Aurelia Butler

Investing.com — China sets its lowest growth target in over 30 years, suggesting that Beijing won’t resort to its past tactics of pump-priming this year. Oil and base metals prices fall in response. The European Central Bank’s chief economist warns that the ECB is going to have to keep raising rates beyond March. U.S. stock markets don’t want to rouse from their weekend sleep, although the sound of another Norfolk Southern train derailment may wake up some. Tesla is cutting prices again, but only for its premium models. Here’s what you need to know in financial markets on Monday, 6th March.1. China growth forecastIndustrial commodities weakened after China’s annual parliamentary session ended with the government setting a growth target of around 5%, the lowest in over 30 years.Premier Li Keqiang, who is making way for a successor more closely allied with President Xi Jinping, said the government’s overriding objective was to restore economic stability, which some took as a sign that there will be no return to the debt-fueled growth of previous years. Budget spending will rise only 5.6%, giving a deficit of 3% of GDP.Recent reports indicate that Xi also intends to install Zhu Hexin, head of one of China’s largest state-owned banks, at the helm of the People’s Bank of China, further consolidating his control over the main levers of economic power. 2. ECB’s Lane flags more rate hikesA top European Central Bank official signaled there will be more interest rate hikes after the expected 50-basis-point move at next week’s policy meeting.Chief economist Philip Lane warned that underlying price pressures appear to be strong and that the price shocks from the pandemic and the war in Ukraine are only unwinding gradually. Lane, one of the more dovish voices on the ECB’s council, made his comments less than a week after data showed core inflation accelerating to 5.6% on the year in February – nearly three times the ECB’s 2% target.In 2021, Lane had been the foremost of those arguing that the inflation spike was likely to be transitory.3. Stocks set for slow start; Norfolk Southern derailed againU.S. stocks are set for a muted opening later, with little in the way of either earnings or economic data to move the dial.Dow Jones futures, S&P 500 futures and Nasdaq 100 futures were all effectively unchanged as of 06:30 ET, holding on to gains made on Friday on a market-wide bout of short-covering.Stocks likely to be in focus later include railroad operator Norfolk Southern (NYSE:NSC), which suffered a second derailment in the last few weeks with a train outside Springfield, Oh., at the weekend. In contrast to the first derailment, this one didn’t result in any spill of hazardous materials.4. Tesla cuts prices again – for Model S and Model XTesla (NASDAQ:TSLA) has cut its prices again, less than two months after its last round of discounting.The EV maker cut the starting price for its Model S and Model X cars by $5,000 and $10,000 respectively, in the latest sign that customers are gagging at cost levels in an increasingly constrained economic environment.The company has gained some breathing room on price, thanks to the sharp drop in lithium prices in recent weeks, which promises to bring down the cost of EV batteries over the coming months.Lithium Carbonate prices in China have fallen 40% from their November highs and hit their lowest in 14 months last week.5. Oil falls on weak Chinese growth forecast; still unsettled by UAE reportCrude oil prices fell in response to China’s economic growth target announcement, which deflated hopes for a big pickup in demand between now and the end of the year.By 06:45 ET, U.S. crude futures were down 1.5% at $78.50 a barrel, while Brent crude was down 1.5% at $84.52 a barrel.The market has been unsettled by a report at the end of last week by The Wall Street Journal suggesting that the cohesion of the group of major exporting countries is starting to fray. While Russia has announced a cut in output to reduce the discount it is having to accept on its crude exports, the WSJ reported that the United Arab Emirates is considering leaving the “OPEC+” group, seeking the freedom to use the additional capacity it has built in recent years. More

