Aurelia Butler

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The East African nation secured a $3.4 billion, four-year financing program from the IMF in July after carrying out a series of reforms including floating its birr currency. It is also in the midst of a fresh push to put its debt restructuring back on track.”An increase in near-term target is warranted by Ethiopia’s vulnerabilities and heightened uncertainty around outlook,” the IMF said in a report published late on Monday.Lower-than-expected volumes of hard currency sales by the central bank through auctions and higher gold exports contributed to an over-performance of the net international reserves target for August, the IMF said. The net international reserves stood at $1.3 billion in mid-August, more than double the target of $630 million, the Fund said. It raised the end-June 2025 target by $300 million to $400 million, to help create a buffer for the country to settle maturing letters of credit for fuel imports issued before reforms started.The flotation of the birr currency resulted in the convergence of the official and the black market rates, the IMF said, but market activities had picked up at a slower pace than expected, leading to persistent unmet demand for dollars.Ethiopia plans to reach a deal with bilateral creditors by year-end, the Fund said, followed by a deal with its Eurobond investors “as soon as is feasible” after that.Bondholders have rejected the size of the proposed reduction in the principal amount, known as a haircut, indicated at 18% in a recent investor presentation, saying the government was ignoring the fact that Ethiopia faces a liquidity issue, not an insolvency one. “The authorities are making good faith efforts to agree terms with Eurobond holders,” the IMF said. More

1. US Election DayMany Americans will head to the polls on Tuesday to cast their ballots in the US presidential election, in what is shaping up to be one of the closest races in modern political history.Donald Trump and Kamala Harris were campaigning furiously across key battleground in the final day before the vote as they tried to secure any last-minute support. In her final rally in the all-important state of Pennsylvania, Harris argued America was ready for a “fresh start.” Trump, meanwhile, urged his backers to vote in his last event in Michigan, another state with huge election implications.Trump and Harris are locked in a virtual tie heading into Election Day, especially in the crucial swing states that will likely heavily impact the outcome of the election.Investors will be closely monitoring the returns, with the winner’s policies set to potentially have a major influence on everything from the oil and gas sector and Big Tech to electric vehicles and financial services.2. Futures mutedUS stock futures hovered just above the flatline on Tuesday, with markets awaiting the election results, gauging a raft of quarterly corporate earnings, and eyeing an upcoming Federal Reserve interest rate decision.By 03:30 ET (08:30 GMT), the Dow futures contract was mostly unchanged, S&P 500 futures had risen by 3 points or 0.1%, and Nasdaq 100 futures had inched up by 28 points or 0.1%.The main averages on Wall Street ended slightly lower on Monday, as uncertainty clouded over a week filled with possibly market-moving events. A poll suggesting Harris held an advantage in the typically conservative-leaning state of Iowa hit so-called “Trump trades” like the US dollar and Bitcoin. Her chances of winning also improved on online betting markets, which traders have been using to assess election expectations.”The narrative is shifting in a pro-Harris direction […] but given that the race still seems extremely close, people are reluctant to have on massive Harris or Trump trades,” analysts at Vital Knowledge said in a note.3. Boeing workers vote to end strikeStriking Boeing (NYSE:BA) workers voted in favor of the planemaker’s latest contract offer on Monday evening, ending a long-running labor action that had severely disrupted production for nearly two months.Local media reports from Seattle said 59% of striking workers voted in favor of a new contract, which will entail wage hikes of 38% over the next four years. But the contract still did not include the return of a defined-benefit pension plan scrapped a decade ago.Monday’s vote was the third time the workers voted on a contract offer from Boeing, having rejected two prior proposals. Roughly 33,000 machinists on the US West Coast have been on strike.The work stoppage began on September 13 and halted most of Boeing’s plane production while also costing the firm about $100 million a day in lost revenue.4. Chinese stocks, Bitcoin rise ahead of electionChinese stocks advanced on Tuesday, outperforming other Asian markets, as investors assessed the US election and data showing faster-than-expected growth in China’s services sector in October.The Shanghai Shenzhen CSI 300 jumped by 2.5% and the Shanghai Composite rose 2.3%, while Hong Kong’s Hang Seng index added 2.0%. Comments from China’s Premier Li Qiang that included a vow to further open up the country’s economy