Aurelia Butler

Today’s top storiesChina’s powerful spy agency attacked recent diplomatic overtures from the US as mixing engagement and containment, hinting that a possible meeting of the two countries’ presidents in November will be in jeopardy if Washington does not show more “sincerity”. Chinese lenders stepped in with billions of dollars for Russian banks hit by western sanctions, according to data analysed for the FT. The moves by four of China’s biggest banks are part of Beijing’s efforts to promote the renminbi as an alternative global currency to the dollar.Ukraine replaced its defence minister in the biggest government reshuffle since the Russian invasion. Russia pounded Ukraine’s ports ahead of today’s talks between the Russian and Turkish presidents about restarting the export of grain via the Black Sea. Ukraine also claimed Russian drones had crashed on Romanian territory.For up-to-the-minute news updates, visit our live blogGood evening.There will be a recession, it’s just going to come later.That’s the gloomy message for many countries from a new aggregation of global forecasts published today by Consensus Economics. The consultancy said persistently high interest rates in major economies would lead to growth slowing in 2024 to 2.1 per cent after a (better than expected) 2.4 per cent in 2023, thanks to strong consumer demand and labour markets.Economists’ caution is based on the belief that persistently high demand will keep inflation higher for longer, forcing major central banks to keep borrowing costs high well into next year.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Recent national data and policy moves however have highlighted key differences between the US, China and Europe. In the US, Friday’s jobs report suggested the world’s largest economy was cooling, giving the Federal Reserve room to hold rates steady at its September meeting. Investors are now dreaming of a “Goldilocks” scenario in which inflation comes under control without causing a recession, after the data showed an uptick in the unemployment rate, subdued jobs growth and wage rises back at pre-Covid rates.This is in strong contrast to the growing pessimism around China, the world’s second-largest economy, which is beset by structural problems and a downturn in manufacturing and exports. Its problems are also reverberating across Asia. In South Korea for example, Asia’s fourth-biggest economy and seen as a bellwether for the region’s tech supply chain which has helped support global growth for decades, exports and factory activity are falling. Japan and Taiwan are suffering similarly.On the positive side, investors today appear to have taken heart from Friday’s moves from Beijing to prop up its ailing property sector.In the eurozone, a better than expected performance this year means the European Central Bank is also likely to keep rates higher for longer. ECB president Christine Lagarde in a speech today offered no clues on the next move but said the bank must do more to explain why its forecasts are sometimes wrong and accept the limitations in its predictions or risk a further erosion of public trust.Germany, the bloc’s largest economy, remains a concern: new export data today added to signs of a poor start to the third quarter. Europe is also facing a stickier inflation problem than the US.In the UK, where the Bank of England is also expected to keep interest rates higher for longer, there are at least grounds for optimism after radical data revisions last week shattered the prevailing economic narrative. The changes, notes economic editor Chris Giles, completely alter analysts’ and policymakers’ thinking, not just about the UK’s comparative growth performance, but also about productivity, inequality and how society has changed since the pandemic.Need to know: UK and Europe economyBrexit and pandemic-related labour shortages have pushed up wages across the UK. FT reporters examine why some sectors are affected more than others.Why is famously rainy Britain at risk of running low on water? A new Big Read explains.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Commentator Martin Sandbu says the EU is poised for a giant leap towards further integration with pivotal decisions on expansion, financing and how decisions are made.Need to know: Global economyIndia is grappling with geopolitical tensions ahead of this weekend’s G20 summit, especially over the use of language on the Russia-Ukraine war that has been opposed by Beijing as well as Moscow. The absence of Chinese president Xi Jinping is a blow to the G20’s status as a global leadership forum.Demonstrations continued for a third week in Syria as protesters called for the removal of president Bashar al-Assad. Their anger was originally sparked by the slashing of fuel subsidies but the calls have morphed into larger anti-regime protests.Eccentric former TV commentator and “anarcho-capitalist” Javier Milei, the frontrunner in Argentina’s presidential race, is still in the ascendancy, and appears to be winning over significant chunks of the population.With vast natural resources and proximity to the US, Canada ought to be one of the world’s economic superpowers. Why is it underperforming?Need to know: businessUS biotech Roivant Sciences distanced itself from its founder and presidential contender, Vivek Ramaswamy, after he alleged that the Food and Drug Administration was “corrupt” and said it should be gutted.US financial editor Brooke Masters examines how American drug prices affect the rest of the world. The country is responsible for almost half the world’s medicine spending and US R&D accounts for two-thirds of the OECD total.BMW chief Oliver Zipse warned that the forthcoming EU ban on combustion engines was pushing European carmakers into a deadly price war with Chinese rivals. China’s frenzy of battery-plant building is expected to reinforce its position as the world’s leading EV maker. Read more in our battery revolution series.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

