Aurelia Butler

Good morning. Today we start in Beijing where China’s government has disowned comments made by its ambassador to France, who sparked outcry in Europe at the weekend.Lu Shaye infuriated European capitals on Sunday when he questioned the legal status of former Soviet states and Ukraine’s sovereignty over Crimea. In response, China’s foreign ministry yesterday contradicted Lu’s comments, saying that “China respects the sovereign status of the republics after the disintegration of the Soviet Union.” Later on Monday, the Chinese embassy in Paris posted a statement online saying that Lu’s “remarks on the Ukraine issue were not a statement of policy but an expression of personal views”. Analysts suggested the Chinese foreign ministry’s response represented a repudiation of the remarks from Lu, who has built a reputation as one of the “wolf warrior” diplomats known for their combative style.China’s efforts to play down the ambassador’s claims have not satisfied the Baltic nations of Lithuania, Latvia and Estonia, who said they would summon senior Chinese diplomats today to protest against Lu’s remarks.Here’s what else I’m keeping tabs on today:South Korea GDP: Flash figures for the first quarter are set to be released.Anzac Day: Markets will be closed in Australia and New Zealand as the nations honour members of the military.Earnings: We’re in the thick of US earnings season. Companies reporting results include Alphabet, General Electric, General Motors, Halliburton, McDonald’s, Microsoft, PepsiCo, Verizon Communications, Visa and more. Five more top stories1. The EU and Japan have pushed back against a US proposal for G7 countries to ban nearly all exports to Russia, according to documents seen by the Financial Times. The disagreement over the measure underscores the lack of additional options available to G7 leaders as they seek to increase the economic punishment for Vladimir Putin’s regime.2. Tucker Carlson is leaving Fox News, just days after the television network agreed to settle a defamation lawsuit over accusations it aired false theories about US election fraud. The departure was sudden and Carlson, who is among the most-watched personalities on US television, ended his last broadcast with no indication that it would be his final one.3. Adani Ports announced it will buy back up to $650mn in bonds, as Indian tycoon Gautam Adani’s conglomerate fights to prove it has ample cash on hand following a short seller attack. Although the Adani group has strenuously denied Hindenburg’s allegations that it manipulated its stock price and engaged in fraudulent accounting, it has pledged to slim its ballooning debt pile and slow its rapid expansion.4. Credit Suisse has revealed for the first time the scale at which depositors rushed to withdraw their money from the Swiss bank before it was forced to merge with rival UBS last month. The bank said it suffered SFr61.2bn ($68.6bn) of outflows in the first quarter as clients fled, exposing the scale of the task for UBS after taking over its Swiss rival.5. Australia has unveiled the biggest strategic shift in its military posture since the second world war to adapt to China’s military build-up in the region. The country’s defence spending review warned of “major power strategic competition” in the Indo-Pacific and that the country’s defence posture was “no longer fit for purpose”. Read more on the planned overhaul. The Big Read

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The weeks since Silicon Valley Bank collapsed on March 10 have brought an uncomfortable realisation — the problems that provoked the biggest bank run in history were neither a freak occurrence nor an unforeseeable emergency. Ahead of the first official postmortem on its failure, almost everyone agrees that the crisis had been hiding in plain sight.We’re also reading . . . How to stop a war: Washington and Beijing are getting locked into a cycle of action and reaction that brings them closer to direct conflict, writes Gideon Rachman. Fishing for answers: A legal dispute playing out in the UK High Court provides a glimpse into the lucrative and murky business of fishing in the south Pacific. Banking on Apple: Rana Foroohar asks if the tech giant — with its considerably greater global reach and consumer trust than most banks — can fix a troubled sector. Chart of the day

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India is likely to have officially overtaken China as the world’s most populous country this month, the UN said yesterday. The exact timing of the long-awaited crossover has been the source of much speculation, with officials blaming a lack of accurate statistics.Take a break from the news

