Aurelia Butler

Hello and welcome to the working week.This week the US election cycle is starting to gather speed. The first Republican presidential primary debates will kick off in Milwaukee, Wisconsin, on Wednesday. But the debate may have one notable absentee, Last Friday Donald Trump, on his social media platform Truth Social, suggested he would not take part.Without Trump, the debate may not matter to many Republican voters. Trump leads the race for the party’s nomination by a significant margin, a recent New York Times/Siena poll suggesting Trump can command 44 per cent of the party’s votes with Florida governor Ron DeSantis trailing at 20 per cent. Meanwhile, other events this week have taken us quite far away from US politics. India and Russia had both launched spacecraft towards the Moon, hoping to be the first to reach the previously unvisited South Pole, where data suggests craters could hold deposits of water ice. But Russia’s unmanned Luna-25 span out of control and crashed into the Moon’s surface on Sunday ahead of its planned Monday touchdown. India’s Chandrayaan-3 is scheduled to land on Wednesday.Back on Earth, some companies are reporting this week that are worth keeping an eye on. Zoom, which had huge growth through its streaming of virtual meetings during the Covid-19 pandemic, is set to report its second-quarter earnings on Monday — just after the company started requiring some of its own employees to come back into the office. The world’s biggest mining group BHP reports full-year earnings on Tuesday. Chinese tech company Baidu is set to report its second-quarter earnings on Tuesday as the company tries to compete with the likes of Open AI, Google and Microsoft in the race to conquer AI. Nvidia, which builds the chips that power most AI models, is also set to report second-quarter earnings on Tuesday.One more thing . . . This Thursday is Ukraine’s Independence Day, marking 32 years since the state was formed after the break-up of the Soviet Union. Celebrations within the country will be muted, with no big events or parades scheduled to take place as conflict continues. But the Ukrainian diaspora will be hosting events in cities across the globe. The Ukrainian World Congress has a list of some of the events this week if you would like to join in. Our FTWeekend Festival is back on Saturday, September 2 at Kenwood House Gardens, London! Book your pass today to enjoy a day of debates, tastings, Q&As and more . . . Speakers include Michael Gove, Rachel Reeves, Jesse Armstrong, and many others. As a newsletter subscriber, claim £20 off your festival pass using promo code FTWFxNewsletters at: ft.com/festivalEconomic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayUK: the High Pay Centre publishes its annual review of remuneration for chief executives of FTSE 100 companies. UK: Rightmove updates its house price index for August.Results: Breville FY, Goldwind Science & Technology H1 interim results, Lufax Holding Q2, Nordson Q3, Self Storage Group Q2, SJM Holdings FY interim results, Zoom Q2. TuesdayIceland: harmonised Consumer price index for July.UK: CBI industrial trends survey.US: Richard Dickenson becomes CEO of Gap, the clothing retailerResults: Dick’s Sporting Goods Q2, BHP FY, Baidu Q2, China Aircraft Leasing Group, Coty H1 interim results, Q4, Fidelis Insurance Holdings Q2, John Wood Group H1, Kingsoft Q2, Lowe’s Q2, Macy’s Q2, Medtronic Q1, Redbubble FY, SFC Energy H1, Toll Brothers Q3. WednesdayIceland: Reykjavík’s central bank will decide if it will raise its main interest rate, which stands at 8.75 per cent. After the last increase in May, the bank’s governor Ásgeir Jónsson refused to rule out rates climbing above 10 per cent. Singapore: CPI for July.South Africa: CPI for July.UK: flash purchase managers’ index for August.Results: Autodesk Q2, Bath & Body Works Q2, Footlocker Q2, Grab Q2, Kohl’s Q2, Mowi Q2, NetApp Q1, Nvidia Q2, Ooma Q2, Peloton Q4 Snowflake Q2, Splunk Q2, Williams-Sonoma Q2, Woolworths Group FY, Zuora Q2.ThursdayFrance: the Organisation for Economic Co-operation & Development releases trade statistics for the second quarter of the year.Results: Abercrombie & Fitch Q2, Air New Zealand FY, Burlington Stores Q2, Dollar Tree Q2, Gap Q2, Hays FY preliminary results, Nordstrom Q2, Norwegian Air Shuttle Q2, Qantas Airways FY preliminary results, Royal Bank of Canada Q3, Weibo Q2, Workday Q2. FridayUK: GfK releases its consumer confidence survey which tracks consumers’ outlook on their finances and the wider economy for the next 12 months. Results: Australian Finance Group FY, Cathay Financial Holdings Q2, China Merchants Bank H1 interim results, CMOC Group H1 interim results, Hofseth BioCare H1, Wesfarmers FY, Yuexiu Property H1 interim