Aurelia Butler

Global regulators are considering stronger rules on smaller banks and requiring all lenders to be prepared for faster runs on deposits after the recent financial turmoil shook confidence in banks and rocked markets on both sides of the Atlantic.Policymakers gathered in Washington for the IMF and World Bank spring meetings last week told the Financial Times that the Basel Committee on Banking Supervision, which sets global standards, is focusing on the issues exposed by the demise of Silicon Valley Bank.That could mean forcing medium-sized lenders such as SVB and now-defunct Signature Bank to comply with Basel rules on capital and liquidity, the people briefed on the talks told the FT. Currently the rules only apply to “internationally active” banks in the US — a group limited to the largest institutions. No timeframe has been set for these changes.The Bank of England is also exploring a major overhaul of its deposit guarantee scheme after SVB’s collapse led to billions of pounds being withdrawn overnight from the failed lender’s UK arm.People briefed on the BoE’s thinking said the reforms could include boosting the amount covered for businesses and forcing banks to pre-fund the system to a greater extent to ensure faster access to cash when a lender collapses.Opinion: Deposit guarantees are key to the confidence trick of banking, and reforms in the UK and US are essential to avoid a deeper crisis, writes Patrick Jenkins.Here’s what I’ll be keeping tabs on today:Earnings: Retail broker Charles Schwab is the latest financial services company to report earnings. Monetary policy: Richmond Fed president Thomas Barkin is scheduled to deliver a speech in Virginia. SpaceX: Elon Musk’s company is scheduled to make its first attempt to launch Starship, the most powerful rocket ever to be launched into space. Today we’re launching One Must-Read, a new newsletter that features a single remarkable piece of journalism every weekday. If you haven’t already, sign up here.Five more top stories1. A Delaware judge has delayed the start of the Fox News-Dominion Voting Systems trial by a day, raising expectations of a last-minute settlement. The $1.6bn defamation lawsuit was due to start today but in a statement issued last night Judge Eric Davis said the trial would now start tomorrow. Read more on the trial here. 2. Prices of new homes in China rose at the fastest pace in 21 months in March, the latest example of how quickly the world’s second-largest economy is recovering following the end of the zero-Covid policy. The latest upbeat data comes ahead of first-quarter GDP which is scheduled for release tomorrow.More on China: Beijing has begun to target western business interests with sanctions, investigations and the arrest of local staff. It is now considering curbs on materials critical to the global car industry. 3. Almost 100 civilians have been killed in “bloody chaotic fighting” in Sudan between the army and a rival paramilitary group. The UN, US, EU, Russia and China have urged both sides to halt the clashes which erupted on Saturday. Read more on efforts to broker peace. 4. Merck has agreed to buy San Diago-based Prometheus Biosciences for $10.8bn as the US drugmaker bolsters its pipeline ahead of the possible loss of exclusivity over its best-selling cancer drug later this decade.5. G7 countries pledged to “accelerate the phaseout of unabated fossil fuels so as to achieve net zero in energy systems by 2050” at the end of their summit in the Japanese city of Sapporo yesterday. The agreement was reached after weeks of fraught negotiations and claims the world’s most advanced economies were backtracking on their climate targets because of the Ukraine war.The Monday interview

Mohammed Alardhi took over the cockpit at Investcorp in 2015 © Charlie Bibby/FT

Mohammed Alardhi, who realised his dream of becoming a pilot and rose to be chief of Oman’s Air Force, sees a link between his teenage self’s need for speed and his current role as executive chair of Investcorp, the fast-growing Bahrain-based investment manager. “The pushing of the envelope — that’s still what I try to do,” the 61-year-old tells senior business writer Andrew Hill. Read the full interview. We’re also reading . . . Military briefing: As the first phase of Ukraine’s spring counter-offensive approaches, the stakes could not be higher. US immigration: The return of migrant dynamism could mean good things for American growth and the fight against inflation, writes Rana Foroohar.Gates Foundation: The Bill & Melinda Gates Foundation is making an unusual investment in a French biotech start-up’s experimental cancer trial. Chart of the dayUS president Joe Biden’s sweeping subsidies under the Chips Act and the Inflation Reduction Act are beginning to bear fruit. Investment committed in semiconductor and clean-tech production since August is almost double that in 2021 and nearly 20 times that of 2019, according to the FT’s analysis.

