Aurelia Butler

Today’s top storiesFormer US president Donald Trump attacked “election interference at a scale never seen before” after he became the first former president to face criminal charges. Here’s a recap of a surreal couple of days and an explainer on what happens next. French president Emmanuel Macron has gone to Beijing in the latest attempt by a European leader to urge China’s Xi Jinping to withdraw support for Russian president Vladimir Putin. Ukraine’s president Volodymyr Zelenskyy has been drumming up support in Poland.Troubles are growing at the CBI, the UK business lobby group, over allegations of workplace misconduct. Events have been cancelled, the government is distancing itself and several big companies said they were reviewing their membership.For up-to-the-minute news updates, visit our live blogGood evening.Geopolitical tensions and increasing protectionism are reshaping global investment, threatening to depress growth and lead to more financial instability, according to a flurry of reports ahead of the spring meetings of the World Bank and IMF.The IMF said that the rise of “friendshoring” — foreign direct investment flowing more between countries that are political allies than those that are geographically close — was likely to increase the risk of economic downturns and could cut long-term global output by 2 per cent. “The estimated large and widespread long-term output losses show why it’s crucial to foster global integration — especially as major economies endorse inward-looking policies,” the reports’ authors said.The message comes as governments increasingly take to protectionist rhetoric, from US Treasury secretary Janet Yellen’s call for prioritising supply chains “with countries we can count on” to Washington’s export restrictions on Chinese semiconductor technology.Emerging economies that are more dependent on inward investment by foreign companies were most likely to feel the impact, the IMF said.In a separate report, the World Trade Organization warned that rising interest rates and financial instability would add to the problems of protectionism and hit growth in exports. Export volumes increased by a lower than expected 2.7 per cent in 2022 compared with 2021 as the war in Ukraine and sanctions on Russia disrupted supply chains already fragile from the pandemic, the WTO said. It forecasts that growth in exports will slow this year to 1.7 per cent, well below the past decade’s average expansion of 2.6 per cent. The report also highlighted global food insecurity stemming from the war, with famine still a possibility.Chief economics commentator Martin Wolf in his latest column explores the ramifications of this shift in trading relationships, and especially the decoupling of the US and China, which he characterises as a “significant turning point, with unpredictable and, in all probability, damaging outcomes”. It follows a World Bank warning earlier this week that technology decoupling and trade restrictions were hurting knowledge generation and innovation in both superpowers, posing a long-term threat to growth across Asia.What then should the rest of the world do? One answer, Wolf suggests, is to create a free trade agreement on WTO principles — but then going beyond them, building on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). “Add in the Atlantic and Indian oceans. But also leave the superpowers outside. The rest of the world can still co-operate,” he concludes.Disrupted Times is taking a short holiday break and will be back in your inboxes on Wednesday April 12.Need to know: UK and Europe economyBank of England chief economist Huw Pill hinted at another interest rate rise in May so the bank can “see the job through” in its fight against inflation. Sterling this week hit its highest level against the US dollar in 10 months as fears of recession lessened. The pound is the best-performing G10 currency this year.German factory orders were far higher than expected in February, adding to positive indicators on exports and business confidence. Economists also reversed their 2023 economic forecasts from a decline in GDP of 0.4 per cent to an expansion of 0.3 per cent, pointing to the less-severe-than-feared energy crisis. EU house prices on the other hand had their first quarterly fall since 2015 in the last three months of 2022, as rising borrowing costs ended the almost decade-long boom in residential property.Need to know: Global economyTaiwanese president Tsai Ing-wen is meeting US House Speaker Kevin McCarthy in California today, while her predecessor has been in China as the country’s two main parties debate which superpower to side with. Here’s our Big Read on Taiwan’s deepening political divide.The world’s need for copper is driving a surge of interest in mining, highlighted by Glencore’s offer for Teck Resources. Other recent moves include BHP’s bid for Oz Minerals, Rio Tinto’s takeover of Turquoise Hill and Newmont’s offer for Newcrest. Openings for new US jobs fell below 10mn in February for the first time since May 2021 in a sign that the labour market is cooling, a trend confirmed in private sector hiring data. The closely watched monthly jobs report (aka non-farm payrolls) is published on Friday. There’s no DT that day but FT.com will have all the details.Countries negotiating a crucial treaty on pandemics at the World Health Organization are struggling to agree key points — including a basic definition of the term.Need to know: businessJohnson & Johnson proposed an $8.9bn settlement to resolve tens of thousands of lawsuits alleging its talcum powder caused cancer, in an attempt to resolve a decade-long legal battle. If approved, it would become the largest product liability settlement in bankruptcy history.JPMorgan chief Jamie Dimon hit out at regulators that he said had stoked the recent sector turmoil by encouraging banks to load up on government securities and imposing flawed stress tests.Credit Suisse chair Axel Lehmann apologised to investors for the 167-year-old Swiss bank’s collapse at its final shareholder meeting as an independent business. Shareholders at its new owner, UBS, have been voicing their concerns about the government-engineered takeover.Chinese billionaire Robin Zeng, aka “the battery king”, is in the crosshairs of regulators in Washington as well as Beijing over his company’s market dominance of the highly strategic and fast-growing electric vehicle battery market. Although 70 per cent of the world’s electric car batteries are currently made in China, Tesla in the US has plans to upend the industry. Companies in Japan are bracing for a surge in ransomware demands after last year’s hacking attack at Fujitsu, the country’s largest IT company. Cyber attacks have risen sharply in recent years, with the global cost to companies put at $4.5mn, according to IBM — not including the payment of the ransom itself.The World of WorkHow should company bosses plan for a crisis and deal with risk? Listen to the new Working It podcast.“Our clients are saying to us, ‘how can we encourage more people to return to the office?’” Companies are on the hunt for better facilities to comply with green regulations and attract workers back, with occupied office space in London still below pre-Covid levels.New FT analysis shows 80 per cent of UK employers pay men more than women. The gap has widened since the start of mandatory gender pay gap reporting six years ago.

