Aurelia Butler

Investing.com — Microsoft (NASDAQ:MSFT) is the first of the Big Tech megacaps to report earnings for the final quarter of 2022, and it’s expected to show profit falling. There’s a flood of other earnings to digest in the meantime, with General Electric (NYSE:GE) suffering after giving a weak outlook and Johnson & Johnson (NYSE:JNJ) coming in just ahead of expectations. Europe appears to have returned to growth, but at a price – the cost of energy subsidies and interest payments on inflation-linked debt sent U.K. government borrowing sharply higher in December. Poland puts Germany on the spot with a request to send tanks to Ukraine, while crude oil is drifting ahead of the latest U.S. inventory data. Here’s what you need to know in financial markets on Tuesday, 24th January. 1. Microsoft leads earnings floodMicrosoft heads a long list of companies reporting earnings for the last quarter of 2022, on a day that’s likely to illustrate how widespread the effects of the U.S. economic slowdown are.The software giant is expected to show a modest drop in profits despite a rise of around 8% in revenue, with the dollar’s strength eating into the profitability of its global operations.The company will be hoping that its investment in OpenAI, the creator of the viral AI-tool ChatGPT, will sustain faith in its future growth, after signs that growth at its Azure Cloud-hosting business, the star performer of recent years, was slowing.  2. Eurozone returns to growth in January; U.K. borrowing soarsA key gauge of the Eurozone economy signaled growth for the first time in seven months, as the collapse of European natural gas prices underpinned consumer sentiment and averted a meltdown in industrial output.S&P Global’s composite purchasing managers’ index for the Eurozone rose by more than expected to 50.2 in January, from 49.3 in December. While that may not be enough to avert a recession in itself, it adds to a growing body of evidence suggesting that any recession will be brief and shallow – thus allowing the European Central Bank to keep raising interest rates to bring inflation down more quickly.Elsewhere in Europe, German consumer confidence rose for the fourth straight month, albeit by less than expected, while the U.K. counted the cost of its runaway inflation as the interest payments on its inflation-linked debt drove government borrowing sharply higher in December.3. Stocks consolidate after solid gains on Monday; GE outlook dampens moodU.S. stock futures consolidated moderately in premarket, hunkering down ahead of an incoming barrage of earnings from across the economy. That follows a day of solid gains driven by the hope of slower interest rate increases from the Federal Reserve, which holds its policy-making meeting next week.By 06:30 ET (11:30 GMT), Dow Jones futures were down 85 points, or 0.2%, after the main cash index gained 0.8% on Monday. The picture with S&P 500 futures and Nasdaq 100 futures was similar, down by 0.3% and 0.4% respectively after gains of 1.2% and 2.0% by the cash indexes to start the week.While Microsoft will report after the close, the early session will be dominated by updates from – among others – Johnson & Johnson, Verizon (NYSE:VZ), Danaher (NYSE:DHR), General Electric, Union Pacific (NYSE:UNP), Raytheon (NYSE:RTX), 3M and DR Horton (NYSE:DHI).GE’s numbers were largely in line with expectations but the stock still fell 2.7% in premarket on the back of a weak outlook.Also in focus later will be Amazon (NASDAQ:AMZN), after it launched a new discounted drugs service, and Alphabet (NASDAQ:GOOGL), which is reportedly facing U.S. antitrust action over its dominance of online advertising.4. Europe closer to sending tanks to UkrainePoland formally requested permission from Germany to send its modern Leopard 2 battle tanks to Ukraine, pushing on a door that was opened at the weekend by Foreign Minister Annalena Baerbock.After months of German blocking of any initiative to dispatch tanks to Kyiv, Baerbock had said Germany wouldn’t stop other countries sending their own German-build Leopards if they wanted to.Elsewhere, NATO Secretary-General Jens Stoltenberg said he was “confident” of a broader agreement on dispatching heavy armor as aid to Ukraine “very soon.”In Ukraine itself, President Volodymyr Zelensky dismissed a handful of regional governors amid growing signs of pressure on the government as Russia prepares for a new offensive in the spring.5. Oil drifts ahead of API dataCrude oil prices trod water after newswire reports that the Organization of Petroleum Exporting Countries is likely to keep production quotas unchanged at its next meeting at the start of February.OPEC and its allies have been caught between obvious signs of a rebound in Chinese demand combined with a slowdown in much of the rest of the world, notably in the U.S., where inventories have risen sharply in recent weeks. The American Petroleum Institute releases its latest weekly numbers on crude and distillate stocks at 4:30 PM ET.By 06:25 ET, U.S. crude futures were up less than 0.1% at $81.66 a barrel, while Brent was down less than 0.1% at $88.20 a barrel. More

