Aurelia Butler

Investing.com — China’s economy grew at the slowest rate since the death of Mao Zedong last year (with the exception of 2020), as its population shrank for the first time since the 1960s. Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) report earnings, as does crypto-exposed Silvergate (NYSE:SI). Stocks are set to reopen lower after the Martin Luther King Day holiday. There’s a big turnaround in a key sentiment indicator in Germany and the ECB warns it will have to keep raising rates for a while yet. Oil prices nudge higher ahead of OPEC’s monthly report. Here’s what you need to know in financial markets on Tuesday, 17th January. 1. Chinese growth slows to 3%, as population falls for the first time in 60 yearsChina’s economy performed slightly better than expected at the end of last year, but growth was still weaker (with the exception of the first pandemic year) than at any time since the death of Mao Zedong.GDP rose 3.0% in 2022, coming in fractionally above some heavily-downgraded forecasts thanks to an uptick in industrial production and retail sales in December, as the ruling Communist Party backed away from its restrictive “Zero-COVID” policies.Among the data dump, one striking statistic stood out: China’s population shrank for the first time since the 1960s, by 850,000 to 1.412 billion. The figures underline the rapid deterioration in China’s demographic situation, with births extending a decline that has steepened sharply since the start of the pandemic. China’s working age population has already been in decline for some years, shrinking by an average of 0.4% a year in the seven years prior to the pandemic.2. Goldman, Morgan Stanley to report earningsGoldman Sachs and Morgan Stanley will round off what has been a broadly disappointing round of quarterly earnings from the U.S.’s largest banks.Earnings are expected to fall by around one-third at Morgan Stanley and by nearly half at Goldman, both of whom are more dependent on the performance of global markets and dealmaking than rivals Citigroup (NYSE:C) and Bank of America (NYSE:BAC) this year. That didn’t stop them from outperforming their universal banking rivals over the last 12 months though.Goldman is likely to quantify what reports suggest is its largest round of job cuts since the 2008 crisis, while investors will want to see whether Morgan Stanley adds to the 2,000 or so cuts that it made in December.3. Stocks set to open lower as Cohen goes ChineseU.S. stock markets are set to reopen in relatively downbeat mood later, with gloom about the outlook for the global economy not lightened much, if at all, by the Chinese data.By 06:10 ET (11:10 GMT), Dow Jones futures were down 69 points, or 0.2%, while S&P 500 futures and Nasdaq 100 futures were both down 0.3%. The three main cash indices have gained between 3% and 5% this year as hopes for an end to rate hikes from the Federal Reserve have strengthened.Stocks likely to be in focus later include Alibaba (NYSE:BABA), where activist investor and Chewy (NYSE:CHWY) founder Ryan Cohen has taken a small stake as part of a campaign for accelerated stock buybacks.United Airlines will report earnings after the bell, while Silvergate – bankers to much of the U.S. cryptocurrency universe – will report early.4. A brighter outlook in EuropeThe mood has turned for the better in the Eurozone. The ZEW economic sentiment index for Germany, the region’s largest economy, swung back to 16.9 in January, its highest in 11 months, from -23.3 in December.The index, which is better at marking turning points in sentiment than at measuring actual activity, rebounded thanks to the sharp decline in energy prices over the last month, which has greatly improved the outlook for Germany’s energy-intensive factories.At the World Economic Forum in Davos, Bank of Portugal Governor Mario Centeno – who formerly chaired the group of Eurozone finance ministers – also noted that the Eurozone economy has been surprisingly strong over the last year. Meanwhile, the ECB’s chief economist Philip Lane – a noted inflation ‘dove’ – told the FT that the ECB will have to move interest rates into restrictive territory to bring inflation under control, adding that the problem is “going to be an issue for the next year or two.”The euro, which has risen over 2% in the last month against the dollar, was flat.5. Oil edges higher ahead of OPEC reportCrude oil prices tested a one-week high after the Secretary General of OPEC, Haitham al-Ghais, said the organization will do ‘whatever it takes’ to keep the oil market balanced this year. He added that the group is “cautiously optimistic” about the outlook for the world economy, balancing an expected slowdown in western countries against a rebound in demand from China.OPEC will publish its monthly report on the oil market at 07:00 ET, but the release of U.S. inventory data from the American Petroleum Institute is pushed back to Wednesday this week owing to the U.S. holiday on Monday.By 06:30 ET, U.S. crude futures were up 0.2% at $80.28 a barrel, while Brent crude was up 1.0% at $85.27 a barrel. More