also bolstered sentiment.Still, regional markets in Asia took middling cues from the negative session on Wall Street, with anticipation over a tight race between Trump and Harris keeping investors on edge.Elsewhere, the price of Bitcoin increased, paring back losses from the prior week. The world’s most popular digital token, which has become somewhat of a proxy for Trump’s chances after the former president positioned himself as a champion of the cryptocurrency industry, had been dented in the prior session by the unexpected Iowa poll.5. Oil steadiesOil prices stabilized Tuesday, after the previous session’s strong gains, with the proximity to the extremely tight US presidential election limiting trading ranges.By 03:30 ET, the Brent contract gained 0.2% to $75.22 per barrel, while U.S. crude futures (WTI) traded 0.2% higher at $71.58 a barrel.Both benchmarks had registered gains of over 2% on Monday after the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, announced that it will again delay a planned output hike of 180,000 barrels per day by at least a month.This was the second time OPEC+ has extended its 2.2 million bpd cut, illustrating how concerned the producing countries are about global demand. More

TOKYO (Reuters) – The Bank of Japan is likely to raise interest rates in coming months with January emerging as the most likely timing, when there will be more clarity on political and market developments, former BOJ board member Makoto Sakurai said on Tuesday.The central bank will eventually aim to raise short-term borrowing costs – currently at 0.25% – to 1.5% or 2% by the end of Governor Kazuo Ueda’s term in April 2028, he said.”The BOJ probably wants to hike rates once more by March next year. The exact timing will depend much on market and political developments,” Sakurai told Reuters in an interview.”With domestic politics still in flux, acting in December might be tricky. January seems to be more likely as the BOJ would have more data including on whether consumption and wage growth will hold up,” said Sakurai, who retains close contact with incumbent policymakers.But the chance of a December rate hike would heighten if the yen resumes its decline towards the three-decade trough near 162 to the dollar hit in July, Sakurai said. The dollar stood at 152.45 yen on Tuesday.”Governor Ueda emphasised his resolve to keep raising rates at last week’s news conference, which seems to reflect the BOJ’s desire to avoid triggering excessive yen falls,” Sakurai said.The dollar fell below 152 yen on Thursday when the BOJ kept rates steady, but signaled the chance of near-term action by dropping language that it can “afford to spend time” scrutinising the fallout from U.S.-related downside risks.The BOJ next meets for a policy meeting on Dec. 18-19, followed by another meeting on Jan. 23-24.The BOJ made a landmark exit from a decade-long stimulus programme in March and raised its short-term policy target to 0.25% in July on the view Japan was making progress towards sustainably hitting its 2% inflation target.Ueda has stressed the BOJ’s readiness to keep raising rates if the economy and prices move in line with its forecast.While most analysts expect the BOJ to hike again by the March end of the current fiscal year, they are split on whether the bank would act in December – or wait until January or March.The loss of a majority by Japan’s ruling coalition in an election on Oct. 27 has heightened concerns about policy paralysis with Prime Minister Shigeru Ishiba being forced to court opposition parties to stay in power.The political uncertainty, coupled with potential market turbulence after the U.S. presidential election, could prod the BOJ to stand pat in December, Sakurai said.Another key factor for the BOJ is whether wage hikes would broaden to smaller firms and underpin consumption, he added.After hiking rates again by March next year, the BOJ will probably aim to raise short-term rates once or twice a year from fiscal 2025 to 2027, to bring it to 1.5% or 2%, Sakurai said.”There’s too much uncertainty to predict the exact pace of further rate hikes. But the BOJ is probably hoping to hike rates to around 2% in the long-term horizon,” he added.Japan’s expected huge debt issuance and political calls for bigger fiscal spending, however, could constrain the BOJ’s plan to taper its bond purchases, Sakurai said.The BOJ announced in July a plan to halve its monthly JGB buying to 3 trillion yen ($19.7 billion) as of January-March 2026, which would reduce its huge balance sheet by up to 8%.The central bank will conduct a review of its existing quantitative tightening (QT) programme in June next year, to come up with a tapering plan from April 2026 onward.While the BOJ may prefer to further reduce its bond buying, it may find it hard to do so given expected increases in debt issuance to pay for roll-overs of maturing bonds and additional spending plans, Sakurai said.”The BOJ may be forced to keep buying roughly 3 trillion yen worth of bonds well beyond fiscal 2026,” he said. ($1 = 152.3900 yen) More

