Aurelia Butler

LONDON (Reuters) – PIMCO is underweight the U.S. dollar and overweight UK government bonds in some funds, a senior fund manager said on Monday.”There’s no guarantee that we’re going to be short the dollar all the time, but today, (in) positioning we have dollar underweights versus G10 and EM (emerging markets),” Andrew Balls, chief investment officer for fixed income at the $1.8 trillion asset manager told a media event.”My guess is on average, we’re going to have that over the next couple of years.”The dollar index, which measures the greenback’s value against a basket of other major currencies is virtually unchanged so far this year, having gained 8% last year as U.S. interest rates rose sharply.The U.S. dollar will keep its reserve currency status, Balls added, alluding to a debate on de-dollarization. PIMCO does not hold a strong firm-wide view on the UK so is broadly neutral on UK government bonds, though some of its funds hold overweight positions, Balls said. Inflation in the UK has fallen less than expected, prompting traders to raise bets on Bank of England rate hikes.”We tend to be neutral and in some of our portfolios are a little bit overweight in the UK. It looks like there is value when we compare the UK with the U.S. or with Europe,” Balls said.”(The) inflation profile is not super different across the markets.”Speaking at the same event, Richard Clarida — a former Federal Reserve vice chair — said he expected central banks to provide less policy support in economic downturns than they have previously.Clarida said that it would be harder for central banks to get inflation near their 2% targets than in the past 15 years because of supply shocks. “We think we’re going to be in a world in which, at the margin, there’s probably going to be less policy support provided in economic downturns than we’ve seen… We’re seeing some early evidence of what we call (quantitative easing) fatigue,” Clarida, now an economic advisor at PIMCO, said. For those reasons, risks to growth are “skewed to the downside,” Clarida added. More

Trade barriers between the UK and EU are likely to deepen despite the resolution of a diplomatic stand-off over Northern Ireland creating a “new spirit” in relations, the EU’s Brexit negotiator warned on Monday.“Trade can no longer be as frictionless and dynamic as it was before. This inevitably means additional costs for businesses on both sides,” said Maroš Šefčovič, vice-president of the European Commission.“Over time, increased divergence may bring even more costs and it will further deepen the barriers to trade between [the] EU and the UK,” he told the EU-UK Forum annual conference.The UK has repeatedly said it wants to set its own regulations in areas such as artificial intelligence and financial services, which Brussels argues would require greater checks and controls on imports.UK ministers had hoped that the recent Windsor framework deal to solve a post-Brexit dispute over trading arrangements in Northern Ireland would lay the foundation for closer relations with Brussels.James Cleverly, UK foreign secretary, told the conference he wanted to collaborate more closely with Brussels on migration, security, energy, climate change and international development.“I want us to move forward in the same spirit of mutual confidence and ambition for our relationship and to work closely with you on other areas of mutual interest,” he said.But in a several areas, Brussels has made clear that the UK will be treated much like any non-member state. These include collaboration with the EU on science programmes, electric vehicle tariffs, repatriating euro clearing to the EU and financial services co-operation.Mujtaba Rahman, Europe managing director at consultancy Eurasia Group, said the commission did not share the UK’s view that since prime minister Rishi Sunak had delivered the Windsor framework, the EU should show goodwill elsewhere.“Brussels sees little reason to reward the UK simply for delivering on its treaty commitments. The fact is, life as a ‘third country’ outside the EU is tough, as the ongoing friction over e-passport gates, Horizon, euro clearing and rules of origin clearly demonstrates,” he said.Negotiations over the UK’s “associate membership” to the EU’s €95.5bn Horizon research programme, agreed as part of its post-Brexit Trade and Cooperation Agreement, remain deadlocked over talks on cost.The UK is joining the 2021-27 flagship research programme two years in. While Brussels has offered to cut Britain’s participation fee to account for the two lost years, London has pushed for a bigger discount.“We bring a lot to the table. The benefits of collaboration are self-evident,” said Cleverly. However, Šefčovič insisted that the EU offer was “very good”.Šefčovič also damped hopes that a review of the TCA in 2026, which the Labour party often cites as a chance to improve economic relations, would bring substantial change. The review “does not constitute a commitment to reopen the TCA or to renegotiate the supplementary agreements”, he said.Both of the main UK political parties have ruled out rejoining the EU single market or forming a customs union with the EU.Šefčovič also expressed concern over the rights of EU citizens in the UK and protection of the “level playing field”, a treaty commitment under which UK companies will not undercut their rivals in EU countries by lowering standards or business support.The EU negotiator added there were still concerns about the Retained EU Law bill, which would remove EU regulations from the UK statute book. Sunak has paused progress of the bill but not scrapped it.