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Take a break from the news

A woman in a night train © Ambroise Tézenas

As cheap flights lose their allure, the sleeper train is being reborn as an environmental — and romantic — alternative. Read more in the Weekend Essay.Additional contributions by Tee Zhuo and Annie Jonas More

Investing.com — Big banks continue to divulge their earnings this week, but are also joined by quarterly results from a number of more consumer-facing companies. There are also comments from a plethora of central bank speakers to digest.1. Earnings season starts in earnestFirst-quarter earnings season hits full stride this week, after a number of major Wall Street banks reported better-than-expected results on Friday.Several more big banks, including Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC), are due in the next few days, but the focus may now turn to how more consumer discretionary companies are faring given persistently high inflation and the Federal Reserve’s aggressive rate-hiking cycle.Results from the likes of Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA), Johnson & Johnson (NYSE:JNJ), Procter & Gamble (NYSE:PG) and AutoNation (NYSE:AN) are due this week, and could easily disrupt the optimism generated by Friday’s strong bank numbers.Analysts expect S&P 500 earnings to have declined 4.8% in the first quarter from the year-ago period, according to Refinitiv data Friday. 2. Central bankers speakThe major Western central banks–the Federal Reserve, European Central Bank and Bank of England–all have major policy decisions to make early next month, placing the focus firmly on comments from these policymakers before they enter their traditional blackout periods.ECB President Christine Lagarde speaks in New York later Monday. Investors will be looking to see if she expands on Friday’s comment that “underlying inflationary pressures remain strong”, as opinions are divided on whether the Eurozone’s central bank will hike by 25 or 50 basis points in May.Jon Cunliffe, the Deputy Governor of the Bank of England for Financial Stability, is scheduled to speak Monday, just a couple of days before the release of the U.K.’s consumer price index for March.Inflation unexpectedly rose to 10.4% in February, largely cementing another rate increase next month, which would be the BoE’s twelfth consecutive rate increase since December 2021.A number of Fed officials are also due to speak in the next few days, including New York Fed President John Williams, Governor Michelle Bowman, Governor Christopher Waller and Governor Lisa Cook.3. Futures edge higher; stocks remain resilientU.S. futures traded marginally higher Monday, with investors awaiting the release of more quarterly earnings which should provide strong clues about the health of corporate America.At 05:00 ET (09:00 GMT), the Dow futures contract had gained 20 points or 0.1%, S&P 500 futures inched up 6 points or 0.1%, and Nasdaq 100 futures added 10 points or 0.1%.This is an important week for earnings [see above] with growth expectations pretty low following the Federal Reserve’s series of aggressive rate hikes in order to combat soaring inflation.That said, stocks have remained resilient, with the Dow Jones Industrial Average positive overall last week for the fourth straight time, while the S&P 500 and Nasdaq Composite both had their fourth up week in five.4. SpaceX aims for the moonElon Musk’s SpaceX is set to launch later Monday its new ultra-powerful Starship rocket system to space for the first time, in potentially another step forward in the company’s ambition of sending humans back to the moon and ultimately to Mars.The aim of the launch, if conditions are right, is to provide crucial data about how the vehicle ascends to space and how it will fly back to Earth, with both the lower-stage Super Heavy booster rocket and the upper-stage Starship cruise vessel designed as reusable components, reducing the cost of future launches.The optimism surrounding the SpaceX project contrasts vividly with the decision of Richard Branson’s Virgin Orbit (OTC:VORBQ) to file for Chapter 11 bankruptcy earlier this month after the satellite launching business struggled to secure long-term funding following a failed launch in January.The filing comes less than two years after Virgin Orbit went public at a valuation of roughly $3 billion.5. Oil prices subdued ahead of Chinese growth dataCrude prices traded lower Monday, handing back some of the recent gains, as traders await the latest growth data from China, the world’s largest crude importer.By 05:00 ET, U.S. crude futures traded 0.4% lower to $82.09 a barrel, while the Brent contract edged lower by 0.5% to $85.91 per barrel.Both benchmarks recorded their fourth weekly gains last week, the longest such streak since mid-2022, continuing to be boosted by the output cuts announced by OPEC+ producers earlier this month.The International Energy Agency also helped sentiment last week by forecasting record demand in 2023, largely predicated on the recovery of the Chinese economy after the lifting of its zero-COVID policy.With this in mind, the release of China’s first-quarter GDP early Tuesday is seen as key this week, as traders look for signs of demand recovery in the world’s second-largest oil consumer.  More

