Aurelia Butler

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldOne of the many notable things about the beating under way in US stock markets is that US government bonds are not really picking up the slack. This is not a good sign.Treasuries are typically the yin to stocks’ yang. When stocks take a hit, bonds generally jump as investors flock to safer shores. They are known as the “risk-free” asset after all. This is a mechanism that has helped many a diversified portfolio over the decades, with only rare exceptions. In this month’s rapid stock market shakeout, however, the balancing act is not quite working out. US stocks are being monstered, down 5 per cent this month so far, and we are only halfway through March. We’re down 8 per cent since mid-February. At the same time, bond prices have picked up over the course of this year, but not dramatically so. Crucially, benchmark 10-year US government bonds are at roughly the same level now as they were at the end of last month.This tells you that this is a sentiment shock. It’s not the economy, stupid. That makes it harder to fix. The data on the US economy is wobbly but not terrible, certainly not as ugly as the markets shakeout would suggest. US inflation slipped back to 2.8 per cent in February, a sign that the economy is weakening a bit but not tanking.But that’s not really what is putting off investors. “We are selling US assets as we speak,” Michael Strobaek, chief investment officer at Swiss private bank Lombard Odier, told me on Friday morning. “We are going through the valley of pain right now.” This is quite the switch in view. This time last year, Strobaek was talking about the “geostrategic” imperative of buying and holding US stocks. At the turn of this year he was still all-in on American exceptionalism.The US economy has not changed his mind. Instead, it was what he calls US vice-president JD Vance’s “ultimate provocation” to Europe in his speech to the Munich Security Conference in February. Then it was Donald Trump’s ghastly treatment of Ukrainian President Volodymyr Zelenskyy in the White House days later. Then it was the threat of US tariffs against Mexico and Canada. “It’s absolutely clear they are hitting this agenda with a sledgehammer,” Strobaek said. He is now retreating out of stocks and into bonds and cash instead.At some point, the constant flip-flopping on tariff policy from the Trump administration will hurt the real economy. Wealthy Americans are heavily exposed to now swiftly sliding stocks, so this will hit them in the pocket. Companies will pull back on spending, in case they are walloped with a random and painful policy shift. Even more alarming for investors, the uncertainty makes it very difficult to make earnings forecasts with any conviction, leaving fund managers flying blind.Some content could not load. Check your internet connection or browser settings.The mood is dreadful. Trevor Greetham, head of multi-asset at the UK’s Royal London Asset Management, noted that in his sentiment tracker, running all the way back to 1991, the past few days rank in the 50 grimmest in the market that he has observed. This period is churning out days right up there (or down, I guess) with such entertaining episodes as the failure of Lehman Brothers, the euro crisis, and — one for the finance hipsters here — the demise of the Long-Term Capital Management hedge fund in 1998.Again, Greetham points out, it’s not the economy that is hurting here. It’s the tariffs, the geopolitics, the uncertainty itself doing the damage. And “central banks are not there for you for that”. In other words, the Federal Reserve is not going to ride to the rescue as it did in, for example, the Covid crisis five years ago.If investors did believe the Fed would gallop in on a white horse to cut rates and fix the mess, bonds would be markedly stronger than they are today. Instead, investors are looking ahead to a slower growth, higher inflation future that monetary policy can’t easily fix. That leaves no short-term catalyst to turn this situation around. Barring a personality transplant for the US president, an intervention from an adult in the room or a sudden crash in the real economy that sparks massive Fed cuts, there’s nothing to stop the rot. “We’re in falling knife territory,” Greetham says.Treasury secretary Scott Bessent has dismissed the impact of “a little volatility” in stocks. The White House message is short-term pain for long-term gain. Wall Street heavyweights from Goldman Sachs and Blackstone have this week praised the potential upsides of Trump’s beloved tariffs. I’ll have whatever they’re having. Even if the administration wanted to pressure the Fed to make cuts, that would be viewed by investors as an unseemly intervention in the central bank’s independence that would probably make matters worse.Everything has a price, and temporary bounces in broad declines are par for the course. At some point, US stocks may become cheap enough to reel in the bargain hunters. But at a price-to-earnings ratio of 24 times, compared with 17 in Europe, it is hard to argue we are there yet. Fund managers are left with scant reason for optimism. Maybe US investors will not notice Trump’s proposed 200 per cent tariffs on proper French champagne after [email protected] More