Passing the legislation would mean fundamental parts of the Withdrawal Agreement and TCA “would be thrown into the shredder”, Šefčovič said — a reference to a campaign video Sunak made in which he vowed to shred EU-era laws.Meanwhile, an influential European parliament committee on Thursday will warn that it is “highly concerned” about a recent UK law loosening rules on genetically-modified food.“Regulatory divergence . . . could result in the entry of genetically modified products into the EU with disparate safety controls or without proper labelling,” a draft report states.Even in other areas where there has been progress, for example the activation last month of a long-delayed EU-UK memorandum of understanding on financial services, commission officials are clear there will be no special deals.Asked at the conference about how the UK could improve access for professional and financial services, Stefan Fuehring, the lead EU official overseeing the TCA, said the rules were clear.“All you have to do is establish in the EU and then you avoid many of the problems,” he said.

Video: The Brexit effect: how leaving the EU hit the UK More

BUENOS AIRES (Reuters) – Argentina’s monthly inflation rate likely sped up to 8.8% in May, according to analysts polled by Reuters, as prices in the South America country continue to soar despite a cooling trend in other countries around the region.Argentina is battling soaring inflation likely to end the year near 150%, sapping people’s spending power, pummeling the peso currency and pulling the rug out from under the ruling Peronist coalition ahead of October elections.That’s one of the highest rates in the world and the fastest annual reading for the major grains exporter since 1991.The expected monthly rise was the median forecast of 19 analysts, with estimates ranging between 8% and 9.4%. It would be faster than the 8.4% rise in April.Analysts said it would be hard for Argentina’s government to bring prices down, even as inflation has started to ease in places like Mexico, Chile and Brazil.”It will be hard to put the brakes on inflation without any policy that attacks the underlying problem, which is monetary,” said Natalia Motyl, economist and director of the consultancy NM, adding monthly inflation could hit double digits by June.”None of the measures announced give us any signs that the course will change. Today the floor is at 8%, which is the core inflation. This will be difficult to bring down.”Consulting firm Orlando Ferreres & Asociados said housing along with food and beverages likely led the monthly price increases, followed by household equipment.Argentina’s INDEC statistics office is set to release the official May inflation data on Wednesday afternoon. More

Today’s top storiesItaly’s former prime minister Silvio Berlusconi has died aged 86. His death marks the end of a controversial political career, during which the media tycoon transformed Italian politics with his Forza Italia party. Here’s European comment editor Tony Barber’s obituary of a man inescapably linked to economic decline and sometimes woeful standards in public life.JPMorgan Chase agreed to pay $290mn to settle one of two lawsuits over its 15-year relationship with Jeffrey Epstein, which accused the bank of profiting from human trafficking by ignoring multiple internal warnings about their former client’s sex crimes.Swiss mining and trading giant Glencore wants to buy the coal business of Teck Resources, the latest twist in one of the mining industry’s biggest takeover battles in a decade. It would create a coal mining giant with few rivals in scale anywhere in the world, producing just over 100mn tonnes of thermal coal and 30mn tonnes of steelmaking coal a year.For up-to-the-minute news updates, visit our live blogGood evening.A new report showing US business is continuing to lose faith in Britain as an investment destination because of its political turmoil (as well as Brexit and rising corporate taxes) could hardly have come at a worse time after another few days of Westminster soap opera. The survey from BritishAmerican Business, the transatlantic trade association, showed confidence falling for the third year in a row, despite the (relative) return to normalcy under UK prime minister Rishi Sunak, who has attempted to move on from the chaos created by his two predecessors and reset relations with the EU.The report also takes some of the shine off last week’s “Atlantic declaration” agreed by Sunak and US president Joe Biden, which aims to strengthen economic ties between the two countries and increase trade in areas such as defence, nuclear materials and the critical minerals used in electric batteries.