LONDON (Reuters) – If the U.S. Congress becomes mired in an argument on whether to raise the debt ceiling, this will hurt the U.S. economy and rattle financial markets, a top executive at private equity firm Bain Capital said on Tuesday.     “The debt ceiling is a real risk that will come to a point where it will terrify markets, because it is a wild game of chicken,” Jonathan Lavine, co-managing partner at Bain Capital, which manages $160 billion in assets globally, told an event. The U.S. government on Jan. 19 came close to its statutory borrowing limit. The Treasury Department warned that its extraordinary cash management measures could only allow the government to pay all its bills through early June, at which point the world’s biggest economy could be at risk of failing to meet its obligations, including on its debt securities.House Republicans want to use that critical deadline to force spending cuts, while the White House has said there should be no negotiations over lifting the debt limit. Republicans’ narrow House majority has given outsized influence to the party’s most hardline voices.Expectation of a recession has made markets more sensitive to unanticipated risks, Lavine told attendees at a London School of Economics (LSE) conference.At Bain Capital – which as a private equity firm is involved in taking companies private or buying large parts of firms in mergers and acquisitions deals – Lavine said he had seen instances this year where distressed companies looking for a buy-out solution had pro-actively approached Bain Capital in order to avoid the more costly option of bankruptcy. More

WASHINGTON (Reuters) – Partisan brinksmanship in the U.S. Congress has made government shutdowns seem a routine part of governing in the past decade, but the current standoff in Washington over raising the $31.4 trillion federal debt ceiling is significantly riskier.WHAT IS A GOVERNMENT SHUTDOWN?Congress is supposed to pass detailed spending legislation for each fiscal year, which begins on Oct. 1, or temporary extensions to keep the government operating. If these bills don’t get passed, agencies like the Defense Department and the Internal Revenue Service don’t get the money they need to operate and must shut down or scale back their work.That has happened three times in the past 10 years. A battle over healthcare spending led to a 16-day shutdown in October 2013, while disputes over immigration led to a three-day shutdown in January 2018 and a 35-day shutdown between December 2018 and January 2019.According to the Congressional Budget Office, the 2018-2019 shutdown reduced economic activity by about $11 billion while it was underway, but much of that lost growth was recovered when government activity resumed. Overall, the shutdown cost the economy about $3 billion, equal to 0.02% of GDP, CBO found.WHAT IS THE DEBT CEILING?Congress has another important fiscal function: ensuring that the government can pay its bills, including for spending that lawmakers have already agreed to.Unlike most other countries, the United States sets a hard limit on the amount of money it can borrow. As a result, Congress must periodically raise that cap because the government typically spends more money than it collects each year, adding to the national debt.This is never a pleasant task for lawmakers who do not want to sign off on even more borrowing but also do not want to trigger a default. Sometimes Congress raises the debt ceiling quietly, as it did in August 2019, during Republican President Donald Trump’s administration, and sometimes it uses the occasion to engage in a noisy debate over fiscal policy before raising the cap at the last possible moment, as it did in 2011.This year could see a repeat of 2011, as Republicans who control the House of Representatives say they will not raise the debt ceiling unless Democratic President Joe Biden agrees to limit spending. The White House has said the borrowing limit must be raised without conditions.WHAT HAPPENS IF THE DEBT CEILING IS NOT RAISED?Treasury Secretary Janet Yellen said on Jan. 19 that the United States has reached its current $31.4 trillion borrowing cap, but can continue paying its bills until June by shuffling money between various accounts. At that point, when the so-called extraordinary measures are exhausted, Treasury would not have enough money coming in from tax receipts to cover bond payments, workers’ salaries, Social Security checks and other bills. HOW WOULD THAT AFFECT THE ECONOMY?Unlike a government shutdown, experts