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Some good newsNew research in The Lancet confirms the benefits for cardiometabolic and mental health from “nature prescriptions”, where patients are recommended to spend a fixed amount of time a week in a natural setting, such as a park.© REUTERS More

Hundreds of companies have banded together into various groups with pledges to reduce carbon emissions to net zero by mid-century.But there is limited guidance from governments and regulators on how far they can collaborate to reach that goal without overstepping antitrust boundaries.Zurich Insurance Group (OTC:ZFSVF) on Wednesday said it was quitting an industry grouping of insurers focused on cutting carbon emissions. That followed Munich Re’s unexpected announcement last week that it was leaving the group – the Net Zero Insurance Alliance (NZIA) – to avoid antitrust risks. The German reinsurer on Friday quit group less than two years after co-founding the coalition, part of the Glasgow Financial Alliance for Net Zero (GFANZ) umbrella group of sectors pushing to decarbonise.Alec Burnside, a partner at law firm Dechert, said both Britain and the European Commission had offered “relatively timid” guidance when what was needed were “explicit safe harbours for companies.””There should be confirmation in the guidance coming out of antitrust agencies to re-assure companies committing to GFANZ,” he said.Also last week, a Danish pension scheme said it could quit the Net Zero Asset Owner Alliance because of a perceived lack of ambition among peers, which several sources said stemmed from fears of attracting antitrust lawsuits.The antitrust tensions mark a further setback to GFANZ several months after U.S. asset manager Vanguard pulled out, citing a need to express its own views independently to investors.LACK OF SPECIFIC GUIDANCEThe European Union and Britain have published draft guidelines on how companies can co-operate within the law, but have not released guidance specific to financial institutions and net-zero alliances. A European Commission spokesperson said its guidance, to be finalised in June, is designed to show agreements with a “genuine sustainability objective” will not violate antitrust laws, and that some will benefit from exemptions. Britain’s competition regulator in February explained how it would ease rules to ensure businesses were not “unnecessarily or erroneously deterred” from collaborating.Businesses can get exemptions if they demonstrate a climate change agreement between companies meets four conditions, including provision of benefits such as promotion of economic progress and that consumers will gain. In the U.S., some Republican politicians have highlighted the potential antitrust implications of these climate groups.They have been threatening court action as part of a broader attack on environmental, social and governance investing. U.S. authorities are yet to offer companies any formal protection.Some legal experts said that while they believe the antitrust fears to be overblown, the risk is that members of alliances will use them as a reason to quit.Keith Johnson, CEO of Global Investor Collaboration Services in Minnesota, who advises asset managers and owners on fiduciary duties and governance, said Republicans may not have much legal ground for their arguments but they might still get executives to dial back their ESG efforts.”It’s not as much as the actual liability exposure as it is the intimidation factor,” he said, noting that companies would want to avoid the hassle of litigation even if they can ultimately win.MORE CAUTIOUSWhen it gave guidance in January, NZIA made clear members were committed to complying with regulations, including antitrust laws, and were free to make their own policies and set their own carbon reduction targets.Munich Re said its concerns were linked to the relative market share of NZIA, which has 29 members representing around 15% of insurance premiums sold, globally.The Net Zero Asset Owner Alliance (NZAOA), which Munich Re also belongs to, has 85 members managing $11 trillion against more than $126 trillion in global invested assets. Munich Re said given that ratio, the associated risks were “significantly lower,” Munich Re also said it remained committed to its own climate targets, and it has restrictions on financing and underwriting of some fossil fuel business, including new oil and gas fields.Zurich said it wanted to focus its resources “to support our customers with their transition” and that it remained committed to its sustainability ambitions, but did not elaborate further on its reasons for leaving the NZIA.Reuters contacted its 17 other members, three of which confirmed they would remain members. The other 14 declined to comment or did not respond to requests for comment. Aviva (LON:AV) said it remained committed to NZIA as achieving net zero was “something companies cannot do in isolation”. Allianz (ETR:ALVG) said the net-zero alliances were world-leading in their efforts to mitigate climate change and that it continued to chair the NZAOA.Grupo Catalana Occidente told Reuters that because the path to net zero was still being decided, assessing antitrust concerns was “not possible, at this stage”. Its NZIA membership is a “firm commitment to climate neutrality”, it said. Ben Caldecott, director of the Oxford Sustainable Finance Group at the University of Oxford, said that anti-competition concerns were used as a “smokescreen” for some companies that do not want to adhere to the requirements of a climate alliance. He said this made it all the more urgent for regulators to provide better clarity. “These alliances depend on momentum,” said Caldecott. “If they start to lose critical mass it becomes potentially existential.” More