The World of WorkThe UK is now the only developed country where more people have continued to drop out of the workforce since the pandemic — and an increasing number of them are young, writes FT columnist Camilla Cavendish. Here’s how some bosses are helping staff through long-term illness.Virtual reality may be common when it comes to training pilots but in other sectors companies are still trying to figure out how VR can help in learning and development. Read more in our special report: Upskilling.UK banks are hardening their stance on working from home, arguing it is sapping productivity. The London office of Goldman Sachs is facing a £1mn lawsuit over claims it is a “dysfunctional” workplace.Networking is seen as an essential tool to getting on but a nakedly self-serving approach is likely to put people off, writes Miranda Green.Corporate diversity programmes are increasingly under attack in the US from conservative campaigners: law firms are the latest battlegrounds. Some good newsWhile kidney transplants are the definitive treatment for end-stage renal disease, they are limited by organ availability and post-transplant complications. US researchers have come up with a potential alternative: an artificial kidney that could also free patients from the need for dialysis. More

ISLAMABAD (Reuters) – Saudi Arabia will invest up to $25 billion in Pakistan over the next two to five years in various sectors, Pakistan’s caretaker Prime Minister Anwaar-ul-Haq Kakar said on Monday, adding his government would also revive a stalled privatisation process. The South Asian nation is embarking on a tricky path to economic recovery under a caretaker government after a $3 billion loan programme, approved by the International Monetary Fund (IMF) in July, averted a sovereign debt default.Kakar, speaking to journalists at his official residence, said Saudi Arabia’s investment would come in the mining, agriculture and information technology sectors, and was a part of a push to increase foreign direct investment in Pakistan. There was no immediate response to a Reuters request to the Saudi Arabian government for comment on Kakar’s remarks.If confirmed, a series of investments worth $25 billion would be the biggest ever by the kingdom in Pakistan.A longtime ally of Riyadh, Pakistan is dealing with a balance of payments crisis and requires billions of dollars in foreign exchange to finance its trade deficit and repay its international debts in the current financial year. Kakar did not specify projects Riyadh was looking at for investment, but last month Barrick Gold (NYSE:GOLD) Corp (ABX.TO) said it was open to bringing in Saudi Arabia’s wealth fund as one of its partners in Pakistan’s Reko Diq gold and copper mine.Pakistan’s untapped mineral deposits are conservatively valued at about $6 trillion, said Kakar, whose government is meant to be an interim set up to oversee national elections scheduled for November but are expected to be delayed by months.Barrick considers the Reko Diq mine one of the world’s largest underdeveloped copper-gold areas and it owns a 50% stake, with the remaining 50% owned by the governments of Pakistan and the province of Balochistan.Kakar also said his government would push to complete two privatisation deals, probably for state-run power sector entities, in the next six months, and would also look to privatise another government owned enterprise outside the energy sector.Pakistan’s state owned enterprises have long been an area of concern with bleeding financials adding to financial stress. Recently Pakistan added struggling state-run Pakistan International Airlines to the privatisation list again. The privatisation process has largely stalled in the country with selling of state assets a politically sensitive issue that many elected governments have shied away from. More

