Aurelia Butler

The Federal Reserve and five other leading central banks have taken fresh measures to improve global access to dollar liquidity as financial markets reel from the turmoil hitting the banking sector.In a joint statement on Sunday, the central banks said that, from tomorrow, they would switch from weekly to daily auctions of dollars in an effort to “ease strains in global funding markets”. The daily swap lines between the Fed and the European Central Bank, the Bank of England, the Swiss National Bank, the Bank of Canada and the Bank of Japan would run at least until the end of April, the officials said.The announcement of daily dollar auctions across time zones — a policy last put in place during the 2020 Covid shock — came hours after the SNB announced that Switzerland’s two largest banks, UBS and Credit Suisse, would merge after a frantic weekend of negotiations.European officials are concerned that the heavy losses imposed on Credit Suisse’s shareholders, and bondholders holding its alternative tier one — or AT1 — debt, could increase stress in bank funding markets this week. The Fed’s swap line network, first set up in 2007, has provided an important funding backstop for global banks during periods of acute market stress. Lenders outside the US can use the swap lines to access dollars in exchange for their domestic currencies by pledging collateral at their respective central bank.The ECB’s governing council held a call on Sunday evening to approve the switch to a daily swap line with the Fed. “The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses,” the central banks said.The BoE said it would announce details of each day’s operation at 8.15am London time. Operations would take place at 8.15am with a closing time for bids of 8.45am and the results announced at 10am or shortly afterwards. The funds would be offered at a rate equivalent to overnight US interest rates plus 25 basis points. The Fed also has a facility in place that allows central banks and international monetary authorities to enter into repurchase agreements with the central bank and trade US Treasuries for dollars.The so-called “FIMA” repo facility was first erected as part of the Fed’s emergency measures to contain the fallout from the Covid crisis and was made permanent in 2021.Additional reporting by Delphine Strauss in London More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Buckle (NYSE:BKE) up. Asian markets are set for a volatile open on Monday after Swiss authorities said UBS is taking over Credit Suisse, a forced merger investors hope will ease the strain on the global banking system and avert a full-blown crisis. The $3.2 billion deal comes after a sudden burst of turmoil in the global banking sector – two U.S. bank failures then Credit Suisse’s implosion – sparked unprecedented volatility in the U.S. interest rate and bond markets.Will it be enough to calm the horses? On the face of it, probably. But asset writedowns worth billions of dollars will inflict losses on investors already whiplashed by recent events.China’s central bank announces its latest interest rate decision on Monday morning. With recent inflation much weaker than expected and following Friday’s reserve requirement cut, the 1-year and 5-year loan prime rates are expected to be left at 3.65% and 4.30%, respectively. Given the global banking and market turmoil swirling right now, a rate cut would not be a total shock. But Asian market direction on Monday will be driven by events in Europe and the United States. Last week, MSCI’s World Index ended flat, MSCI Asia ex-Japan rose 0.5%, the S&P 500 rose 1.5%, and the Nasdaq jumped a remarkable 4.5%, lifted by hopes the Fed’s rate-hiking campaign could be over. The Fed delivers its latest policy decision on Wednesday. But no equity market will be able to ignore the seismic shifts in U.S. rates and bonds for long. Last week was historic: – the 2-year U.S. yield fell 75 basis points, its biggest weekly fall since Black Monday in 1987 – the two-year yield has now moved 20 bps or more for seven straight days, the longest streak since at least 1976- the U.S. 2s/10s curve steepened by 50 bps last week, the most in at least a decade- the ‘MOVE’ index of Treasury market volatility posted its biggest weekly rise since 2008, and fourth-largest since the index was launched two decades agoThe damage to investors of all stripes from that level of volatility in one of the world’s most liquid and systemically important securities cannot be overstated. Those with direct exposure will be suffering huge losses.If all that was not enough, geopolitical tensions will be on investors’ radar too. China’s President Xi Jinping is in Moscow, his first international trip since securing a third term as president, visiting Russian President Vladimir Putin.Xi is seeking to strengthen ties and cement his “no limits” partnership with the increasingly isolated Putin, who faces criminal charges over his Ukraine war. Here are three key developments that could provide more direction to markets on Monday:- Credit Suisse-UBS developments- China interest rate decision- Chinese President Xi Jinping visits Russia (By Jamie McGeever; editing by Diane Craft) More