NEW YORK (Reuters) -Wall Street bankers face an increasingly gloomy job market after last month’s banking crisis worsened an already bleak outlook for pay and staffing.The failure of two U.S. banks – Silicon Valley Bank and Signature Bank (OTC:SBNY) – shook confidence in the industry and prompted government intervention to protect the financial system. That turbulence may prompt banks to pare back their lending and slow economic activity, according to industry experts.The increased risks come after a lackluster 2022, when rising interest rates, inflation and the fallout from the war in Ukraine prompted consumers and companies to pull back on spending, bringing down the volume of initial public offerings, share and debt sales as well as mergers and acquisitions. Bankers’ bonuses, which are partly determined by revenue from the deals they strike, fell accordingly. Executives had started to forecast a revival in capital markets in the second half of this year when the failures of the lenders roiled bank stocks and prompted Swiss regulators to orchestrate a takeover of ailing lender Credit Suisse Group AG.In an unusual move, Switzerland instructed Credit Suisse to cancel or reduce all outstanding bonus payments for the top three levels of management and examine whether those paid out can be recovered, its Federal Council disclosed on Wednesday. There has been a public backlash against bonus payouts at the bank, whose rescue by Swiss peer UBS was backed by about 260 billion Swiss francs ($280 billion) of state funding and guarantees.One likely consequence of the past few weeks of turmoil is that banks tighten their lending standards, which could further hinder dealmaking – making the prospects for jobs and compensation on Wall Street more gloomy.”It’s not a dire scenario, but banks are paring back the excesses from the last years and feel they are moderately overstaffed,” said compensation consultant Alan Johnson, who owns a consultancy that specializes in Wall Street pay.Bankers are also more cautious about future U.S. economic growth as the housing market slows due to higher interest rates curbing demand for mortgages. U.S. consumers are starting to fall behind on credit cards and auto loans in greater numbers, even though delinquencies are still low by historic standards.An economic slowdown also translates to fewer deals, and raises the prospect of banks cutting jobs in addition to offering smaller bonuses.The banking crisis will further squeeze the industry “if it creates a credit crunch and hinders dealmaking,” Rahul Jain, deputy comptroller for New York, whose office collects taxes from Wall Street for state coffers, told Reuters.Jain expects bonuses for 2023 to stay flat or shrink by 15%, saying “anything better than that would be good news for New York state and city budgets.” Annual banker bonuses, which are typically paid in the first quarter, had already dropped sharply for 2022.Bonus payouts for employees in the securities industry in New York fell 26% to an average of $176,700 in 2022 from a record $240,400 in 2021, according to a report from New York State Comptroller Thomas DiNapoli last week. The industry accounts for 22% of the state’s tax collections, and is linked to one in every 11 jobs in the city, the comptroller said.EXTREMELY CAUTIOUSCompensation was even lower for U.S. investment bankers, whose bonuses shrank about 30% to 50% from 2021 as deals dried up, estimated Johnson. Commercial bankers’ bonuses in the United States fell about 20%, he said.Traders at U.S. banks bucked the trend, in some cases receiving modest gains in variable pay as trading activity flourished in volatile markets last year.Now, financial industry workers are fretting not only about pay, but job security. Even before the March crisis, Goldman Sachs Group Inc (NYSE:GS) had laid off more than 3,000 people and Morgan Stanley (NYSE:MS) cut about 1,600 staff. Both banks declined to comment. One person with knowledge of Goldman’s policies said the bank had resumed annual performance reviews that were suspended during the pandemic. The Wall Street giant typically cuts about 5% of its lowest-performing staff as part of the process. Other banks, including BNY Mellon (NYSE:BK) and HSBC, are also trimming their workforces, sources familiar with the plans have said.Banks have mainly been adjusting their staffing levels by not replacing employees who leave, said Johnson.Headcount for banks and financial services fell 5% to 10% in the first quarter from a year earlier, estimated Max Kemnitzer, managing director for banking and financial services at PageGroup, a recruitment consultancy. Banks have been “extremely” cautious on pay this year, and have chosen to make cuts on the weakest areas likes IPOs and M&A, said Kemnitzer.Investment firms, such as hedge funds and private equity firms companies, as well as financial technology companies are increasingly attracting talent away from banks, Kemnitzer said.While there are plenty of reasons to be glum, Wall Street workers are enjoying one silver lining after the pandemic: greater flexibility in structuring their workday. Even among the companies with the strictest return-to-office policies, employees are being given some options – whether it is working from home one day a week or flexible hours to support commitments outside work, Kemnitzer added. More