results.World eventsFinally, here is a rundown of other events and milestones this week. MondayCambodia: Parliament convenes for the first time under prime minister Hun Manet after his father, Hun Sen, passed power to him at the start of August. Israel: The US joint chiefs of staff chair Gen Mark Milley is scheduled to visit the country next week and meet defence minister Yoav Gallant. His visit comes after proposed judicial reforms last month led many military reservists to threaten boycotting serving in the county’s armed forces.US: President Joe Biden and first lady Jill Biden will travel to Maui after wildfires tore through the Hawaiian island. They will meet emergency staff who have been responding to the crisis and speak to survivors. TuesdayNorway: Facebook owner Meta is in court seeking to pause fines being imposed by the data regulator, Datatilsynet. The tech company is being fined $98,500 a day until it takes action on privacy breaches identified by the regulator. Singapore: Election nomination day.South Africa: President Xi Jinping visits the country for the Brics summit and is set to meet President Cyril RamaphosaWednesdayGermany: Gamescon, one of the world’s largest expos for video games, starts in Cologne. Economics minister Robert Habeck is expected to attend the opening. India: The Chandrayaan lunar lander is scheduled to touch down on the Moon’s South Pole.US: The first of the Republican primary presidential debates is held in Wisconsin. Zimbabwe: Presidential, parliamentary and local elections. ThursdayIndia: G20 trade and investment ministers meet in Jaipur.US: The annual Jackson Hole economic policy symposium starts. UK: GCSE school results day in England, Wales and Northern Ireland. Ukraine: The country celebrates it 32nd Independence Day; financial markets are closed. FridayEurope: New rules created by the Digital Services Act kick in today. Tech companies including Facebook, TikTok and X Corp, previously known as Twitter, will be forced to police the content that appears on their platforms. The EU hopes the rules will protect children online and crack down on ads that use personal information to target users. UK: Ofgem, the energy regulator, announces the new price cap for gas and electricity running from October to the end of December. US: Deadline for Donald Trump and the 18 other individuals named in a Georgia indictment to hand themselves in to the state’s authorities in Fulton County. SaturdayJapan: A Mitsubishi Heavy Industries rocket carrying a Japanese lunar lander takes off from Tanegashima Space Centre. The mission is designed to show that lighter and more inexpensive missions to the moon are feasible. Gabon: Presidential, parliamentary and local elections. SundayUK: The annual Notting Hill Carnival street festival starts in London. At least 1mn people are expected to fill the streets of the UK capital’s western district.US: The 13th annual Streamy awards are held in Los Angeles, California. The awards honour online creators. More

Germany’s deputy chancellor has set out proposals to increase scrutiny of Chinese investments as Europe’s largest economy grapples with increased geopolitical risks surrounding its biggest trading partner.The measures put forward by Robert Habeck, a Green who also serves as economy minister, would toughen restrictions on foreign direct investment in Germany in critical sectors such as semiconductors and artificial intelligence, and come just weeks after Berlin warned that Beijing was becoming “more repressive internally and more aggressive externally”.The proposals, confirmed by a government official, come at a time of intense debate in Europe and the US about western economic relations with Beijing but risk stoking fresh tensions within chancellor Olaf Scholz’s bickering coalition as well as with business groups. China has been criticised by western allies for its growing authoritarianism, sabre-rattling towards Taiwan and continued close ties with Russia despite the latter’s full-scale invasion of Ukraine last year.The proposed legislation is being circulated across government departments for consultation and follows the publication last month of Berlin’s long-awaited China strategy, which said that the government was assessing the effectiveness of existing investment screening as part of a broader evaluation of ties. Germany’s three ruling parties are already at loggerheads over a series of issues, from child support payments to industrial policy.Scholz, a member of the Social Democrats (SPD), is less eager than his Green coalition partners to take steps that would dramatically curb economic ties with Beijing, fearing that they could damage political and trade relations with a country that was Germany’s largest