LONDON (Reuters) – Central banks across major developed and emerging economies took a breather in August with the pace and scale of interest rate hikes shifting another gear lower as diverging growth outlooks and inflation risks muddied the outlook ahead.August – often a more quiet month for monetary policy decisions – saw only four of the central banks overseeing the 10 most heavily traded currencies hold rate setting meetings. Two of them – Norway and United Kingdom – delivered a total of 50 basis points of rate hikes in the lowest such tally since January. Australia and New Zealand kept their benchmarks unchanged, Reuters data showed. The moves compare to three hikes across six meetings in July, and takes the total 2023 year-to-date tally for G10 central banks to a total of 1,075 bps across 33 hikes.But the outlook ahead was murky, with surprisingly resilient U.S. data contrasting with disappointing numbers from China and much of Europe and markets searching for clues when major central banks could embark on easing rates. “This downbeat growth story does have an upbeat consequence; inflationary pressure should ease further,” said ING’s global head of macroeconomics Carsten Brzeski. He added that while this was likely not enough to bring inflation back to target for many central banks, it should be low enough to see the peak in policy rate hikes.”Central bankers would be crazy to call an end to those hikes officially; they don’t want to add to speculation about when the first cuts might come,” Brzeski said. Across developing economies, more evidence emerged that the turn of the rate cycle was well established in some regions. Brazil’s central bank kicked off its rate-cutting cycle with a more aggressive-than-expected 50 basis point rate cut. Latin America’s biggest economy followed in the footsteps of Chile in July and smaller peers Costa Rica and Uruguay in recent months. China was the second country out of the 18 central banks in the Reuters sample of developing economies to lower interest rates in August, of which 12 held rate setting meetings. However, other developing nations were far from being able to cut rates, instead finding themselves battling currency weakness and stubbornly high inflation that forced policy makers into raising rather than cutting rates. Turkey delivered a super-sized 750 bps rate rise in August while Russia lifted its benchmark by 350 bps and Thailand added 25 bps. The year-to-date tally for emerging markets stands at 2,850 bps of tightening across 27 hikes – well below the pace and scale seen the 2022, where central banks in developing economies delivered 7,425 bps across 92 rate increases.On the easing side, emerging markets banks delivered 220 bps of cuts since the start of the year across five reductions, the data showed. With major central banks expected to maintain restrictive policy through 2024, room for manoeuvre for many developing economies might be limited, analysts predicted. “Major central banks will maintain a restrictive policy stance through 2024,” said Madhavi Bokil, senior vice president strategy and research at Moody’s (NYSE:MCO). “Significant easing by emerging market central banks is unlikely with advanced economy central banks still battling elevated inflation, and uncertainty around the U.S. interest rate outlook.” More

Christine Lagarde has said the European Central Bank must do more to explain why its forecasts are sometimes wrong and accept the limitations in its ability to predict the future or risk a further erosion of public trust.The ECB president warned it would be hard for central banks to rebuild confidence after they were forced to rip up their forecasts for how inflation and growth would be affected by recent economic shocks, including the coronavirus pandemic and Russia’s full-scale invasion of Ukraine.“To rebuild confidence in expert institutions, we need to do a better job of conveying the uncertainty we face and the inherent challenge in conducting forward-looking policymaking in this environment,” Lagarde told an event in London. “Humility in how we communicate is key to fostering trust.” Since eurozone inflation surged to a record high of 10.6 per cent last year, more than five times the ECB’s target, Lagarde and her fellow rate-setters have put more emphasis on past inflation figures than its forecasts to decide monetary policy.Central banks faced “both a challenge and an opportunity” to persuade consumers and businesses that the recent high levels of inflation will not continue into the future, she said in a speech to the European Economics and Financial Centre on Monday. Core inflation, which excludes energy and food to give a clearer idea of the build-up of price pressures, fell in August to 5.3 per cent. But that remains close to its recent record high and the ECB has said it wants to see signs of a sustainable fall in underlying inflation towards its target before it stops raising interest rates.Lagarde’s comments came as the ECB prepared for its most finely balanced policy meeting in several years next week, with policymakers voicing diverging views on whether to raise its deposit rate for a 10th consecutive time, from the current level of 3.75 per cent, or pause in a bid to avert the increasing risk of recession. The ECB president gave little sign of which way she was leaning. But she presented two key reasons why there was an “urgent” need to “seize the moment in communicating more effectively: high inflation and high levels of attention on inflation”. The growth of social media and online news had made it “increasingly challenging” for central banks “to disseminate factual information”, she said, pointing to research finding false news spread about 10 to 20 times faster than facts on social media platform X, formerly Twitter.The ECB, like other major central banks, consistently underestimated how high inflation would rise as Europe’s economy reopened after the lifting of pandemic lockdowns and as Russia’s invasion of Ukraine sent energy and food prices soaring to record levels.“Even if these [forecast] errors were to deplete trust, we can mitigate this if we talk about forecasts in a way that is both more contingent and more accessible, and if we provide better explanations for those errors,” Lagarde said.As well as explaining its mistakes, she said the ECB had changed its forecasting process, such as by outlining a scenario analysis after both the pandemic and the Ukraine war and presenting sensitivity analyses on energy prices and wages.Under Lagarde, the ECB has also sought to use less technical language and to reach a wider audience beyond financial market specialists.The latest EU survey of citizens in May and June found that 40 per cent said they did not trust the ECB — an increase of 2 percentage points from earlier this year, but below the 46 per cent who said they did trust it. Lagarde said public confidence had been eroded by the recent high level of inflation, but the ECB needed to be “open about the limits of what we know, the areas where we have missed the mark, and what we are doing about it”. More