Princes Bridge was built in the late 19th century as a gateway to central Melbourne and retains many of its period features © Abigail Varney

Flowing 240km from clean mountain ranges and farming land before emptying into Port Phillip Bay in the heart of Melbourne, the Yarra river was long neglected before being cleaned up and newly appreciated this century. Wander into the city’s past before venturing into verdant terrain that takes in everything from kangaroos and kayaking via cake shops on these two routes.Additional contributions by Gordon Smith and Tee Zhuo More

The EU and Japan have pushed back against a US proposal for G7 countries to ban all exports to Russia, as part of negotiations ahead of a summit of the world’s most advanced economies.A G7 leaders’ statement being drafted for their meeting in Hiroshima next month includes a pledge to replace the current sector-by-sector sanctions regime against Russia with a complete export ban with a few exemptions, according to documents seen by the Financial Times. The full export ban would include exemptions for agricultural, medical and other products.The proposal was made by the US, according to two officials. It comes amid rising frustration in Washington with the existing system riddled with loopholes that allow Russia to continue to import western technology. But representatives from Japan and EU countries suggested in a preparatory meeting last week that such a move would not be feasible, according to three people briefed on the discussions.“From our perspective it is simply not do-able,” said one of the officials, who spoke on condition of anonymity.The White House’s National Security Council declined to comment on conversations with G7 partners but said the US would “continue to look for ways to hold Russia accountable”.“In coordination with our G7 partners have put in place the largest set of sanctions and export control actions ever imposed on a major economy,” said an NSC spokesperson. “These actions have had a significant impact, undercutting Russia’s ability to fund and fight its unjust war.”The disagreement over the measure underscores the lack of additional options available to G7 leaders as they seek to increase the economic punishment for Vladimir Putin’s regime after 14 months of war, following a number of sanctions measures that were designed to cut off vast swaths of Russia’s economy from western imports of technology, machinery and finance.Cracking down on sanctions evasion and circumvention by third countries is the main focus of the US, UK, EU and other allies, with increased pressure on states such as Turkey, the UAE and countries in central Asia that have increased trade with Russia since western sanctions were imposed. G7 leaders will meet in Hiroshima on May 19 for a three-day summit set to focus on the effects of Russia’s war against Ukraine, economic security, green investments and the Indo-Pacific region. The EU, which is a member of the G7 alongside the US, UK, France, Germany, Italy, Japan and Canada, requires all of its 27 members to agree on sanctions policy.It has agreed on 10 packages of sanctions against Russia since February 2022, but only after weeks of wrangling between member states, some of whom have secured carve-outs and exemptions for their industries by threatening to veto the restrictions.Replacing that regime with a full export ban plus exemptions would risk reopening those debates and the potential weakening of already-existing measures, officials said.Other less-contested proposals listed in the draft statement, which could change before the summit, include more measures to restrict “evasion and circumvention” of existing sanctions and against those “wilfully supporting the financing of Russia’s war,” including financial transactions facilitators.G7 countries will also continue to reduce their Russian energy imports and prevent “the reopening of avenues previously shut down by Russia’s weaponisation of energy,” the draft statement says. In addition, leaders will announce plans to introduce a “traceability mechanism” on Russian diamonds to reduce the Kremlin’s earnings from their export.Additional reporting by Leo Lewis in Tokyo More