trading partner for the seventh year running in 2022.The chancellor has clashed with cabinet colleagues over issues such as Chinese conglomerate Cosco’s purchase of a stake in a Hamburg port terminal, which Green ministers, including Habeck, had wanted to block.The new measures do not focus on outbound investment in China’s technology industries, which was recently subjected to new rules by the White House. Germany is part of EU discussions about how to respond to those measures. Businesses and investors from outside the EU are already subjected to a screening process when buying assets in the country, with the government holding the right to veto the acquisition if it believes it poses a threat to public order or national security.But Habeck’s proposals would aim to simplify and consolidate an array of existing rules. Although they do not explicitly mention China, they include tighter restrictions on sectors where Chinese dominance or influence is seen as a threat to western economic security, such as semiconductors, AI and quantum computing, an official familiar with the proposals said.Habeck is also seeking to crack down on what Berlin sees as China’s efforts to circumvent existing rules, such as the acquisition of intellectual property under licensing agreements, by expanding the definition of what types of investments are subject to screening.Noah Barkin, an expert on Europe’s relations with China at US-based research firm Rhodium Group, said the proposals showed that Habeck’s economy ministry “wants to use the momentum from the strategy [on China] to adjust some policies — in part to limit the chancellery’s wriggle room”.He expected to see the economy ministry, along with the Green-led foreign ministry, make “full use of the language in the China strategy to push their more hawkish agenda”. He added: “It will be interesting to see how Scholz reacts.”The German official stressed that Germany “is and will remain an open investment location” that would continue to welcome international investors. They stressed, however, that FDI “must not jeopardise our goal of ensuring German and European economic security.” More

One of John Maynard Keynes’s best-known quotes is also the most misused. His “in the long run we are all dead” quip has been interpreted as a call to focus policy efforts on correcting short-term swings in economic activity. This is perhaps manifested in James Carville’s slogan for Bill Clinton’s 1992 campaign: “It’s the economy, stupid.” That voter prosperity today outweighs future economic considerations is indeed a flaw of liberal democracies everywhere.Keynes goes on to say: “Economists set themselves too easy, too useless a task if, in tempestuous seasons, they can only tell us that when the storm is long past the ocean is flat again.” Rather than encouraging short-termism, Keynes was critiquing economic models that complacently assume a return to some long-run point of balance.The notion that Keynesian economics equated largely to near-term demand management was in part a convenience. Structural reforms are far harder than interest rate or tax tweaks. As they involve boosting the productive, or “supply side”, capacity of an economy — including its labour, capital, technology and ideas — they often enact a cost on today’s voters, for long-term gain. Those gains can be decades away, such as the benefits of investing in skills, education and research and development. They also rely on political commitment. Take planning reform. It is essential to spur the development of railways, homes and electricity pylons, but it irks homeowners. Outdated tax systems stifle growth and contribute to inequality, but changes involve upsetting one group to benefit another. Ageing populations pile pressure on the state, yet nationwide protests greeted Emmanuel Macron’s efforts to raise France’s retirement age. Surveys also show citizens want action to tackle climate change, but many do not want to pay for it.Advanced economies have already opened to trade, reformed banking sectors and privatised finance, the groundwork for growth since the 1970s. Future supply-side measures may be more complex or involve more disruption for voters: redesigning existing legislation, allocating resources more efficiently and building things. Although it is dubbed “modern supply-side” economics, the US Inflation Reduction Act faces its own supply limitations in skills, workers and permitting.The result is over-reliance on demand management and unrealistic expectations of the power of monetary policy and budgets to guide the economy. The implications are threefold. First, economies have not kept pace with long-term shifts such as climate change, ageing societies and technology. Second, countries have