The world’s second-largest economy slowed sharply in the fourth quarter, data showed on Tuesday, dragging 2022 growth down to one its worst performances in nearly half a century after three years of COVID restrictions and lockdowns.With mass travel for the Lunar New Year possible for the first time in nearly three years after the relaxing of some of the world’s tightest COVID curbs, the economy stands to gain from hundreds of thousands of people a day spending more as they return to China’s hinterland.While many analysts say a return to economic normality will be gradual as the impact of COVID weakens, some see the Lunar New Year as a welcome early consumption boost.”Peak infections passed in major cities in January, and with the Spring Festival coming, tourism is back, and the signs of a recovery in consumption are obvious,” said Nie Wen, a Shanghai-based economist at the investment firm Hwabao Trust.But with so many people on the move, health experts fear a deepening of the COVID outbreak, leaving the elderly in rural villages particularly vulnerable.Despite authorities confirming a huge increase in deaths on Saturday – announcing that nearly 60,000 people with COVID had died in hospitals between Dec. 8 and Jan. 12 – World Health Organization (WHO) officials are seeking more accounting of death rates.The WHO earlier welcomed Saturday’s announcement after last week warning that China was heavily under-reporting deaths from the virus.Reuters reported on Tuesday that doctors in both public and private hospitals were being actively discouraged from attributing deaths to COVID.Specifically, the U.N. agency wants information on so-called excess mortality – the number of all deaths beyond the norm during a crisis, the WHO said in a statement. “This is especially important during periods of surges when the health system is severely constrained,” it said.The WHO added that it would continue working with China to provide advice and support, but had not yet fixed another formal meeting with Chinese officials after WHO Director General Tedros Adhanom Ghebreyesus spoke with Ma Xiaowei, director of China’s National Health Commission, at the weekend.RISK, BUT OPTIMISMThe Ministry of Transport has estimated the rush will see a total of 2.1 billion passenger trips nationwide between Jan. 7 and Feb. 15 as many city dwellers make the most of their first chance for Lunar New Year trips to see extended family in home regions since the pandemic began.Chinese officials jettisoned Beijing’s “zero COVID” policy – an approach previously championed by ruling Communist Party leader Xi Jinping – in early December, letting the virus run unchecked across its population of 1.4 billion people.Those stringent policies have further damaged China’s demographic outlook, now at the start of a historic decline with government figures released on Tuesday showing the population fell for the first time in six decades.State media reported that some 390,000 passengers were expected to travel from Shanghai train stations on Tuesday alone for what is known as the Spring Festival holiday – seen as the world’s largest annual mass migration before COVID.As travellers moved through stations in Shanghai, China’s largest city, some expressed optimism despite the risks.”I am not worried about the virus. Because we are young, our immunity is okay,” 37-year-old migrant worker Zhou Ning told Reuters outside the Shanghai Railway Station as he prepared to head back to his home area in Bazhong in the northeastern province of Sichuan.”Back in my hometown, there are many people who have tested positive, but I am not worried about it.”On a train leaving Shanghai, fellow migrant worker Feng Hongwei, aged 21, said he was “so happy, so excited” as he began a trek home to Puyang, Henan. “I haven’t seen my parents in two years”.The holiday season has also sparked a revival in domestic air travel with more than 70,000 flights across China between Jan. 7-13, according to industry data reported by Shanghai Securities News on Monday. That is equivalent to more than 80% of the levels seen before the pandemic. More

UK wages grew at the fastest rate seen outside the pandemic period at the end of 2022, according to data that will bolster the Bank of England’s resolve to keep raising interest rates to curb inflation.Average pay in the three months to November was 6.4 per cent higher than a year earlier, both including and excluding bonuses, the Office for National Statistics said on Tuesday. But wage growth was much stronger in the private sector than in the public sector — 7.2 per cent compared with 3.3 per cent — a gap that will fuel the bitter stand-off between the government and striking public sector workers.The wave of strikes sweeping the UK was the most disruptive for more than a decade in November, even before nurses, ambulance staff and civil servants began their industrial action. The ONS said 467,000 working days were lost because of labour disputes in November, the highest since 2011.With inflation running at 10.7 per cent in December, average earnings were still 2.6 per cent lower than a year earlier in real terms, marking one of the biggest falls in living standards since comparable records began in 2001, the ONS said.However, chancellor Jeremy Hunt said in response to Tuesday’s figures that the “single best way to help people’s wages go further” was “to stick to our plan to halve inflation this year”. This suggests he remains opposed to higher funding for government departments that would allow them to make a substantially better pay offer to NHS workers and teachers.Economists said the acceleration in wage growth would strengthen the case for the BoE’s Monetary Policy Committee to continue raising interest rates when they meet next month, and traders priced in a higher probability of a 0.5 percentage point increase after data was released. “At the moment, the jobs market is too strong for comfort for the Bank of England,” said Sandra Horsfield, economist at Investec. She added: “The worry is that, if wage growth exceeds productivity gains, firms may seek to pass on some of these extra costs . . . prolonging the bout of inflation.”