KARACHI, Pakistan (Reuters) -Pakistan will be required to give an assurance that its balance of payments deficit is fully financed for the fiscal year ending in June to unlock the next tranche of IMF funding, the fund’s resident representative said on Monday.The funding is critical for the South Asian economy, which is facing a balance of payments crisis, with its central bank foreign exchange reserves dropping to levels barely able to cover four weeks of imports.The International Monetary Fund has been negotiating with Islamabad since early last month to clear its ninth review, which if approved by the board will issue $1.1 billion of a $6.5 billion bailout agreed in 2019. That bailout ends at the close of this fiscal year, which concludes June 30.Finance Minister Ishaq Dar had said last week that the external financing assurance was not one of the IMF’s conditions for clearance of the funding. “All IMF programme reviews require firm and credible assurances that there is sufficient financing to ensure that the borrowing member’s balance of payments is fully financed … over the remainder of the programme,” the fund’s Esther Perez Ruiz told Reuters in an e-mailed response to questions.”Pakistan is no exception.”Pakistan has completed almost all other measures needed except for the external financing requirement, officials say. Dar said last week that Pakistan will need $5 billion external financing to close its financing gap this fiscal year ending June 30, adding the IMF believed it should be $7 billion.Longtime ally China is the only country that has so far committed a refinancing of $2 billion. Out of that $1.2 billion has already been credited to Pakistan’s central bank.Dar said hoped more external financing will be coming as Pakistan signs the IMF deal this week. The IMF has not given any timeline. INTERNATIONAL BONDS FIRMPakistan’s international bonds rose on Monday – broadly in line with other smaller, riskier emerging markets. Pakistan’s 2026 bond added as much as 1.2 cents to trade at just over 44 cents in the dollar, Tradeweb data showed. Some analysts were upbeat on Pakistan’s immediate prospects. “After fulfilling a long ‘to-do’ list in an effort to get the IMF program back on track, we believe the resumption of Pakistan’s EFF (Extended Fund Facility) program is imminent,” said Anna Friedemann at Deutsche Bank (ETR:DBKGn) in London.She, however, added that a restructuring at some point was “almost certain”.The rupee, whose value has been depreciating amid delays in the funding deal with the IMF, also rose in interbank trading on Monday, extending a recovery from Thursday’s 6% drop against the dollar.”The exchange rate has moved significantly in recent days, which has narrowed the informal FX market premium bringing the rates closer together in a similar way to that seen around January 26,” the IMF Luiz said in her email. “This should result from the unconstrained operation of the foreign exchange rate market.”On Jan. 25, foreign exchange companies removed a cap on the currency, saying it caused “artificial” distortions for an economy in desperate need of IMF help. Ruiz noted that the difference in foreign exchange rates between the open and informal markets has been very damaging for Pakistan, resulting in shortages of foreign exchange and consequently imported goods.She also said that Pakistani authorities were also planning a permanent power surcharge on consumers to address the energy sector’s debt.”The power sector CD [circular debt] flow for FY23 is expected to largely overshoot expectations under the EFF-supported program by a sizable margin due to a significant under-collection from delays in regular tariff adjustments, declining recovery rates, and unbudgeted subsidies,” she said. More

The new agency, which is set to become the top Chinese regulator on various data-related issues, will be discussed and approved at the National People’s Congress during its annual session on March 13, the report said, citing people familiar with the matter.The new national data bureau would set and enforce data-collection and sharing rules for businesses and decide whether multinational companies can export data generated by their operations in China, it said.It would also investigate various issues in the digital domain and identify data-security vulnerabilities that are prone to cyberattack, the newspaper reported.Chinese regulators recently eased some deadline pressure on multinational companies struggling to comply with new rules requiring them to seek approval to export user data. More

Philip Lane’s words are likely to cement investor expectations for more ECB hikes after March — which investors have been betting on for weeks amid stronger data and hints from other policymakers.”The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting,” he added.The ECB has effectively pre-announced another 50-basis-point increase at March 16 meeting, when it is also expected to give some guidance about future moves.Investors expect the central bank for the 20 countries that share the euro to increase the rate it pays on bank deposits from 2.5% currently to 4% by the end of the year.Lane said the “calibration” of future rate hikes will depend on the ECB’s new economic forecasts, which come out next week, and on incoming data.He flagged easing price pressures from raw materials, economic activity and supply bottlenecks, partly offset by food and labour costs.”The heatmap suggests still strong inflationary pressures, but some signs of easing are emerging,” Lane said.He expected wage growth to drive core inflation this year, with 4%-5% salary increases “plausible”, as workers try to catch up with the higher prices.On the flipside, he expected corporate margins, which have been boosted by constrained capacity and pent-up demand after the COVID-19 pandemic, to come down, “translating into lower inflationary pressures”. More