JERUSALEM (Reuters) -The Bank of Israel left interest rates unchanged on Monday citing signs inflation is easing, but its decision was overshadowed by a report – denied by the central bank – that its governor was set to announce he would not seek a second term.As expected, policymakers kept the benchmark rate at 4.75% for the second meeting in a row, its highest level since late 2006. It had paused at its July 10 meeting after raising short term borrowing costs at 10 consecutive meetings from April 2022, an aggressive tightening cycle that took the main rate from 0.1%. The central bank had earlier denied a report by one of Israel’s two main radio channels that Governor Amir Yaron would say on Monday that he will not seek to stay on when his current term expires at the end of the year. “The report this morning by Army Radio that the governor will deliver his decision today regarding the extension of his term is incorrect,” the Bank of Israel said. “As he has said until now, the governor will deliver his decision on extending his term around the (Jewish) holiday season.” The high holiday season this year is Sept. 16 to Oct. 7.The issue of whether Yaron will seek or be reappointed for a second term has loomed over financial markets for months. Them Israeli-born U.S. finance professor, who was nominated by Prime Minister Benjamin Netanyahu in 2018, has been critical of the economic impact of a plan by Netanyahu’s government to overhaul Israel’s judicial system. He has also clashed with lawmakers over sharp interest rate increases that have boosted bank profits while hurting mortgage holders.After keeping rates steady – a break with the U.S. Federal Reserve which raised rates in July – the central bank said economic activity remains strong, with a tight labour market. Inflation is broad and high but appears to be slowing.Many economists believe the hiking cycle is over and that the Bank of Israel will start rate cuts in 2024. The central bank said on Monday, however, that it still saw a real possibility of having to raise in the future “if the inflation environment does not continue to moderate as expected”. Israel’s annual inflation rate dropped to 3.3% in July from 4.2% in June, its lowest rate since March 2022 but above a government target range of 1-3%.”The tone of the statement was overall neutral but with one hawkish element: the ‘real possibility’ of further rate hikes reference was not yet removed,” said Citi economist Michel Nies, who sees a rate cut in early 2024.Part of the path of inflation depends on the shekel, which is at a 3-1/2 year low versus the dollar. The exchange rate, which the central bank has said has a pass through of up to 20% on inflation, has weakened more than 8% so far in 2023.It was down 0.5% to a rate of 3.815 per dollar in late afternoon trading.”The shekel’s depreciation in recent months is contributing to the increase in the inflation rate and the path of the exchange rate in the coming months will have an impact on the dynamics of inflation,” the central bank said.Israel’s economy meanwhile grew at a faster than expected 3.0% annualised rate in the second quarter from the prior three months. More

