Aurelia Butler

WHAT HAPPENED BETWEEN CHINA AND AUSTRALIA?China and Australia’s relations had been strained since 2018 when Canberra banned Huawei Technologies from its 5G broadband network.The relationship deteriorated further in 2020 after Canberra’s call for an international inquiry into the origins of COVID-19, triggering a raft of trade reprisals by Beijing on Australian exports.WHICH PRODUCTS WERE AFFECTED?Aside from coal, exports of barley, beef, cotton, wine, lobsters and grapes were all hit with restrictions of varying degrees during 2020.China has however continued buying large volumes of iron ore, wheat and liquefied natural gas.WHAT DID THE REPRISALS INVOLVE?China issued verbal instructions to buyers to avoid Australian goods such as coal and cotton, and imposed anti-dumping tariffs on barley and wine.An October 2020 order to avoid coal from Australia sent prices plunging and left dozens of ships stranded outside Chinese ports. Beijing later said it had found coal imports failed to meet environmental standards.WHICH PRODUCTS WERE HARDEST HIT?Anti-dumping and anti-subsidy tariffs on both barley and wine, in place for five years, all but wiped out imports of the products.The tariffs on barley totalled 80.5% while duties on wine were as much as 218% for some brands.Wine exports to China, previously Australia’s largest market, declined by $844 million in the year to March 2022, the first year after final tariffs were imposed. The barley trade with the world’s biggest beer maker had previously amounted to between A$1.5 billion ($1.01 billion) and A$2 billion a year.WHAT ABOUT OTHER GOODS?China also ordered cotton mills to stop buying Australian supplies or face a 40% tariff. China had been the biggest buyer of Australian cotton, taking about 60% of its supplies, worth about A$900 million during the 2018/19 crop year. Five of Australia’s largest beef processors were also suspended from exporting to China in 2020 for reasons such as poor labelling and contamination with a banned substance.Though other plants are still allowed to ship to China, importers have complained of long delays clearing Australian beef at customs. The trade was worth A$3 billion in 2019.Lobster exports, meanwhile, fell after China customs said they would be subject to enhanced inspection.HAS IT IMPACTED AUSTRALIA’S ECONOMY?Despite the measures, Australia has continued to record a trade surplus with China thanks to rising commodity prices, especially of iron ore.Australia has also successfully diverted exports of coal, barley and other products elsewhere.Barley farmers also reduced acreage sown with the grain and planted more canola instead. Australia’s biggest wine company, Treasury Wine Estates (OTC:TSRYF), has shifted its strategy to produce wine in China to rebuild a business that was decimated by the tariffs.The overall economic impact of the easing of the restrictions, while positive for the affected sectors, is likely to be small, Goldman Sachs (NYSE:GS) said in a Jan. 6 note.WHO HAS BENEFITED?Winemakers in South Africa have seen demand boom, while barley exports from France, Canada, Argentina and Ukraine to China also surged.Cattle farmers from the United States have also benefited, as China sought out an alternative supplier of high quality grain-fed beef.WHAT SPURRED THE RESUMPTION IN COAL BUYING?Relations between Beijing and Canberra are thawing after a change in Australia’s government, highlighted by a meeting between the countries’ foreign ministers in Beijing last month and messages between their two leaders.Australia is hoping China will also ease other import restrictions. Trade Minister Don Farrell said in late December he was willing to visit China to talk about Beijing’s curbs on barley and wine, currently the subject of an Australian complaint to the World Trade Organization.($1 = 1.4797 Australian dollars) More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Asian markets are set to open the week with a spring in their step on Monday, buoyed by Wall Street’s surge on Friday and rising hopes of a soft U.S. landing, and optimism surrounding China’s re-opening after its ‘zero-Covid’ policy came to an end this weekend.A ‘Goldilocks’ U.S. employment report on Friday was taken by investors as a sign that the Fed might win its anti-inflation battle without doing too much damage to the economy – U.S. and global stocks, risky assets and bonds all soared, which is likely to set the tone in Asia on Monday. MSCI global stocks – https://fingfx.thomsonreuters.com/gfx/mkt/lbvggorymvq/MSCIGlobal.png A relatively benign U.S. backdrop – economic activity and inflation cooling enough to allow the Fed to end its hiking cycle soon, and maybe even reverse it later this year – is enough to whet investors’ risk appetite. Throw in increasingly positive signs from China, and the bulls could be leading the charge on Monday.Travelers (NYSE:TRV) began streaming into mainland China by air, land and sea on Sunday, as Beijing opened borders that have been all but shut since the start of the COVID-19 pandemic. Beijing’s abrupt U-turn has triggered huge waves of infections, but