become less resilient to shocks. Britain is an inflationary outlier in part due to labour shortages, exacerbated by limitations in its skills and health system. Finally, these factors have stifled productivity growth. As this underpins sustained wage growth and tax revenues, it feeds us-vs-them politics, making reform harder.The upshot is an erosion in underlying growth. The IMF recently forecast medium-term global growth to be at its weakest since 1990. A report published last week by Fitch Ratings shows that gross domestic product growth in major developed economies has slowed over the past decade compared with long-run historical averages — which suggests that growth potential is waning. So how can reform happen? Russell Jones looks at Britain’s economic history in The Tyranny of Nostalgia. First, a consensus for change has been easier to muster in the aftermath of disruption. Margaret Thatcher’s free-market reforms came after the economic pains of the 1970s. Under Tony Blair, reforms were made early in the electoral cycle, such as the Bank of England’s independence in 1997. The economic backdrop mattered, too. Blair inherited solid growth and public finances, enabling him to focus on fixing public services. But democracies cannot wait until the political and economic conditions align. With globalisation — a driver of growth — slowing, reforms take on greater importance. Supply-side policymaking must become an open-ended process to support economic agility and productivity. Institutions need to be geared for the long term. Structural growth requires regular monitoring. The private sector needs incentives to invest for the future. Creative policy design helps, cushioning the short-term cost of reform. Ultimately, the public conversation must mature to an acceptance of trade-offs, without which long-term economic progress for everyone stutters.It is time to update our understanding of Keynesianism. Yes, economies are prone to a boom-and-bust cycle, but they are also not guaranteed to return to the same long-term path to prosperity. It’s the supply side, [email protected] More

Federal Reserve officials will hold their annual Jackson Hole symposium next week, when the US central bank’s chair Jay Powell is expected to offer some clues as to how the central bank will approach monetary policy decisions this autumn.Powell’s speech on Friday morning will be the highlight of the three-day event in Wyoming. In past years, he has used the occasion as an opportunity to steer market expectations about Fed policy during the late-summer gap between meetings. At present, traders in the futures market are placing very low odds that the central bank will raise interest rates when it next meets in September, but they are divided on whether a final rate increase could come in November. Powell’s remarks are likely to sway those expectations.Since the Fed’s meeting in July, two significant developments have occurred: a promising inflation report for July, and a bigger-than-expected slowdown in US hiring in the same month. Both suggest the Fed could end its campaign of rate raises at the current range of 5.25 per cent to 5.5 per cent. Still, another round of inflation and jobs data intervenes between the Jackson Hole summit and the September Fed decision, so surprises on either may change the outlook even after Powell speaks. Kate DuguidThe Bank of England’s battle against inflation may not yet be won © Charlie Bibby/FTWill gilts yields keep drifting higher? Benchmark UK borrowing costs surged to their highest level since 2008 this week as stronger-than-expected wage data raised fears that the Bank of England’s battle against inflation has not yet been won.Investors across the developed world have been selling government bonds, thus pushing yields higher, as the strength of the US economy has prompted investors to remove bets on imminent interest rate cuts.But the rise in UK bond yields has been the biggest. Ten-year gilt yields rose 0.15 percentage points this week to 4.68 per cent. That was about double the move for benchmark US Treasury yields, which rose 0.07 percentage points over the same period.The UK’s outsize inflation problem is part of the reason its debt yields are increasing by more than in other countries, surging on Tuesday after official figures showed wages had grown at a record annual rate of 7.8 per cent in the three months to June. Swaps markets are pricing in UK rates peaking at 6 per cent by the end of the year, up from 5.25 per cent now.Ross Walker, chief UK economist at NatWest, said market pricing for interest rates implies 10-year gilt yields could rise to 4.9 per cent. “We think yields will have to go a bit higher, partly on further rate rises being delivered, but also