Hello and welcome to the working week.Is your diary full of meetings this week? Well, so is ours. It begins with a Chinese state visit to Russia by President Xi Jinping, reaffirming his ties with his Russian counterpart Vladimir Putin during a three-day trip. China has presented itself as a potential mediator in the Ukraine conflict, although this is viewed with scepticism in Europe and the US. This is Xi’s first visit to Russia since the war began in February last year.On the subject of questionable gatherings, partygate is returning to your newsfeeds. Former British prime minister Boris Johnson will on Wednesday give evidence to the cross-party House of Commons inquiry into whether he intentionally misled parliament about illegal office social gatherings during the Covid-19 lockdowns.Fortunately, not every diary item is caught in a doom loop. Progress is being made in ending the UK’s long-running labour disputes. The meetings here are about finding resolutions. Also, RMT members will on Monday conclude a ballot to accept Network Rail’s revised offer on pay and conditions. But the picture is complicated. For instance, about 70,000 members of the University and College Union will resume strike action on Monday despite their employers’ offer of new proposals on pay, conditions and pensions.Things are moire complicated still across the Channel for Emmanuel Macron, where further strike action over his pension reforms may be the least of his worries, given the vote of no confidence his party faces on Monday.British trade negotiators are heading to New Delhi for an eighth round of talks to secure a UK-India Free Trade Agreement, beginning on Monday. Read this excellent explainer from the equally superb [and premium] Trade Secrets newsletter for background on what, if agreed, would no doubt be billed as another Brexit success (on top of the Windsor framework) for British prime minister Rishi Sunak. What good it would do him or his party’s chances in the polls is another matter.The government of Sri Lanka is hoping to move on from its economic crisis this week with the IMF board meeting on Monday to approve a $2.9bn rescue package for the country. Sri Lanka owes about $40bn in public debt to creditors including China, India and Japan as well as private bondholders, so it is significant that these countries have all recently given their backing to the international assistance programme.Thank you (again) for sending in your comments about items included here. Email me at [email protected] or, if you have received this in your inbox, hit reply.Economic dataThe Federal Reserve gets top billing in the economic news with its monthly rate-setting committee announcing its monetary policy adjustment on Wednesday. Despite the trauma of this month’s banking sector crises, which some argue should warrant a pause in rate movements, the markets are expecting a 25 basis point rate increase. This would certainly please the OECD.The Bank of England rate decision follows on Thursday. Economists are split over what the Monetary Policy Committee should do with the markets pricing in an almost equally split probability of a 25-percentage-point increase or no change. Expectations that the MPC might stick with the base rate at 4 per cent were bolstered by last week’s public expectations on inflation survey results.CompaniesNike reports on Tuesday, so time to dust off the athletics metaphors. The road ahead includes a number of hurdles, including the company’s significant reliance on China at a time when this is less politically acceptable in the US. Analysts polled by CapitalIQ expect earnings per share of $0.54 on revenues of $11.46bn for Nike’s quarter, which ended in February, and will be keen to see what success the company has had reducing its significant inventory pile.Things are looking up (a bit) for Tencent with analysts forecasting mild revenue growth (less than 1 per cent) in its fourth-quarter results. This would end two consecutive quarters of revenue decline, although it will probably still illustrate the negative impact of China’s zero-Covid policy, which ended in December. Observers are watching for further announcements about share distributions. Tencent has been shedding some of its assets in China’s internet sphere as Beijing pressures it to downsize its tech empire. It’s possible also that the company will announce the divestment of Kuaishou holdings, according to Ellie Olcott, the FT’s China corporate tech correspondent.