say it could be catastrophic if the U.S. government was unable to pay its bills.Some Republicans have suggested that Treasury could choose to cover some obligations, like Pentagon salaries and debt payments, and postpone others. Yellen has said that’s not possible.A missed debt payment would likely send shockwaves through global financial markets, as investors would lose confidence in Treasury’s ability to pay its bonds, which are seen as among the safest investments and serve as building blocks for the world’s financial system.Treasury was unable to make timely payments to some small investors in 1979 due to computer problems, but analysts say that did not have a broader effect on financial markets.A 2011 budget battle that took Washington to the brink of default prompted a stock sell-off and a first-ever downgrade of the United States’ top-tier credit rating. Other economic indicators, like consumer confidence and small business optimism, fell during that period as well. The U.S. economy could face a severe contraction if the 69 million people enrolled in Social Security don’t get their monthly retirement and disability benefits, or hospitals and doctors don’t get paid for treating patients through government programs like Medicare.Signs of worry are already showing up in financial markets, as investors are demanding higher yields on some Treasury bills.Sources: Congressional Budget Office (CBO), Government Accountability Office, Congressional Research Service, Office of Management and Budget, Social Security Administration More

Good morning. The row between EU and US politicians over subsidies linked to Joe Biden’s Inflation Reduction Act is deepening as governors across America try to lure European clean energy businesses to their states.Governors of Michigan, Georgia and Illinois, as well as West Virginia senator Joe Manchin, one of the IRA’s architects, were at the World Economic Forum in Davos last week extolling the virtues of the act, which will provide $370bn worth of subsidies for clean energy on everything from solar panels to electric cars.“I have been astonished by the many activities from state governments, from business development agencies, state-owned business development agencies, which have been trying hard to lure us in,” said Gunter Erfurt, chief executive of Meyer Burger, a Switzerland-based solar modules manufacturer.But European politicians have been less impressed. Germany and France have expressed unease with the IRA. Belgian prime minister Alexander De Croo complained recently about the “very aggressive way” the US had pitched the subsidies to EU businesses.In a recent editorial the FT said the US and EU need to work together and “not engage in a wasteful battle to draw business and investment away from each other”. It went on to say avoiding distortionary subsidies, and having clear rules on the boundaries of what support is acceptable, is key.Valdis Dombrovskis, Europe’s trade commissioner, said last week that the fight against climate change should be done by “building transatlantic value chains, not breaking them apart”.Five more stories in the news1. Former FBI agent charged with violating sanctions by working for Oleg Deripaska Charles McGonigal, who previously served as special agent in charge of counter-intelligence at the FBI’s New York office and investigated the Russian oligarch, has been arrested. 2. Ford plans to slash jobs in Europe The US carmaker wants to cut thousands of jobs in Europe and move more product development roles to the US, according to Germany’s largest union. IG Metall said Ford had internally announced plans to slash up to 3,200 jobs in Germany, with more cuts expected elsewhere in Europe.3. Elon Musk says he believed he had funding to take Tesla private On his second day of testimony in a San Francisco federal court, Musk said he believed it was “a done deal” that Saudi Arabia’s Public Investment Fund would support a possible attempt to take Tesla private at $420 a share, a 20 per cent premium to the share price at the time. But Musk acknowledged there was no contract and that many details had not been worked out.4. Lazard expands venture banking unit The boutique investment bank is set to advise a greater number of fast-growing start-ups in the US as part of a broader push to expand its private-capital offering. Lazard is assembling a team of six specialist bankers to be based in Los Angeles and Austin, according to a memo seen by the Financial Times.5. China is ‘barrier’ to ending Zambian debt crisis, says Janet Yellen The US Treasury secretary called on China to agree to a rapid restructuring of loans to Zambia, saying Beijing was a “barrier” to ending the debt crisis in the southern African nation. Africa’s second-largest copper producer defaulted on $17bn of debt in 2020.The day ahead Markets latest