this huge supply programme in the coming years,” he said.The UK plans to sell about £241bn of gilts in the current financial year, with issuance net of BoE bond sales and purchases expected to be about three times the average over the past decade.Mary McDougallECB policymakers must decide whether to pause the bank’s recent run of interest rate rises © AFP/Getty ImagesHow weak is eurozone business activity?Eurozone businessmen seem to have little to feel upbeat about, unless they benefited from tourism’s resurgence this summer. But more insight into how companies are faring in the region will come on Wednesday with the results of the latest purchasing managers’ poll.Economists polled by Reuters expect S&P Global’s composite eurozone PMI, a gauge of business activity, to have declined slightly from 48.6 last month to 48.5 — keeping it below the 50 threshold that separates growth from contraction.Policymakers at the European Central Bank will be watching the results closely as they decide whether to pause the recent run of interest rate rises at their next meeting on September 14.“It could come down to what the PMIs are showing in August,” said Jens Eisenschmidt, chief Europe economist at Morgan Stanley. “If it stays at current levels then the ECB can raise rates once more. Another significant drop is likely to make them think again.”Piet Haines Christiansen, director of ECB and fixed-income research at Danske Bank, said the big question was how the services sector was doing. “We all know the manufacturing sector is weak, so the question remains how the service sector is doing here in the tourism season of August,” he said.Investors will get a glimpse of how ECB president Christine Lagarde interprets the latest data on the eurozone economy when she speaks at the Federal Reserve’s annual conference in Jackson Hole on Friday. Martin Arnold More

One man died in the Baja California Sur state when a family of five was swept away into the sea while crossing a stream, according to a Mexican official, who also shared images of flooding and roads that were swept away in the area.In the United States, the hurricane disrupted flights and sports games before it arrived.Early on Sunday, the hurricane was carrying top sustained winds of 85 mph (140 kph), the U.S. National Hurricane Center (NHC) said. Its center was forecast to move close to the west-central coast of the Baja California peninsula in the next few hours and then across southern California on Sunday afternoon.Hilary was expected to weaken but would likely remain a hurricane as it passed near Baja California, becoming a tropical storm before reaching southern California, the NHC said.Storm surges – when the ocean is pushed inland – could produce coastal flooding in parts of Baja California and the hurricane was carrying heavy rain that could cause catastrophic flooding in some areas, the NHC said. Rainfall of 3 to 6 inches (7.6 to 15 cm), with isolated amounts of 10 inches, was expected across the northern Baja California peninsula as well as portions of southern California and southern Nevada, the Miami-based agency said in its latest advisory.As of 0900 GMT, Hilary was about 385 (625 km) miles south-southeast of San Diego, the NHC said. It was moving north-northwest at 21 mph (33 kph).U.S. President Joe Biden received a briefing on Saturday from senior staff on preparations for the hurricane, the White House said. In the Baja California peninsula, some school and other non-essential activities were canceled through Monday, and authorities in Mexico’s second-largest city, Tijuana, urged people in high-risk zones to move to temporary shelters.Images shared on social media showed flash floods in the coastal town of Santa Rosalia, on the eastern side of the Baja California peninsula, with water gushing down what used to be a road, sweeping away a tree.Some 30 miles (48 km) south, in the town of Mulege, where the one person died when crossing a stream, Municipal President Edith Aguilar Villavicencio said on her Facebook (NASDAQ:META) account that Mexico’s navy and local firefighters were rescuing people.U.S. authorities in affected areas warned residents and businesses to take precautions.Nearly 200 flights scheduled for Sunday at the San Diego International Airport have been canceled and another 184 on Monday, according to the FlightAware website.In California, Major League Baseball’s Los Angeles-based Dodgers and Angels brought their Sunday games forward to Saturday to turn them into split doubleheaders.The city’s soccer teams, Los Angeles FC and LA Galaxy, both postponed their Sunday matches due to threat of heavy rains and flooding. (This story has been corrected to change day of the week from Saturday to Sunday in paragraph 1) More