Aurelia Butler

Chinese investment into Europe fell to its lowest point in almost a decade last year as European countries tightened rules to stymie a slew of Chinese acquisitions.The 22 per cent decline in investment in 2022, charted in a study by Rhodium Group, a research company, and Merics, a Berlin-based think-tank, reflects Europe’s recent moves to police the sale of assets to China after years of enthusiastically courting investment from Beijing.The researchers found that at least 10 out of 16 investment deals pursued in 2022 by Chinese entities could not be completed in the technology and infrastructure sectors, principally because of objections raised by authorities in the UK, Germany, Italy and Denmark.Several of the aborted deals, such as proposed semiconductor acquisitions in Germany and the UK, were blocked following reviews into the specific technology targeted by the Chinese investor. In other cases, deals already agreed were annulled or collapsed after the imposition of regulatory stipulations, the report added.“Increased scrutiny of inbound investment will likely continue in coming years,” said the report by Agatha Kratz and Mark Witzke at Rhodium Group and Max Zenglein and Gregor Sebastian at Merics. The authors noted that their study of 16 investment deals was by no means exhaustive because government reviews of transactions are often not made public.Some of the deals blocked by European regulators included Germany’s ban on Sai MicroElectronics’ proposed acquisition of the automotive chip assets of Elmos Semiconductor, the UK’s stopping Hong Kong’s Super Orange from buying electronic design company Pulsic and Italy’s annulment of the sale of a military drones group, Alpi Aviation, to Chinese state-backed companies.The authors highlighted that more EU countries were tightening their oversight of Chinese investments, including with powers to revisit regulatory approval for past deals. “In 2023, review mechanisms will come into effect in Belgium, Estonia and Ireland, in the latter also with retroactive effect,” said the report. “The Netherlands is planning to launch a broader review system that will allow for reviews of sensitive technologies and energies, also with retroactive effect.”Increased European scrutiny of deals follows a similar trend in the US, where the Committee on Foreign Investment in the US — the inter-agency body that screens deals by non-US companies — has become more active in vetting proposed Chinese acquisitions of American tech assets.The overall level of Chinese investment into the EU and UK declined 22 per cent to €7.9bn in 2022, the report said. The level of investment was a fraction of the €47.4bn recorded in 2016 and the lowest total recorded since 2013. The totals include investment into new operations as well as mergers and acquisitions.Other factors weighing on investment flows included the coronavirus pandemic, which severely limited travel to Europe by Chinese businesspeople, and domestic Chinese controls on outbound capital. The regulatory barriers to Chinese acquisitions in Europe have meant that greenfield investments now dominate China’s profile in Europe, accounting for €4.5bn in 2022 or 57 per cent of the total. One big focus of the investment has been the electric vehicle value chain, with Chinese battery companies announcing $17.5bn in investments in Europe since 2018.“China’s interest in Europe, the world’s second-biggest EV market after China, is . . . not surprising,” said the report. “It has comparatively good charging infrastructure and generous government purchasing subsidies, developed within a wider green agenda to decarbonise road transportation.” More

UK consumer spending grew at about half the pace of inflation in April as fast-rising prices continued to suppress demand, even as the leisure sector saw some “renewed momentum”, according to new sector data. The value of retail sales increased 5.2 per cent in the year to April, according to figures compiled by KPMG and published on Tuesday by the British Retail Consortium trade body. This compares with March’s headline inflation figure of 10.1 per cent.Helen Dickinson, chief executive at the BRC, said that inflation had kept “volumes . . . down for both food and non-food as customers continued to adjust spending habits”.Shoppers have been spending more in stores while getting less since prices started surging in 2021. In March, sales values were up 16 per cent from February 2020, before the pandemic, while volumes were down 0.8 per cent, according to the latest official data. Paul Martin, head of retail at KPMG, said that retailers would be hoping that the coronation of King Charles III, the three bank holidays in May and signs that inflationary pressures were easing would boost consumer confidence significantly “enough to start to see real, profitable growth”.The BRC figures chime with consumer spending data tracked by Barclays, the payments company, which monitors almost half of all UK credit and debit card transactions.