Huw Pill, BoE chief economist, said earlier this month that high inflation might persist for longer in the UK than elsewhere because low unemployment and stubbornly high economic inactivity was pushing up wage growth, adding to price pressures.The latest figures showed the labour market remained strong even as the economy weakened in the face of soaring energy prices, with an unemployment rate of 3.7 per cent for the three months to November. That was unchanged from the previous month’s reading — although up from the previous quarter’s figure of 3.5 per cent.Employment was also broadly unchanged from the previous figures, as was the rate of economic inactivity, although some older workers who had left the labour market since the start of the pandemic had begun looking for work again as cost of living pressures began to bite. However, there were some early signs that the labour market may be turning. The number of vacancies fell for a sixth consecutive month — although it remains far above pre-Covid levels, with a ratio of one post unfilled for every unemployed jobseeker. The number of redundancies has also climbed steadily over the past year, returning to levels that were normal before the pandemic, and the number of people claiming jobless benefits edged up in December, suggesting unemployment would soon rise.“Having experienced a period where employees have had near unprecedented levels of power, we may be starting to see signs of a shift back to employers having greater control,” said Pawel Adrjan, an economist at the job search site Indeed. More

China’s population fell in 2022 for the first time in six decades, while economic growth last year missed Beijing’s annual target.The population decline is expected to have long-term consequences for the domestic and global economies, as the world’s most populous country has long been a crucial source of labour and demand.The National Bureau of Statistics said today that the total population fell by 850,000 in 2022 to 1.41bn. Last year’s birth rate was the lowest since records began more than seven decades ago — 6.77 births for every 1,000 people, down from 10.41 in 2019.

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China’s strict zero-Covid policy of containing coronavirus is widely seen to have accelerated the fall in the country’s birth rate, as couples delayed or decided against having children.The anti-pandemic strategy, which was abruptly abandoned last month, has also been blamed for an economic slowdown. China’s gross domestic product expanded by just 3 per cent in 2022, well below the government’s target of 5.5 per cent.Five more stories in the news1. Yellen to meet Chinese economic tsar The US Treasury secretary will meet her opposite number, Chinese vice-premier Liu He, in Switzerland this week. The move signals Washington and Beijing’s commitment to improving ties despite simmering tensions over trade and Taiwan.Yellen also set to visit Africa: Yellen’s meeting with China’s top economic official comes ahead of a 10-day visit to Africa by the former chair of the Federal Reserve. You can read a preview of that trip here. 2. Meme stock investor launches activist campaign against Alibaba Ryan Cohen, the investor behind rallies at GameStop and Bed, Bath and Beyond, is pressing Alibaba to speed up its share buyback plan after acquiring a minority stake in the Chinese ecommerce group. Cohen started lobbying Alibaba, which has a market capitalisation of more than $300bn, in the second half of last year.3. Olaf Scholz picks new defence minister The German chancellor has picked the interior minister of Lower Saxony to be his next defence minister. Christine Lambrecht quit yesterday following a series of gaffes. The change of leadership at the top of the ministry comes as Berlin faces a momentous decision on whether to send tanks to Ukraine — and whether or not to allow other European nations to do so.4. PwC resigns as Evergrande’s auditor Indebted Chinese property developer Evergrande said today that global accounting firm PwC had resigned as its auditor, citing different views on financial statements under investigation by Hong Kong regulators. The Accounting and Financial Reporting Council in Hong Kong has been investigating Evergrande and PwC since 2021 over the property developer’s 2020 accounts.5. Russian paramilitary defects Andrei Medvedev, a former Russian paramilitary fighting in Ukraine, has promised to give evidence against the notorious Wagner group after making a dramatic escape and seeking asylum in Norway. Medvedev, who says he served as a commander for the mercenary group, is the first former member of the unit known to have defected to the west since the war started.Andrei Medvedev says after fleeing the front lines, he hid in Russia for two months before escaping across a frozen river to Norway © Gulagu.netThe day ahead Investment bank earnings Goldman Sachs and Morgan Stanley are expected to provide details of the impact last year’s slowdown in deal making and initial public offerings had on profits when they report earnings this morning. Tesla trial Jury selection is set to begin today in San Francisco for a securities fraud trial over tweets sent by Elon Musk in 2018 in which the electric vehicle company’s chief executive said he was considering taking the carmaker private.Bank of Japan begins policy meeting The yen neared a seven-month high against the dollar as the Japanese central bank began a two-day interest rate meeting. It is the penultimate meeting to be chaired by the BoJ’s longest serving governor, Haruhiko Kuroda.Economic data Consumer prices in Canada are expected to have moderated in December, with the annual pace of inflation forecast to come in at 6.3 per cent, according to a Refinitiv survey. That would follow November’s 6.8 per cent pace.Davos day two The World Economic Forum continues today. Tune in to the Davos Daily Show, hosted by the FT’s Andrew Hill, from 12pm GMT January 17-19. Register here for free.What else we’re reading Microsoft’s $10bn bet marks new era of AI The US software giant is considering a $10bn investment in OpenAI, the San Francisco-based developer of ChatGPT. If the company is right about the technology’s far-reaching implications, it could trigger a realignment in the AI world as other tech groups race to stake out their place in the new field.How Apple tied its fortunes to China The company spent two decades and billions of dollars building a supply chain of unprecedented sophistication, with 95 per cent of iPhones, iPads, Macs and AirPods being manufactured in China. This has created Apple’s biggest vulnerability: its dependence on a single country that has grown increasingly authoritarian and estranged from the west. Tomorrow the two-part series looks at what avenues Apple has to diversify beyond China.

