Aurelia Butler

The biggest earthquake to hit Turkey in more than 80 years has killed more than 1,000 people in the south of the country and across the border in Syria.The quake, which measured 7.8 on the Richter scale, caused huge destruction, levelling thousands of buildings and sending people fleeing into the streets. Turkish state media said 912 people were confirmed dead in the quake that hit just after 4am local time, while President Recep Tayyip Erdoğan said thousands more had been hurt across 10 Turkish provinces.An initial Turkish assessment showed almost 3,000 buildings were destroyed across the affected areas, centred on the Turkish province of Kahramanmaraş, in the south of the country near the Syrian border, and spanning at least 500km. Turkey’s government has dispatched rescue teams, with military and cargo planes carrying supplies to the affected regions — with about 9,000 people working on the effort. In Syria, more than 237 people were killed and hundreds more injured in government-held areas, mostly in the provinces of Hama, Aleppo, Tartus and Latakia, according to the country’s deputy health minister. In north-west Syria, the last pocket of the country still under opposition control, the Syria Civil Defence said more than 120 civilians had died.Turkey mobilises rescuers to find earthquake survivorsFive more stories in the news1. China steps up condemnation of balloon shooting by US Vice-minister of foreign affairs Xie Feng lodged a formal protest with the US embassy in Beijing in which he came close to accusing Washington of violating international law.“What the US has done has dealt a serious blow and damaged the efforts and advances in stabilising China-US relations since the Bali meeting,” he added, referring to US president Joe Biden’s summit with Chinese leader Xi Jinping in November.Beijing’s balloon fleet: After years of research, China is now using its sprawling “lighter than air” programme for military purposes.Opinion: In the long run, the stakes are too high for US-China diplomacy to fall victim to a spy balloon, writes Gideon Rachman.2. Ukraine to replace defence minister In Kyiv’s biggest shake-up since Russia launched its invasion, defence minister Oleksiy Reznikov is set to be replaced by head of military intelligence Kyrylo Budanov. Reznikov said he did not know of the change and added he would reject a new senior government role.Renewed Russian offensive: Ukrainian forces are preparing for an imminent large-scale attack as the Kremlin seeks to seize the rest of the Donbas region.War smuggling: Moldova’s prime minister has called for more EU help to curb increased trafficking of people and arms from Ukraine.

Ukraine’s defence minister Oleksiy Reznikov addresses a press conference yesterday © Oleg Petrasyuk/EPA-EFE/Shutterstock