Good morning, welcome to the week.One of Credit Suisse’s longest-standing supporters, US investment firm Harris Associates, has sold its entire stake in the scandal-hit Swiss bank. The chief investment officer of Harris Associates explains his decision — scroll down for more.To split or not to split? EY partners will soon have to vote on whether to separate the Big Four firm’s audit and advisory businesses. The Financial Times breaks down the proposed plan in today’s Big Read.Today I’m keeping an eye on:Economic data: US factories will report orders for January. WTO meeting: The general council of the World Trade Organization convenes, with sanctions against Russia on the agenda.Any thoughts on today’s FirstFT? Let us know at [email protected]. Today’s top news1. EXCLUSIVE: Harris Associates has sold its entire stake in Credit Suisse after years of scandal and an exodus of clients at the Swiss lender. Last year the firm held 10 per cent of the bank, now Harris has raised questions about “the future of the franchise”.2. BP is not slowing its green transition to cash in on high oil prices, the boss of its US business insisted, despite the company announcing a scaling back of climate goals last month after record profits. Read our full interview with Dave Lawler, chair of BP America.3. Fed officials are growing more hawkish. The most recent example was Mary Daly, president of the San Francisco Fed, who joins a growing cast of governors hinting rates will need to stay higher for longer. High borrowing costs are driving companies away from buying debt to avoid a hit to their credit ratings.4. Global minimum tax could eat up US green subsidies according to a group of multinationals. The combination of the new global minimum tax of 15 per cent and the special green tax credits could lead to a costly combination for foreign companies. 5. EXCLUSIVE: Beijing has told Hong Kong’s elite to give up their western passports if they want a seat in China’s rubber-stamp parliament. Here’s why it matters.Related: China has set a 5 per cent economic growth target, the lowest in three decades.The Big Read

To split or not to split? That is the question facing EY’s partners when a plan to spin off the Big Four firm’s advisory arm from its audit business goes up for a vote. EY’s bosses believe partners understand the rationale for the deal, but falling company valuations have changed the landscape.We’re also reading . . . Battle of the regulators: America is toppling the EU from its regulatory throne, writes Rana Foroohar, with US agencies becoming more ambitious.The coming neurotech disaster: The advent of “neurotechnology” could mean apps will know how we think, that’s bad news for humanity argues Camilla Cavendish. ‘Unsmoke the world’: Philip Morris chief Jacek Olczak speaks to Oliver Barnes about his mission to detoxify the world’s largest tobacco group.Chart of the dayDriven by dissatisfaction with the current Republican leadership, a new class of megadonors are giving millions to far-right groups such as the anti-tax Club for Growth and allowing them to wield outsized influence within the party.

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Take a break from the newsThis week’s Lunch with the FT is with Miss Malaysia-turned-movie star Michelle Yeoh, who talks about what an Oscar would mean to Asian actors — and why she really, really wants to bring that statue home.

Michelle Yeoh © Ciaran Murphy

Additional contributions by Tee Zhuo and Annie Jonas More

PARIS (Reuters) -French Finance Minister Bruno Le Maire has reached a deal with the country’s main supermarket chains to help shoppers cope with food price inflation, he said on Monday.Food retailers have agreed to offer shoppers “the lowest possible prices” for a three-month period on a selection of items left to them to decide, Le Maire told a news conference after he met retail bosses.The discounts are expected to cost retailers “hundreds of millions of euros”, Le Maire said.From June, retailers and government officials will reassess the situation and may ask large consumer goods suppliers to re-negotiate prices with retailers, he added.French annual inflation rose unexpectedly to 7.2% in February from 7.0% in January, partly as a result of higher food prices, preliminary figures from the INSEE statistics body found. INSEE has forecast that food price inflation would remain at 13% for the first half of the year.The basket of anti-inflation groceries is the government’s latest effort to show political support to lower-income citizens. Initially, the government sought to establish a harmonised basket of everyday items, but supermarkets held out to be able to determine which groceries would be included.On Sunday, Carrefour (EPA:CARR), Europe’s largest food retailer, pre-empted the government announcement by saying it would offer its own selection of 200 low-cost items and that there was no need for the government to impose a unified basket. Its CEO Alexandre Bompard told Le Journal du Dimanche that 200 items will be offered at less than 2 euros, from March 15, and the price would be frozen until June 15. Smaller rival Casino on Monday also said it would offer its a selection of 500 low-cost items at less than one euro from March 15 with prices frozen for three months.Michel-Edouard Leclerc, the head of unlisted hypermarket giant E.Leclerc, however, told CNEws on Monday he saw no need to attend Monday’s meeting with Le Maire and was not waiting for political talks to cut prices.”My goal is to offer the lowest prices on all products,” he said.Carrefour shares were down 1.3% at 17.86 euros as of 1039 GMT while Casino shares were off 0.7% at 9.64 euros. More