investors hope the reopening will eventually bear economic fruit. China is in talks with Pfizer (NYSE:PFE) over a vaccine, and economists at many big banks are revising up their GDP growth forecasts for the second half of this year. Chinese yuan – offshore and onshore – https://fingfx.thomsonreuters.com/gfx/mkt/byvrlroneve/CNY.jpg The increasing bullishness is being reflected in China’s exchange rate. The yuan is its strongest since mid-August, moving further away from the 7.00-per-dollar level. Hong Kong tech stocks have been on a tear recently – up a staggering 65% from the October low – but could open on a more cautious note on Monday following news that Ant Group’s founder Jack Ma will give up control of the fintech giant. Analysts are split on whether this paves the way for the company to revive its IPO plans, or results in further delay.There is little in the way of economic data from Asia on Monday, but the flow accelerates later in the week. Among the major events to watch are: new loans, consumer and producer price inflation, and trade data from China; Australian and Indian inflation; and current account and Tokyo inflation figures from Japan.South Korea’s central bank is also expected to raise interest rates by 25 bps on Thursday to 3.50%. Policymakers are split on where the terminal rate should be – three out of six in November saw 3.50%, two saw potential for 3.75%.Three key developments that could provide more direction to markets on Monday: – Fed’s Bostic speaks- Japan’s PM Kishida meets with France’s President Macron- Euro zone unemployment (November) More

White House press secretary Karine Jean-Pierre told reporters that “we’re not considering any measures that would go around Congress,” calling on lawmakers to raise the limit without preconditions.Republicans, who recently took over control of the U.S. House of Representatives, have promised a bare-knuckle fight over any move to increase the limit. They say they plan to extract concessions to keep the U.S. government from defaulting. Jean-Pierre told reporters aboard Air Force One that Democratic President Joe Biden’s White House would make no concessions on the debt ceiling. “Attempts to exploit the debt ceiling as leverage will not work,” she said. “There will be no hostage-taking.” More

NEW ORLEANS (Reuters) – The Federal Reserve’s effort to shock the economy back to lower inflation is in its early days, making it tough for the U.S. central bank to avoid overdoing it with higher-than-needed interest rates, a top economic adviser in the Obama White House said after a fresh review of Fed policy since World War Two.The Fed has raised its target policy rate by more than 4 percentage points in the last year, and “we are just now entering the window where the effects might start to be noticed,” Christina Romer, an economics professor at the University of California, Berkeley, and chair of the White House’s Council of Economic Advisers (CEA) from 2009 to 2010, told a national gathering of economists late on Saturday. “Because of the lags involved, policymakers are going to face a very difficult decision about when to stop rate increases or reverse course,” Romer said in a keynote address to the American Economic Association’s annual meeting in New Orleans.”Policymakers are going to need to dial back before the problem is completely solved if they want to get inflation down without causing more pain than necessary,” she said.Fed officials have acknowledged how tricky it will be to judge how high to raise rates and how long to keep them elevated, and have scaled back the pace of the increases in borrowing costs to try to avoid a mistake.Minutes of the most recent Fed policy meeting in December showed central bankers struggling with the risks, while economists see a high probability that the rate increases will lead to a U.S. recession in the coming year. POLICY SHOCKRomer, outgoing president of the AEA, is an expert on the causes and recovery of the Great Depression of the 1930s and argued as CEA chair for a much larger fiscal response to the 2007-2009 recession than was approved. She collaborated with Berkeley economist David Romer, her husband, to mine Fed meeting transcripts and minutes dating back to the 1940s for the review of U.S. central bank policy.They identified 10 instances when the Fed tried purposefully to change the path of economic growth, in all but one case to try to lower inflation it felt was too high.Since transcripts are only available through 2016, they relied on minutes alone in more recent years and concluded that the current tightening cycle counts as an 11th monetary policy “shock.”Those events contrast with other Fed rate decisions meant to stay in synch with the business cycle or respond to outside economic events, such as the collapse of the housing market and the onset of recession in 2007. Isolating the shocks, she said, allows a clearer view of how Fed rate increases influence economic output and employment, and over what time frame.As interest rates rise, she found, overall output begins to slow about six months after the start of the policy shock, and after nine quarters was 4.5% below where it otherwise would have been. The unemployment rate starts rising after about five months and goes up by an average of 1.6 percentage points after 27 months, with the impact fading after five years.The Fed began raising rates last March but sped up the pace of rate hikes in June to one comparable with the rapid tightening former Fed Chair Paul Volcker used in the late 1970s and early 1980s. The central bank’s policy rate now stands in the 4.25%-4.50% range and officials are widely expected to lift it by another quarter of a percentage point at their Jan. 31-Feb. 1 meeting, with an eye to pushing it above 5% in the months ahead. More