3. Stocks fall as investors worry over US rate rises European stocks and Wall Street futures declined and the dollar strengthened on Monday, after last week’s stronger than expected US jobs report raised the likelihood of further interest rate increases. Data released on Friday showed the US added 517,000 jobs in January.4. Disney cuts ‘Simpsons’ episode with China labour camp reference in Hong Kong The missing programme mentions ‘forced labour camps where children make smartphones’. Beijing imposed a sweeping national security law on the city in 2020, which bans broadly defined crimes including secession and subversion as part of a clampdown on its political opposition and civil society.Hong Kong pro-democracy activists go on trial in landmark national security case Delayed proceedings against 47 defendants could extinguish the city’s opposition5. France and Germany to push back against US green tech poaching France and Germany’s economy ministers will ask the US to stop making “aggressive” overtures to European companies in a bid to lure green investment across the Atlantic, French officials said ahead of a visit to Washington tomorrow. France’s Bruno Le Maire and Germany’s Robert Habeck aim to underscore EU concerns about Joe Biden’s climate bill and push for better co-operation.Gas woes: US energy companies say Europe’s climate goals are stopping them from supplying the continent with natural gas in the long term.The day aheadEconomic data The EU has December retail sales figures, Germany releases factory orders for the same month and S&P Global publishes its construction purchasing managers’ index for the UK.Military meeting The defence ministers of Sweden and Finland meet Nato’s deputy secretary-general and Norwegian military chiefs at a two-day security conference in Oslo to discuss the war in Ukraine.Gold bid Newcrest, Australia’s largest listed gold company, is considering a weekend takeover bid from rival Newmont. Newcrest shares rose more than 9 per cent in Australia.Corporate results Activision Blizzard, Anima, Pinterest and Tyson Foods report.What else we’re reading How the $3.9bn Americanas scandal has shaken corporate Brazil With personal care products and cheap electronics, Americanas stores are a staple of the Brazilian high street. Since last month a multibillion-dollar accounting scandal at the retailer has gripped corporate Brazil, ensnaring some of the nation’s richest men and sparking bitter recriminations and accusations of fraud.Biden makes his case for a second term Encouraging labour figures and a better than expected performance by Democrats in last year’s midterm elections — historically regarded as a referendum on the incumbent administration — have put US president Joe Biden in a much stronger position to launch another general election campaign.Trump’s run: The US donor network led by billionaire Charles Koch said it would oppose Donald Trump’s bid for the 2024 Republican presidential nomination.Barclays chief executive: the life lessons I have discovered during cancer treatment CS Venkatakrishnan gives his personal account of leading the bank while undergoing care for non-Hodgkin lymphoma.“You have to let go and have total trust in your colleagues to handle the responsibilities you are relinquishing temporarily. Senior executive teams comprise high-achieving, opinionated leaders — that is what got them there.”Opinion: Letting the public decide is key to regulating Big Tech The US justice department is quite right that ordinary people should hear arguments on a second major antitrust case filed against Google, writes Rana Foroohar. It is dangerous to allow important decisions on key issues such as corporate power and the rules of surveillance capitalism to be made by technocrats behind closed doors.Opinion: The paradox of financial conditions A gap has emerged between the US central bank and its peers at a time when its policy signals are at odds with financial conditions, writes Mohamed El-Erian. Central banks should be careful to avoid their communication becoming an undue source of economic and financial volatility even as they seek to address the same.Take a break from the newsIn searching for tomorrow’s furniture design classics, how does one go about spotting the Eames lounge chair of the future?

(Clockwise from top left) Cabinet salvaged from a Mayfair jewellery shop by Retrouvius; Bold Chair by Moustache; Lewis Kemmenoe’s Patchwork Cabinet; cabinet by mid-century Czech designer Jiří Jiroutek (mobile view only), at Merchant & Found; oak table by Simon Pengelly; Jupiter chair by Mac Collins; Screen by Casey McCafferty More