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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldIt now appears that neither a slowing economy nor plunging stock prices are enough to deter US President Donald Trump from his radical economic agenda. Beyond promising to buy a Tesla to prop up the beleaguered stock of Elon Musk’s enterprise, he is in fact doubling down. Asked about the economic and market turbulence, the self-proclaimed “tariff man” argues that a “period of transition” may be necessary as his administration brings “wealth back to America”. It is “a detox period” according to Treasury Secretary Scott Bessent. The cleanse has, so far, raised the spectre of stagflation, wiped $5tn off the S&P 500, and undermined the nation’s standing with global investors.The short-term pain might be easier to digest if the means — and the ends — were intelligible. Indeed, if the overarching goal is to, however vaguely, “Make America Great Again”, then the hotchpotch of economic measures that Trump has so far offered lacks any coherent theory of change to get there.Take Trump’s central plan to rebuild 25th president William McKinley’s tariff wall around America. The idea is to urge foreign companies to set up factories in the country, spur a renaissance in manufacturing jobs, and use revenues from import duties to slash taxes. These aims are antithetical: if more production did shift to the US, tariff revenues would suffer. Then there’s Musk’s so-called Department of Government Efficiency. Curbing bureaucratic excess is worthwhile. But Doge has been undermining its own efforts. It recently sacked a team responsible for using technology to streamline public services. A plan to cut the Internal Revenue Service’s staff by as much as half would also weaken tax collection.Next, Trump wants the US shale sector to “drill, baby, drill”. But his team has also indicated a desire to see crude prices fall to support consumers, perhaps to $50 a barrel or lower. That would be uneconomical for US producers. US energy secretary Chris Wright added this week that higher oil production could come through innovation. If so, fomenting economic uncertainty, including through on-and-off tariffs, is no way to encourage it or the broader manufacturing boom the administration seeks. Trump’s national strategic reserve of Bitcoin — an inherently volatile asset, with a lack of obvious utility — is another befuddlement. Finally, there’s the rumoured effort to weaken the dollar — perhaps in a so-called “Mar-a-Lago accord” — to help turn America into an industrial export powerhouse. A global deal would probably be a non-starter when key trade partners are peeved by Trump’s tariff threats. Nor does everyone in the administration seem to be on the same page. Bessent recently insisted that the Treasury’s strong dollar policy remained intact.What can investors and companies deduce from all this? One is that assuming this administration will operate coherently is a gross oversight. Some even wonder if the chaos is part of a deliberate grand plan to restructure America’s economy and its place in the global system. Either way, the end result is a loss of economic confidence. Now even the promise of tax cuts and deregulation is losing its allure amid the unpredictability.Trump may continue to paint a weakening economy and falling markets as part of a disruptive yet necessary shift for America’s greater good. But the longer his methods remain inscrutable, while heaping costs on to households, businesses and investors, the harder that sell will become. Indeed, rather than trading pain today for a brighter tomorrow, it seems increasingly as though America is swapping its long-established model for an amorphous and far-fetched notion of a future one. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Northern Ireland risks becoming “collateral damage” in a US-EU trade war because of the post-Brexit deal that leaves it within the European bloc’s single market for goods, manufacturers and analysts have warned.UK Prime Minister Sir Keir Starmer said this week that he was “disappointed” that the UK was among countries to be hit by US tariffs on steel and aluminium imports. But if he secures an exemption under a trade deal with the US, Northern Ireland would be at a competitive disadvantage to Britain.