Aurelia Butler

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Germany’s central bank bosses have often accused their Eurozone counterpart of being too aggressive in cutting interest rates, but now the Bundesbank has backed up some of their old arguments with an in-house artificial intelligence tool.Bundesbank economists used their own AI to screen about 50,000 sentences from European Central Bank monetary policy statements and speeches, tasking Meta’s multilingual large language model to analyse the hawkishness of the bank’s communications since 2011. The research found the ECB’s tone from that time has been “predominantly dovish”, meaning rate-setters were not overly concerned about inflation risks, stressed economic weaknesses and signalled monetary easing. It said the bank’s policies remained dovish even after it hardened its rhetoric when inflation started to rise in 2021.Bundesbank’s AI made a striking observation about the tenure of then-ECB president Mario Draghi, including when he pursued historically loose monetary policy during the past decade in an effort to avoid deflation. During that time, ECB communications on wider economic sentiment was noticeably more upbeat than its dovish narrative on inflation and interest rates, the Bundesbank analysis found. The research can be seen as supportive of arguments made by former Bundesbank bosses such as Axel Weber and Jens Weidmann, who routinely sparred with the ECB. Weidmann publicly said the Eurozone bank had “overshot the mark” with its dramatic monetary easing. Draghi once described the German banker as Mr No, or Nein zu allem.Draghi, who is credited with saving the euro after he indicated the ECB would do “whatever it takes” to stabilise the common currency, was dubbed “Count Draghila” by the German tabloid Bild, which accused him of “sucking dry” the bank accounts of German savers by imposing negative interest rates. According to the Bundesbank AI analysis, the ECB’s dovish stance was mostly in line with weak growth and overall adverse economic sentiment — in particular during the European debt crisis, the Covid-19 pandemic and the early days of Russia’s 2022 invasion of Ukraine. But it spotted a mismatch in the run-up to the 2022 price surge, when inflation shot up to as much as 10.6 per cent: the ECB’s wording on inflation risk became more hawkish from early 2021, but its stance on interest rates remained dovish for almost a full year. The hawkish tone on inflation risks peaked in June 2022 before the ECB started to finally respond with rapid interest rate increases a month later. While the Bundesbank has moderated its tone towards the ECB in recent years, the study’s findings could potentially underpin the widespread view among economists that the Eurozone’s central bank waited too long to respond to inflation risks that had long become visible.“The ECB governing council emphasised the increase in inflation at the time but assessed it was temporary,” the study says. “The inflation narrative remained highly hawkish until the end of 2022,” the Bundesbank finds, adding that the inflation narrative became “gradually less hawkish” over the past two years and “most recently” has been balanced.The ECB declined to comment on the findings. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK’s largest car insurers have piled hidden costs on top of double-digit interest rates for customers paying in monthly instalments, according to people familiar with the practice.Admiral and Aviva are among the car insurers that have pre-screened customers who opt to pay their premiums monthly rather than annually, one analysis of the practice found, and have raised the prices they charge such clients as a result.So-called double-dipping is expected to be scrutinised as part of a probe by the Financial Conduct Authority into whether insurance customers using “premium finance” — or paying in monthly instalments — are being overcharged, according to a person briefed on the matter.Matthew Brewis, head of insurance at the FCA, has described premium finance as “a tax on the poor” and the regulator is examining whether insurers’ use of the product breaches the consumer duty rules requiring them to give customers a fair deal. Admiral told the FT that it makes its costs ‘clear’ to customers More