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Although the prospect of closer co-operation on electric vehicles was welcomed by the motor industry, analysts warned that carmakers such as Jaguar Land Rover and battery makers such as China’s Envision, which has a plant in Sunderland, would not be able to qualify for US tax credits because the batteries and vehicles still had to be assembled in North America.Biden also backed Sunak’s ideas on regulating artificial intelligence, including the hosting of the first global summit on the issue this autumn. Sunak was back on the theme at the opening of London Tech Week this morning, but any hopes for an opportunity to shine a light on the UK’s ambitions were immediately dashed by the continuing dispute over former PM Boris Johnson’s resignation honours list. Johnson quit as an MP on Friday night, followed by two of his supporters, ahead of the publication of a Commons report on whether he misled parliament over breaches of pandemic lockdowns. The political drama around Johnson and the spat over the government’s refusal to hand over all the evidence also threatens to overshadow the UK Covid-19 Inquiry, which holds its first public hearing tomorrow. The investigation is set to last until at least 2026 and will cost more than £100mn, with a remit ranging from preparedness and government decision-making to the impact on care homes and the health service.Need to know: UK and Europe economyEU carmakers said they would lose more than €4.3bn and cut production by almost 500,000 electric vehicles unless Brussels agreed to delay the imposition of tariffs between the EU and the UK, with China the biggest beneficiary.The UK’s National Audit Office hit out at tax authorities for omitting key figures for its business case on a digital tax project, which it says will cost five times the original forecast. Italy, the largest beneficiary of the EU’s €800bn post-pandemic recovery programme, warned that a labour shortage was hindering its ability to implement projects worth billions of euros. The country is also entering a “demographic winter” as its birth rate falls relentlessly.Need to know: global economyA new Big Read discusses whether US economic resilience is starting to crack as consensus breaks down over the pace of inflation and bank failures weigh on investor optimism. Leading economists polled by the FT predicted the Federal Reserve, which makes its interest rate decision on Wednesday, would have to take tougher action to cool the economy with at least two more rate rises. Linda Yueh, author of The Great Crashes: Lessons from Global Meltdowns and How to Prevent Them, says lessons from past crises could help stave off a commercial property crash.Argentina is turning to the IMF in a last-ditch effort to stave off devaluation. Inflation is expected to hit 145 per cent this year, a recession is on the cards and the peso has fallen almost 40 per cent against the US dollar on the black market this year. Early moves by Nigeria’s new president Bola Tinubu to reform the country’s economy and run it along more orthodox lines have been welcomed by investors, who cheered the removal of the central bank chief and the scrapping of fuel subsidies. The shift to greener energy sources can only happen if renewable projects can connect to electricity grids. A Big Read explains.Need to know: businessNasdaq is buying financial risk software company Adenza for $10.5bn in its largest-ever such deal, as the world’s big exchange operators diversify from transactions into more stable revenue streams such as data and risk management.Iran’s strategically important car industry is in crisis because of the impact of sanctions. The plunging rial and shrinking state revenues have created shortages of crucial parts and a sudden increase in prices.A former executive at Samsung Electronics was arrested and indicted in South Korea for allegedly stealing the company’s technology to build a copycat chip plant in China. Markets may be fretting over the direction of US interest rates and inflation, but volatility, as measured by the Vix index, has fallen to its lowest level since the start of the pandemic.Foreign investors are fleeing Chinese tech giants such as Tencent and Alibaba as the country continues to be hit by geopolitical tensions and faltering growth.One sector that is doing well is Big Pharma in the US, where spending on deals has surged in the early part of this year. The jump in mergers and acquisitions is being fuelled by large cash reserves amassed during the pandemic and investor concerns about future growth prospects.The US consulting industry is set for a year of upheaval as economic uncertainty leads to cancelled projects and clients pushing for lower fees. The world of workEU member states reached a long-awaited agreement on rules governing gig work, paving the way for stronger protections for the 28mn people across the bloc working for companies including Uber and Deliveroo.How do I leave academia and move into management consultancy? FT careers expert Jonathan Black and FT readers weigh in.The shift to homeworking continues to reshape the office property market, with billions spent converting unwanted spaces for new purposes. Some good newsUnderstanding how spiders spin silk may hold clues for treating Alzheimer’s disease, say researchers. More

