Aurelia Butler

WASHINGTON (Reuters) – International Monetary Fund Managing Director Kristalina Georgieva will travel to China from March 24 to March 30, IMF sources told Reuters on Friday.Georgieva will deliver a keynote speech at the China Development Forum (CDF) in Beijing on March 26, and speak at the Boao Forum for Asia Annual Conference on March 30 in the Boao town of Qionghai city, Hainan Province, the sources said, asking not to be identified.She will also participate in a number of side events and bilateral meetings with the authorities while she is there, the sources added.Georgieva’s trip to Beijing comes just after China’s new leadership team took office following a parliamentary conference earlier this month, including new Premier Li Qiang and Vice Premier He Lifeng, who replaced Liu He as China’s top economic official.Georgieva has been pressing China to participate more fully in providing debt relief to struggling countries that borrowed heavily from Beijing, organizing a sovereign debt roundtable discussion that included Chinese officials on the sidelines of a G20 finance leaders meeting in India in February.China later agreed to provide specific financing assurances to Sri Lanka that is expected to unlock a $2.9 billion IMF bailout program for the embattled island country. But it remains unclear whether Beijing will extend similar assurances and debt principal reductions to other countries in debt distress, including Zambia.China has insisted that multilateral development banks share in debt “haircuts” for poor countries, a demand opposed by the World Bank, the United States and other wealthy countries and developing countries. More

This was the week that the global banking system finally started to crack under the weight of historic interest rate increases. It began last Friday, with the collapse of start-up lender Silicon Valley Bank. US authorities guaranteed all deposits and offered liquidity to the banking system, but fears spread. By midweek, the troubled Credit Suisse was offered a safety line from the Swiss central bank and US lenders were tapping the Federal Reserve for billions in liquidity. On Thursday, Wall Street banks agreed to prop up First Republic, a California-based lender. Central bankers were left wondering whether they will endanger financial stability if they continue with the rate rises necessary to tame inflation. The question on everyone’s minds is: what will break next?It was only a matter of time before the fastest synchronised rate hiking cycle by global central banks in 50 years strained another segment of the financial system. The rapid reversal of a decade of loose money has already revealed weaknesses, from the UK pension market crash in September to recent crypto-market chaos. SVB’s demise sparked concerns over unrealised interest rate losses on assets held by banks. But the episode also showed how fears over interest-rate exposures can spill over into wider panic. US bond market volatility rose to its highest level since the 2008 financial crisis, and share prices dropped globally. Credit Suisse fell prey to this crisis of confidence. Central banks know they risk breaking things as they raise rates rapidly. But the strains are now becoming harder to ignore. This week’s turmoil is a reminder that tight monetary policy not only operates with a lag, but that its effects also do not feed through gradually or smoothly. Policymakers will recallhow rate hikes preceded the 2001 bursting of the dotcom bubble and contributed to the subprime US housing sector collapse — which triggered the 2008 crisis. The problem is that the battle against inflation in both the US and Europe is not yet conclusively won. While energy and supply-chain price pressures have eased, domestic price growth remains high. If central bankers appear to row back on commitments to fight inflation that could equally spook markets that price growth may remain high. The European Central Bank acted effectively on Thursday. It hiked rates by 50 bps, which it had already committed to do, and clearly communicated that future decisions would be data dependent while promising liquidity should the financial system need it. The Fed faces a harder decision when it meets next week. It still needs to raise rates, but must tread carefully: the banking ructions in the US are more directly linked to high rates than those in Europe. It will need to closely monitor conditions in the lead-up to its meeting. In addition to trying to parse the conflicting US economic data on inflationary pressures, the Fed also now needs to assess how much the turmoil has itself tightened conditions and whether its liquidity facilities offer it enough cover to raise rates at the pace it had planned.Despite the echoes of events 15 years ago, there are few indications that a 2008-style crisis is in store. The banking system is stronger than it was then, though the past week has revealed regulatory flaws that need correcting. Efforts to stave off contagion through deposit insurance, liquidity lines and reassurance have brought some calm, albeit creating moral hazard. Over-leveraged sectors and financial institutions with rate-sensitive assets and concentrated exposures will, however, continue to be big vulnerabilities in the system. This has been a testing rate-hiking cycle for central bankers as it is. Now that the cracks have widened, it has become even harder. More

