Aurelia Butler

The EU has agreed a trade deal with Kenya, marking an important step in Brussels’ efforts to boost economic relations with Africa. The accord, which will be announced on Monday, according to EU officials, comes as Brussels contests growing Chinese involvement in the continent.The Interim Economic Partnership Agreement (IEPA) will give Kenya duty-free, quota-free access to the EU market for all its exports, including coffee, flowers and minerals.Kenya will gradually open its market to more EU imports. It has also agreed to binding commitments on environmental protection, climate and labour rights, an EU demand that has complicated trade negotiations with other middle-income countries such as Brazil and Indonesia.“It is a partnership of equals,” said an EU official on Wednesday about the deal, the first trade accord the EU has struck with an Africa nation since an agreement with Ghana in 2016. “Kenya wants to show . . . [it is] a good place for companies to set up shop. This agreement sends that message very powerfully to European investors.”Valdis Dombrovskis, European trade commissioner, will travel to Nairobi on Sunday to clinch the agreement with Kenya’s President William Ruto.The deal is the legacy of negotiations over a wider regional EPA with the east African Community concluded in 2014 but never implemented. Of the five members — Kenya, Rwanda, Burundi, Tanzania and Uganda — only Kenya ratified it. Two years ago the other members of the bloc allowed it to pursue a renegotiation of the agreement without them. All other members of the bloc, which now includes Democratic Republic of Congo and South Sudan, are on the UN’s list of least-developed countries and eligible for tariff and quota-free access to the EU. But they could now join the new IEPA, the official said.Kenya is the continent’s seventh-largest economy by purchasing power parity, according to the World Bank. But Nairobi has recently experienced opposition-led protests over living costs after a surge in fuel and food prices partly driven by Russia’s invasion of Ukraine, while also suffering a decline in its currency and rising borrowing costs. The EU is Kenya’s biggest export market with more than 20 per cent of the country’s total exports to the world, according to a 2021 European Commission document. More than 70 per cent of its flower production heads to the European bloc. It sold €1.3bn of goods to the EU in 2022 and imported products worth €2bn, with two-way trade growing by about a quarter since 2019.In February, during an EU-Kenya business forum, Ruto said a trade deal with the EU “would enable Kenya to expand its export base”.Kenya is also in talks with the US to build a stronger trade relationship. The EU and US have agreed a joint plan to upgrade the country’s telecoms infrastructure. During his presidential campaign last year Ruto, who is viewed as pro-business and open to western investment, struck a hostile tone towards China as debt servicing costs have climbed in recent years after his predecessor, Uhuru Kenyatta, borrowed heavily from Beijing.The EU has launched its Global Gateway aid initiative, which will spend €150bn in Africa between 2021 and 2027 as a rival to China’s own Belt and Road infrastructure programme.However, relations with developing nations remain strained. On Wednesday the EU shelved a co-operation treaty with 79 developing countries, many in Africa, after Poland vetoed its approval over their attitudes towards Ukraine. The commission instead asked member states to roll over an existing deal with the Organisation of African, Caribbean and Pacific States to prevent disruption to trade and development. Due to expire on June 30, Brussels wants to extend the “Cotonou” agreement for three months. Poland has said a glut of Ukrainian grain that would normally go to African and Asian countries has built up, reducing prices for its own farmers. Countries complaining of food shortages should take the shipments, Warsaw’s EU ambassador told the Financial Times. But many nations are keen to preserve relations with Moscow, with several African countries saying EU sanctions has made it harder to buy Russian crops and fertilisers.Several countries such as South Africa and Uganda have also abstained on UN votes condemning Russia’s invasion of Ukraine. More