“The challenge is [US] imports into Northern Ireland — because of the Windsor framework, we have to automatically apply EU tariffs,” said Stephen Kelly, head of Manufacturing NI, a lobby group. “For us, it’s not so much what [Donald] Trump has done. It’s the response from the EU and the potential no response from the UK where Northern Ireland potentially becomes collateral damage,” he said.US President Donald Trump’s imposition of 25 per cent tariffs on global steel and aluminium imports this week prompted the EU to hit back with a plan for counter measures targeting up to €26bn of American industrial, consumer and agricultural goods. They are set to take effect on April 1.The Windsor framework is supposed to give Northern Ireland the best of both worlds: unique, unfettered dual access to the UK’s internal market as well as the EU’s single market for goods, which Britain officially left in 2020. Kelly said he felt “queasy” looking at the EU’s “horrendous” 99-page list of prospective US tariff targets, many of which are used in Northern Ireland supply chains. “Say we make a product using a widget that comes from the United States and it is on the EU’s 99-page list, then we pay 25 per cent more,” he said. “But if the UK doesn’t have the same tariffs, our competitors in GB would get it at 25 per cent less than what we’re having to pay.”Northern Ireland’s top imports from the US include machinery, chemicals and manufactured goods and were worth £835mn in 2023, according to official data. Imports from the EU were £6.6bn.Some content could not load. Check your internet connection or browser settings.Emma Little-Pengelly, Northern Ireland’s deputy first minister, told BBC Radio Ulster that if EU tariffs were levied on US goods it was “likely that Northern Ireland would be caught up in this somewhat accidentally”. Trump insists the EU was set up to “screw” the US. On Thursday, he threatened a 200 per cent tariff on EU alcohol if the bloc imposed a levy of up to 50 per cent on US whiskey.Kelly said Northern Ireland’s famous Bushmills whiskey would, however, be exempt as Northern Irish goods travel to the US under the UK export trade regime.Starmer is seeking to secure an economic deal with the US and has not yet announced any tit-for-tat retaliation to the steel and aluminium tariffs.“If the UK doesn’t apply countermeasures equivalent to the EU, that’s the front at which Northern Ireland becomes exposed,” said Conor Houston, Northern Ireland director at Vulcan Consulting. “This is a great test of the Windsor framework and the UK’s commitment to Northern Ireland.”For the region, UK tariffs on the US would be the “least worst option” because it would level the playing field with Britain, Kelly said. Emma Little-Pengelly presenting US President Donald Trump with a personalised flag from Royal Portrush Golf Club, at the US Capitol in Washington More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and happy Friday. On today’s agenda:Tesla warns Trump it is ‘exposed’ in trade warChina blasts the Panama Canal ports dealDoes the Olympic business model still work? Elon Musk’s Tesla has warned that President Donald Trump’s trade war could make it a target for retaliatory tariffs against the US and increase the cost of making vehicles in America.In an unsigned letter addressed to US trade representative Jamieson Greer, the electric-car maker said it “supports” fair trade but warned that American exporters were “exposed to disproportionate impacts when other countries respond to US trade actions”.The letter underscores how even Tesla, a group led by Musk, a close Trump ally, is concerned about the potential effects of the wide-ranging tariffs. It follows two weeks of erratic trade policy announcements from the government that have rattled businesses and financial markets.One person familiar with the process of sending the letter said it was “a polite way to say that the bipolar tariff regime is screwing over Tesla.”The person added: “It is unsigned because nobody at the company wants to be fired for sending it.” Here’s what else we know about Tesla’s tariff concerns. Here’s what else we’re keeping tabs on today and over the weekend:US government shutdown: Chuck Schumer, the top Senate Democrat, said he would back a Republican stop-gap funding bill, reducing the risk of a shutdown early tomorrow.Economic data: Argentina and Brazil report February inflation figures. G7 meeting: Top diplomats hold a second day of talks in Canada amid rising trade tensions and divisions over Ukraine.How well did you keep up with the news this week? Take our quiz.Five more top stories1. Vladimir Putin has struck a hard line over any deal to halt the fighting in Ukraine, even as he said he “supports the idea” behind a US-backed 30-day ceasefire. Russia’s president suggested Ukraine could use the proposed ceasefire to “continue forced mobilisation, get weapons supplies and prepare its mobilised units”. Here’s how Trump responded to Putin’s comments.2. China has criticised CK Hutchison’s sale of its Panama Canal ports and urged the Hong Kong-based conglomerate to “think twice” about its $22.8bn deal with US asset manager