Those figures, which unlike the BRC data includes services such as restaurants and bars, showed spending rose 4.3 per cent last month. Abbas Khan, UK economist at Barclays, said that while high inflation continues to squeeze real household disposable incomes and constrain consumption, “the data suggests that pockets of the economy, particularly the leisure sector, enjoyed some renewed momentum in April”.Spending on utility bills was up 34 per cent year on year, reflecting the surge in energy prices. As a result, many households had to cut other purchases, such as groceries, where sales rose 5.5 per cent, well below the food inflation running at nearly 20 per cent. However, spending on entertainment registered a “sizeable” 12 per cent annual growth in April, according to Barclays, which it attributed to low levels in the same month last year when Covid-19 was still hampering demand. Britons also booked more holidays with spending on airline tickets rising 32.1 per cent compared with the same month last year, an acceleration from the 28.5 per cent growth registered in March. More

(Reuters) -Palantir Technologies said on Monday it expects to turn a profit every quarter in 2023, betting on interest “unlike anything we have seen” in its new artificial intelligence platform, sending its shares up about 20% in extended trading.The new generative AI platform was launched two weeks ago and works on the same technology that’s behind ChatGPT. The data analytics software maker, known for its work with the U.S. Central Intelligence Agency, also beat first-quarter revenue and profit expectations on bigger projects from existing commercial and government clients.”Investors will be pleased not only with the better-than-expected results for the quarter, but also the guidance for profitability as well as the recent AI initiatives,” said D.A. Davidson & Co analyst Gil Luria.The first iteration of the AI platform will be made available to some customers this month, Palantir CEO Alexander Karp said, adding the new offering can assist militaries in targeting enemies. The customers include “one of the largest insurance companies in the world” and supply chain and security customers, Chief Revenue Officer Ryan Taylor told Reuters.Palantir’s first-quarter revenue rose 18% to $525.2 million and adjusted profit stood at 5 cents per share, both above estimates.The strong first quarter was driven by a 26% rise in commercial revenue, rising more than expected, said RBC Capital Markets analyst Rishi Jaluria. Palantir continues to tighten its cloud spending and is investing in focus areas like AI, said finance chief David Glazer. In February, it said it would cut 2% of its workforce. It remains bullish on demand for its offerings in the United States, but faced challenges in “certain areas” internationally, Taylor said, without elaborating. The company forecast second-quarter revenue of $528 million and $532 million, below estimates of $536.2 million, per Refinitiv data. Its full-year revenue forecast, however, was largely in line with estimates. More

(Reuters) -PayPal Holdings Inc on Monday cut its outlook for annual adjusted operating margin, overshadowing its profit forecast raise, sending shares in the payments firm down 5% in extending trading.PayPal (NASDAQ:PYPL) expects adjusted operating margin expansion of 100 basis points this year, compared with its earlier forecast of a 125-basis-point growth. Investors are assuming that the company’s branded checkout button, a high margin business, isn’t doing as well as people thought it was and the fear is that it is losing market share to Apple (NASDAQ:AAPL), Dan Dolev, analyst at Mizuho told Reuters, explaining the drop in PayPal shares. The high interest-rate environment has also begun to discourage expensive purchases as shoppers increasingly find themselves under heavy debt, particularly lower-income bracket customers, analysts have said. PayPal payments volume on a forex-neutral basis came in at $354.5 billion in the first-quarter ended March 31, compared with $357.4 billion in the fourth-quarter. Even as the company cut operating margin outlook, it raised its full-year adjusted profit forecast on the back of stronger-than-expected e-commerce trends and cost cuts. PayPal now expects adjusted profit growth of about 20% to $4.95 per share, above analysts’ estimate of $4.88 per share. The company also highlighted its push towards artificial intelligence in a call with analysts, as it expects new advances in generative AI to help accelerate its productivity initiatives. “We expect AI will enable us to meaningfully lower our costs for years to come,” CEO Dan Schulman said, adding that the company intends to use the technology to add features for both merchants and consumers on its platform. PayPal has said in the past that it is focused on lowering expenses while cautioning that inflation was impacting discretionary consumer spending.PayPal revenue rose 10% on a forex-neutral basis to $7.04 billion in the first-quarter. It posted a profit of $1.17 per share on an adjusted basis, compared with 88 cents last year. More