BEIJING (Reuters) – Fears of a widening tariff war between China and other major exporting nations are keeping diplomacy between the world’s second-largest economy and the European Union alive, even as trade talks over electric vehicles stall.While the U.S. election on Tuesday is almost certain to result in more American curbs on Chinese goods, European negotiators are investing in a longer game that may yield no immediate resolution but would at least stop an escalating trade conflict.Some EU member states are even using the dispute to bolster bilateral ties away from the Brussels-Beijing negotiations and attract fresh investment from China.”I don’t think China wants this thing to significantly torpedo the EU-China relationship, especially given the fact we will probably be seeing a very different world (after the U.S. election),” said Bo Zhengyuan, a Shanghai-based partner at Plenum, a consultancy.New EU tariffs of up to 45.3% on Chinese EV imports came into effect last week after a year-long investigation that divided the bloc and prompted retaliation from Beijing.Brussels maintains that Beijing doles out unfair subsidies to its auto industry and refuses to accept China’s counter-offer of minimum import prices. Beijing hit back with probes into Europe’s pork and dairy industries and imposed curbs on brandy imports.Beyond the headlines, however, is a more complicated series of negotiations.Beijing has in recent months hosted a procession of official visits from the EU and its member states.A French junior trade minister is visiting Shanghai this week, with Paris keen to continue developing commercial ties in China’s financial capital.France is also a “Country of Honour” at China’s annual flagship import expo, despite Beijing having placed retaliatory import tariffs on its brandy.While little progress has been made in even approaching a resolution, engagement remains a priority, analysts say.”I am not terribly optimistic that the Chinese side will put anything on the table that the EU will accept, but I probably should also be curbing my pessimism a bit, and would not discount a solution,” said Max Zenglein, chief economist at Merics, a Berlin-based China studies institute.”I am sure certain member states will be pushing for this to demonstrate their willingness or ability to work out a deal.”A DIVIDED UNIONAs Washington steps up its curbs on Chinese products, Beijing is wary of broader damage to its trade ties with the EU, worth $783 billion last year.For its part, the EU is conscious of widening the division the tariffs have already created among its members.Among the bloc’s 27 member states, 10 voted for the tariffs, five voted against and 12 abstained. Germany, Europe’s biggest economy, was among the dissenters.”The definitive lack of a majority against the tariffs meant that some countries’ ‘no’ votes were symbolic,” one European diplomat said.”Some EU countries want more in-country investment from China and hoped for less retaliation by not voting for the tariffs outright,” they added.Slovakian Prime Minister Robert Fico is the latest European leader to visit Beijing, seeking deeper two-way trade and investment ties as insurance against a wider fallout with China.Finland, which abstained, last week also agreed to deepen commercial ties with China during a visit by President Alexander Stubb, following Spain’s and Italy’s lead.CONSTRUCTIVE MUDDLE-THROUGHChina has incentives to contain the dispute: Its economy is slowing and it needs to find buyers for its EVs to ward off deflationary pressures.European diplomats, veterans in complex multilateral negotiations that can take years to iron out, said it was clear Beijing wanted to avoid a trade war, but it only started talks with Brussels relatively late in the process.While both China and the EU have launched challenges against each other at the World Trade Organization, that arbitration could take years.”Chinese action on brandy, pork and dairy imports from the EU is probably baked in at this point,” said Noah Barkin, senior advisor at Rhodium Group.”A win for the EU would be Beijing limiting its response to brandy, pork and dairy, and then both sides hashing it out at the WTO,” he added.Barkin warned a less contained response could see China curb EU access to the critical raw materials it needs for a green energy transition.During his visit to China in September, Spanish Prime Minister Pedro Sanchez said Spain would seek to resolve the EV dispute within the WTO.While that would signal a failure of bilateral talks, it would head off a worsening in relations.”I think there is a chance they will come to some agreement, regarding the minimum prices, but this will not lead to the removal of the tariffs, just a readjustment of the rates,” said Plenum’s Bo on EU talks. “That is probably the best outcome.” More