Early moves by Nigeria’s new president to put the country on a more orthodox economic trajectory have been praised by investors who are hopeful that Africa’s most populous country has passed an important inflection point.Bola Tinubu late on Friday suspended Godwin Emefiele, central bank governor since 2014, citing an “investigation and the planned reforms in the financial sector”. Emefiele, later detained by Nigeria’s intelligence agency, pursued a policy at the central bank of spending large amounts of the country’s foreign reserves to prop up the naira.This followed the decision by Tinubu, who took office last month, to scrap the fuel subsidies that cost Nigeria more than $10bn last year. The IMF and the World Bank had long urged Abuja to end the subsidies and instead channel the money into health and education, but successive governments had shied away from doing so.Analysts said Tinubu’s early weeks suggested a change of direction for Nigeria’s battered economy, which stagnated under his predecessor, Muhammadu Buhari.“The markets are getting everything they hoped for from the change of president in Nigeria,” said Charlie Robertson, head of macro strategy at FIM Partners, an asset management firm.Kevin Daly, investment director at EM specialist asset manager Abrdn, said talk of changes to Nigeria’s foreign exchange system had been “another trigger for a big rally in Nigerian bonds”.Nigerian eurobonds maturing in 2051 were on Monday 3.8 per cent higher, at 73.8 cents in the dollar, the highest level since January.“It’s been a long time since we had positive reform momentum in Nigeria and we’re seeing it now,” Daly said. But he said investors still had to be convinced of a lasting conversion to economic orthodoxy by Tinubu, who promised in his inaugural speech to keep interest rates low.“We’ve seen how that played out in Turkey,” he said. “It’s important for him to understand that rates will have to go up to attract foreign investment into the local bond market, and you can’t start talking rates down until there’s a meaningful decline in inflation.” The annual rate of inflation was 22.22 per cent in April.Godwin Emefiele, left, who was suspended as Nigeria’s central bank governor, with former president Muhammadu Buhari, right, at the launch of new banknotes last year © Nigerian Presidency/Anadolu Agency/Getty ImagesRazia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank, said eliminating subsidies and removing Emefiele “signals in part” the promise of coming reforms to Nigeria’s foreign exchange markets. Tinubu said last month that monetary policy needed “thorough housecleaning” and that the system of multiple exchange rates introduced under Emefiele should be unified. Allowing the naira to trade freely against the dollar to reflect its true value was rejected under Buhari, with the central bank using multiple “windows” to sell dollars cheaply to industries seen as essential to the economy. This provided an avenue for arbitrage as well-connected businesses bought dollars on the cheap from the bank and sold higher on the black market.The central bank has held the main naira rate at about 460 to the dollar for most of this year, down from about 380 to the dollar before the pandemic. But dollars currently change hands on the parallel market at about 740 to the dollar. Dollar scarcity, also due to low oil production, has forced many businesses to source hard currency at the parallel rate. Robertson said removing expensive subsidies and a potential convergence of forex rates would be “hugely important for Nigeria’s budget” and pushed back a default risk he said had been “seriously concerning” for at least a year. Folashodun Adebisi Shonubi, one of Emefiele’s deputies, has assumed the role of temporary central bank governor.

Despite investor support for policy and personnel changes at the central bank, there are concerns that Emefiele’s unceremonious removal threatened the institution’s independence. Nigeria’s president can only legally remove a central bank chief on the basis of a two-thirds majority in the country’s 109-member Senate.In 2014, former president Goodluck Jonathan suspended central bank chief Lamido Sanusi for “financial recklessness” in a move widely seen as politically motivated after Sanusi alleged that $20bn had gone missing from the state oil company. He challenged his dismissal but a court declined to hear the case.Cheta Nwanze, a partner at the Lagos-based consultancy SBM Intelligence, said the manner of Emefiele’s suspension was “fraught with illegality”.“The central bank act doesn’t quite give the president the powers he has just exercised,” he said. “This was a bad precedent that was set when Emefiele’s predecessor was removed and another layer of instability has become entrenched in Nigeria’s political economy.” More

Prices of consumer goods sold online fell 2.3% in May in the US, the ninth consecutive month of declines and the biggest drop since the pandemic started, according to data from Adobe (NASDAQ:ADBE) Inc. That was mainly due to steep decreases in discretionary categories.Essential items like food, pet products and personal care, however, are seeing persistent inflation. Online grocery prices increased 8.2% from last year — although the pace of inflation has been abating since peaking at 14.3% last September.Americans have been shifting more of their discretionary purchases to services over the past year, cutting spending on items for the home.Online prices for appliances were down 7.9% in May from last year, the largest drop in digital-prices data from Adobe going back to 2014. Online prices for computers slumped 16.5% and electronics were down 12%.The Adobe Digital Price Index was developed with the help of Austan Goolsbee before he became president of the Federal Reserve Bank of Chicago this year. The gauge analyzes one trillion visits to retail sites and more than 100 million items to track price changes.©2023 Bloomberg L.P. More