ORLANDO, Florida (Reuters) -Engineering a soft landing is hard. But if you zoom out from the strictest definition of the term, the U.S. Federal Reserve has managed it more often than is generally believed.Admittedly, by the textbook definition of raising interest rates to cool an overheating economy or inflation without triggering a recession, the Fed has only achieved that once in its history. That was in the mid-1990s, when the U.S. economy avoided recession after the Alan Greenspan Fed doubled interest rates to 6% between February 1994 and February 1995. The latest U.S. inflation and job market data this week sparked a tangible burst of optimism that the Fed, under the stewardship of Jerome Powell, might emulate that rare feat.To be fair to the Fed, it probably is more art than science, with luck playing a bigger part than skill. What Milton Friedman called the “long and variable lags” between monetary policy decisions and their effects on the economy can be anywhere from six months to two years. That’s a big window.In a paper earlier this year, former Fed Vice Chair Alan Blinder – who was in situ during that fabled 1994-95 soft landing – said that it is “difficult, maybe impossible” to predict the timing of policy changes on the real economy.Blinder posits that the soft landing parameters of avoiding recession completely are too narrow. He argues that if GDP declines by less than 1% or there is no recession determined by the National Bureau of Economic Research for at least a year after a Fed tightening cycle, that is a “softish” landing. By this definition, Blinder reckons that five of the 11 Fed tightening cycles since 1965 were followed by soft landings to varying degrees, and the 1990-91 recession was due to Saddam Hussein and Iraq’s invasion of Kuwait, not Alan Greenspan.Of the five hard landings, two were not a result of Fed monetary policy: the Great Recession of 2008-09 was because the financial system imploded, and the 2020 recession was a consequence of the global COVID-19 pandemic.That leaves three recessions – 1973-75, 1980 and 1981-82 – that can fairly be considered hard landings and a direct result of high interest rates. It’s no coincidence that they followed what were by far the three most aggressive tightening cycles.COMING DOWN FASTAs Blinder says, the landing largely depends on how high the ‘plane’ is flying before it starts its descent. To extend the analogy further, Powell and his colleagues are flying blind now, given the fog created by post-COVID pandemic supply chain disruptions, and food and energy shocks.”To achieve another soft landing under these circumstances, the Fed will have to be skillful indeed,” Blinder concludes.Paul McCulley, adjunct professor at Georgetown University and former chief economist at bond giant Pimco, reckons the Fed is at the end of its cycle even though inflation remains well above the central bank’s 2% target. He draws parallels with the end of the 1994-95 hiking cycle, particularly Greenspan’s remarks in February 1995 that the Fed could keep rates on hold or even cut them, “despite adverse price data”, if there were signs that underlying inflation pressures were cooling.The Fed cut rates five months later and the rest is soft landing history.”Knowing when to declare enough is enough is critical, to abort a self-feeding dynamic of negative macro animal spirits,” McCulley said.In a paper last year analyzing 70 tightening cycles between 1980 and 2019 across 19 advanced and six emerging economies, the Bank for International Settlements used even looser definitions for hard and soft landings. A hard landing is a recession – two consecutive quarters of negative GDP growth – within three years of the interest rate peak; otherwise, it is a soft landing, the BIS wrote.The tightening cycles were defined as at least three consecutive quarters, ending with the policy rate at its peak.Of these 70 episodes, 41 ended with a hard landing and 29 with a soft landing. All else equal, larger rate hikes spread over a longer period are more likely to be associated with hard landings, and front-loaded tightening cycles tend to be followed more frequently by soft landings, the BIS found.Maybe the Fed does have a fighting chance this time around.The nature of the landing, however, is surely subjective. A short and shallow recession – a “softish” landing – will be little comfort to the potential millions of newly unemployed and their families.”Restraining demand is just a euphemism for creating a recession and raising unemployment,” notes Phil Suttle, founder of consultancy Suttle Economics. “We will have a recession, the only question is how severe.”(The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Emelia Sithole-Matarise) More