Plants and animals that have moved beyond their native habitats as a result of human activity are having a catastrophic global economic and environmental impact, a biodiversity body has warned in the first comprehensive assessment of “invasive alien species”.The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (Ipbes) estimated the annual economic cost at $423bn in damage caused to nature, human health and economic activities such as farming and fishing, warning policymakers are failing to take adequate action against the growing threat from alien species. Its report, prepared by 86 experts over four years, found people had transferred 37,000 species of animals, plants and microbes to new habitats around the world. More than 3,500 were classified as invasive aliens because of the extent of damage they caused.Ipbes scientists said the $423bn economic impact of invasive species, calculated for 2019, was a “very conservative” estimate and that costs were quadrupling every decade. Their report was approved by the organisation’s 143 member states meeting in Bonn this weekend.Aníbal Pauchard of Chile’s Concepción university, a co-author of the report, said invasive alien species had been a major factor in 60 per cent of global animal and plant extinctions and the only factor in 16 per cent of such events recorded by Ipbes.“It would be an extremely costly mistake to regard biological invasions only as someone else’s problem,” he said, adding that these “risks have global roots but very local impacts, facing people in every country”. Even Antarctica, where grass grows from seeds introduced inadvertently by tourists and researchers, was affected, Ipbes said.Preventive action at national and global levels, through enhanced biosecurity and the detection and eradication of newly introduced species before they become permanently established, was needed to stem the tide, Ipbes added.A river choked with water hyacinth, the world’s most widespread alien species © CanvaThe most widespread invasive species is water hyacinth, native to South America and one of nature’s fastest-growing plants, which is clogging lakes and rivers around the world — with disastrous effects on freshwater fishing, particularly in Africa. Second on the Ipbes list of most widespread alien species is lantana, a flowering shrub from central and South America originally planted in gardens as an ornamental plant but now seen as an invasive weed that is increasingly interfering with agriculture. Third is the black rat, which has wiped out defenceless native fauna and birds on islands across the oceans after escaping from ships.“We’re seeing unprecedented rates of increase, with 200 new alien species recorded every year,” said Helen Roy of the UK Centre for Ecology and Hydrology and another co-author.

Biological control — introducing a new species to eradicate a pest — can help reduce the damage, though this strategy has sometimes backfired disastrously. An example is the harlequin ladybird, an Asian native brought to the US in the early 20th century to control insect pests but now a destructive predator of beneficial native species.However, the approach could work when introduced with rigorous risk analysis, Roy said. On the remote Atlantic island of St Helena, the alien jacaranda bug was destroying native gumwood trees until a different ladybird was introduced to control it. “It is really specific to controlling the bug,” she said. “That little ladybird has saved the gumwoods from extinction.”Peter Stoett of the University of Ontario Institute of Technology, the third co-chair of the Ipbes assessment, said ambitious progress in tackling invasive alien species was achievable.“What is needed is a context-specific integrated approach, across and within countries and the various sectors involved in providing biosecurity,” he said. “This will have far-reaching benefits for nature and people.” More

China’s powerful spy agency has attacked recent diplomatic overtures from the US as mixing engagement and containment, hinting that a possible meeting of the two countries’ presidents in November will be in jeopardy if Washington does not show more “sincerity”. The rare warning from the Ministry of State Security came less than a week after US commerce secretary Gina Raimondo visited Beijing, praising her meetings with Chinese officials but saying US businesses viewed China as increasingly “uninvestable”.“Recently, a number of US officials visited China one after another, saying that the Biden administration has no intention to curb China’s development or seek decoupling from China,” the MSS said in a statement on its official WeChat social media account.The US strategy on rapprochement with China was “old wine in new bottles”, the ministry said, pointing at Washington’s approval of arms sales and military financing to Taiwan, over which Beijing claims sovereignty.“China will never relax its vigilance because of a few ‘beautiful words’ from the United States,” it said.The MSS accused the US of continuing to “stir up trouble” in the South China Sea and Tibet. Washington has said it will punish Chinese officials responsible for what it called the forcible assimilation of 1mn Tibetan children in government-run boarding schools.In addition, the US “openly badmouthed the Chinese economy”, the MSS said. Last month, US president Joe Biden described China as a “ticking timebomb”, saying the country was in trouble because its economic growth had slowed. The MSS issued what appeared to be a veiled warning on an expected meeting between China’s president Xi Jinping and Biden at the Asia-Pacific Economic Cooperation forum in San Francisco in November. This would be their first meeting since they spoke last year at the G20 in Bali, Indonesia. “To truly achieve ‘From Bali to San Francisco’,” the United States needs to show sufficient sincerity,” the MSS said.Since the US and China re-established diplomatic relations in 1979, Washington’s typical approach had been a combination of “engagement and containment”, it added. The MSS’s comments are Beijing’s sternest rejoinder yet to recent statements from the US, which has been seeking to re-establish dialogue and improve bilateral relations.