US stocks are taking a pause after Monday’s rally and ahead of a busy day for earnings announcements. Contracts tracking Wall Street’s blue-chip S&P 500 and those following the tech-heavy Nasdaq 100 traded in a tight range ahead of the New York open. Read the latest market report.Debt ceiling: US president Joe Biden will meet the congressional Democratic leadership to chart their united front on the country’s debt limit. The US last week hit the legal maximum amount the federal government is allowed to borrow, leading the Treasury to say it is now taking “extraordinary measures” to meet its debt obligations. Earnings Microsoft reports earnings having announced plans to cut 10,000 jobs and pour billions of dollars into the company behind the ChatGPT artificial intelligence platform in recent days. US defence contractors Lockheed Martin and Raytheon also report earnings as demand for their products surges. 3M, Johnson & Johnson and General Electric also report.Ticketmaster: The Senate judiciary committee will hold an antitrust hearing focusing on the meltdown during the sale of tickets for Taylor Swift’s upcoming Eras tour. Joe Berchtold, chief financial officer of Live Nation, the company that owns Ticketmaster, is due to testify.To coincide with the publication of Martin Wolf’s new book, ‘The Crisis of Democratic Capitalism’, join him and other thought leaders online for a subscriber-exclusive event on January 31. Register for free here.What else we’re readingWagner Inc: a Russian warlord and his lawyers As founder of the private mercenary operation known as the Wagner Group, which offers muscle to dictators and has waged war in the Middle East and Africa as an unofficial foreign policy tool of the Kremlin, Russian entrepreneur Yevgeny Prigozhin is one of the most sanctioned individuals on the planet. An FT investigation shows how he has used leading corporate lawyers around the world to try to keep western governments at bay.Opinion: Gideon Rachman explains why it is getting harder for the world’s democracies to maintain a united front on Ukraine.The rise of Esther Crawford in Musk’s ‘hardcore’ Twitter The social media giant’s director of product management has become one of the few women at the company to join Elon Musk’s trusted lieutenants. Some insiders believe the 39-year-old has the charismatic energy needed to transform Twitter’s flailing business, while also having the ear of its impulsive owner. Others revile her as a sycophant and opportunist.Trawler case tests Norwegian control over Arctic Archipelago In a case starting today, Norway’s supreme court will assess whether a Latvian trawler needs a Norwegian licence to fish for snow crab in an extended area around the Arctic Archipelago of Svalbard. The case will test Oslo’s interpretation of territorial waters and control of the region’s resources.

Why passive investing makes less sense in the current environment Passive portfolio management is attractive in a world where investment outcomes are heavily influenced by a common global factor — as in the decade of artificially floored interest rates and massive central bank injections of liquidity. But in a world where the macro outlook is murky dynamic asset allocation trumps low fees, writes Mohamed El-Erian.What to do if you hate your job Whatever your reason for being unhappy at work, hating your job is not viable long term. Grace Lordan of the London School of Economics shares eight proactive strategies to identify the source of the problem — and to do something about it.Take a break from the newsEleven across is simply “nonsense, twaddle”, while the down clues are more cryptic. Try your hand at the FT’s latest crossword puzzle. More

“My hope was always that we would not use the full amount,” Lindner said in an interview with the Westfalen-Blatt newspaper published on his ministry’s website on Tuesday.    Germany’s spending on gas and electricity price caps, designed to help households and businesses shoulder soaring energy bills, could be lower than expected due to falling energy prices.    Lindner said in the interview the relief measures could cost “significantly less than feared”.The 200-billion-euro fund is not part of the general federal budget. “As a result this means loans not needed for the crisis measures will lead to an overall reduction in state debt – and so these funds cannot be reallocated,” he said.”We must now ensure that the state budget grows out of the current deficit and that the state’s debt ratio falls again,” the finance minister said on Twitter.Germany first suspended its constitutionally enshrined debt brake in 2020 to fund spending in response to the COVID-19 pandemic. The government hopes to comply again this year with the debt brake, which limits the budget deficit to 0.35% of gross domestic product.($1 = 0.9195 euros) More