Prices of new homes in China rose at the fastest pace in 21 months in March, in the latest sign of green shoots for the world’s second-biggest economy as it recovers from three years of pandemic restrictions and Beijing eases up a crackdown on the debt-laden property sector.New home prices rose 0.5 per cent on the previous month, according to official data, following a 0.3 per cent increase in February.The positive data signalled some relief for China’s ailing property sector, which has suffered a liquidity crisis over the past two years, and followed better than expected export figures released last week, as China’s trade was buoyed by shipments of electric vehicles and their components as well as an increase in trade with Russia.The encouraging data came ahead of China’s first-quarter gross domestic product figures, set for release on Tuesday. Economists polled by Reuters forecast growth of 4 per cent for the first three months of the year as Beijing chases a full-year target of 5 per cent.The People’s Bank of China on Monday kept its one-year medium-term lending facility rate — which sets the floor for the country’s benchmark interest rate — at 2.75 per cent. Analysts said the lack of easing from the central bank suggested that the first-quarter GDP data was expected to be on target.China posted GDP growth of just 3 per cent last year, falling short of a 5.5 per cent target that was already the lowest in decades and raising concerns about a structural slowdown in the economy’s expansion.“If the GDP report [for the first quarter] comes in close to market expectations then the speed of the economic recovery is on track,” said Iris Pang, chief greater China economist at ING. She added that with growth forecast to continue rising in the second quarter, “we expect the PBoC to keep interest rates unchanged”.Nomura analysts noted on Monday that electricity consumption growth had increased “markedly” to 5.9 per cent year on year in March, from 2.3 per cent over the first two months of the year.This was evidence that China’s economy had entered a “sweet spot” in the wake of Beijing suddenly dropping President Xi Jinping’s zero-Covid controls in late December and backing off from property sector tightening, they said.Still, Beijing’s growth target for 2023 is the lowest in decades, and economists have warned of an uneven recovery despite the fledgling signs of improvement in exports and the property sector.

One crucial area of concern for the pace of the recovery is the strength of consumer services, a driver of economic and jobs growth for the country of 1.4bn.China last week reported softer than expected consumer price data, with a 0.7 per cent year-on-year increase for March, trailing forecasts of 1 per cent. Citi said the weak inflation result signalled that “this year’s consumption recovery will be a recovery of two halves”.“Services recovery is steady, but it’s not a supercharged rebound,” the US bank’s analysts said. “Meanwhile, goods consumption could be struggling with the payback of stimulus support, especially for autos,” they added, noting that it “could also take some time for the property stabilisation to benefit related downstream consumption”. More

Turmoil across the banking sector, sparked by the collapse of Silicon Valley Bank, has ignited fresh doubts among investors over the outlook for interest rates and bond yields — at a time when inflationary pressures globally remain uncomfortably high.Central banks on both sides of the Atlantic have repeatedly emphasised their determination to bring runaway inflation under control. But additional hikes in interest rates could create more instability across the banking sector and increase the risk of pushing economies into recession.At the start of April, financial markets were pricing in a 50 per cent chance of a 25 basis point increase in US rates in May, followed by a decline to around 3 per cent by the end of next year. However, Jim Cielinski, global head of fixed income at asset manager Janus Henderson, expects the Federal Reserve to hold rates at their peak level for longer than the market is currently factoring in, because of policymakers’ failure to achieve their main task: ensuring price stability.