Hello and welcome to the first full working week of the new year.How is your 2023 going? Amid the economic gloom and ongoing conflict in Ukraine, there are signs of a return to normality. The Golden Globe Awards ceremony is back this week in its Los Angeles home, after boycotts over a lack of diversity led to the cancellation of the event last year. Looking further ahead, world leaders, business leaders and economic thinkers will begin arriving in the Swiss resort of Davos this Sunday for the World Economic Forum the following week.The next seven days also sees the official start of the fourth-quarter earnings season, beginning with Wall Street banks and British retailers. This will of course remind us that we are far from back to normal for the global economy — more details below.For the UK, normality at the moment means widespread industrial action. Ambulance workers and driving instructors stage further walkouts this week, while strike ballots close for teaching unions in England and Wales.Normality has been restored at least in Congress. Attention can now focus on the economic challenges this year will bring — more about the data announcements coming this week below. Japanese prime minister Fumio Kishida will be touring the capitals of the G7 nations this week, consulting his counterparts to agree themes for this year’s summit in May, something he has made a key item of his political agenda this year. Kishida personally advocated for the summit to take place in his home town of Hiroshima.Could things be looking up? Yes, if you’re in Cornwall. Monday promises to be a historic day for the UK county — at least according to the Virgin Orbit press release — with the first space satellite launch from mainland Britain. It could perhaps better be described as a bit of classic British eccentricity since the nine satellites will be shot into orbit using a rocket launched from a repurposed Boeing 747, due to take off from Newquay airport on Monday night. It certainly shows a degree of creativity and should at least lift some British spirits.Thank you to those who responded to last week’s alternative guide to the year ahead and for your comments about the regular newsletter. Email me at [email protected] or by hitting reply if you received this via email (see the sign-up details here).Economic dataExpect consumer price index (CPI) and other inflation data over the coming days from the US, China, Japan, Australia, Brazil and Mexico. The British Retail Consortium updates its monthly UK high street sales survey on Tuesday, while on Friday the Office for National Statistics publishes the monthly GDP estimate giving a sense of where the country stands in terms of recession. Monetary policy comes this week from the Bank of Korea, which is expected to increase the base rate a further 25 basis points to 3.50 per cent on Friday.CompaniesWho likes interest rate rises? Banks, that’s who. That will be made clear this week when several of Wall Street’s biggest lenders report fourth-quarter numbers on Friday. These companies have made money on Fed tightening by raising rates for loans more than deposits. Analysts estimate JPMorgan Chase, Bank of America, Citigroup and Wells Fargo to report collective net interest income for the final three months of 2022 of almost $60bn, up 30 per cent year on year, according to consensus data compiled by Bloomberg. The concern is that this revenue-raising party cannot last and that net interest margins have reached a peak.The flip side of rate rises is the problem of high inflation, which brings me to the other theme of the corporate calendar this week: retailers. Increased checkout prices might seem like a good thing for retailers. Not when inflation hits double digits, it isn’t. We will find out exactly how bad it has been over the Christmas period — or indeed whether stocking up for World Cup viewing provided any sort of fillip — through trading updates from British high street and online brands this week.Consumer spending could of course be better than expected, as Next showed last week. Games Workshop, which reports first-half results on Tuesday, is creating a lot of excitement (and not just among Dungeons and Dragons obsessed teenagers) about growth opportunities owing to a spike in role-play gaming during the pandemic. Investor (as well as teenager) expectations have been raised further at the fantasy games producer’s recent Amazon TV and film deal.