Today’s top storiesThe Federal Reserve announces its decision on US interest rates at 2pm ET/7pm BST. New data showed US inflation eased last month to an annual rate of 4 per cent, its lowest level in more than two years, but “core” CPI remains elevated.Brussels hit Google with fresh charges over its alleged distortion of competition in advertising technology and may force it to sell part of its online ad business. Donald Trump blasted “the most evil and heinous abuse of power” after pleading not guilty to federal charges in a Miami courthouse as he sought to turn his legal problems into political gain ahead of the 2024 election.For up-to-the-minute news updates, visit our live blogGood evening.Policymakers in China have some tough challenges ahead as the country’s economic recovery slows while foreign investors turn increasingly hostile. Beijing is expected tomorrow to unveil stimulus measures and cut interest rates in an attempt to reinvigorate an economy weighed down by a property slowdown, weaker trade and record youth unemployment. The country’s reopening, which was expected to give a jolt to the global economy, has also failed to revive confidence.As a precursor, Beijing yesterday announced measures to manage short-term liquidity in the banking system and lower costs for companies, including tax breaks and measures to cut their borrowing costs and channel loans to certain sectors.Foreign investors meanwhile are turning cold. Global fund managers, deterred by geopolitical tensions and lower growth are rushing to meet demand for new Asian investment products that exclude China.The country’s tech groups have also been badly hit by fleeing foreign investors who are selling shares even in profitable big names such as Tencent and Alibaba. “China is getting cancelled and the economy is a dumpster fire,” said one Hong Kong-based analyst. The worsening relationship with the US is also a constant reminder of what happened to those who backed Russian companies before Vladimir Putin’s assault on Ukraine led to billions of dollars of value disappearing.The bearish mood towards China is not universal. Billionaire investor Ken Griffin told the FT yesterday that China could still prop up the global economy this year, helping avert an “ugly” showdown in growth if the US fell into recession. And Chinese tech is still in demand in some quarters: the EU for example continues to fund Huawei to run research on next-generation communications systems despite several member states banning the tech group from their telecoms networks. Western companies continue to “de-risk” their supply chains by shifting sourcing away from China. Bunzl, the British distributor of products that range from plastic spoons to PPE, said yesterday it was diversifying its sourcing into countries such as Mexico, India, Vietnam and Malaysia.Some of the rhetoric in markets echoes cold-war thinking. Diana Choyleva, chief economist at Enodo Economics, writes in the FT today that investors need to pick a side as Washington and Beijing battle for economic and geopolitical supremacy.With the two countries so far ahead in cutting-edge technology, the weapon of choice in this battle, other players have little chance of creating their own independent sphere of influence, she argues. “Given that both are happy to use economic coercion and sanctions to press their technological advantage,” she says, “countries, companies and investors will be under growing pressure to choose whose technology they want to use and cannot do without.” Need to know: UK and Europe economyThe UK economy grew by 0.2 per cent in April, driven by a rebound in consumer spending (and fewer strikes). However, data yesterday showing British wage growth accelerating pushed UK short-term borrowing costs above the level reached during the turmoil following the “mini” Budget last autumn. Here’s an explanation of why the labour market seems to be defying gravity.UK households should expect energy bills to remain high as wholesale prices are still well above the average before the Ukraine war. They could get even worse if suppliers are unable to prevent struggling customers from running up large debts, according to the head of Centrica, British Gas’s parent company.Britons can also expect food prices to increase when post-Brexit border charges are introduced next January, industry bodies warned. The EU said trade barriers with the UK would likely “deepen further”.The UK’s pandemic preparations were damaged by austerity and resources having to be diverted to Brexit planning, the Covid inquiry heard on its first day in session. France’s finance minister Bruno Le Maire told the FT that he would cut public spending after the country narrowly escaped a downgrade in its credit rating.Investors also seem to be cooling on Germany, where sluggish manufacturing output, slowing consumer spending and weak export growth, together with high inflation and rising borrowing costs, have caused the economy to shrink in the past two quarters.In better news for the eurozone, factory production rose more than expected in April, driven by a big jump in Ireland.Swedish central bankers have found a new culprit for surging inflation: Beyoncé. The singer’s decision to start her world tour in Stockholm in May led to a surge in local hotel prices that in turn meant inflation rose more than expected. Need to know: Global economyRussia restarted oil exports to North Korea after a pandemic hiatus, while Pyongyang plans to deliver more weapons to Moscow. Chief economics commentator Martin Wolf says urgent action is needed to help developing countries that have been particularly hard by the polycrisis of the pandemic, supply constraints, war in Ukraine, soaring inflation and tightening money and financial conditions.Our new graphical presentation explains how the subsea cable market is at risk of dividing into eastern and western blocs as the US pushes China out of the internet’s plumbing. Need to know: businessVodafone and Three-owner CK Hutchison agreed a deal to combine their UK mobile businesses and create the country’s largest operator. The deal will reduce the number of networks in the UK from four to three, prompting a likely challenge from regulators.Shell, Europe’s largest energy company, is boosting its dividend and cutting spending as it tries to “simplify” its business and increase investor confidence. A Big Read examines the plight of Croatia’s Fortenova, a kind of local equivalent of Walmart that has a similar supersized effect on the country’s economy. The retailer is still struggling to ditch its Russian owners and its failure would undermine the food industry across the western Balkans.A US judge put a temporary block on Microsoft’s $75bn acquisition of games company Activision Blizzard pending an antitrust investigation. The EU has already cleared the deal, while the UK has blocked it.Saudi Arabia has spent almost $8bn acquiring and building stakes in gaming companies in the past 18 months to dominate the global industry. Savvy Games Group, wholly owned by Saudi’s $650bn Public Investment Fund, has led the charge.The bosses of Goldman Sachs and Morgan Stanley said they were seeing “green shoots” in their struggling investment banking businesses, which have seen activity damped by higher interest rates.The World of WorkShould we pay more attention to food labels marked “harvested by hand”? Columnist Sarah O’Connor argues that companies making a point about the use of human labour should also provide some detail of the pay and conditions under which those people worked.The big accounting firms should increase pay for junior auditors if they want to make the profession more attractive to young recruits, says the chair of the UK regulator.Columnist Tim Harford discusses productivity hacks in the new Working It podcast and whether there is a link between personal and national productivity.FT Alphaville discusses a paper from McKinsey on the effects of generative AI on knowledge workers. Some good newsUS researchers have developed a way of manipulating genes to suppress the population of an insect known to destroy soft-skinned fruit in North America, Europe and parts of South America. More