WASHINGTON (Reuters) – Treasury Secretary Janet Yellen said on Monday that a failure by Congress to raise the $31.4 trillion federal debt limit would cause a huge hit to the U.S. economy and weaken the dollar as the world’s reserve currency.Asked whether the U.S. Treasury could prioritize payouts to bondholders in the event of a default, Yellen told CNBC that President Joe Biden would be forced to make decisions on what to do with Treasury’s resources if the debt ceiling was not raised, but declined to discuss or rank the options.”There are a variety of different options, but there are no good options. Every option is a bad option,” she said. “The only option that really leaves our economy in good shape – and our financial system – is raising the debt ceiling.” She said Biden hoped to establish a process for discussing and compromising on fiscal-policy issues and his budget proposal with congressional Republicans but would not do it “with a gun” to his or the American people’s heads. Biden insists that Congress has a constitutional duty to raise the debt ceiling, which reflects previously spent federal money, without conditions, but Republicans have tied any increase to sweeping budget cuts that Democrats oppose.Biden will meet on Tuesday with Republican House Speaker Kevin McCarthy, Senate Minority Leader Mitch McConnell and top congressional Democrats at the White House to try to break the impasse.Yellen conceded there was “a very big gap” between Biden’s position and that of many Republicans, warning that their proposed spending cuts were “draconian.” Risking default to secure budget cuts could bring “enormous harm to American households,” and even the current brinkmanship would harm financial markets and could jeopardize U.S. government credit ratings and undermine the U.S. currency.”The dollar is regarded – and Treasury securities – as the bedrock safe asset in the entire global financial system,” she said. “It’s trusted, and it is the ultimate safe asset and a failure to raise the debt ceiling, impairing the U.S. credit rating, would put that at risk. So that is a real concern.Yellen told lawmakers last week that Treasury will likely be unable to pay all the government’s bills as early as June 1 without an increase in the federal debt limit.Yellen, other economists and analysts have repeatedly warned that a default on U.S. debt would result in millions of job losses, while driving household payments on mortgages, auto loans and credit cards higher.Unlike most other developed countries, the U.S. puts a hard limit on how much it can borrow. Because the government spends more than it takes in, lawmakers must periodically raise the debt ceiling. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Chinese trade and Japanese household spending data are on tap Tuesday, although Asian market sentiment looks set to be led once again by the ebb and flow of data and sentiment around U.S. banks, credit and loan demand.Asian stocks ex-Japan had their best day on Monday since March 23, China’s Shanghai Composite had its best day in over two months, Wall Street held onto Friday’s stellar gains, and Brent crude oil rose for a third day.If the mood in Asian markets on Tuesday reflects the broader global mood on Monday, there’s every reason to expect an increase in risk appetite and risk assets, despite a higher dollar and Treasury yields.The Fed’s quarterly Senior Loan Officer Opinion Survey (‘SLOOS’), a snapshot of national lending and credit conditions, was not as gloomy as might have been the case, given the severe stress in the regional banking sector since early March.As U.S. Fed Chair Jerome Powell indicated last week, lending standards are getting tighter for firms of all sizes. And as analysts point out, conditions are consistent with previous recessions.But there was no obvious sign of a credit crunch, which fits with recent weekly bank deposit flow and lending data too. Next up is the National Federation of Independent Business’s April survey of small businesses on Tuesday.The March report also raised red flags, but again, markets may need evidence of an obvious credit crunch if they are to wilt.In its semi-annual financial stability report on Monday, the Fed said the U.S. banking sector appears well-positioned to weather recent industry turmoil.Several positioning and sentiment indicators suggest investors are the most gloomy on stocks – especially Wall Street – than they have been in years, even decades. The burden of proof is very much on the bears, and the longer the capitulation doesn’t materialize, the closer they get to throwing in the towel.World stocks might have been expected to follow Friday’s rally – the strongest in five months – with a spot of profit-taking on Monday. They rose.There are reasons to be cautious, of course.U.S. President Joe Biden and Republican lawmakers meet on Tuesday to discuss the debt ceiling standoff. Treasury Secretary Janet Yellen on Monday again said that the government could run out of cash by June 1, and warned that default would be catastrophic.Asian markets appear to be looking at the U.S. banking and debt issues with a ‘glass half-full’ mentality. The yen fell against the dollar on Monday, always a good indication that safe-haven demand is at a low ebb.Here are three key developments that could provide more direction to markets on Tuesday:- China trade (April)- Japan household spending (March)- Australia consumer confidence (May) (By Jamie McGeever) More