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayChina, central bank interest rate decisionEU, January trade balance dataFrance, Germany, UK: quarterly changes to local equity indices come into force, including the FTSE 100, DAX and CACGermany, February producer price index (PPI) inflation rate dataMexico, financial markets closed for Birthday of Benito Juárez public holidayTwitter implements a new policy mandating two-factor authentication using text messages for all Twitter Blue accountsTunisia, financial markets closed for Independence Day holidayUK, Rightmove House Price IndexResults: Computacenter FY, Foot Locker Q4TuesdayCanada, February CPI inflation rate dataFrance, February retail sales figuresGermany, March Zew economic sentiment surveyUK, February public sector borrowing figuresUS, existing home sales dataResults: Alliance Pharma FY, Boku FY, Henry Boot FY, JBS Q4, Kingfisher FY, Luceco FY, Nike Q3, Oxford Nanopore FY, RWE FY, Trustpilot FY, YouGov H1WednesdayUK, Consumer Price Index (CPI), Retail Price Index (RPI), PPI and CPI plus owner occupier housing costs (CPIH) inflation rate figuresUS, Federal Open Market Committee decision on interest ratesResults: Essentra FY, Fever-Tree Drinks FY, Hostelworld FY, Tencent Q4, Ten Entertainment Group FY, Vistry Group FYThursdayEU, March consumer confidence figuresPakistan, Republic Day national holidayUK, Bank of England’s Monetary Policy Committee rate decisionResults: Accenture Q2, Darden Restaurants Q3, General Mills Q3, Inchcape FY, Lloyd’s of London FY, Pirelli FY, Wickes FYFridayCanada, January retail sales figuresEU, France, Germany, Italy, Japan, UK, US: S&P Global manufacturing and services purchasing managers’ index (PMI) dataJapan, February CPI inflation rate data (AM local time)UK, February retail sales figures and GFK consumer confidence surveyResults: Ceres Power FY, JD Wetherspoon H1, Smiths Group H1World eventsFinally, here is a rundown of other events and milestones this week. MondayVernal equinox, the first day of spring as measured by a day’s length equalling that of the night and the Earth’s poles being equidistant from the Sun20th anniversary of US missiles striking Baghdad, launching the Shock and Awe campaign that began the Iraq war to end Saddam Hussein’s ruleEU Foreign Affairs Council meeting, including discussion on Tunisia, the Windsor framework with the UK and developments in Russia’s invasion of UkraineFrance, president Emmanuel Macron’s party faces a no confidence vote in parliament over his efforts to push through pension reform Russia, Chinese president Xi Jinping will meet his Russian counterpart Vladimir Putin in Moscow during a three-day state visitSri Lanka, the IMF board meets to discuss approving a $2.9bn rescue package to pull the country out of an economic crisisUK, British and Indian officials begin an eighth round of talks in New Delhi to try to secure a UK-India Free Trade AgreementUK, more than 70,000 staff at 150 universities begin another three days of strikes in their dispute over pay, pensions and working conditions. Members of the Public and Commercial Services union at the Maritime and Coastguard Agency, Ofsted and the Driver and Vehicle Standards Agency also walk out.TuesdayNato secretary-general Jens Stoltenberg presents the defence alliance’s annual report at its headquarters in BrusselsUS, special presidential envoy for climate John Kerry expected to visit Oaxaca in south-west Mexico to study the area’s new wind energy projectsWednesday60th anniversary of the Beatles releasing their debut album, Please Please Me, recorded in a single 12-hour session at the Abbey Road studios in LondonUK, former prime minister Boris Johnson to give public evidence to parliament’s privileges committee about whether he misled MPs over the numerous “partygate” social gatherings in government buildings during Covid lockdownsThursdayCanada, US president Joe Biden makes his first trip north of the border since entering the White House in a state visit delayed owing to Covid restrictionsFrance, unions to leader further protests against president Emmanuel Macron’s pension reforms, raising the retirement age by two years to 64FridayBelgium, EU leaders attend a summit in Brussels, chaired by European Council president Charles MichelUK, Conservative party Spring Forum opens in Birmingham, discussing campaigning