Raimondo’s visit followed those of secretary of state Antony Blinken and Treasury secretary Janet Yellen in recent months. The US commerce secretary said she found her Chinese counterparts receptive and established a number of channels for communication to solve commercial and intellectual property issues and to discuss export controls.But she also demanded action from Beijing on what she said were increasing barriers for US companies doing business in China, including random fines, police raids on offices and new espionage and data laws. The MSS said the Biden and Trump administrations had both relentlessly escalated economic decoupling, supply chain disruptions and containment of China, but that the strategy was “doomed to failure”. This was because the “momentum of historical development” was not on “the American side”, it said. “The great rejuvenation of the Chinese nation has entered an irreversible historical process.”The MSS comments follow China’s confirmation on Monday that Xi will not attend a G20 leaders’ summit in New Delhi this weekend, the first such gathering he has missed since taking power in 2013. More

BRUSSELS (Reuters) – Belgium has raised a record 21.9 billion euros ($23.65 bln) from savers in a bond sale designed to compete with bank deposits, a sign of growing popularity for government debt as discontent grows with lenders failing to keep up with surging interest rates.The sale, launched on Aug. 24, was aimed at pressuring banks to raise deposit rates. It marks the biggest funding drive from households in Belgium’s history and is likely Europe’s biggest retail bond sale, the country’s debt agency said on Monday. Equivalent to around 5% of Belgian deposits, it eclipses the 5.7 billion euros raised from savers at the height of the euro zone debt crisis in 2011 and beats the 18 billion euros Italy raised from savers earlier this year.European lenders awash with cash have resisted raising savings rates while market interest rates have surged as central banks fight inflation, prompting withdrawals by households looking for better returns.Bonds issued by governments targeted at savers have become a popular alternative. Italy and Portugal have this year shifted big slices of their funding programmes to households. The scale of demand for the bond was “a clear signal for the banks,” Belgian finance minister Vincent Van Peteghem told Reuters, adding he had never expected the sale to prove so popular. “Savers are giving a signal to their banks to say: we are expecting a higher return than the one that you are offering nowadays on your savings accounts. We ask at least the same respect that you have for your shareholders,” he said.Belgium’s one-year bond pays an interest rate of 3.3%, above the 2.5% and often much lower rates on savings accounts, according to aggregator website Spaargids. IT CRASHJean Deboutte, a director at the debt agency, said high demand led to its IT systems crashing several times during the sale.”At one point in time we had one subscription per second.” he said. “That’s a figure one would find with Amazon (NASDAQ:AMZN).” Across Europe, governments are seeking ways to compensate households taking a blow from the surging cost of living while missing out on the benefit of rising interest rates. Italy recently dealt a blow to banks with a one-off tax on their excess profits. While demand for the bond is high, the country’s biggest lenders are yet to raise rates paid on savings accounts. “It is now up to every bank individually to see which impact this had on their bank,” Belgian financial sector lobby Febelfin spokesperson Isabelle Marchand said. “This will be different for every bank, but the financial stability of every bank needs to be monitored closely.”Noting that some institutions have raised rates or offered similar products since the bond sale, Van Peteghem said he hoped and expected bigger banks would now follow. “If that’s not happening that means that we still need to look for other tools. We can issue again another bond in December,” he added.The one-year maturity, shorter than Belgium’s usual retail bonds, was designed to mirror savings accounts that increase the payout to savers if they lock up their money for a year. The government has agreed a bill, pending approval, reducing the withholding tax buyers will pay to 15% to make the bond more attractive relative to savings accounts, from 30% on other Belgian retail bonds.Marchand said Febelfin had no problem with a tax-friendly bond, but added: “the same conditions should apply to all similar investment products, and therefore there should be a level playing field.”Belgium’s debt agency said the vast size of the bond sale meant outstanding short-term debt would be reduced by more than 10 billion euros over the course of 2023, longer-debt issuance cut by over 2 billion euros and the cash reserve position increased by around 9 bln euros.($1 = 0.9260 euros) More