The Fed’s target range for the federal funds rate  — which it is expected to leave unchanged at 5%-5.25% at the meeting that concludes at 2 p.m. in Washington — has resulted in an actual rate of 5.08%. The highest rate on swap contracts for future meetings was about 5.29% in September on Wednesday morning, with the July contract’s rate 5.28%. As recently as Tuesday the July contract’s rate was higher, anticipating no rate increases after that point. Meetings are scheduled for July 26 and Sept. 20.The minority view that the Fed might raise rates in June got beaten up Tuesday by May inflation data that showed more deceleration than expected. However the view that rate cuts are possible during the second half of the year was also damaged, as inflation remains well above the Fed’s 2% target. The December contract’s rate at 5.15% continues to price in about half of a rate cut from the expected peak.  More

Central bankers looking for somebody to blame for persistent price pressures have a new target: Beyoncé.Economists at Danske Bank believe that the singer’s decision to start her world tour in Stockholm in May led to a surge in local hotel prices that in turn meant Swedish inflation exceeded expectations.Fans from around the world flocked to the Swedish capital for the opening two sold-out concerts of Beyoncé’s Renaissance tour last month, with anecdotal evidence suggesting many of the 46,000 attending each night had to stay well outside of Sweden’s capital and at highly elevated prices.Sweden Statistics said on Wednesday the annual core measure, which excludes changes in energy prices, had fallen just 0.2 percentage points between April and last month to 8.2 per cent. That was a smaller margin than economists and the central bank had hoped. “Beyoncé is responsible for the extra upside surprise this month. It’s quite astonishing for a single event. We haven’t seen this before,” said Michael Grahn, Danske’s chief economist in Sweden, who estimated the singer caused 0.2 percentage points of the rise.Sweden Statistics said restaurants and hotels added 0.3 percentage points to the May figure, while recreation and culture contributed 0.2 percentage points. Economists said they expected the effects to unwind this month. But some such as Andreas Wallström, head of forecasting at Swedbank, worried about the next big concert in Sweden — three nights of Bruce Springsteen in Gothenburg at the end of July — having a similar effect. Beyoncé — famous for hits such as “Halo”, “Crazy in Love” as well as “Bills, Bills, Bills” when part of Destiny’s Child — is touring for the first time in seven years, sparking huge demand for tickets in Europe and from next month the US. US websites were filled with tales of Americans travelling over to Sweden to take advantage of the weak Swedish krona and significantly cheaper ticket prices than back home.Tickets for the Stockholm concerts sold with a face value of between SKr650-Skr1495 each ($60-140). For her Las Vegas shows, Ticketmaster prices for standard admission vary from $91 to $689. In other US cities, resale tickets are selling for several multiples of those amounts. The Riksbank was one of the last western central banks to start lifting interest rates, only moving away from zero lower bound in May last year. Its benchmark rate is 3.5 per cent and most economists such as Grahn expect two more hikes this year as it tries to lower headline inflation to its target of 2 per cent. The consensus expectation for Swedish core inflation in May was 7.8 per cent. The Riksbank forecast a figure of 8.1 per cent. Beyoncé’s Renaissance tour moved from Stockholm through several European capitals including Brussels, Cardiff, Edinburgh and five nights in London. She has seven more dates in Germany, the Netherlands and Poland before moving to Canada and the US. Her impact has yet to show up in any of the other countries’ inflation data, however. Large sporting tournaments often skew economic statistics but economists said it was rare for a single event to do so. More