ABUJA (Reuters) -Nigeria has secured $800 million from the World Bank to scale up its national social program ahead of the removal of its costly but popular subsidies on petrol in June, Finance Minister Zainab Ahmed said on Wednesday.Africa’s biggest economy set aside 3.36 trillion naira ($7.3 billion) this year to spend on petrol subsidies until mid-2023, after which it has made no provision for the expense, which cost more than its spending on healthcare and education.Ahmed said the government was considering cash transfers and mass transit buses for workers to ease the pain of the subsidy removal on the most vulnerable segment of its population.She added that the country has registered ten million households, which is equivalent to 50 million people on its vulnerable list. “Several things are still on plan,” Ahmed told reporters in Abuja after the government’s cabinet meeting.”Some we can start executing quickly while some are of long-term implementation.”The World Bank said in 2021 it expected the COVID-19 crisis to push over 11 million Nigerians into poverty by 2022, taking the total number of people classified as poor in the country to over 100 million. The total population is estimated at 200 million.Ahmed said discussions were going on at different levels of government and with members of the incoming administration of President-elect Bola Tinubu on the subsidy removal.Last week, Labour Minister Chris Ngige recommended that Tinubu’s new administration give public sector workers pay rises after removing a fuel subsidy in June. Tinubu will take office in May, when Buhari steps down.Many Nigerians regard cheap subsidised fuel as at least one benefit they receive from the state, which fails to deliver other basic services such as electricity and security despite receiving billions of dollars every year from oil exports. More