Congress will need to raise the U.S. debt ceiling or risk a catastrophic debt default, with analysts predicting the Treasury is most likely to run out of funds in July or August.As a result, some investors are avoiding debt that comes due in this timeframe. But they are also seeking safe places to park cash. That has led one-month bill yields to tumble, and the spread between one-month and three-month bills to expand to its widest level since the one-month bills were introduced in 2001.”You’re seeing this demand for the very front-end … and then the three- to four-month part of the bill curve is quite cheap because of these debt ceiling concerns,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale (OTC:SCGLY) in New York.”There’s a lot of cash on the sidelines. Money left the regional banking systems and made it to the larger banks and then from there to money market funds. Money market funds are the highest they’ve been and there’s a dearth of supply,” Rajappa added.The failure of two regional banks, including Silicon Valley Bank in mid-March, has increased demand for Treasury bills on concerns about the safety of uninsured bank deposits. But the Treasury has cut its issuance of short-term debt as it bumps up against its debt limit.”The market is nervous and is avoiding the debt ceiling issues and has unfortunately nowhere to go because bill supply continues to be cut,” said Gennadiy Goldberg, a senior interest rate strategist at TD Securities in New York.Yields on one-month bills were last at 3.362%. after reaching 3.206% last Thursday, the lowest since Oct. 20. They are now trading around 130 basis points below the Fed funds rate, the largest gap since 2008.Yields on three-month bills, meanwhile, have increased to 5.113%, and are holding just below a 22-year high of 5.318% reached on Thursday. The gap between one-month and three-month bills has widened to a record at around 175 basis points.The Treasury is expected to increase bill issuance once the debt ceiling is raised. Until then, investors are also likely to continue to make use of the Federal Reserve’s reverse repurchase agreement facility, which is seeing daily demand of around $2.25 trillion. More

The country, which was the major sovereign casualty of the COVID-19 pandemic and has been in default since 2020, said on Friday it would share a first fully-formed debt restructuring plan with China and other government creditors. “We can confirm the proposal has been sent,” a spokesperson working with advisors to the government in Lusaka said.Zambia has earmarked over $18 billion of debt for overhaul, but progress has been slow, hampered by the concerns of its main creditors, including China, about the scale of relief required. More