Investors have wiped nearly half a trillion dollars from the value of bank shares around the world in the worst rout for the financial sector since the onset of the Covid-19 pandemic.Financial stocks dived this week as the fallout from the collapse of Silicon Valley Bank spread through global markets. Banks in the US, Europe and Japan have collectively lost $459bn in market value so far this month — the 16 per cent fall is the sharpest slump since March 2020.The heaviest losses came in the US, where the KBW Bank index has lost 18 per cent in March. Europe’s Stoxx 600 banks index has fallen 15 per cent, while Japan’s Topix banking sector index is down 9 per cent.Efforts to stabilise the financial system and head off broader panic have been only partly successful. Shares in troubled Californian bank First Republic fell more than a quarter in afternoon trading on Friday despite a $30bn cash infusion from Wall Street banks including JPMorgan Chase and Goldman Sachs.Credit Suisse shares fell 8 per cent even after Thursday’s provision of a SFr50bn ($54bn) emergency credit line from the Swiss central bank. The Zurich-based lender’s credit default swaps and bonds were trading at distressed levels.The volatile markets have hurt even banks that are seen as stronger, with some affected by the yield on the two-year Treasury note falling at its fastest pace since 1987. Goldman lost about $200mn at its trading desk that deals in interest rate products, according to people familiar with the matter. Goldman declined to comment.Global regulators held talks on Friday evening to discuss how to calm fears about the health of the financial system, with some focusing on options to stabilise Credit Suisse and its international subsidiaries.Executives and board members at the Swiss lender are also debating the future of the 167-year-old bank, which for years has lurched from one crisis to another.“Clearly we have to review the strategic plan,” said one person involved in emergency talks. “It has been a week of madness. We’re looking at everything possible that could be done. There is nothing that is taboo. But whatever happens the bank will survive.”Another senior figure at the lender said they had to “reflect on the various contingency options that we have”. “We have a good strategy, but there is a question now whether market conditions and investor support will allow it the time to work.” Options under consideration include breaking up the bank and raising funds via a public offering of its ringfenced Swiss division, with the wealth and asset management units being sold, the two people said. This would most likely be to rival UBS because the government and regulators would prefer them to stay under Swiss control.

Adding pressure on management, one of the bank’s largest shareholders is now publicly calling for a separation of the domestic unit to protect depositors, mortgages and small businesses.“Drastic action is needed. There needs to be a full spin-off of the Swiss branch. We need to isolate that now because contagion is spreading to it,” said Vincent Kaufmann, chief executive of Ethos Foundation, which represents Swiss pension funds and institutions holding up to 5 per cent of the stock.Credit Suisse’s ringfenced domestic bank is worth as much as double the group’s entire market capitalisation, according to analyst estimates.“The SNB [Swiss National Bank] needs to step in,” Kaufmann added. “I had some calls from Swiss pension funds who are very worried about their exposure and they have been reducing it.”Other proposals to be examined over the weekend include speeding up cuts at the investment bank, or even closing it entirely, the people added.