FRANKFURT (Reuters) -The European Central Bank’s tough talk on Thursday may not have convinced investors hoping for an early end to rate hikes, but ECB policymakers largely agree on how much more is needed to tame inflation, six of them said. The central bank for the 20 countries that share the euro has raised interest rates by a combined 3 percentage points since July, the most in its history, and on Thursday promised another big move in March. Yet markets still pared bets on further rate hikes overnight, interpreting the bank’s lack of guidance on subsequent moves as evidence its commitment to fighting inflation is waning. A similar disconnect can be seen in the United States, where markets are pricing in rate cuts this year despite Federal Reserve chair Jerome Powell saying he does not see this happening.But on- and off-record conversations with half a dozen policymakers suggest the ECB’s 26-member Governing Council is more united on the need for further rate increases than markets perceive, and differences on the final destination mostly small.There appears to be little or no disagreement that rates will rise again in May after hitting 3% in March, taking the deposit rate to at least 3.25% but possibly 3.5%. The central bank governors of Belgium, Slovakia and Lithuania publicly backed such a step, while others advocated it privately.”The March rate hike is not the last one,” Lithuania’s Gediminas Šimkus said. “It could be 50 basis points in (May) or 25, but hardly 75.”For now, there appears to be little appetite to go much further beyond that. Several hawkish policymakers who spoke on condition of anonymity said they were comfortable with the 3.5% peak rate financial markets had priced in before Thursday’s meeting. That would put the gap between policy hawks and doves at just 25 basis points – a small margin considering the deposit rate was minus 0.5% when the ECB started hiking, so that a move to 3.5% would represent a rapid shift of 400 basis points. PEAK IN SIGHTThe caveat is that sticky underlying inflation, which excludes volatile food and energy prices, could alter views and push rate hike expectations higher.”If core remains persistent, if we keep seeing core momentum being close to 5%, for me a terminal rate of 3.5% would be a minimum,” Belgian central bank chief Pierre Wunsch told Reuters, arguing that rate moves to 4% or above in the United States and Britain could be seen as reference points for the ECB. On Thursday, ECB President Christine Lagarde cited high core inflation to explain why “we have more ground to cover and we are not done”. Underlying inflation has been hovering above 5% in recent months, even as overall inflation is declining fast because of falling energy prices and base effects. If push comes to shove, conservative policymakers seem to have a clear numerical advantage. Most swing voters now see a greater risk in doing too little than doing too much, the sources said, and have sided with the hawkish camp, as evidenced by the clear majority for Thursday’s moves and the relative ease with which they were agreed. Investors and economists have also focused on a peak in the deposit rate of between 3.25% and 3.5%, which suggests just one or two moves after the March hike and an end by mid-year. “In the grand scheme of things, we can be relatively confident about a terminal rate of 3.25%-3.50%,” UBS economist Reinhard Cluse said. He said the Bank of England is likely to have stopped raising rates by June, while the Federal Reserve may be getting there, with the U.S. economy shrinking.”We’ll have external weakness creeping into the European economy so we’ll be at a point where the ECB can say ‘we have done enough’,” Cluse added.Economists at Deutsche Bank (ETR:DBKGn), BNP Paribas (OTC:BNPQY), Morgan Stanley (NYSE:MS), JPMorgan (NYSE:JPM) all see the terminal rate at 3.25% while Goldman Sachs (NYSE:GS) Asset Management sees it at 3.5% and Societe Generale (OTC:SCGLY) at 3.75%. More

COPENHAGEN (Reuters) – Thousands of people gathered in Copenhagen on Sunday to protest a bill put forward by the government to scrap a public holiday to help finance increased defence spending.The demonstration was organised by the country’s biggest labour unions which oppose abolishing the Great Prayer Day, a Christian holiday that falls on the fourth Friday after Easter and dates back to 1686.Unions organising the protest estimated at least 50,000 people took part, which would make it Denmark’s biggest demonstration in more than a decade. Local police don’t give such crowd estimates.The holiday abolition was proposed in December to help raise tax revenues for higher defence spending in wake of the Ukraine war, and is part of the newly formed government’s sweeping reform programme aimed at overcoming challenges to the country’s welfare model. The government has proposed moving forward by three years to 2030 a goal of meeting a NATO defence spending target of 2% of GDP. It says most of the extra 4.5 billion Danish crowns ($654 million) needed to meet the target could be covered by the higher tax revenues it anticipates from abolishing the holiday. However, unions, opposition lawmakers and economists have questioned the effect of the proposal. Some economists have said it is unlikely to have long-lasting effects, as workers would find other ways to adjust their working hours.In the Danish labour market, pay and working hours are primarily regulated by collective agreements between highly-organised worker and employer groups without intervention by the state. However, the government, which holds a slim majority in parliament, says it intends to push the bill through regardless of any opposition.”Normally these things are discussed with the working people, and now this model is about to be overruled. We are protesting to hopefully make them listen,” said plumber Stig De Blanck, 63, who was demonstrating in front of parliament. Danes work less hours than most countries in Europe according to OECD data. (This story has been refiled to remove a superfluous ‘a’ in paragraph 1) More