Stay informed with free updatesSimply sign up to the More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the world“Stock vigilantes” is a term that only recently entered the markets vernacular. It is time to retire it again equally swiftly.It refers to the idea that if the going gets tough, and US stock markets tumble in value, Donald Trump will sit up, take notice, and reverse some of his more aggressive policies. Typically, this is a task left to the bond market, but here we have a president who basked in the reflected glory of upbeat stock markets in his first term. Surely this sensitivity cuts both ways? Investors and analysts certainly assumed so. (Full disclosure: so did I.)This notion had its first trial run in Trump 2.0 in February, when Trump declared he was serious about slapping hefty trade tariffs on supposed friends and neighbours in Canada and Mexico. Alas, stock vigilantes were found lacking. Stocks did stumble, but far too mildly to ring any alarms in the Oval Office. That left the president and his administration free to double down, not back down. Stronger vigilance was required, it seemed.One month later, and markets are clearly in a more pronounced tizz, with US stocks briefly entering so-called correction territory — down a tenth from their most recent high. Whether they have further to fall or not is, of course, a matter of opinion. Ask two analysts, get at least three answers.Either way, even at this point, the scale of the rethink on the US among money managers is quite extraordinary. In its latest monthly survey of fund managers around the world, released on Tuesday, Bank of America found the biggest swing out of the US on record. A net quarter of the fund managers surveyed said they were now underweight in US stocks — holding a smaller allocation than global benchmarks would suggest, a shift lower of some 40 percentage points from the previous survey. Nearly 70 per cent of investors say the much-vaunted concept of “American exceptionalism” has now peaked. Investors are in a foul mood. The bank’s survey also found the second-biggest rise in levels of pessimism — those saying they expected the global economy to weaken — since its records began in 1994. For context, the biggest increase was five years ago, in the teeth of the global Covid lockdowns.This is more like it — an unambiguous message from Wall Street to the president that his constant flip-flopping over tariffs and what we might euphemistically call his geopolitical realignment are a black mark against a stock market that has led the world for as long as most fund managers can recall.Again, though, Team Trump claims to be unruffled. In fact, it is turning the whole idea on its head, seeking to convince the world that this is what they wanted all along — an astringent, purifying reset in markets that is a necessary step to Make America Great Again. I missed this from the campaign trail, too.Treasury secretary Scott Bessent, the very same man who declared last year that “Kamala Harris will start with a Kamala crash in the stock market, and then it will be the Kamala crash in the economy”, is now saying he is “not at all” worried about the “healthy” correction that has been running of late. Commerce secretary Howard Lutnick echoed that, noting earlier this month that the performance of the stock market is not the “driving force” behind the president’s tariff policy.As analysts at Barclays diplomatically put it, “Trump and his administration have expressed more tolerance for adverse economic fallout from tariffs than we had expected.” Those waiting for a “put” here — the point in the market at which the president has a change of heart and backtracks — are creeping to the horrible realisation that they got this wrong. “Where has the put gone?” asked the multi-asset team at HSBC.To bring it back in play, they said, one of a few things needs to happen: a lasting seize-up in the flow of fresh public debt or equity into the world; an outbreak of stress in the deepest plumbing of the financial system; or a global and disorderly collapse in risky assets. None of these is happening yet — the drop in US stocks has not fully infected Europe, for example, and the market moves have been orderly, if unpleasant.One related item to add to that list is a bond shock. Right now, Treasuries are broadly calm and in balance — supported by the rising chance of a US economic slowdown but also held down by lingering concerns over fiscal incontinence and nascent worries over the dollar’s reserve-currency status. If something were to break in either direction there, the administration would be more likely to respond. Bond vigilantes — the original and best — still beat their newbie counterparts in stocks any day of the [email protected] More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Beijing is delaying approval for carmaker BYD to build a plant in Mexico amid concerns that the smart car technology developed by China’s biggest electric-vehicle maker could leak across the border to the US.BYD first announced plans for a car plant in Mexico in 2023, along with intentions to make cars in Brazil, Hungary and Indonesia. It said the Mexican plant would create 10,000 jobs and produce 150,000 vehicles a year.But domestic automakers require approval from China’s commerce ministry to manufacture overseas and it has yet to give approval, according to two people familiar with the matter.Authorities fear Mexico would