This article is an on-site version of our Europe Express newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday and Saturday morning. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGood morning. Today, I write on how Europe is prepared — or at least is telling itself it has prepared — for the US election, and our parliament correspondent has news on the latest crackdown on Chinese online retailers.Judgment dayIn 2020, European Commission president Ursula von der Leyen’s cabinet set up a special TV room in the EU’s headquarters to watch the US election results roll in. This time, her aides would be wise to make sure there’s space to hide behind the sofa.Context: America goes to the polls today to elect their next president, with Republican Donald Trump and Democrat Kamala Harris in a virtual dead heat, according to most of the opinion polling. The dollar and US government debt yields fell yesterday in signs investors had pared their bets on a Trump victory, as both candidates focused their final hours of campaigning on the critical swing state of Pennsylvania.Months of pearl-clutching, prophecies and attempted preparations by the EU for a possible return of President Trump end today as polls open, in a race that could have seismic impacts on European defence, trade and generations of transatlantic policy.“In 2016, we were basically hoping for the best,” said one senior EU diplomat, referring to Trump’s first election. “Now, at least there has been some preparation . . . in theory.”That preparation has been done by major EU capitals, but also inside the commission. A small working group set up earlier this year has drawn up potential response strategies to Trump, including a pre-cooked trade deal to avoid his threat to impose blanket import tariffs, and possible initiatives to partially offset any withdrawal of US military support to Europe. But most senior officials around the EU are privately sceptical about the tangible benefits of such work, aside from providing a theoretical comfort blanket should Trump win.“We say we know what he is like,” said a senior EU official involved in the Trump-proofing talks. “[But] we don’t know what he is like.”Many also caution against the complacency of interpreting victory for Harris as a major relief for the EU. On structural, long-term issues such as Europe’s widening competitiveness gap with the US and its over-reliance on America for defence and security, the EU needs to push ahead with remedies regardless of who is the next US president.According to internal assessments seen by the Financial Times, the commission believes that a Harris administration would broadly continue Joe Biden’s approach, including existing soft protectionist policies and viewing China as the major geopolitical priority, even if that means collateral damage against Europe.“Whoever wins those elections, we will work with Kamala Harris, we will work with Donald Trump. I have no doubt,” Nato secretary-general Mark Rutte said yesterday.Though Rutte offered a rather sobering reference to back up his confidence: “It is in our interest here, but also in the United States’, because they are not in this to repeat the mistake after the first world war of withdrawing from Europe.”Gulp.Chart du jour: DeindustrialisationOver the past three years, Europe’s largest economy has slowly but steadily sunk into crisis. But what is happening now is “unprecedented”.UnboxingIt is “almost impossible to control” the contents of parcels entering the EU from China and elsewhere, the EU’s incoming trade commissioner has admitted, as the bloc tries to better police foreign online retailers, writes Andy Bounds.Context: Consumers are increasingly ordering cheap goods from websites such as China’s Temu and Shein. The European Commission has launched an investigation into Temu for allegedly selling counterfeit goods.Maroš Šefčovič told a European parliament confirmation hearing yesterday that the EU had to introduce a proposed new customs regime two years early, in 2026 rather than 2028, as the number of packages hits 4bn this year.He said some imports, most of which arrive by plane, were dangerous and did not comply with EU standards.When asked by Green MEP Anna Cavazzini what the EU should do about the “unsafe and illegal goods flooding our market”, Šefčovič said it was “almost impossible to control without proper tools”. The planned reform would introduce an EU customs authority and centralise data. It would also scrap a threshold exempting items worth less than €150 from duties. In 2023, 2.3bn in customs-exempt items were imported into the EU, according to the commission.But member states have opposed the new legislation for years, over fears of transferring more powers to Brussels. Šefčovič now wants them to agree a joint position in the first half of next year, so it can come into force the following year.He also said national enforcement teams for product safety needed more training and co-ordination.What to watch today EU finance ministers meet.Nato secretary-general Mark Rutte meets Italian Prime Minister Giorgia Meloni in Rome.Now read theseRecommended newsletters for you Trade Secrets — A must-read on the changing face of international trade and globalisation. Sign up hereSwamp Notes — Expert insight on the intersection of money and power in US politics. Sign up hereAre you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET and on Saturdays at noon CET. Do tell us what you think, we love to hear from you: europe.express@ft.com. Keep up with the latest European stories @FT Europe More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Just days into his presidency, Indonesia’s new leader has sent a strong message to foreign tech companies looking to sell in the world’s fourth-most populous country: invest locally or lose access to the market. But analysts warned that strategy, which remade Indonesia’s economy as a commodities powerhouse, could backfire against the likes of Apple and Google as competition in the region for foreign direct investment heats up.Over the past week, Prabowo Subianto’s government has banned sales of Apple’s iPhone 16 and Google’s Pixel phones, citing the companies’ failure to meet requirements for 40 per cent of products to be made with locally sourced raw materials.