MUMBAI (Reuters) – India’s central bank is widely expected to raise its policy interest rate by a quarter percentage point to mark its final increase in the current tightening cycle on Wednesday before pausing to assess the impact of its hikes, economists said.”With inflation now having clearly passed the peak and domestic demand showing signs of softening, we think the MPC (monetary policy committee) will mark the end of the tightening cycle with a final 25bp hike to the repo rate,” said Shilan Shah, senior India economist at Capital Economics.Annual retail inflation edged down in December from the previous month and remained within the central bank’s comfort zone 2%-6% range for a second consecutive month amid cooling food prices.”This policy decision is likely to be a very close call between a pause and a final hike of 25 bps,” said Aditi Nayar, chief economist at rating agency ICRA.”Given the expected moderation in inflation in Q1FY24, uneven domestic demand and uncertain external demand, it may be an opportune time to pause,” she added.A Reuters poll, conducted before the government announced its 2023/24 budget on Feb. 1, found 40 of 52 economists and analysts expected the RBI to raise the repo rate by 25 basis points to 6.50%.The remaining 12 predicted no change at the Feb. 8 meeting.Interviewed by television channel CNBC-TV18 after the budget, Finance Minister Nirmala Sitharaman said the downtrend in inflation should reduce pressure on the RBI to keep raising interest rates at the same pace, while adding that it was the Monetary Policy Committee’s decision.The budget contained one of India’s biggest ever increases in capital spending to create jobs, while also targeting a reduction in the fiscal deficit.Markets reacted positively to the lower-than-expected borrowing numbers but investors are concerned about demand for government debt falling in the second half if demand for credit from private firms for capex gathers steam.With this in mind, investors will scrutinise the RBI’s commentary regarding the future trajectory of rate hikes, liquidity and management of the government’s borrowing programme. Economists at State Bank of India said, of the record gross borrowing of 15.43 trillion rupees in 2023/24, around 2 trillion rupees may not find adequate demand from market participants.To balance the demand-supply in second half of the financial year, the SBI economists said the central bank may need to resort to open market purchases of bonds, or conduct a cash neutral debt switch – buying back bonds maturing in the near future and replacing them with longer maturity bonds. Barclays (LON:BARC) said they expect the policy stance also to be changed to neutral, where it was last in December 2018, when the repo was 6.50%. More

Many EU leaders are worried the local content requirements of $369 billion of green subsidies in the U.S. Inflation Reduction Act will encourage companies to relocate, making the United States a leader in green tech at Europe’s expense.Habeck said the European Commission was taking the lead on the trade issue, but added: “We want to lend support.””And supporting means: in the working atmosphere that we have developed, to explore ways in which the problematic parts of the Inflation Reduction Act – that is, this industrial project – can perhaps be resolved,” he said.”And I am quite confident that maybe not today and tomorrow but in the next few days and weeks we will succeed in finding further solutions,” he added.Habeck and French Finance Minister Bruno Le Maire will hold talks with U.S. Treasury Secretary Janet Yellen on Tuesday. More

Good morning. We spent the weekend wondering how the China spy balloon saga could be turned into an extended metaphor for what is happening in the stock market. No luck; sometimes a balloon is just a balloon. So we wrote about the jobs report instead. Email us: [email protected] and [email protected]. The blowout jobs report and the disorienting economyUnhedged is feeling confused about the economy. Is it firing on all cylinders? Cresting into a mid-cycle slowdown? Hurtling towards a Fed-induced recession? Friday’s jobs report didn’t help. It showed the US economy adding half a million jobs in January, blasting through expectations and making any recent labour market cooling look marginal indeed. It’s not just the jobs data. As Jay Powell put it last week: “This is not like the other business cycles in so many ways.” We’ve summed up several data points we look at below. If there’s an obvious overriding story, it eludes us:

Whaddya make of this?Strong signalsMixed signalsWeal signalsEmploymentWage growthRetail salesCredit/debit card spendingCorporate earningsManufacturingRisk appetites in financial marketsCredit conditionsYield curve Consumer spending on servicesConsumer spending on goods Housing sales Big tech outlooks

Whatever is going on, the labour market is an important part of it. The Fed is worried about a category of prices called non-housing core services, which it sees as the beating heart of sticky inflation. And historically, that category has looked awfully sensitive to wage growth. This chart from Deutsche Bank shows the close correlation (ECI is the employment cost index, a wages measure):