BlackRock. Shares in the company fell more than 6 per cent after the strongly worded commentary appeared in Beijing-backed newspaper Ta Kung Pao in Hong Kong. The piece also attacked the US for pressuring the deal “through despicable means”.US-China relations: Steve Daines, a senator with close ties to Trump, is trying to get the president to name him as a special envoy to China to help secure a meeting with Xi Jinping.3. Insurers have warned that mass firings at US science agencies could threaten the critical weather and geospatial data that the industry uses to manage natural disaster risks and potentially raise prices for consumers. The trade group Reinsurance Association of America is lobbying the government to preserve data collection at the National Oceanic and Atmospheric Administration, after the department said that it would fire more than 1,000 staff.4. Exclusive: China’s DeepSeek is choosing to focus on research over chasing revenues as its billionaire founder decides not to follow Silicon Valley rivals by taking advantage of a sudden jump in sales. A surge in demand for the artificial intelligence start-up’s services meant revenues were enough to cover ongoing costs for the first time last month.5. The US has unlocked almost $5bn in funding for a liquefied natural gas project by France’s TotalEnergies in Mozambique, potentially restarting work on one of Africa’s largest energy investments. The company put the project on hold in 2021 after Islamist insurgents killed civilians and workers in attacks near the site. Here’s why the Trump administration has reapproved the loan.The Big Read© Fabrizio Bensch/ReutersOn the face of it, the Olympics are riding high after the success of Paris 2024, which attracted a surge in viewership and revitalised a brand many feared was losing relevance with younger audiences. But as the organising committee chooses a new president next week, the world’s biggest sporting event is facing an exodus of major sponsors and a fast-changing media landscape.We’re also reading . . . Tariffs on money?: Capital inflows could be the Trump administration’s next target, writes Gillian Tett. Peak brain power: Data across countries and ages reveal a growing struggle to concentrate and declining verbal and numerical reasoning, writes John Burn-Murdoch.FT Magazine: Once a heavyweight in Hong Kong finance, Blackpool FC owner Simon Sadler now faces the possibility of jail. Kaye Wiggins goes inside the downfall of a trading titan.Graphic of the dayFears of possible tariffs on gold imports have sparked a rush in transatlantic trade of the metal. But due to a quirk in global bullion markets and the asset’s physical nature, refineries in Switzerland are working overtime, resizing the 1kg bars used in New York to the 12.5kg bricks traded in London. Here’s how the time-consuming process of shipping gold has become strained.Take a break from the news . . . After 13 years of reviewing restaurants, Tim Hayward is questioning his own tastes and prejudices in his final critique. Restaurants have brought new menu items and exciting ideas, but one thing always stuck out. Now, he finally explains himself.© Simon BaillyRecommended newsletters for youOne Must-Read — Remarkable journalism you won’t want to miss. Sign up hereNewswrap — Our business and economics round-up. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldGold surged to a record high above $3,000 per troy ounce, as fears over the threat to global growth from Donald Trump’s trade war push investors into the safe haven metal.The price of bullion rose to $3,004 per troy ounce on Friday. Gold has been the among the world’s best-performing assets since Trump took office in January, and has risen 14 per cent since the start of the year.The US president’s fast-changing tariff policies have sparked concerns that a global trade war will fuel inflation and cause an economic slowdown in the US and beyond, causing Wall Street stocks to fall into a correction and adding to gold’s appeal.Expectations of interest rate cuts by the US Federal Reserve have also buoyed bullion, which as a non-yielding asset typically benefits from lower borrowing costs. “Both institutional and private investors are turning to gold to hedge their portfolios against economic turbulence,” said Alexander Zumpfe, senior precious metals trader at Heraeus.“The physical gold market is experiencing strong demand” because precious metals are valued as protection against economic crises, he added.Gold’s last major price milestones were during the financial crisis, when it passed $1,000 per troy ounce in March 2008 — and during the Covid-19 pandemic, when prices hit $2,000 in August 2020.Concerns that Trump might place tariffs on bullion have driven an unprecedented surge of gold bars into New York, where stockpiles on the Comex have reached record levels. Since Trump was elected, more than $70bn of gold has been flown into New York, although that flow has recently started to slow. The unexpected surge in gold prices this year has sent investment banks racing to revise their price forecasts. At least four banks — Citibank, Goldman Sachs, Macquarie and RBC — have raised their forecasts in recent weeks. The rise above $3,000 means gold has risen nearly tenfold since 2000, outperforming major stock indices.