Aurelia Butler

The recent regional banking failures along with the U.S. Federal Reserve’s continued rate hike cycle has roiled markets, pushing demand for hedging tools in an increasingly uncertain macroeconomic environment as investors try to dump risky assets.”As global market participants sought to manage risk across asset classes, we saw a flight to futures,” Terry Duffy, CME Group’s (NASDAQ:CME) chief executive officer, said.CME’s clearing and transaction revenue in the quarter ended March 31 rose 5.5% to $1.2 billion.The exchange operator’s average daily volumes in the first quarter were 26.9 million contracts. On an adjusted basis, net income for the quarter was $882 million, or $2.42 per share, compared with $766 million, or $2.11 per share, a year earlier. More

Results from Google parent Alphabet and Microsoft yesterday have fed hopes on Wall Street that Big Tech is proving more resilient than recent concerns might suggest.Revenue at Microsoft’s cloud division climbed 16 per cent in the first three months of 2023, a faster than expected rate that dispelled fears of a sharp slowdown in spending by their corporate clients following a boom for digital services during the Covid-19 pandemic.Google’s search advertising business also topped forecasts and returned to growth, with revenue rising 2 per cent in the quarter after slipping 2 per cent in the final three months of last year.The biggest US tech companies had been expected to produce little growth, if any, owing to difficult comparisons with the strong start they had to 2022 and a spending slowdown that has hit many parts of their businesses.The better than expected performance pushed Microsoft and Alphabet shares higher yesterday and boosted rivals due to release earnings this week, including Facebook parent Meta, which reports today.Here’s what else is happening today:Results: Boeing, Danone, eBay, GSK, Heathrow, Hilton, Michelin and Standard Chartered report. See our Week Ahead newsletter for the full list. Also, Nestlé, PepsiCo and Kimberly-Clark among companies reporting resilient quarterly sales despite price rises. Read the story hereMicrosoft-Activision deal: The UK’s Competition and Markets Authority is set to publish its final report on the $69bn takeover.General Motors and Samsung SDI: A $3bn plan for a new US battery plant signals South Korean companies’ dominance of the North American EV battery supply chain, facing off Chinese rivals.Five more top stories1. Biden’s re-election bid: The US president has dispelled rumours that he will switch out his running mate, despite Kamala Harris’s low approval ratings as vice-president. Read our analysis of Joe Biden’s high-stakes election gamble.2. Shares of First Republic continued to plunge on Tuesday as regulators in Washington and financiers on Wall Street scrambled to come up with a plan to stabilise the ailing bank. Read more here.Markets: US stocks sank and government bonds rallied sharply as the steep sell-off in First Republic shares reignited fears about the banking sector.3. Exclusive: Universal Music chief executive Lucian Grainge is under pressure from shareholders over a $100mn pay deal that has been criticised as “excessive”. This comes ahead of the company’s annual meeting next month. Read the story here.4. A senior executive has left Citigroup days after a report that he had met with Jeffrey Epstein on several occasions while working at JPMorgan Chase. In response to a query from the Financial Times, Citi confirmed that Paul Barrett, head of the North American private capital group at its private bank, was no longer employed by the company.5. Exclusive: Tencent is ramping up overseas investment in gaming assets with a focus on Europe, seeking to diversify away from China even as Beijing lifts punishing restrictions on the industry. Read the full story. The Big Read

© FT montage/Molfar/Bloomberg/Reuters

From a St Petersburg grandmother with her own art gallery to a teenager competing in international equestrian events, the family members of Russian warlord Yevgeny Prigozhin have led a charmed life. Western governments have struggled to impose costs on the Wagner founder’s relatives, even though they have been heavily involved in his businesses.We’re also reading . . . US and Philippines joint military exercise sinks ship in South China Sea: The rare manoeuvre is a clear signal of President Ferdinand Marcos Jr’s hopes to repel Chinese encroachment in the disputed waters and revive a military alliance with the US. US car industry’s plans for going electric: Ford and General Motors are among those that have set out multibillion-dollar plans to sell only EVs within the next 20 years. Read the forecast from the International Energy Agency. Related: Japan’s carmakers are caught in the middle as tensions between Washington and Beijing add to concerns over rising Chinese competition in the world’s largest auto market. Chart of the dayChina already has a potent economy, a big role in world trade and a huge military, writes Martin Wolf. Its relationship with the US is likely to determine humanity’s fate in the 21st century — whether there will be peace, prosperity and protection of the environment, or the opposites. Take a break from the news