ahead of May’s local elections and a general election due next yearSaturdayGreece, Independence Day public holidayUK, the Scottish Green party, junior partner to the Scottish National party administration in Holyrood, holds its spring conference in GlasgowThe World Wide Fund for Nature’s Earth Hour rolls around the globe with famous landmarks, skylines, businesses and homes turning off their lights for an hour at 8:30pm local time to highlight the impact of climate changeSundayUkraine, Day of the National GuardUK, King Charles and his wife Camilla begin their first state visit as monarch and Queen Consort, travelling first to France, then Germany next weekEuropean Daylight Saving Time — British Summer Time in the UK — begins with clocks moving forward by an hour More

Days after Vladimir Putin was hit with an international warrant for alleged war crimes in Ukraine, Xi Jinping’s first state visit to Moscow in four years is a demonstration of the Chinese leader’s commitment to Russia’s president — but is also set to show the red lines in what the pair last year dubbed a “no limits partnership”.Putin, who travelled defiantly to occupied Ukrainian territory at the weekend after the International Criminal Court warrant, will hope that Xi’s three-day visit from Monday will lend legitimacy to his invasion of Ukraine and that China might pledge material support to help his military fight it.But there are signs that Xi will remain guarded over the potential costs of friendship with Russia’s leader, particularly in Europe as Beijing tries to boost trade after its zero-Covid policy savaged its economy last year. And despite warnings from the US that China was considering sending arms to Russia, there is as yet little evidence of substantial flows of weapons between the two countries.After his trip to Moscow Xi may call Putin’s nemesis, Ukraine’s president Volodymyr Zelenskyy, according to one person familiar with the matter. It would be Xi’s first direct contact with Zelenskyy since the full invasion and a sign of the constraints China sees on its alliance with Russia, at a time when Beijing wants to assert credentials as a potential peacemaker.“I think he will do the call,” said Yu Jie, a senior research fellow on China in the Asia-Pacific Program at Chatham House. “China simply cannot afford to become a rival of both the US and Europe.”Beijing’s close ties with Moscow despite the war, which analysts have dubbed “pro-Russia neutrality”, are damaging its standing in Europe. While China’s position paper last month on a potential settlement in Ukraine was met with scepticism in the west, it is a way for Beijing to reposition itself and see how the conflict evolves, analysts say.The challenge for Xi is to strike a balance between those concerns and the benefits of closer ties to Moscow at a time of mounting tension with the US and its allies.“The Ukraine war has intensified the great power rivalry and made the geopolitical faultlines between the US and China even more pronounced, and in response China and Russia are now really consolidating their alignment,” said Alexander Korolev, an expert on China-Russia relations at the University of New South Wales in Sydney.“China will need Russia for its impending confrontation with the US, which is becoming very real,” he added, pointing to closer military relations between the two countries and Beijing’s need to prepare alternative energy supply routes in case seaborne oil imports from the Middle East were blocked in any clash with the US over Taiwan.As Europe and the US have imposed harsh sanctions on Russia, China’s trade with its neighbour has soared over the past year, jumping 34.3 per cent to a record Rmb1.28tn, according to Chinese state-controlled media. This year, natural gas imports from Russia are expected to rise by a third. Trade with Beijing has given Russia an economic lifeline, making up for some lost oil sales to the US and Europe and supplying replacements for crucial western-made components such as microchips, 5G equipment and industrial machinery. “[The Chinese] understand that this is a very beneficial moment for them to get Russia deeper in their pocket. They have a tremendous amount of leverage,” said Alexander Gabuev, a senior fellow at the Carnegie Endowment for International Peace.Putin’s framing of the war as part of a broader conflict with the west has drawn the two countries closer. Russia is a useful partner in China’s efforts to push back against the US “hegemon”, analysts say. Russia’s powerful security council secretary Nikolai Patrushev gave full-throated backing for Beijing’s stance on Taiwan when meeting China’s top diplomat Wang Yi last month.