“Gold is the best-performing asset class of the 21st century so far,” said Adrian Ash, director of research at BullionVault, a gold trading platform. Since the turn of the millennium, bullion had benefited from market shocks such as the 2008 financial crisis and the UK Brexit vote in 2016, as well as from increasing geopolitical conflict, he said.“That has been the sea change for gold, that hubris that western democracy had 25 years ago has absolutely been shattered,” said Ash.Gold’s surge in recent years has also been fuelled by demand from central banks as they diversify their holdings away from the US dollar. Central banks, mainly in emerging markets, have bought more than 1,000 tonnes of gold annually for the past three years in a row.John Ciampaglia, chief executive of Sprott Asset Management, said that growing levels of government debt were one of the biggest factors driving bullion’s performance since the turn of the millennium. “Global levels of debt have exploded over the past 25 years, they are starting to really weigh on economies and budgets,” said Ciampaglia. “That is why gold has proven itself to be a store of value, not for the last 25 years, but for the last 5,000 years, because it can hold its value relative to traditional currencies.”Gold’s momentum suggests prices are likely rise further this year, according to Michael Haigh, commodities analyst at SocGen, who forecasts a price of $3,300 per troy ounce by the end of the year. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK economy unexpectedly contracted by 0.1 per cent in January, underscoring the challenge facing chancellor Rachel Reeves as she prepares to deliver a high-stakes Spring Statement this month.Friday’s monthly GDP figure from the Office for National Statistics was below both the 0.1 per cent growth predicted by economists polled by Reuters and December’s 0.4 per cent. The decline was largely driven by weakness in the production sector.Reeves is preparing to rein in public spending in her March 26 Spring Statement after disappointing growth and higher government borrowing costs sparked fears that she is on track to break her fiscal rules.Growth has largely stalled since May, hitting tax revenues, after the UK economy rebounded from a technical recession at the start of 2024.Labour MPs and some cabinet ministers have expressed concern that Reeves is planning politically damaging cuts to ease pressure on the public finances, including slashing the welfare budget.“It’s the toughest thing we have had to do,” admitted one ally of the chancellor. However, Reeves has ruled out rewriting her fiscal rules to allow more borrowing, forcing her to make what she has called “tough choices”.Mel Stride, shadow chancellor, urged Reeves to turn her March 26 statement into an “emergency Budget”, including reversing tax rises on business and abandoning what he called “extreme employment legislation”.The Office for Budget Responsibility in October forecast economic growth for 2025 at 2 per cent — double the 1 per cent predicted by economists polled by Reuters. The watchdog is expected to release a new forecast alongside the Spring Statement.Suren Thiru, economics director at the Institute of Chartered Accountants, said January’s GDP contraction made Reeves’ Spring Statement “more problematic” since it increased the likelihood that the OBR would downgrade its forecasts, “further undermining the chancellor’s spending plans”.Some content could not load. Check your internet connection or browser settings.The pound weakened slightly after Friday’s data release and was down 0.2 per cent against the dollar by late afternoon, trading at $1.293. Gilts were stable, with the 10-year yield down 0.02 percentage points at 4.67 per cent.The figures come as the fallout from Donald Trump’s escalating trade war has added to the economic strains facing the UK, as well as the prospect of higher defence spending as the US president disrupts western security alliances.