“The notion that US rates can be cut at the first sign of trouble, and that central banks will do more quantitative easing if conditions get tough . . . that era is over,” says Cielinski. He believes that headline US inflation has passed its peak but will remain structurally higher — and is unlikely to return to the target levels set by the Fed. That leaves investors having to contend with higher inflation risks, greater geopolitical risks, and more uncertainty about the path of monetary policy.“The front end of the yield curve in most sovereign bond markets provides the most attractive risk-reward balance,” Cielinski says. “The US yield curve is steeply inverted and it is not clear why an investor that is worried about inflation would prefer a 10-year Treasury bond over two- to five-year Treasuries.”Stephen Jones, chief investment officer for fixed income at Aegon Asset Management, is also concerned that investors are overconfident about inflation returning to very low levels. Aegon is recommending that clients stick with less-risky fixed-income assets, including short-term government and investment-grade bonds.“Investors can consider adding duration — fixed-income assets that are more sensitive to changes in interest rates — later in the year when the outlook for monetary policy becomes clearer,” suggests Jones.Uncertainty about the outlook for inflation and interest rates, combined with the danger of problems spreading across the banking sector, has increased volatility in the bond market.The Ice BofA Move index — a measure of bond market volatility — has risen to levels last seen when Lehman Brother imploded in 2008.Fraser Lundie, head of fixed income, public markets at Federated Hermes, says that central banks will try to “hold the line” on interest rate policy but disruptive events could become more frequent.“Policymakers will be aware that things are already breaking due to the tightening of monetary policy, with the difficulties in the US banking sector following only a few months after liquidity problems among UK pension funds triggered a crisis in the gilt market,” he points out.Federated Hermes says that US and European investment-grade bonds and convertibles are looking more attractive as a result of the pricing shifts that occurred during the banking crisis in March. It is more cautiously positioned in lower-quality high-yield bonds where smaller issuers and private companies have fewer levers to pull if the underlying business encounters problems.

Henrietta Pacquement, head of the global fixed-income team at the US manager Allspring, says that it is “not a surprise” that signs of stress are starting to emerge, given the speed of interest rate hikes over the past 12 months.“Companies are having to contend with increasing costs and rising wages so we have passed the peak for financial health for the corporate sector,” says Pacquement.Investment grade bonds still look attractive to Allspring in this “less forgiving economic environment” and the manager also expects opportunities to open up in the high-yielding parts of fixed income later this year, when valuations catch up with the deterioration in corporate fundamentals.Looking further ahead to next year, Steve Ellis, global CIO for fixed income at Fidelity International, thinks the threat of a credit crunch for US companies — due to problems in the bank sector and the growing risk of a hard landing for the American economy — could force the Fed to cut its main policy rate sharply.

1.28%

Yield above US consumer price rises offered by 10-year inflation-linked bonds

Adding “duration” — exposure to bonds that are more sensitive to changes in interest rates — in US investment grade credit may be an attractive option at this stage in the cycle given its defensive risk exposure to any hard landing.“Investors should want to take more interest rate risk as the Fed is already providing additional liquidity and likely to loosen monetary policy later this year,” says Ellis.Ten-year US inflation-linked bonds are offering 1.28 per cent a year above US consumer price inflation — which provides an attractive way to take out some inflation protection, according to Fidelity. But the asset manager is still cautious about the US junk bond market, where the average yield of around 8.2 per cent is still implying a very low level of defaults — around 3 per cent — this year.“It is not obviously clear that pricing in US high-yield bonds is offering enough protection, given that the US economy is facing a credit crunch and a hard landing,” warns Ellis. More