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayGermany, monthly industrial production dataMexico, December consumer price index (CPI) inflation rate dataUS, monthly consumer credit figuresResults: Tata Consultancy Services Q3TuesdayWorld Bank launches the winter edition of its Global Economic Prospects report, its semi-annual global economic forecastFrance, monthly industrial production figuresUK, Office for National Statistics publishes interactive maps for data from the 2021 Census in England and Wales down to local authority and community levelUK, Barclaycard consumer spending dataUK, British Retail Consortium-KPMG Retail Sales MonitorUK, Recruitment & Employment Confederation-KPMG jobs reportUS, the brother of a former Coinbase product manager, Nikhil Wahi, is due to be sentenced today after pleading guilty in September to an insider trading chargeResults: Games Workshop H1, Robert Walters Q4 trading updateWednesdayItaly, monthly retail sales figuresMexico, November industrial production dataUK, Heathrow December monthly traffic figuresResults: Barratt trading update, Ferrexpo Q4 production report, Grafton trading update, Jaguar Land Rover sales update, JD Sports Christmas trading statement, PageGroup Q4 trading update, Sainsbury’s Q3 trading statement, Topps Tiles Q1 trading statementThursdayChina, December CPI and producer price index (PPI) inflation rate data, plus December trade balance dataFrance, December CPI and harmonised index of consumer prices (HICP) inflation rate dataGermany, unemployment claims figuresIndia, December CPI inflation rate dataJapan, November trade balance data (AM local time)US, December CPI inflation rate dataResults: Asos trading update, Fast Retailing Q1, Halfords Q3 trading update, John Wood FY trading update, Marks and Spencer Christmas trading update, N Brown Q3 trading statement, Persimmon trading update, Tesco Q3 and Christmas trading update, TSMC Q4, Whitbread Q3 trading updateFridayFrance, final monthly CPI inflation rate and industrial production figuresGermany, flash annual GDP figuresSouth Korea, monetary policy committee rate-setting meetingUK, November GDP estimate and goods trade balance figuresResults: Bank of America Q4, Bank of New York Mellon Q4, BlackRock Q4, Citigroup Q4, Delta Air Lines Q4, DFS Furniture H1 trading statement, JPMorgan Chase Q4, Taylor Wimpey trading update, UnitedHealth Group Q4, Wells Fargo Q4 World eventsFinally, here is a rundown of other events and milestones this week. MondayJapan, Coming of Age Day public holiday, celebrating those turning 20 in the 12 months to April 1 this year.Mexico, president Andrés Manuel López Obrador hosts the North American Summit with his counterparts from the US and Canada at the National Palace in Mexico City. The event will conclude on Wednesday with a bilateral meeting between López Obrador and Canada’s prime minister Justin Trudeau.UK, members of the Public and Commercial Services Union at the Rural Payments Agency and DVLA in Swansea are to strike in an ongoing dispute over pay, pensions, job security and redundancy terms. Separately, teaching union NASUWT closes a strike ballot among members working in schools and sixth form colleges in England and Wales, recommending that they vote for a walkout over pay.UK, the first orbital launch from mainland Britain is due to take place from Cornwall Airport Newquay, with Virgin Orbit using a repurposed Boeing 747 to launch a rocket carrying nine satellites into space.TuesdaySweden, Bank of England governor Andrew Bailey chairs a panel discussion on central bank independence and potential future risks at an event hosted by Sweden’s Riksbank.US, the 80th Golden Globe Awards return after a year off air. The Los Angeles ceremony took place privately in 2022 amid boycotts by actors and media companies over the lack of diversity in the Hollywood Foreign Press Association’s membership.WednesdayUK, strike by ambulance staff who are members of the GMB union in their ongoing dispute over pay.ThursdayEU, president Ursula von der Leyen leads a European Commission visit to Sweden to discuss the country’s priorities during its bloc presidency, which began this month.UK, NHS England publishes figures for November and December, along with quarterly waiting time data for A&E attendances and emergency admissions.UK, further rail strikes over pay, this time by members of the TSSA union at Rail for London Infrastructure, operator of London’s new Elizabeth Line service.FridayCzech Republic, first of the two-day election to decide the country’s next president and head of state. Incumbent president Miloš Zeman will not be able to run again having served two five-year terms, but former prime minister Andrej Babiš has confirmed his candidacy.UK, National Education Union closes a strike ballot over pay among about 300,000 teachers and support staff in England and Wales.US, The Trump Organization due to be sentenced after the former president’s real estate company was convicted in December on tax fraud charges.US, Japanese prime minister Fumio Kishida meets US president Joe Biden at the White House ending a week of visits to five G7 nations building consensus for the economic group’s annual summit this year hosted by Japan in May.SaturdayOrthodox New Year celebratedSundaySwitzerland, delegates gather in Davos for the World Economic Forum that returns as an in-person event on Monday More