“For Russia, the limitations that existed before are gone,” Gabuev said. “Putin is obsessed with this war, and the partnership brings him a lifeline to the economy, critical components for his military machine, and China a tool to push back against the US — because the enemy of my enemy is my friend.”Beijing and Moscow’s deepening ties led US secretary of state Antony Blinken to warn last month that any material Chinese support for Russia’s military would have “serious consequences” for relations with the US.China has responded that the west is fuelling the conflict with its arms sales to Ukraine. “China was not the cause of or catalyst of the Ukraine crisis, nor did it provide weapons to any party in the conflict,” Qin Gang, China’s foreign minister, said this month.Yet while relations with Russia remain important, China has a limited opportunity if it wants to stabilise ties with bigger trading partners in the west.Xi will have a chance to meet US president Joe Biden at two summits this year but with a US election next year the chances of further rapprochement with Washington will be limited. And while several European leaders including French president Emmanuel Macron plan to visit China this year, the success of these meetings will be coloured by how far Xi backs Russia in Ukraine.For this reason, Beijing’s efforts to paint itself as a mediator are important, analysts say. China this month enjoyed a rare success in conflict resolution when it brokered a deal to restore diplomatic relations between Iran and Saudi Arabia.Solving the Ukraine conflict would be far harder, analysts say. China’s position paper last month failed to condemn the Russian invasion and contained thinly veiled criticisms of the west and Nato.China “lacks the status of an impartial mediator in the Ukraine conflict because of its substantial support of Russia”, said Leif-Eric Easley, a professor of international studies at Ewha University in Seoul. “For China to be helpful, it should not suggest what Kyiv can compromise but rather find a face-saving way for Moscow to pull back forces.” Contact between Xi and Zelenskyy would represent a concession from China to western scepticism. But any contact was likely to be virtual rather than in-person and the results inconclusive, analysts said, as Xi sought to balance China’s desire to play peacemaker against giving any ground to the US.Beijing viewed the Ukraine conflict as a proxy struggle pitching Russia against Nato and the US and “Zelenskyy lacks decision-making power”, said one expert at a Chinese think-tank in Beijing. “All he [Zelenskyy] can do is to forward the message to Joe Biden. President Xi has no need to endorse Zelenskyy by meeting him in person. China respects Ukraine’s interests. But that’s different from prioritising US interests.”Additional reporting by Sun Yu in Beijing, Kathrin Hille in Taipei and Edward White in Seoul More

Taiwan’s former president Ma Ying-jeou will visit China this month in what will be the first ever visit to the Communist country by a sitting or retired Taiwanese president.The 10-day trip, starting on March 27, will highlight the stark differences between Taiwan’s two main political parties over its relations with China, just as they gear up to campaign for next January’s presidential and parliamentary elections. Ma’s China visit will take place at roughly the same time as Taiwan’s president Tsai Ing-wen is scheduled to travel to the US, the only guarantor of Taiwan’s security.Tsai’s Democratic Progressive party sees Taiwan as an independent country, while Ma’s opposition Kuomintang, which was founded in China, sees Taiwan as part of a Chinese nation, albeit not the People’s Republic of China.China, which claims Taiwan as part of its territory and threatens to attack if Taipei refuses to submit to its control indefinitely, has been menacing the country with air and naval manoeuvres in its vicinity on an almost daily basis since the 2019 landslide re-election of Tsai, with whom Beijing refuses to engage. Meanwhile, China’s ruling Communist party is seeking dialogue with the KMT.Beijing had been expected to make a big push for talks with the KMT this year ahead of next January’s election at the same time as showing Tsai the cold shoulder, said Chao Chun-shan, a cross-Straits expert who has advised Taiwan’s last four presidents including Tsai and Ma on China policy. “There will be a push for big dialogue this year, but after the election there will be a big change,” said Chao, who met China’s top Taiwan policy officials on a trip to Beijing with KMT vice-chair Andrew Hsia last month.“If the DPP wins, they will pressure Taiwan to move towards unification with military threats. If the KMT wins, they will push Taiwan to move towards unification through negotiation,” he said.Ma oversaw a detente with Beijing during his two consecutive presidential terms from 2008 to 2016, mainly because he agreed to the formula that Taiwan was a part of China although the two sides’ concept of that China differed. He cut defence spending and took a low-key approach to foreign relations and sovereignty. His government concluded a bilateral trade deal with China and negotiated a second agreement for trade in services. But his presidency disappointed China because Ma’s trade deals triggered mass protests and a broad pushback against engagement with Beijing. He met with Chinese leader Xi Jinping in Singapore in November 2015, the first-ever encounter between a Taiwanese and Chinese president and the first such meeting between KMT and Chinese Communist party leaders since the end of the civil war the two parties fought in China until 1949. More

