index to hold such a large weighting.Such pitfalls can be avoided with a “barbell approach” that focuses on high conviction public credit trades and strongly secured private credit. Private credit is a proven asset class that Morgan Stanley estimates has expanded to about $1.5tn as of 2024. It is now a compelling emerging markets opportunity too, with high yields and collateralised loans with senior levels of security. In many ways, private credit in emerging markets looks as if it is in a similar stage of development to lending in developed markets 15 years ago. This market has subsequently boomed, delivering strong returns.Dollar-denominated, direct lending also avoids the risk of negative currency swings, while hard collateral such as factories, headquarters or personal real estate provide downside protection, mitigating default risk. Collateral drives willingness to pay and proper outcomes, even in duress. (The owner of a family conglomerate, for example, is going to be highly motivated to meet obligations if the family villa, owned for generations, is on the line.) Undoubtedly, there are concerns about a slowdown in global growth. But individual countries and borrowers warrant a deeper look. Despite all the noise around Mexico and tariffs, the peso has held up, signalling continued confidence in the country. It is up about 5.5 per cent against the dollar in the year to date and about 2.6 per cent since US President Donald Trump’s so-called “liberation day” announcement of tariffs. President Claudia Sheinbaum has kept a cool head in negotiations with the Trump administration. This could result in reduced tariffs or expanded “carve-outs” for some industries, allowing the “nearshoring” boom in locating production near the US to continue.Elsewhere, eastern Europe, with Germany increasing defence spending and economic activity, stands to gain from growing capital flows and supply chain diversification. And the Mercosur bloc’s trade agreement with the EU offers economic resilience to Latin American exporters.In addition, consider that international banks in emerging markets never really reversed their retrenchment since the 2008 global financial crisis, leaving small- to mid-size corporates starved for capital. No matter the state of tariffs negotiations, US inflation or stock market volatility, well-structured credit remains in high demand: there will still be Brazilian agriculture companies, for example, which need working capital collateralised by inventories or family conglomerates in eastern Europe willing to pledge assets and cash flows to secure needed working capital. With very tight legal covenants for enforcement of payment, investors can meet these needs and gain exposure to dynamic, fast-growing industries in emerging markets in a secure way.And more generally, by pairing high-quality public and private credit in a barbell investment strategy and using market swings for liquidity, investors cannot just protect themselves in uncertainty, they can also thrive. Big investors are already deploying this hybrid strategy in developed markets. Why not take this better approach to investing in emerging markets, too?Gramercy is an investor in emerging market public and private credit More