The US appears poised for a manufacturing boom as companies tap into Biden administration subsidies with pledges to spend tens of billions of dollars on new projects, according to Financial Times research.The Chips Act and the Inflation Reduction Act, passed within days of each other last August, together include more than $400bn in tax credits, grants and loans designed to foster a domestic semiconductor industry and clean-tech manufacturing base. The package was aimed at countering China’s dominance in strategic sectors such as electric vehicles and recapturing jobs from abroad. The FT identified more than 75 large-scale manufacturing announcements in the US since the passage of these two industrial policies. Here is what we learned.Semiconductor and clean energy projectsCompanies have committed roughly $204bn in large-scale projects to boost US semiconductor and clean-tech production as of April 14, promising to create at least 82,000 jobs. While not all these projects were a direct result of the passage of these bills, they will probably be eligible for the tax credits. The amount is almost double the capital spending commitments made in the same sectors in 2021 and nearly 20 times the amount in 2019. While the FT identified four projects worth at least $1bn each in the semiconductor and clean-technology sectors in 2019, we found 31 of that size after August 2022. Semiconductors, electric vehicles and batteries captured the bulk of investment. The FT identified 21 semiconductor-related investments and more than three dozen projects aimed at boosting the US electric vehicle supply chain. Taiwan Semiconductor Manufacturing Company’s $28bn expansion in Phoenix marks the largest investment to date, bringing the company’s total investment in its Arizona fabrication plants to $40bn, the biggest foreign direct investment project in US history.

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The FT looked at projects involving capital investment of at least $100mn since the Chips Act and IRA were passed. We included projects aimed at boosting manufacturing in the semiconductor, electric-vehicle, battery and clean-energy sectors. Our analysis was based on company and government announcements and drew on data from fDi Markets, Rystad Energy, Wavteq and the Semiconductor Industry Association. The IRA included $369bn worth of tax credits, grants and loans for clean-tech development, with bonus credits for projects paying prevailing wages or located in fossil-fuel communities. The credits can be accumulated, accounting for about 50 per cent of costs for some projects, say accountants. The Chips Act provides $39bn in funding for semiconductor manufacturing as well as $24bn worth of manufacturing tax credits. “The industrial policy that’s being put into place hasn’t been seen for generations,” said Scott Paul, president of the Alliance for American Manufacturing. “This is a generational, transformational change that we’re seeing in America and our productive capacity.”

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Republican districts are winning projectsMore than 75 per cent of all investment is headed to Republican-held Congressional districts, where it will create 58,000 jobs, according to FT data.The surge in spending pledges in Republican areas comes despite the GOP’s votes against both the Chips Act and IRA in Congress. Some in the party remain critical of the legislation.“I wish that we would be more specific and more calculated in our efforts,” said John Curtis, a Republican representative for Utah and founder of the Conservative Climate Caucus. Curtis declined to say whether he supported or opposed the legislation.

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Senior Democrats are working to gain political credit for the jobs promised by the spending pledged since the industrial policies were passed last year. Earlier this month, US vice-president Kamala Harris toured Hanwha Qcells’ solar factory in Dalton, Georgia, a district represented by the far-right Republican Marjorie Taylor Greene. Harris announced that the South Korean manufacturer would build the largest community solar project in the US, on top of its $2.5bn expansion announced in January. “It’s going to be harder for Republican lawmakers to say these policies aren’t effective or aren’t worth it because they’re seeing jobs being produced in their communities,” Paul said.