gain unrestricted access to BYD’s advanced technology and knowhow, they said, even possibly allowing US access to it. “The commerce ministry’s biggest concern is Mexico’s proximity to the US,” said one of the people.Beijing is also giving preference to projects in countries that are part of China’s Belt and Road infrastructure development programme, according to the people.Shifting geopolitical dynamics have also contributed to Mexico cooling on the plant. Mexico has sought to maintain relations with Donald Trump, who has put tariffs on cross-border trade, threatening exports and jobs.Trump has also launched a trade war with Beijing, imposing tariffs on imports from China. Beijing retaliated by slapping tariffs on roughly $22bn in US goods, aimed mainly at America’s farming sector.Trump’s team has accused Mexico of being a “backdoor” for Chinese goods to enter the US duty-free through the North American Free Trade Agreement. The Mexican government denies this but has responded to US pressure by placing tariffs on Chinese textiles and launching anti-dumping investigations into steel and aluminium products originating from China.“Mexico’s new government has taken a hostile attitude towards Chinese companies, making the situation even more challenging for BYD,” said the second person.In November, shortly after Trump’s re-election, Mexico’s President Claudia Sheinbaum said there was still no “firm” investment proposal from any Chinese company to set up in Mexico, despite BYD having reaffirmed its intent to invest $1bn earlier that month.“The Mexican government obviously would like to get some of the investments [from China], but [its] trading relationship with the US is a lot more important,” said Gregor Sebastian, a senior analyst at US-based consultancy Rhodium Group. It doesn’t “make business sense” for BYD to hasten the construction of a production facility in Mexico at the moment, Sebastian added, pointing out that the lack of a robust automotive supply chain would force BYD to import numerous components from China, subjecting them to higher tariffs.When asked whether US tariffs and Mexico’s tougher stance on China had stalled the company’s plans, Stella Li, executive vice-president at BYD, said that it had “not decided [on] the Mexico facility yet”.“Every day is different news, so we just have to do our job,” said Li in a recent interview with the FT. “More study has to be done on how we can satisfy and improve to deliver the best result to everybody.”In February last year, Li had said they would select a location for the factory by the end of 2024.BYD reported sales of more than 40,000 vehicles in Mexico last year. It has said it wants to double sales volume and open 30 new dealerships in the country in 2025. Mexico’s economy ministry said it had no further comment beyond Sheinbaum’s previous remarks. BYD and China’s commerce ministry did not respond to a request for comment.BYD sold 4.3mn EVs and hybrids globally in 2024 and unveiled its “God’s Eye” advanced driving system in February, with plans to install it on its entire model line-up.Earlier this month, Tesla’s main rival raised $5.6bn in a Hong Kong share sale, with the proceeds expected to help fuel its overseas expansion. But it has suffered a setback with its $1bn development in Brazil, which was delayed in December when the authorities halted construction over workers being subject to “slavery”-like conditions. BYD subsequently fired a Chinese subcontractor. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUS stocks dropped sharply on Tuesday with shares in technology groups including Elon Musk’s Tesla selling off as investors continued fretting over President Donald Trump’s economic and trade policies.The blue-chip S&P 500 ended the session 1.1 per cent lower, with nine of the index’s 11 sectors in negative territory and consumer cyclicals, which tend to fall during times of rising worries over the economy, posting some of the steepest declines.The tech-heavy Nasdaq Composite dropped 1.7 per cent, erasing Monday’s rally. Tesla slumped 5.3 per cent — extending a recent decline that has brought it down by half from its December peak — and Nvidia lost 3.4 per.The declines are the latest sign of how investors remain deeply concerned over Trump’s tariffs on America’s biggest trading partners, and their potential to slow growth and increase inflation. A Bank of America survey released on Tuesday showed investors made the “biggest-ever” cut to their US equity allocations in March.A New York Federal Reserve survey of business leaders, released on Tuesday, showed that the region’s business environment was “considerably worse than normal” as employment declined and input prices for industry increased at the swiftest pace in almost two years.A separate Fed report showed that US industrial production rose 0.7 per cent in February, far more than