© Leon Edler

How does a Scottish-born socialist go about pricing his Napa Cabernet? DuMOL owner Andy Smith juggles philosophy with the incredible fame of his Sonoma Pinot Noir and Chardonnay, writes wine columnist Jancis Robinson.Additional contributions by Tee Zhuo, Gordon Smith and Emily Goldberg More

“In general, dealing with cost-push inflation is very difficult for central banks. On the one hand, you’d like to curb inflation. On the other hand, you don’t want to tighten monetary policy knowing that cost-push inflation will cool the economy,” Ueda told parliament.”Striking the right balance is very difficult. It depends on economic developments at the time, including where inflation stood at the outset,” he said. More

WASHINGTON (Reuters) – Rapid aging of both wealthy and middle-income countries will make their economies increasingly dependent on migration from poorer countries, and the process needs to be better managed, the World Bank said on Tuesday.The bank’s latest World Development Report said that about 184 million people across the world now live in countries where they lack citizenship, 43% in low- and middle-income countries. About 37 million of the total are refugees, a number that has tripled over the last decade.Some countries face rapid declines of working-age adult populations, including Spain, where it is projected to shrink by more than a third by 2100, with those above age 65 increasing to nearly 40% of the population from 20% currently, the development lender said.Countries including Mexico, Thailand, Tunisia and Turkey may also soon need more foreign workers because their populations are no longer growing, while cross-border migration movements are already becoming more complex, with destination and origin countries spanning all income levels, according to the report.”Migration can be a powerful force for prosperity and development,” World Bank Senior Managing Director Axel van Trotsenburg said in a statement. “When managed properly, it provides benefits for all people – in origin and destination societies.”The report presents recommendations for policymakers, chiefly to better match migrants’ skills with needs in destination countries, while protecting refugees and reducing the need for distressed movements.Gains are larger for both destination countries and migrants when their skills match well with demands in destination countries. When the skills match is weak, the costs of hosting refugees should be shared multilaterally, it said.More difficult policy challenges arise when the skills match is weak and migrants are not refugees, often leading to deportation and putting pressure on transit countries. The report said stronger international development efforts were needed in origin countries to reduce the need for migration prompted by economic distress. The World Bank said origin countries should make labor migration an explicit part of their development strategy and work to lower the cost of remittances to families back home, facilitate knowledge transfers from their diasporas abroad, and build skills that are in demand globally.The bank said destination countries should encourage migration from populations where their skills are in high demand, adding that new financing instruments be developed multilaterally to help countries care for non-citizens in a predictable manner. More

WASHINGTON (Reuters) – World Bank Chief Economist Indermit Gill is calling for new approaches to address the mounting debt crisis facing many countries, including steps to factor domestic borrowing into assessment of a country’s debt sustainability.Gill told Reuters the Common Framework set up by the Group of 20 major economies to help the poorest countries had resulted in only glacial progress because it did not account for 61% of developing countries’ external debt held by private creditors, a far larger share than decades ago.Only four countries – Zambia, Chad, Ethiopia and Ghana – have applied for relief under the G20 mechanism set up in late 2020 at the height of the COVID-19 pandemic, although the International Monetary Fund estimates that many more – 60% of low-income countries – are in or at high risk of debt distress.Only Chad has reached a debt relief deal with creditors – and it does not include an actual reduction in debt. Rising interest rates in the United States and other advanced economies would keep money flowing out of emerging markets for some time, just as in the 1980s, and that, Gill said in an interview this week, would result in “more train wrecks.” “Debt levels are already starting to hurt prospects, getting them into the wrong kind of spiral,” he said ahead of a World Bank seminar on debt on Wednesday. “Many of these countries are in debt crisis already. A country like Egypt is under water.”The Common Framework should be replaced, he said, in the strongest terms used by a World Bank official. “It’s not the right machinery.”About two-third of Ghana’s external debt, for example, is privately held, but the framework is focused on Paris Club official creditors and newer lenders like China, now the world’s largest sovereign creditor. It also lacked common rules for dealing with countries’ debts, he added.REVISIT BRADY BONDS?He said a new sovereign debt roundtable set up to address challenges in the debt relief process brought in debtor nations and private sector players, but achieved only modest results.IMF officials said China and other participants reached a common understanding that multilateral development banks could provide positive net flows of loans and grants to countries in need, instead of accepting “haircuts.”But Gill said China likely did not see that as binding since the meeting was not intended to be a decision-making mechanism.Issuing Brady bonds – sovereign debt securities denominated in dollars and backed by U.S. Treasuries – as during the 1980s debt crisis might address some of the deficiencies, Gill noted, adding that those bonds had been largely retired, indicating their success. One key issue remained how the IMF and the World Bank assessed the debt sustainability of countries while excluding domestic borrowing, which masked too-high levels of borrowing.That happened in part because developing countries had built up their domestic financial sectors but without the corresponding sustainable fiscal frameworks, Gill said.”Suddenly your assessment tool, which is only looking at assuming that these guys can only borrow abroad, is no longer appropriate,” he said. More