Today’s top storiesFrench luxury group LVMH became the first European company to reach a $500bn market value as the return of Chinese customers drove up its share price.UK chancellor Jeremy Hunt admitted that UK business taxes were too high but insisted the best way to lower them would be to expand the economy. A European Central Bank policymaker told the FT that investors were underestimating how high eurozone interest rates might have to rise unless wage growth started to fall alongside core inflation.For up-to-the-minute news updates, visit our live blogGood evening.The semiconductor showdown between the US and China stepped up a notch today as Washington tried to rally allies for its battle with Beijing against a backdrop of growing mutual suspicion and geopolitical tensions. As South Korean president President Yoon Suk Yeol arrives in DC for a state visit, the White House has asked his country’s chipmakers not to fill market gaps in China if Beijing bans the sale of chips from America’s Micron, one of the three big companies in the DRam memory chip market alongside South Korea’s Samsung and SK Hynix. China’s move is retaliation for US attempts to prevent it from obtaining or producing advanced semiconductors and is seen as a litmus test of how far Beijing is willing to take action against US businesses.The US at the same time is attempting the difficult task of breaking its dependence on China by reshoring production, an exercise described by the founder of Taiwan’s TSMC, the world’s largest chip producer, as a “very expensive exercise in futility”. Semiconductor companies meanwhile have signalled that the industry’s current slowdown is lasting longer than expected as weakening demand for car parts adds to a slump in sales of smartphones and personal computers after the boom times of the pandemic era.The developments follow a sell-off in Asian markets this morning that was prompted by expectations that China will announce wider restrictions on US investment at next month’s G7 summit. Investors also have the jitters over tensions in the South China Sea. The US at the weekend held war games in the Philippines, a potential front line in a possible future conflict over Taiwan, while Australia today unveiled its biggest strategic shift in defence since the second world war as a reaction to China’s military build-up in the region. Tensions between China and Europe are also simmering after Beijing’s ambassador to France questioned the legal status of former Soviet nations Estonia, Latvia and Lithuania and Ukraine’s sovereignty over Crimea, before Beijing disowned the remarks. Relations with China are on the agenda at today’s meeting of EU foreign ministers in Luxembourg as they seek to “recalibrate” their approach to Beijing. The EU’s problem, says FT commentator Martin Sandbu, is that it is too often willing to subordinate political strategy to its economic ambitions, with many business leaders still salivating at the size of the Chinese market. “It is time for Europe to learn that what is good for VW is not necessarily good for Europe,” he concludes.Need to know: UK and Europe economyWork has begun on the UK’s largest solar and battery storage plant near Faversham in Kent, which is forecast to generate enough power each year to service about 100,000 homes.UK policymakers are worried that shoppers’ concerns over food price inflation — which last week hit its highest level in more than 45 years — could fuel demand for higher pay settlements, embedding higher overall inflation. Nothing — yet — however compares with grocery prices in the US, home of the $29 ham and cheese sandwich.In Spain meanwhile, a lack of rain has pushed olive oil prices to record levels. The country is Europe’s largest producer and accounts for around half of world supplies. Another of our Big Reads examines France’s attempts at delivering a second nuclear era as an ambitious reactor construction programme comes up against a shortage of skilled workers.Need to know: Global economyPresident Joe Biden’s Inflation Reduction Act may help reindustrialise the US and create new jobs, but it will not stop rising prices, critics argue. A scramble for workers for these new projects could trigger another bout of inflation, complicating the Federal Reserve’s efforts to cool the economy.A somewhat surreal legal battle over mackerel in the Pacific has reached London’s high court. Vanuatu, a tiny nation of islands, is challenging an obscure Panamanian company over the acquisition of its fishing rights “in perpetuity” for a fraction of their market value. Countries rushed to evacuate nationals from Sudan as fighting between armed forces and paramilitaries intensified. Here’s our profile of Hemeti, the paramilitary leader. Need to know: businessCredit Suisse was hit by outflows of SFr61.2bn ($68.6bn) in the first quarter as clients fled the stricken bank, highlighting the challenge ahead for new owners UBS. Here’s a new Big Read on how multiple warnings were missed at Silicon Valley Bank in the US ahead of an official postmortem on its collapse.Are the banking sector’s difficulties a good opportunity for Apple to test its mettle as a financial institution? Although there is a debate about whether a marriage between Big Tech and big banks is good for competition, columnist Rana Foroohar says the company is well placed to solve some of the industry’s ongoing problems.Profit warnings at UK companies surged in the first quarter, particularly among tech businesses, as economic uncertainty left them facing “recession-like conditions”. UK-listed companies are also increasingly losing their chief executives. It is still unclear when — or if — business travel will return to pre-pandemic health, writes columnist Pilita Clark, pointing to high air fares, flexible working patterns and concerns over climate change.Florida governor Ron DeSantis launched new salvos in his battle against “woke” Disney, the state’s biggest employer, ahead of an expected run for the 2024 Republican presidential nomination.With global supply chains under threat, 3D printing could be vital to the future of US manufacturing. Watch our new video.

Video: Why 3D printing is vital to success of US manufacturing | FT Film

The World of WorkEmployers are using psychological tests to resolve disputes and diversify their workforce but their accuracy is not guaranteed, writes management editor Anjli Raval. Headhunters say people lie, responses can change depending on the day and practice tests mean you can beat the system. Tech companies are laying off droves of middle managers in a phenomenon dubbed “the flattening”. Carving out a layer of staff could speed up decisions but some argue it removes a vital link between bosses and staff.Proposed new UK laws on sexual harassment in the workplace look likely to fail thanks to a series of amendments from Tories in the House of Lords including for example the exclusion of “vexatious, frivolous or malicious” claims. Andrew Hill takes issue with the idea that bullying should have a threshold level for action, as suggested by Dominic Raab who resigned as UK deputy prime minister on Friday after allegations were upheld against him. Bosses don’t have to swear and shout to undermine or intimidate their staff, Hill argues.Some good newsResearchers in Abu Dhabi have created a new nanomaterial that they say can clean up trillions of gallons of waste water from the textile industry that flows untreated into rivers and streams, loaded with harmful chemicals and dyes. (CNN) More