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Looming Twitter interest payment leaves Musk with unpalatable options After borrowing $13bn from a Morgan Stanley-led bank syndicate, Elon Musk is facing his first repayment on the debt he used to purchase Twitter. In order to cover the payments the billionaire has a range of unpalatable options, from bankruptcy proceedings to another costly sale of Tesla shares.There is no lasting path to Russian victory Putin’s war has left his country isolated in Europe, while permanent occupation of Ukraine is unfeasible, writes Gideon Rachman. Russia will only have a chance of rebuilding its moral, economic and international status if it ends the war.Philip Lane: ‘We haven’t seen “normal” in Europe for a long time’ The European Central Bank’s chief economist speaks with Martin Wolf about the institution’s response to global shocks, sustainable debt levels and a digital euro. “2022 was a year of a big pivot,” says Lane, “a big transition from accommodative towards restrictive policy.”Take a break from the newsThere was no shortage of gadgets for the home at this month’s Consumer Electronics Show in Las Vegas. Adrian Justins rounds up the ones that caught his eye, from wireless televisions to an oven that uses artificial intelligence.

A 55-inch OLED television from California-based start-up Displace uses a swappable rechargeable battery removing the need for unsightly cables More

China has lifted many of the most debilitating restrictions after abruptly jettisoning its strict “zero COVID” policy, fuelling hopes that the world’s second largest economy can resurrect global growth even as the United States, the euro zone and Britain flirt with a recession over the coming quarters.”The reopening of China has to be the major event and it will be a key driver for growth,” Laura M Cha, the Chairman of Hong Kong Exchanges and Clearing, told the forum in Davos. “Asia is where the growth factor will be, you know, not only China, (but also) India, Indonesia; these are all emerging and very strong economies.” Her comments were echoed by others who saw China as the key to the global recovery.”There’s pent-up savings, there’s pent-up demand, so we think that China will see very strong growth, especially as you get later in the year,” Douglas L. Peterson, the President and CEO of S&P Global (NYSE:SPGI) told a panel discussion.’STRONG LABOUR MARKETS’Peterson said he still expected a “very mild” recession in the United States, Europe and the Britain, but full year net growth was still going to be positive. “Strong labour markets are not consistent with what we see with a recession and the labour markets are strong almost everywhere in the world,” he added.Credit Suisse Chairman Axel Lehmann said he even hoped the United States could avoid a recession, but he too put his bets on China. “The growth forecasts now for China is 4.5%. I would not personally be surprised when that would be topped,” he said.China’s economic growth in 2022 slumped to 3%, one of its worst levels in nearly half a century, as the fourth quarter was hit hard by the strict COVID curbs and a property market slump.Fuelling a bit of optimism about the 20-nation euro zone, one of the weakest economies this year because of its excessive reliance on Russian gas, European Central Bank policymaker Mario Centeno said a recession is not a foregone conclusion.”I also think that the economy has been surprising us quarter after quarter; the fourth quarter in Europe will be most likely still positive,” Centeno said. “Maybe we’ll be surprised also in the first half of the year.” More