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Foreign investors want a stake — including ChinaAbout a third of all investments announced since August involve a foreign investor, with nearly two dozen projects coming from companies headquartered in Japan, South Korea and Taiwan. This includes LG Energy Solution’s $5.5bn proposed project in Arizona, announced in March, the largest battery investment ever in the US.Analysts say these investments from the US’s Asian allies are also attempts to diversify away from dependence on China’s supply chains. “Their strategic calculations here are somewhat similar to the United States’, in that China is the largest economy in their region but it’s also an economy with which they have somewhat tense security relationships,” said Cullen Hendrix, a senior fellow at the Peterson Institute for International Economics. But Chinese investors are also vying for a stake in the US supply chain. While the Chips Act and the IRA have anti-China clauses, the US government is yet to rule on the extent to which Chinese companies can participate in building US facilities.Two other large deals announced since August, both in Michigan, are Ford’s $3.5bn battery plant using technology from CATL, China’s battery giant, and a $2.4bn battery plant being built by a subsidiary of China’s Gotion. Both Chinese companies have been accused by some Republicans of being fronts for the Chinese Communist party. Virginia governor Glenn Youngkin rejected a proposal for the Ford project to be based in his state, telling TV reporters that it was a “Trojan horse”.“There is no Communist plot,” said Chuck Thelen, North American vice-president of Gotion at a local town meeting. “The fact is we already live in a global industry, and to bring a Chinese manufacturing or a multinational manufacturing site into North America is the onshoring that our past president really promoted.”CATL did not respond to a request for comment.

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‘A race to the bottom’The competition is fierce to win the largest manufacturing projects, with states doling out historic incentive packages to secure investments. Of the spending commitments tracked by the FT, less than half — or about $80bn — disclosed the size of the subsidies they will receive from state and local authorities, on top of the credits available in the IRA and Chips Act. The total size of the subsidies for those that did disclose them amounted to $13.7bn. The largest disclosed incentive package was $5.5bn given to Micron for its $20bn semiconductor fab in Clay, New York, helping the state beat Texas to the project. “We gave every penny that we could give, and New York literally offered billions of dollars that we could not keep up with,” said Texas governor Greg Abbott in February.The subsidy race has raised concerns among watchdogs over whether the projects will deliver economic benefits to the community.

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Greg LeRoy, executive director of Good Jobs First, called the competition among states a “race to the bottom”. Because negotiations are rooted in secrecy, companies can convince states to give out larger packages even if they were intending to site in the state all along.“We’re all in favour of green jobs. We’re all in favour of saving the planet. We’re not in favour of busting the budget to do that,” said LeRoy. Last year set an all-time record for billion-dollar subsidy packages, according to the research group. Are you aware of any new IRA or Chips Act projects in your area? Let us know: [email protected] More

Ikea stores in Malaysia have severed ties with a labour provider after an internal investigation found there had been a breach of the furniture retailer’s own policies.Many security guards in Ikea’s Malaysian stores had paid fees to secure jobs, according to the retailer’s investigations. The findings, unreported until now, come as leading western brands face growing scrutiny from regulators and investors over labour issues in their international operations.Ikea’s investigation was launched after a campaigner reported workers from Nepal had paid fees as high as $1,000 to obtain jobs as security guards in Malaysia, according to communications seen by the Financial Times. The probe was led by Inter Ikea, which oversees the brand’s franchise stores, and Ikano Retail, which runs Ikea stores in Malaysia as well as Singapore, Thailand, the Philippines and Mexico.Ikano, which is owned by the Kamprad family that founded Ikea, said the inquiry confirmed “many of the security guards working in our Malaysia business had paid recruitment fees”, contravening its code of conduct rules. The group said its probe had revealed “multiple layers of subagents involved in the process in rural villages”.Campaigners say brokers and recruiters charging fees from workers looking for jobs is an endemic problem in many developing countries. Workers often take out loans to cover the cost. For multinational brands that rely on local agents, such problems in the supply chain are often a blind spot, say campaigners.Debt bondage is recognised as an indicator of forced labour by the UN’s International Labour Organization, whose guidelines state workers should not be charged “any fees or related costs for their recruitment”. Ikano said: “After many weeks of negotiation with our supplier, we were unable to resolve our concerns and have subsequently terminated our relationship.” The company declined to confirm its former supplier and the Financial Times was unable to contact it for comment. Ikano said the incident had been reported to local authorities and the Nepalese embassy. Ikea, whose roughly 460 stores are owned by a sprawling network of franchisees globally, is the latest brand to be caught up in a controversy over recruitment fees. Activists say Nepal’s numerous unlicensed hiring agencies are among the most exploitative when it comes to charging workers. Nepalese migrants around the world have reportedly fallen victim to the practice, including those working on UK farms and on construction sites for the Qatar World Cup.Ikano said it had secured a new supplier that will recruit workers directly rather than using subcontractors, adding that it would conduct follow-up audits.Additional reporting by Richard Milne More