“We’re encouraging the local content policy to create fairness for all investors, as well as to create added value domestically,” said Febri Hendri Antoni Arief, a spokesperson for the industry ministry, on Friday.The bans, which came a week after Prabowo was inaugurated, signal that south-east Asia’s largest economy could step up the use of restrictive trade policies to secure investments from foreign companies.Critics said such policies could dent Indonesia’s appeal — which is hampered by red tape and corruption — against more investment-friendly nations in the region such as Vietnam and Malaysia. The restrictions also come as Prabowo has set out ambitious plans to boost annual economic growth to 8 per cent.“Indonesia takes a hit in its competitiveness compared to other countries in south-east Asia as a result of this kind of policy,” said Lydia Ruddy, managing director of the American Chamber of Commerce in Indonesia. Ruddy said it could be “very challenging” for foreign companies to meet local content thresholds because domestically made products were not available for some sectors such as electronics, pharmaceuticals, medical devices and renewable energy.“This becomes a real deterrent for foreign investors. If they cannot import the products or materials they need and they are not available on the local market yet, companies will look to other markets in the region,” she said.Indonesia has long used trade regulations to attract foreign investment and onshore manufacturing to protect its domestic industries. The local content requirement is one of its strongest mechanisms, requiring industries from energy to agriculture machinery to locally source a certain percentage of goods. For power plants, it is as high as 70 per cent.This year, Indonesia relaxed the local content requirement for solar power plant projects in a bid to facilitate foreign investment. The energy minister at the time, Arifin Tasrif, said the requirement had made projects much more expensive for foreign companies.Indonesia’s protectionism has been even more aggressive in commodities. Prabowo’s predecessor Joko Widodo banned nickel ore exports in 2019, forcing foreign companies to invest in domestic nickel processing facilities. The policy drew record investment in the steel and electric vehicle sectors, both of which use nickel extensively.While Prabowo has said he will be investment-friendly, he is yet to set out detailed plans. He has vowed to continue Widodo’s policy of “downstreaming”, or adding value to commodities, to boost the value of the country’s exports.At the Qatar Economic Forum in May, Prabowo pushed back against criticism of Indonesia’s “downstreaming” policies. “We are not protectionist,” he said. “What we are doing is very logical. Every country in the world will fight or protect the national interests of its people.”His government’s recent moves indicate a focus on technology companies. In the final weeks of the Widodo administration, officials said they would ban Chinese ecommerce platforms Temu and Shein because of the potential harm to small- and medium-sized enterprises from cheaper foreign products.Prabowo’s administration has not commented on the bans on Temu and Shein. Indonesia holds great potential for companies such as Apple and Google due to its young, tech-savvy population. The number of active mobile phones in Indonesia totals 354mn, according to the country’s industry ministry, exceeding the population of 280mn.Indonesia has previously called for more investment from Apple, which has four developer academies in the country to train students and engineers to develop apps but no manufacturing facility.The Widodo administration had asked Apple to set up a factory or research and development centre, saying the developer academies were not enough, but Apple’s chief executive Tim Cook, who met Widodo in Jakarta this year, did not make any commitments.The ban on Apple and Google is an attempt by Indonesia to have more bargaining power, but it is a tough sell because “Indonesia still lacks the manufacturing capabilities”, said Bhima Yudhistira, director of the Center of Economic and Law Studies in Jakarta.“This is a bad precedent for investors and potential partners for Indonesia under the Prabowo administration,” he said. “The government has failed to increase the fundamental competitiveness to attract more investments.” More