“The world has changed and across the globe we are feeling the consequences,” Reeves said in response to Friday’s figures.As a result, she said, “we are launching the biggest sustained increase in defence spending since the cold war, fundamentally reshaping the British state to deliver for working people and their families, and taking on the blockers to get Britain building again”.The Labour party won the general election last July with a promise to kick-start growth, but Reeves has faced criticism over her October Budget, which left businesses bearing the brunt of £40bn in tax increases.Businesses have warned of job cuts as a result of the measures, which take effect from April. Paul Dales, economist at the consultancy Capital Economics, said January’s fall in output “highlights the weakness of the economy before the full effects of the rise in business taxes and the uncertain global backdrop is felt”.The Bank of England is expected to keep rates on hold at 4.5 per cent at its meeting next week amid signs of a rebound in inflation. Last month, the central bank cut its economic growth forecast for the first quarter of 2025 to 0.1 per cent, from the 0.4 per cent expected in November.Despite January’s contraction, Thiru said a rate cut by the BoE next week was “unlikely” as rate-setters would probably want to assess the impact of the increase in employers’ national insurance contributions from the Budget.Friday’s data cemented traders’ expectations that there will be at least two further quarter-point interest rate cuts from the BoE this year, with a small chance of a third, according to levels implied by swaps markets.According to Friday’s ONS data, the manufacturing sector contracted 1.1 per cent in January, with a 0.2 per cent decline in construction, while services grew 0.1 per cent. Liz McKeown, ONS director of economic statistics, said the overall picture for the UK economy was of “weak growth”. However, services continued to grow in January, she said, “led by a strong month for retail, especially food stores, as people ate and drank at home more”. The ONS said the publication of trade data, usually released alongside GDP figures, had been delayed due to errors. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US government’s tariff announcements have become a “big headache” for technology companies such as iPhone maker Apple and cloud service provider Amazon, their manufacturing partner Foxconn said on Friday, in a rare public admission of the disruption caused by President Donald Trump’s erratic trade policy.“The issue of tariffs is something that is giving the CEOs of our customers a big headache now,” chief executive Young Liu told investors on an earnings call. “Judging by the attitude and the approach we see the US government taking towards tariffs, it is very, very hard to predict how things will develop over the next year. So we can only concentrate on doing well what we can control.”Liu said the company’s customers were “one after another” hatching plans for co-operating with Foxconn on manufacturing in the US. He declined to give details as those plans were not yet finalised, but said there should be “more and more” manufacturing in the US.The world’s largest contract electronics manufacturer assembles the vast majority of the world’s iPhones for Apple and also makes a broad range of other electronics products, including laptops, servers, robots, medical equipment and electric vehicles.Foxconn itself is affected by Washington’s attempts to force more manufacturing to move onshore. The lion’s share of its manufacturing capacity is in China — recently hit by an additional 10 per cent US tariff — India and Vietnam, which are both likely targets for Trump’s planned reciprocal tariffs. Foxconn is also building what it said last October would be the world’s largest factory for Nvidia Blackwell servers in Mexico, where Trump has slapped a 25 per cent tariff on its exports to the US.Foxconn forecast its information and communication products business, dominated by its contract work for Apple, would be stable this year. “But under the uncertainties related to geopolitics and tariffs, manufacturing will face challenges and demand might also suffer,” Liu said, adding that the company would work closely with customers to adjust its global footprint.  But the Taiwanese group gave a bullish outlook for AI servers. The company’s server assembly revenue increased 78 per cent in the fourth quarter of 2024 compared with the same period a year earlier, and it said it expected the AI server business to more than double in the current quarter.Liu said he did not share concerns that cloud service providers might cut spending this year. He said the success of Chinese AI company DeepSeek in developing a large language model with smaller hardware investment was likely to encourage larger numbers of medium-sized companies to develop their own LLMs, further boosting server demand.Driven by that strong growth, cloud and networking products would account for half the company’s revenue this year, overtaking the consumer electronics business, which has long weighed on Foxconn’s margins with its low-margin smartphone assembly operations.Foxconn reported a surprise 13 per cent year-on-year drop in net profit for the fourth quarter. Net earnings slid to NT$46.3bn (US$1.4bn) in the three months to the end of December, but the decrease was due to a drop in non-operating income, while operating profit increased by 32 per cent. More