Last week Yuko Kishida, the wife of Japan’s prime minister, made a rare solo trip to the White House to plant a cherry tree with Jill Biden, celebrating a friendship between the two countries that will last “forever and ever”, in the US first lady’s words. It was a congenial symbol of the close alignment between the two nations.The costs of those ties have been a source of concern for some Japanese executives as tensions mount between the US and China. But at the Shanghai motor show also held last week, there were more pressing concerns for Japanese carmakers — how to survive in the world’s largest car market.Japanese carmakers are already suffering the sharpest sales decline this year among foreign brands in China. The likes of Toyota and Honda are facing further big risks if they fail to keep pace with the rapid advances in electric vehicle and self-driving technology of Chinese rivals. Both companies pledged at the Shanghai show to increase local production so they can deliver EVs to Chinese consumers faster.“I do feel an underlying sense of crisis that we need to accelerate our efforts to do business in this market,” Koji Sato, Toyota’s new chief executive, said in a group interview. That might be harder if decoupling between the US and China gathers pace. Sato carefully avoided directly addressing whether a China-only supply chain was needed to hedge against further escalation in the tensions. But the practical difficulty of decoupling has been widely noted. And a growing number of Japanese chief executives have expressed concern in private about how far Tokyo should play along with Washington in distancing itself from China, even as national and economic security threats appear to bind the US and Japan closer together.On the surface, the economic tension is hardly noticeable. Japan recently announced big curbs on exports of semiconductor manufacturing equipment, fulfilling its side of a trilateral deal with the US and Netherlands aimed at curtailing China’s ability to produce high-end chips for military use. Japan was also the first to sign a trade agreement with the US covering critical minerals needed for electric car batteries, giving its companies access to at least some of the Biden administration’s green subsidies. Still, there are some in Japan questioning the economic benefits offered by the US to offset the huge risks from the China trade tensions. Joe Biden did launch a trade initiative with 12 Indo-Pacific countries in May as part of efforts to counter a more assertive China.But the Indo-Pacific Economic Framework has already come under much criticism since it does not include any new access to the US market from Asian countries. There is also no prospect for the US to join an 11-member Asia-Pacific trade bloc known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (soon 12 nations with the inclusion of the UK). That bloc is the successor to the Trans-Pacific Partnership that was signed in 2016 but which Donald Trump pulled the US out of the following year. And while Tokyo did unveil export controls on semiconductor equipment that will affect a larger number of Japanese companies than previously expected, the US has signalled that it would seek even tougher measures and it remains unclear whether Japan will continue to play along. Within Japan’s trade ministry, people with knowledge of the matter say there is deep division between one camp that is concerned about the economic consequences of such measures and another camp that is seeking more aggressive steps to further align Tokyo with Washington. For Japanese chief executives, the political uncertainty in the US is another factor in their reluctance to place all their bets on the country’s alliance with Washington. In an interview earlier this year Keiji Kojima, Hitachi’s chief executive, openly called into question the concept of “friend-shoring”, which involves the shift of production towards friendly geopolitical partners. “With various changes in the geopolitical power balance, how do you know that our friend today will always be our friend?” he asked.Because these concerns are not widely shared publicly, it can be sometimes difficult to spot the subtle tensions brewing underneath. But it will be dangerous to assume that Japanese companies are on board on the basis of strong national security co-operation between Washington and Tokyo. The strains are likely to surface eventually if the US does not address the gap in its trade [email protected] More