With that in mind, Friday’s whopper jobs number presents a question. Does a strong data surprise in the labour market make a soft landing more likely, or less? The question is a bit pat; one month of data can always be a blip. But the rock-solid labour market has been surprising everyone for months now. Is it good news for investors or bad news?The range of opinion runs wide. Some in the “soft landing more likely” camp, like BlackRock’s Rick Rieder, take employment strength as a sign the economy can muscle through higher interest rates without a recession. He wrote on Friday:Central banks are embracing the slowdown in excessive levels of inflation witnessed over the past year, while maybe not having to sacrifice as many jobs as previously thought. We think the Fed would be well-served to consider this as a success and think that slowing down the pace of hikes (and potentially ending them over the next few months) would allow the job market to bend, but maybe not break. Today presents good evidence of a job market not breaking and evidence of how the economy can adapt and adjust to remain vibrant in the face of major headwinds (such as higher interest rates).Others emphasise how wage growth (slowly decelerating) and employment (still growing) have decoupled. The hope is that we might get the best of all worlds — a high-employment disinflation — as long as the Fed’s anti-inflation zeal doesn’t get in the way. Preston Mui at Employ America writes:For months, the Fed has been telling a story that “pain” in the labour market will be necessary to bring down inflation …The Fed should revise its views based on the last few months of data. The unemployment rate is at a historic low. The prime-age employment rate, while not at a historic high, is at its highest level since COVID began.Meanwhile, nominal wage growth has been slowing …Along with recent disinflationary data from the CPI, we are seeing what many said to be impossible: slowing inflation in prices and wages even as levels of labour market strength remain strong across the board.On the “less likely” side, Don Rissmiller of Strategas argues that the Fed is focused on its price stability mandate to the exclusion of all else. Inflation is high, so rates must remain restrictive until that’s no longer true. Labour market resilience just prolongs the process:The default position remains that the US labour market is overheating, with the unemployment rate making a new cycle low. Underlying inflation pressure remains, so central banks are mandated to move policy to a restrictive stance & hold there.The FOMC still looks set to take fed funds above 5 per cent in early 2023. The US labour market will likely have to show more slack to create an end game for tightening — we’re not there yet with the surprising momentum we’re seeing in 1Q.Aneta Markowska at Jefferies points out that a structurally tight labour market combined with falling price inflation is a recipe for pinched margins and, ultimately, lay-offs. Yes, wage growth has been slowing, which in theory eases margin pressure, but can that last? Markowska calculates that in December there were 5.3mn more job vacancies than unemployed people, but only 1mn in potential workers who could join the labour pool:In this context, labour should still enjoy a great deal of pricing power . ..Price growth is likely to slow much more sharply. Put differently, firms are losing pricing power faster than labour. This points to a steep slowdown in top line growth, while costs remain sticky. The result: margin compression.So, despite softer wage growth than we envisioned in January, data are still tracking broadly in line with our scenario. The base case continues to be margin compression in 1H, triggering more lay-offs around mid-year and recession in 2H. In the meantime, it is possible that the Goldilocks narrative [ie, slowing wage growth and low unemployment] remains alive and kicking for several more months. But we doubt it will live past this summer.Markowska’s scepticism about wages and employment decoupling for long seems right to us. Both are functions of workers’ bargaining power, which is high. Wage growth is still elevated by any measure, and a little deceleration seems weak evidence that a high-employment disinflation is coming.But a generous helping of modesty is due. The chance of a soft landing comes down to how easily inflation falls. No one really has any idea what will happen, in large part because of the mass transition from goods spending to services spending in the aftermath of Covid: we’ve never seen an economic event like it. A comparison to history illustrates the enormity of the change. As far back as the data go, there is no real precedent, including the second world war:Remember that the cooling inflation reports that markets have cheered on lately have all come on the back of goods disinflation. How long will that inflation drag last? Is today’s services inflation, like goods two years ago, just a temporary Covid distortion working its way through the economy? Or is it a more entrenched expression of the labour shortage? We simply don’t know. (Ethan Wu)One good readFTX’s in-house shrink had two prescriptions: more pills and more dating. More