Investing.com — The European Central Bank will have to continue raising interest rates after this month’s meeting, in the light of strong underlying inflation, the ECB’s chief economist Philip Lane said on Monday. “The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting,” Lane, an influential figure on the ECB’s Frankfurt-based directorate, said in a speech in Dublin, although he didn’t commit the extent of any further tightening beyond March. “While there has been a clear turnaround in energy inflation and there are some signs of deceleration for food inflation, momentum for core inflation has not declined,” Lane explained, highlighting that “momentum in the goods category remains strong.”Higher-than-expected consumer inflation data for February – especially core inflation, which accelerated to 5.6% – had triggered a sharp selloff in Eurozone bonds last week, with investors moving to price in expectations that the ECB may raise its deposit rate to an all-time high of 4% by the end of the year, and only start to reverse course in 2024. The ECB has all but nailed on a 50-basis point increase in its three key rates at its meeting on March 16. Many analysts have also started to predict a similar hike at the following meeting in May. The comments from Lane, arguably the most senior ‘dove’ at the ECB, suggests there is little resistance to that idea in Frankfurt.Lane acknowledged that the unwinding of various price shock effects from the pandemic and Russia’s invasion of Ukraine may unwind only gradually, keeping headline inflation high enough for long enough to cause an upward shift in inflation expectations among the population. However, at the same time, he argued that the impact of changes in energy prices on core inflation appeared to be more immediate now than it had been before the pandemic, holding out the hope that the collapse of wholesale energy prices in the last few months may quickly be reflected in declines in the headline rate of inflation.The euro was broadly flat after Lane’s speech. By 06:00 ET (11:00 GMT), it was down less than 0.1% at $1.0627. Ten-year bond yields, however, came down strongly, with the German Bund yield falling 7 basis points to 2.58% and the Italian BTP yield falling 11 basis points to 4.43%. More

South Korea and Japan have announced a series of measures to ease tensions over wartime forced labour and recent trade restrictions, which the US welcomed as a “groundbreaking” step to improve ties between its two most important regional allies.South Korean foreign minister Park Jin on Monday said South Korea’s private sector, which was compensated under a 1965 treaty with Japan, would pay into a public foundation for victims of forced labour during the second world war.Just hours after Seoul’s announcement, Tokyo said it would launch talks to ease export controls imposed in 2019 on chemicals vital to South Korea’s semiconductor industry. South Korea said it would suspend a complaint lodged against Japan with the World Trade Organization while the talks proceeded.The efforts by Japan and South Korea to repair strained relations come after the US pressed for reconciliation between its Pacific allies to counter China’s regional assertiveness and to deter nuclear-armed North Korea.Japanese prime minister Fumio Kishida said Seoul’s proposed fund would help “to return relations between Japan and South Korea to a healthy state”. US president Joe Biden hailed the plan as “a critical step to forge a future for the Korean and Japanese people” in a “free and open Indo-Pacific”.But it drew immediate backlash from victims and opposition parties for failing to compel payments from Japanese companies.The leader of South Korea’s main opposition Democratic party called the plan “humiliating” and accused President Yoon Suk Yeol’s administration of choosing “the path to betray historical justice”.Lim Jae-sung, a lawyer for several victims, wrote in a Facebook post: “It is a complete victory by Japan, which has said it cannot pay a single yen on the forced labour issue.”Ties between Tokyo and Seoul disintegrated in 2018 after South Korea’s Supreme Court ordered two Japanese companies — Mitsubishi Heavy Industries and Nippon Steel & Sumitomo Metal — to pay victims of forced labour.The same year, a separate deal brokered by Kishida, then foreign minister, to compensate South Korean victims of sexual slavery collapsed.Tokyo has rejected calls for compensation from Japanese companies, insisting that all claims related to its colonial occupation of the Korean peninsula from 1910 to 1945 were resolved by the 1965 treaty.Japan’s foreign minister Yoshimasa Hayashi said on Monday that the government would not object to Japanese companies making voluntary contributions to the fund. He said Kishida’s administration endorsed a 1998 expression of “deep remorse and heartfelt apology” for colonial rule.Analysts said leadership changes in South Korea and Japan had brightened the prospects of a thaw. Yoon last week said Japan had “transformed from a militaristic aggressor of the past into a partner that shares the same universal values with us”.

People close to both governments said Yoon could visit Tokyo as soon as later this month.For Japan, tensions with South Korea had complicated efforts to bolster regional defence efforts with the US. “The speed with which the two countries reached this deal shows that they share a deep understanding of the deterioration in the security environment,” said Kohtaro Ito at the Canon Institute for Global Studies.Experts, however, said South Korea’s options had been limited by Japan’s refusal to make significant concessions on the 1965 treaty.“It is hard to move bilateral relations forward without resolving the forced labour issue,” said Park Cheol-hee, professor of Japanese politics at Seoul National University. “The government seems to have made a political decision to compensate the victims quickly.” More