Video: Credit Suisse: what next for the crisis-hit bank? | FT Film More

Today’s top storiesThe International Criminal Court issued an arrest warrant for Russian president Vladimir Putin over the deportation of children from Ukraine. Chinese leader Xi Jinping will visit Putin in Russia next week in an affirmation of Beijing’s strong ties with Moscow.The OECD upgraded its outlook for global growth this year from 2.2 per cent to 2.6 per cent, while inflation was projected to hit 4 per cent in 2023 and 2.5 per cent in 2024. The UK was singled out as the most fragile advanced economy apart from Russia.A breakthrough in talks between the UK government and health unions could end a series of strikes. Hopes have also been raised of an agreement with education workers.For up-to-the-minute news updates, visit our live blogGood evening.It’s been a rollercoaster week. Markets have been roiled by banking crises on both sides of the Atlantic, prompting speculation that central banks might have to rethink their plans for interest rate rises, only to be urged by the OECD today to hold their nerve.US banking stocks were hit with a renewed sell-off today as investors shrugged off a $30bn rescue package for First Republic Bank from major Wall Street institutions. Sector concerns were first sparked by the collapse a week ago of Silicon Valley Bank — the second-largest bank failure in US history — and Signature Bank. The parent company of SVB filed today for bankruptcy protection.US lenders have flocked to the Fed for support over the past week, but Treasury secretary Janet Yellen maintains that the banking system remains “sound” despite the failures. Over in Europe, turmoil at Credit Suisse, which has been having difficulties for some time, has added to investors’ jitters. The bank is limping on thanks to a $54bn lifeline from the Swiss central bank but its shares fell again today, dragging the wider sector down with it.Although some fear that the continuation of aggressive policy tightening could make the banking crisis worse, the OECD today urged central banks to “stay the course” and continue raising rates to beat inflation. The European Central Bank appears to be on board, yesterday announcing a rise of 50 basis points to 3 per cent. It did however ditch its previous commitment to keep “raising interest rates significantly at a steady pace” in a sign of uncertainty about how much further it can go. New eurozone data today showed labour costs rose at a record rate of 5.7 per cent in the final quarter of 2022, underlining the scale of the challenge still ahead. All eyes are now on the Fed, which announces its decision next Wednesday, followed a day later by the Bank of England.Activist investor Carl Icahn is one of those urging the Fed to stick to its guns, telling the FT there was no alternative to stamping out “the disease of inflation”. New survey data today — mainly covering the period before the banking crisis hit — showed consumer sentiment deteriorating for the first time in four months, highlighting concerns that inflation might become entrenched. In the UK, new information showed public expectations of inflation had eased to a 16-month low, adding to the view that the BoE might leave rates unchanged at 4 per cent. Markets are currently evenly split between no change and a rise of 25 basis points.Need to know: UK and Europe economyReaction to Wednesday’s UK Budget continued. Chancellor Jeremy Hunt was accused yesterday of gaming his fiscal rules to make the public finances look better, while the opposition Labour party vowed to reverse the pension tax break for the rich. The FT editorial board said the plans for growth were a step in the right direction. Economics editor Chris Giles assesses the performance of Bank of England chief Andrew Bailey after three years in the job, highlighting plaudits for crisis management but criticism over inflation and communication.French president Emmanuel Macron said he would ram through his unpopular plan to raise the retirement age without a parliamentary vote. He now likely faces a no-confidence motion next week and another nationwide protest from unions on Thursday.The EU’s climate agenda could be at risk after Germany blocked a ban on new combustion engines. Other member states want to weaken limits on pollution from heavy trucks and industrial-scale farms.Need to know: Global economyAjay Banga, the US nominee for president of the World Bank, said the institution had to work with the private sector and adapt to tackle challenges its founders could not imagine, such as climate change, pandemics and forced migration.The rising use of deepfakes and AI in spreading government-aligned misinformation in Venezuela has raised concerns about their potential influence on a population that has little access to trustworthy news sources. Need to know: businessThe UK banned the use of Chinese-owned social media app TikTok on government devices. The US has threatened a ban if its owners do not sell their stake.Shares in tech business Baidu fell after the disappointing debut of its chatbot Ernie, China’s answer to ChatGPT. The launch, featuring pre-recorded video, prompted online comments of “Is that it?” US west coast editor Richard Waters looks at how Big Tech is racing to adapt to AI.UK retail bellwether John Lewis waived its staff bonus and warned of more job cuts after its full-year loss widened. “Inflation has hit us like a hurricane,” said chair Dame Sharon White, adding that the cost of living crisis had pushed some of its customers towards discount supermarkets. British American Tobacco is the latest company facing pressure to move its primary listing to New York after a top shareholder said it “makes no sense” for the cigarette maker to remain on the UK stock market. Visitor numbers at the UK’s most popular attractions such as the British Museum and Tate Modern, have failed to rebound as the cost of living crisis and the lack of Chinese travellers hobbled demand. Science round-upComputing and life sciences in the UK should benefit from financial and regulatory measures announced in the Budget aimed at making the UK “the best place in Europe” for tech companies to invest and grow. Plans were also confirmed for a £2.5bn investment in a 10-year quantum computing programme.Business groups have urged prime minister Rishi Sunak to rejoin the EU’s Horizon research scheme “as swiftly as possible” as fears increase over scientists’ access to projects. Britain’s science sector has some way to go before it can be described as world-leading, writes commentator Anjana Ahuja.A new study on mice showed high doses of sucralose have an unexpected calming effect on the immune system, meaning the most widely used artificial sweetener could be used to treat some inflammatory diseases.A US clinic is offering ketamine alongside psychotherapy to people with alcoholism as the fast-growing psychedelics industry moves into the treatment of addiction. The drug has been licensed from UK biotech Awakn Life Sciences, which is developing psychedelic-assisted therapies for depression, anxiety and other mental illness. Japan’s decade-long effort to join the top league of space competition fizzled out after the failure of its newest rocket. The H3 was seen as Tokyo’s competitor to Elon Musk’s SpaceX Falcon 9 in the potentially lucrative commercial satellite launch market.A new study of global air quality showed 90 per cent of the world’s population was still breathing air that poses a risk to health, with the gap widening between richer and poorer countries. Our Big Read tackles the question: is 1.5C still realistic as a global climate target.Some good newsUniversity of Birmingham sustainable engineering experts and local company Suscon have developed a new type of emergency relief shelter for refugees fleeing disaster zones. The four-person shelter is delivered as a flat-pack, can quickly be erected by unskilled labour and has a minimum lifespan of 10 years.The emergency relief shelter for people fleeing disaster zones is big enough for four and can be erected quickly © University of Birmingham/Suscon More