the 0.2 per cent increase expected by analysts. The reading should “sooth concerns that the [US] economy is on the cusp of recession”, said Bradley Saunders at Capital Economics.He warned, however, that “the drag” from Trump’s aggressive tariffs has “yet to properly take effect”, meaning there was “downside to come for [US] industry over the coming months”.Previously high-flying tech stocks have fallen more than most as investors have shifted away from riskier holdings, with an index tracking the so-called Magnificent Seven of Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla down 17 per cent since the S&P 500 hit a record high on February 19.Traders were also bracing for the outcome of the latest Federal Reserve meeting on Wednesday. While investors are widely expecting the central bank to leave interest rates unchanged, any hints from Fed chair Jay Powell on the health of the world’s largest economy will be closely watched.The dollar fell 0.1 per cent against a basket of rivals. The currency had already erased all its gains since November’s US presidential election. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldLeading academic economists are fretting not just about what the Trump administration’s policies might to do US growth and inflation. More than 90 per cent of respondents to the latest FT-Chicago Booth poll said they were very or a little worried, too, about the quality of America’s economic statistics. Concerns have mounted after an influential advisory council — the Federal Economic Statistics Advisory Committee (Fesac) — was disbanded. With thousands of pages of US government data also being altered or removed from websites, not just economists but scientists, researchers and rights campaigners are alarmed by what they see as an incipient White House war on data. Fesac, which for 25 years advised offices compiling inflation, employment and GDP data, is among five advisory councils to federal statistical agencies that were terminated by commerce secretary Howard Lutnick on February 28. A second advised on other economic data; three advised the US Census Bureau. Since they were involved in improving accuracy and effectiveness of data collection and analysis, including adapting to new trends and technology, Lutnick’s claim that their purpose had been “fulfilled” makes little sense.Lutnick also unsettled many economists when he suggested — after being asked whether spending cuts imposed by Elon Musk’s so-called Department of Government Efficiency could cause a downturn — that government spending could be separated from GDP reports. Musk, too, has said GDP would be more accurate if government spending were removed, in a departure from economic theory and international practice.Since Donald Trump returned to the White House, meanwhile, multiple data sets — on climate, crime, natural disasters, and diversity, equity and inclusion — have disappeared from federal websites. Some were deleted or modified due to directives, for example on gender ideology and orders to remove statistics on climate change. Some have fallen victim to Doge-led cuts. Some have been restored, for now, after legal rulings.Trump is not the first US president to dispute some official data or be accused of trying to skew it in his favour; some critics worry less about the extent of changes so far than about what they might portend. But this administration’s interventions already go beyond those of most predecessors. Reliable statistics are, moreover, a public good and vital national asset. The US was a pioneer of modern economic statistics, under the economist Simon Kuznets, in the 1930s and 1940s.Effective policymaking, by government agencies and central banks, as well as decision-making by investors and businesses, relies on accurate and timely data. Trustworthy statistics are vital, too, for experts and the public to assess governments’ performance.Indeed, Doge’s cost-cutting efforts might yet backfire, in a specific way. Reducing government spending is seen, in part, as a route to lowering borrowing costs. But if it reduces trust in economic data, it could raise the risk premia investors demand for buying US bonds. Attempts to curb official data tend to be associated less with democracies like the US than with authoritarian countries such as China under Xi Jinping.Some data that could prove uncomfortable for the Trump team, such as consumer confidence indices, remain beyond its control. Private sector and big tech companies could provide some substitutes for official statistics, but would not necessarily enjoy the trust previously conferred by a government imprimatur. Though economists are signalling unease on data, many investors seem more sanguine. Yet as with much else, how far the White House is willing to go may depend in part on how vocal companies and investors are prepared to be about their concerns. More