European stocks continued their recent upward push on Wednesday, as investors prepared for the US Federal Reserve to pause in its monetary tightening when policymakers announce their decision on interest rates later in the day.Europe’s region-wide Stoxx 600 and Germany’s Dax both added 0.5 per cent, while France’s Cac 40 rose 0.7 per cent and London’s FTSE 100 gained 0.3 per cent.The moves follow a further overnight rally on Wall Street, as the benchmark S&P 500 index rose 0.7 per cent and pushed higher into the bull market territory it entered last week. The tech-focused Nasdaq Composite gained 0.8 per cent. The US consumer price data showed headline inflation had slowed to a year-on-year rise of 4 per cent in May, down from almost 5 per cent in April, reinforcing the widespread market view that the Fed would keep interest rates steady on Wednesday. “The Fed wants to pause and would need a significant reason to alter that view,” said Mohit Kumar, chief Europe financial economist at Jefferies, noting that the inflation report “did not provide that reason”.Markets were pricing in a 92 per cent probability that the Fed would hold interest rates steady at the conclusion of its monetary policy meeting on Wednesday, according to data compiled by Refinitiv and based on interest rate derivatives prices.“Our expectation is that the Fed will leave rates unchanged, in line with market pricing,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “However, we also expect policymakers to send a clear message to markets that at least one more rate hike is likely at a later meeting.”Investors were also waiting for the US commerce department to release its producer price index later in the day. Economists polled by Reuters expect the growth in prices paid by businesses to have fallen to 1.5 per cent year-on-year in May, down from 2.3 per cent in the previous month.The yield on the US two-year Treasury, which is most sensitive to monetary policy expectations, slipped 0.03 percentage points to 4.67 per cent, while the yield on the 10-year note was down 0.01 percentage points at 3.83 per cent. Bond yields fall as prices rise.Contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 both added 0.2 per cent ahead of the New York open.

Meanwhile, economists still expect the European Central Bank to raise its deposit rate by another 0.25 percentage points at its meeting on Thursday.Asian equities were mixed, with Japan’s benchmark Topix index rising 1.3 per cent, while China’s CSI 300 index was flat and Hong Kong’s Hang Seng index lost 0.6 per cent.Shares in China were buoyed earlier in the day by growing hopes for policy support from the People’s Bank of China after the central bank lowered its short-term lending rate on Tuesday for the first time in nine months.Analysts at Goldman Sachs said the move “could suggest the start of additional monetary policy easing” and expected the PBoC to cut its one-year medium-term lending facility rate on Thursday by 0.1 percentage points. The rate serves as the floor for China’s benchmark prime loan rate. More

NEW DELHI (Reuters) – Most G20 member nations are of the view that banking systems and regulations in their countries are steady, India’s chief economic advisor said on Wednesday.”Most country members who spoke expressed the view or the hope that their individual country regulations and banking systems were sound, and they don’t anticipate any trouble,” V. Anantha Nageswaran said after the bloc discussed financial stability risks. More