SYDNEY (Reuters) – Asian stocks opened cautiously on Monday as U.S. earnings season gets into full swing, while a raft of Chinese data will offer insight into how the world’s second-largest economy is recovering.Markets have also seen a mood shift on the outlook for U.S. interest rates, with futures implying an 80% chance the Federal Reserve will hike by a quarter point to 5.0-5.25% in May. Resilience in core U.S. retail sales and a jump in inflation expectations reported on Friday led investors to trim the amount of easing expected later this year to around 60 basis points (bp).”Early April data on the labour market, inflation and consumption all indicate the Fed has more work to do and that a soft or bumpy landing is a greater probability than a sharp and relatively sudden contraction in activity,” said analysts at ANZ in a note.”Our baseline view is for two more 25 bp hikes and, if data does not start to weaken soon, the market will need to reprice for no rate cuts in the second half of this year.” At least eight top Fed officials are speaking this week, including three governors, and could generate plenty of headlines to move the dial further.This combination of factors made for a slow start on Monday and MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1%, while Japan’s Nikkei inched up 0.3%.Chinese data on retail sales, industrial output and gross domestic product are due on Tuesday, and analysts suspect the risks are for an upside surprise given recent strength in trade. Figures out over the weekend showed new home prices climbing at the fastest pace in 21 months, supporting consumer demand and confidence.EYES ON EARNINGS OUTLOOKS&P 500 futures edged up 0.2%, while Nasdaq futures were flat as investors awaited a slew of earnings reports led by Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC). Other big names reporting earnings include Johnson & Johnson (NYSE:JNJ), Netflix (NASDAQ:NFLX) and Tesla (NASDAQ:TSLA).Analysts expect Q1 S&P 500 earnings to fall 5.2% from the year-ago period, though BofA analyst Savita Subramanian is more concerned about the outlook for 2023. “Overall, we expect an in-line quarter, but big cuts for the full-year,” BofA warned. “Our 2023 EPS estimate for the S&P 500 remains $200, still 9% below consensus estimates.””Demand for consumer goods has already softened and now we’re watching services,” said Subramanian. “Airlines, hotels and restaurants are feeling pressure from slowing macro, tough comps (comparison periods) and no respite from wage pressure.”In bond markets, the shift in Fed expectations pushed U.S. two-year yields up to 4.12%, having risen 12 basis points last week. [US/]Yet, the outlook has also turned more hawkish on the European Central Bank (ECB), sending German two-year yields surging 33 basis points over the week for the biggest increase since September.Futures have 37 basis points of ECB tightening priced for the May meeting and 82 basis points by December.That sea change saw the euro gain 0.8% last week, even after a dip on Friday. Early Monday, the single currency was holding at $1.0983 having hit a one-year high of $1.1075 last week.The dollar has fared better on the yen as the Bank of Japan remains committed to its super-easy monetary policy, at least for now. That kept the dollar at 133.96 yen, after rallying 1.2% last week.The bounce in the dollar took some of the shine off gold which was back at $2,002 an ounce, off last week’s peak above $2,048. [GOL/]Oil prices have enjoyed four straight weeks of gains, helped by cuts to output and as the West’s energy watchdog said global demand will climb to a record this year on the back of a recovery in Chinese consumption. [O/R]The market was consolidating on Monday with Brent up 6 cents at $86.37 a barrel, while U.S. crude rose 1 cent to $82.53. More