Wages in the eurozone increased at a record pace between the final quarter of 2022 and a year earlier, highlighting why many central bankers worry inflation will be hard to tame.Figures published by Eurostat, the EU statistics agency, on Friday showed hourly labour costs in the eurozone accelerated by 5.7 per cent over the period. The growth in hourly labour costs, which includes wages and non-wage costs such as taxes, increased from 3.7 per cent in the previous quarter to hit the highest level since such data started being collected for the eurozone in 2010. The rise means wage growth in the eurozone is now outstripping the US, where hourly unit labour costs for non-farm workers in the same period was up 4.9 per cent. But the eurozone figure remains below the 6.7 per cent growth in UK wages excluding bonuses.Signs that wage growth is accelerating and putting upward pressure on prices in the single currency bloc is one of the big worries of the European Central Bank, which raised interest rates for the sixth time at its meeting on Thursday.ECB president Christine Lagarde said higher wages were one of the factors that “could drive inflation higher,” when announcing its decision to raise its deposit rate from 2.5 per cent to 3 per cent on Thursday.Other members of the ECB’s governing council said on Friday it would need to raise rates further. Slovakian central bank boss Peter Kažimír said it was “not yet at the finish line” and his Lithuanian counterpart Gediminas Šimkus said this week’s rate rise “was not the last”.Recent wage agreements since the start of this year and a eurozone unemployment rate near an all-time low at 6.7 per cent in January pointed to further increases in wage growth. This would keep price pressures high — particularly in the wage-sensitive services sector.During the period from the fourth quarter of 2021 to 2022, there were double-digit increases in seven of 27 EU countries, including Poland, Bulgaria, Slovenia and Lithuania. German hourly labour costs rose 6.3 per cent, which was the highest since such data started being collected in 1997, according to Eurostat. Deutsche Post last weekend agreed a pay deal for 160,000 employees to avert a strike by German postal workers, by giving them €3,000 of one-off payments over the next year plus a €340 rise in monthly pay the following year. The Verdi union said it added up to a pay rise of 11.5 per cent, but the Bundesbank calculated it increased wages by just over 7 per cent.“Timelier data show that the labour market remains strong, which suggests that wage growth will stay high this year,” said Jack Allen-Reynolds, an economist at research group Capital Economics. “While the outlook for monetary policy is highly uncertain, the wage and price data send a clear message.”Higher wages have not been enough to offset the increase in workers’ cost of living, however. Inflation rose 8.4 per cent in the eurozone last year, leaving many people with a pay cut in real terms.However, economists expect inflation to fall sharply this year — the ECB forecast it would slide from 7.8 per cent in the first quarter of this year to 2.8 per cent in the fourth quarter — which is likely to reduce pressure on wages.“Private sector wage growth in the eurozone will likely pick up further at the start of this year and a wage price spiral is a risk, but for now, we still think wage growth will fall in line with inflation,” said Claus Vistesen, an economist at Pantheon Macroeconomics. More