Will US consumer price growth have cooled again in December?Investors and economists are betting that the Federal Reserve’s aggressive monetary campaign will have slowed consumer price growth once again in December.The Bureau of Labor Statistics on Thursday will release its consumer price index data for the month before, with market participants surveyed by Refinitiv expecting prices to have risen 6.6 per cent year-on-year in December, down from an increase of 7.1 per cent in November. That would mark the slowest pace since October 2021. Month over month, consumer prices are expected to have remained flat, compared with an increase of 0.1 per cent in November.The drop is expected to have been driven in part by a fall in energy prices, which included gasoline that was 13 per cent lower in December, said Jon Hill, a strategist at Barclays.Core CPI, which strips out the volatile food and energy components, is expected to have risen 5.7 per cent year-on-year, versus 6 per cent in November.These moves would come at the end of a year in which the Fed lifted interest rates from near zero to a range of 4.25-4.5 per cent. The effects of the historic pace of increases were somewhat slow to take hold: inflation peaked in June, but continued to run above 8 per cent until September. December’s inflation data will be a crucial piece of information for the Fed‘s two-day meeting beginning on January 31 and could help decide whether the central bank will lift interest rates by 0.5 percentage points, matching last month’s increase, or slow the pace of hikes further. Kate DuguidWhat will industrial production data reveal about Europe’s manufacturing sector?Last year was tough for many European manufacturers and conditions were unlikely to have improved much in November, when industrial production was expected to suffer its second consecutive monthly decline.The energy crisis caused by Russia’s invasion of Ukraine on top of continued disruption to global supply chains and weakening economic growth all contributed to make 2022 a difficult one for many industrial groups in Europe. Economists polled by Reuters expect overall eurozone industrial production to have fallen 0.2 per cent when those figures are released on Friday. Earlier in the week, the national figures for Germany, France and Italy — the bloc’s three largest economies — are also expected to reveal slight contractions in industrial output.The gloomy outlook for the German industrial sector was underlined last week, when factory order data for November revealed a much bigger than expected drop of 5.3 per cent from the previous month.Economists, however, believe it will take some time before the sharp drop in demand hits production because of the large backlogs of orders built up since the coronavirus pandemic hit in 2020. Underlining this, turnover in German manufacturing remained buoyant in November, rising 2.1 per cent.“Weaker demand is only likely to have a muted impact on production,” said Ralph Solveen, an economist at German bank Commerzbank. “After all, most industrial companies have a considerable backlog of orders, which they can now work off.” Martin ArnoldHas the UK economy contracted further?The UK economy is expected to have continued to struggle at the end of last year under the weight of high inflation and rising borrowing costs.Economists polled by Reuters forecast UK GDP to have slipped 0.3 per cent between October and November, when data is released on Friday. Sandra Horsfield, economist at Investec, noted that the UK economy has trended lower since May 2022, when inflation started surging. The government has offered help to households and businesses facing a cost of living crisis, which may have supported the economy in November.The reversal from November onwards of the national insurance hike that took effect in April 2022, which left post-tax pay cheques somewhat higher than in October, should also have supported consumers’ ability to spend. Moreover, power generation looks likely to have rebounded to some extent after weakness in October, as higher than normal wind speeds should have fed through to industrial production.But Horsfield said those factors and other government help have absorbed only part of the hit.“Add to this the restraining impact on activity of higher interest rates, and the likelihood is that GDP will trend lower for some time further — all the more so at a time when widespread [industrial] strikes cause some additional disruption,” said Horsfield.The economy contracted in the third quarter of 2022 and November data will provide more information about the final quarter. Many economists expect the UK to have already entered a recession that will last for most of 2023.“The silver lining to this particular cloud is that we expect it to help in quelling price pressures,” said Horsfield. Valentina Romei More