WARSAW (Reuters) – Poland’s central bank held its main interest rate at 6.75% on Wednesday, ahead of an expected sharp fall in inflation in the coming months. After soaring to levels unseen since the 1990s, inflation in emerging Europe’s largest economy eased in March. The central bank’s Monetary Policy Council (MPC) now hopes that the rate hikes it has already implemented, combined with a global slowdown, will see price growth return to single digits before the end of the year.”The MPC clearly communicates its willingness to keep interest rates unchanged and data published last month do not change this attitude,” said Grzegorz Maliszewski, chief economist at Bank Millennium.Inflation in March was 16.2% compared to 18.4% in February, according to statistics office data. All of the analysts in a Reuters poll had forecast rates would remain unchanged, a trend economists expect to continue until the end of the year.Central bank governor Adam Glapinski has said that he expects inflation to fall to single digits around the beginning of September, paving the way for interest rate cuts in the fourth quarter. Investors are now waiting for more insight into the central bank’s thinking when it releases a press release at 1330 GMT and Glapinski holds a press conference on Thursday.”I do not expect a significant change in the narrative of the MPC’s stance, although taking into account the March CPI reading…the Council’s assessment of inflation prospects may be interesting,” Maliszewski said.Other central banks in the region have also opted to leave rates unchanged in recent months as they balance risks to growth from the war in Ukraine against high inflation.On Tuesday, Romania’s central bank kept its benchmark interest rate at 7.00%. More

Rising geopolitical tensions have triggered a reshaping of global investment that threatens to depress growth and raise the risk of financial instability, the IMF has warned. In reports published on Wednesday, the fund noted that foreign direct investment was increasingly flowing between countries that were geopolitical allies rather than those that were geographically close. There had been a notable decline in investment between the US and China since 2015 as the countries increasingly view each other as strategic rivals. The fund also found that the increased tensions between the world’s two largest economies had reduced their hot money flows and bank lending by around 15 per cent. While increasingly locating capital in friendly countries — a phenomenon known as “friendshoring” — might improve political security, the IMF warned that the trend was likely to reduce the diversity of risks, amplifying the chances of economic downturns. In a simulation exercise, the IMF said the long-term efficiency costs of the world shifting towards economic blocs with greater investment barriers at borders would be large. It estimated they could cut global economic output by 2 per cent. “The estimated large and widespread long-term output losses show why it’s crucial to foster global integration — especially as major economies endorse inward-looking policies,” the authors of the IMF report said.

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The reports were published ahead of the spring meetings of the World Bank and IMF next week. They highlight the potential risks that have arisen as countries and companies seek to build resilience into their supply chains by trading and investing increasingly in countries with a similar geopolitical mindset. The message also clashes with increasingly protectionist rhetoric from governments. Janet Yellen, US Treasury secretary, called last year for companies to continue to look outside the US for investment locations, but prioritise friendshoring of supply chains “with countries we know we can count on”. China has sought to limit its dependence on foreign countries’ technology. These policies alongside the rising tensions since 2016 could be seen in the data, the IMF report said, with foreign direct investment declining since 2008 and increasingly flowing between countries that were geopolitical allies. Rising geopolitical tensions were further amplified, it said, by hot money flows between countries with portfolio balances and bank lending seriously affected as political relationships soured globally. The effects of the fragmentation of the global investment landscape were likely to be felt most by emerging economies that were more dependent on inward investment by foreign companies, it said. Poorer countries were almost twice as vulnerable to rising geopolitical tensions than advanced economies.

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In a simulation of the potential efficiency losses stemming from a 50 per cent reduction in investment flows between two large economic blocs centred on the US and China, the IMF found the US economy to be least vulnerable with Asian emerging economies outside China most at risk. The long-term hit to the US economy from efficiency losses arising from geopolitical tensions would be less than 1 per cent of gross domestic product in the IMF simulation. GDP losses in countries that relied on investment and trade flows with both the US and China were potentially as large as 6 per cent. “Losses may be especially severe for emerging market and developing economies facing heightened restrictions from advanced economies, which are their major sources of foreign direct investment,” the IMF said. It recommended efforts to preserve global integration of economies as the best means of avoiding these losses and promoting global prosperity. More

Those guarantees cover 11 projects in Ukraine by German companies, the sources said.Three new investment guarantees have been added to the list since Russia invaded Ukraine in February 2022, they added. These are in the areas of seeds, production of building materials and electronics.The ministry sources also spoke of 21 applications to secure a further 48 million euros in investments, spanning from energy production to agriculture and logistics.Economy Minister Robert Habeck, who also serves as vice chancellor of Germany, visited Ukraine on Monday and Tuesday together with a small business delegation.With a view to helping rebuild the war-battered country, Habeck told German companies that their capital would be backed by state guarantees if they invested in Ukraine now.This means that if factories were to be damaged or destroyed in missile attacks, the German state would be liable for those investments.($1 = 0.9142 euros) More