FRANKFURT/DUESSELDORF (Reuters) -Thyssenkrupp launched on Monday the long-awaited listing of its hydrogen division Nucera, suggesting its new chief executive intends to waste no time in reviving the fortunes of the embattled conglomerate.Thyssenkrupp (ETR:TKAG) Nucera, a 66:34 joint venture with Italy’s De Nora, is targeting proceeds of up to 600 million euros ($647 million) via the sale of new shares, confirming initial listing plans first outlined in early 2022.The initial public offering (IPO), which was delayed by weak market conditions after the Ukraine war, is expected to be completed before the summer break, depending on market conditions, the company said.It comes as hydrogen technology is getting a boost from favourable legislation in the United States and Europe, which are both seeking to strengthen the technology to help carbon dioxide-heavy industries, including steel and chemicals, to decarbonise.”The Nucera IPO is essential for the transformation of ThyssenKrupp. It will provide Nucera with urgently needed funds for expansion,” said Ingo Speich of Deka Investment, a top-20 shareholder of Thyssenkrupp.”Nucera can only stay ahead in the competition for hydrogen technology with significantly more capital.”The move comes less than two weeks after Thyssenkrupp’s new CEO Miguel Lopez took over from Martina Merz, underlining his commitment to steer the German industrial icon into calmer waters and raise its languishing share price.Thyssenkrupp has faced delays in two key areas of restructuring – the partial sale of its steel division as well as the IPO of Nucera – which was among the reasons for Merz’s surprise resignation earlier this year.”A potential IPO would enlarge the financial flexibility of Thyssenkrupp Nucera and raise its profile as a leading supplier of technology for the production of green hydrogen,” Lopez said.HYDROGEN HYPESources told Reuters in April that Thyssenkrupp was targeting June for a new listing attempt that could value the business at up to 5 billion euros.Baader Bank analyst Christian Obst said a valuation of 4-5 billion euros would be ambitious.The listing, which is run by Citi and Deutsche Bank (ETR:DBKGn), will primarily consist of new shares, Thyssenkrupp Nucera said. Thyssenkrupp is also expected to sell some of its own shares, but plans to retain a majority in the business.De Nora said it remains committed to its long-standing partnership with Thyssenkrupp, but declined to say whether it would sell any sharesThyssenkrupp shares, which have gained 16% since late April in anticipation of a listing, were down 1.1% by 1225 GMT. De Nora’s shares were up 1.2%.Nucera builds electrolysers to produce green hydrogen, a field in which it competes with Norway’s Nel, Britain’s ITM Power, France’s McPhy Energy and U.S. company Plug Power (NASDAQ:PLUG).It focuses on so-called alkaline water electrolysis, which Credit Suisse reckons will make up 60% of the global market by 2030, as it is more suitable for big projects, while proton exchange membrane electrolysis is seen at about a third.At the end of March, Nucera’s order backlog stood at 1.4 billion euros. First-half sales were up 74% at 306 million euros, while the group’s earnings before interest and tax rose 87% to 13.3 million euros.”With our electrolysis technology we want to shape a new era of the energy transition,” said Werner Ponikwar, chief executive of Thyssenkrupp Nucera.($1 = 0.9277 euros) More

Honduras’ President Xiomara Castro is on a six-day official visit to China. She launched diplomatic relations with Beijing after cutting ties with its rival, Taiwan, in a bid for more investment and jobs. The country is also seeking support from China to mitigate its debt burden.China will actively promote Honduran products to enter the Chinese market, Xi was quoted as saying by state broadcaster CCTV.China’s customs said on Monday it had approved the import of Whiteleg shrimp from Honduras.Xi said China will unswervingly develop the friendly relations between the two nations and firmly support Honduras’ economic and social development. China also encourages Chinese enterprises to participate in Honduras’ projects in areas including energy, infrastructure and telecommunications, CCTV cited a joint declaration as saying.The Honduran side is willing to provide policy support and facilitation, CCTV reported. The Chinese leader also emphasized that both sides should deepen political mutual trust, and uphold the “One-China” principle. “One-China principle is the primary premise and political foundation for the establishment of loyal diplomatic relations and the development of bilateral relations,” Xi said.When Honduras ended its decades-long relationship with Taiwan, the island’s foreign minister accused it of demanding exorbitant sums before being lured away by Beijing.China claims democratically ruled Taiwan as its own territory with no right to state-to-state ties, a position Taipei strongly rejects. China demands that countries with which it has ties recognise its position.The Honduran foreign ministry said at the time it recognised the People’s Republic of China as the only legitimate government that represents all of China and that Taiwan was an “inseparable part of Chinese territory”.The United States is watching with concern as China expands its footprint in its backyard by taking away Taiwan’s Central American allies, and has repeatedly warned countries not to believe China’s promises of aid.Xi said that China supports Honduras’ “independent choice of development path in line with its national conditions”, and opposes any external interference in the Central American country’s internal affairs. More