The writer is an FT contributing editorThe famous quantum mechanics thought experiment posits that if a cat is sealed in a box with a deadly substance, you can’t know whether it is still alive until you open said box. In the meantime, it is simultaneously alive and dead. And so it is with banking today: we can’t know if the past week was a series of idiosyncratic, containable issues or the start of a 2008-style banking crisis. At the moment it is both.Investors and depositors must not only believe that banks have good capital ratios, ample access to liquidity and behave responsibly, but also that the supervisory and regulatory architecture put in place after 2008 to save the system works. In the short term, there can be gradations of confidence in all of this. But when we finally look in the box, investors must either trust all of these things or none. It is a binary outcome: the cat can’t be a little bit dead.Reason points to the recent banking instability being a series of containable issues, mostly based on supervisory and management issues. Silicon Valley Bank, Silvergate Bank and Signature Bank were unusually exposed to interest rate risk through both their clientele (itself a phenomenon of a low-rate environment) and their assets (long-term bonds that had to be sold at a huge loss to redeem deposits). First Republic, with a wealthy depositor base that might largely be uninsured, has also been caught up in concerns about liquidity. Credit Suisse, in trouble many times before for a litany of reasons, is now dealing with both confidence and liquidity concerns. The good news is a lot has changed since 2008. Banks are far better capitalised and regulated than before the global financial crisis. And as awful as that period was, we learnt many lessons from it, among them the importance of swift, decisive action to stem contagion. Central banks immediately dusted off the playbook for addressing a liquidity crisis and stepped in as lenders of last resort. The US Federal Reserve, Treasury and FDIC guaranteed all deposits for SVB and Signature Bank, and the Fed created a new lending programme, the Bank Term Funding Program, for banks with underwater securities on the books to access at par. The Swiss National Bank extended a credit line of up to SFr50bn ($54bn) to Credit Suisse.The bad news is that so far trust in the banking sector has not been restored. A week after the US programmes were announced, First Republic remains under pressure — even after receiving $30bn in deposits from larger banks. Its shares fell 33 per cent on Friday. All of the banks in the KRE banking ETF were down; the index closed off by 6 per cent. Fed data showed it loaned $11.9bn through its new facility in the week up until last Thursday and a record high of $152.9bn through its usually stigmatised discount window. Clearly, liquidity is a concern across the US system. And the new credit line was not enough to save Credit Suisse: the Swiss authorities organised a weekend sale of the bank to rival UBS.Central banks and regulators must do more to restore confidence. Fundamental trust in the banking system is wobbling. And I worry more toxic things might still be added to Schrödinger’s box. Commercial real estate loans account for about 28 per cent of small banks’ loans in the US (relative to 8 per cent for the largest banks). Some of these are underwater given high interest rates and the pandemic shift to working from home. If even a few small banks have to write down assets, solvency questions will become contagious.Another risk lies in private markets. They do not have to mark to market, and have booked much smaller paper losses than public markets over the past year. They may delay crystallising losses in the hopes that asset values reflate in the meantime. If assets continue to fall, however, the losses could be staggering. Private markets could undermine financial stability.We shouldn’t assume the cat is dead and a banking crisis is upon us, but we will keep hitting pockets of market dislocation as central banks continue to withdraw liquidity by raising rates and shrinking balance sheets. This is the third time in two decades we’ve had banking issues, after the financial crisis and eurozone crisis. More needs to be done to rebuild and maintain confidence in the system. Even if the cat is alive this time, we can’t assume it has nine lives. More