Aurelia Butler

LONDON (Reuters) – Britain’s government must focus on sound public finances and avoid further fuelling inflation by pumping up demand, new finance minister Nadhim Zahawi is due to say in his first major speech on Tuesday.Zahawi will address the City of London’s annual Mansion House dinner, where he is set to confirm a post-Brexit reworking of financial regulation inherited from the European Union, including Solvency II insurance rules.However, tackling inflation is a top priority alongside boosting longer-term growth, according to speech extracts provided ahead of the event.”That means delivering sound public finances to avoid pushing up demand still further, providing help for households as they deal with the worst price rises in over a generation,” he says in his speech.”The country should feel confident that we can, and we will, get inflation back under control,” the speech added.Consumer price inflation hit a 40-year high of 9.1% in May and the Bank of England forecasts it will exceed 11% in October, when regulated household energy prices are due to rise by 40%.Zahawi’s message on public finances contrasts with that from some of the contenders in the Conservative leadership contest to succeed Prime Minister Boris Johnson.Foreign Secretary Liz Truss has said she wants to reverse more than 30 billion pounds ($36 billion) of tax rises announced by rival leadership contender Rishi Sunak, whose resignation as finance minister two weeks ago helped trigger Johnson’s downfall.Zahawi made his own brief bid to become prime minister last week, but failed to get enough support from lawmakers to progress, despite hinting at his own support for tax cuts.Tuesday’s speech will also contain more about government plans to replace “hundreds” of pieces of EU financial regulation with home-grown equivalents, including changes to Solvency II. This would ensure “UK insurers have more flexibility to invest in long-term assets like infrastructure” and increase “the competitiveness of our capital markets”.However, the Bank of England – whose governor Andrew Bailey will also speak at the Mansion House dinner – has warned that reducing the amount of capital which insurers need to hold is no “free lunch” and could increase risks to policyholders. More

NEW YORK (Reuters) – Japan and China pared back holdings of U.S. Treasuries in May to multi-year lows, data from the U.S. Treasury department showed on Monday.Japan’s holdings fell to $1.212 trillion, the lowest since January 2020, when the country’s stash of Treasuries was $1.211 trillion. In April, Japan’s holdings were at $1.218 trillion.China’s hoard of U.S. government debt dropped as well to $980.8 billion in May, still the lowest since May 2010 when its holdings were at $843.7 billion, data showed. In April, China had $1.003 trillion in Treasuries.The world’s second largest economy has reduced holdings Treasuries for six straight months.Although China and Japan sold Treasuries in May, U.S. Treasury yields slid. The benchmark 10-year Treasury yield started the month of May at 2.996%, down about 15 basis points to 2.844% by the end of the month.Overall, foreign holdings of Treasuries slid to $7.421 trillion in May, the lowest since May 2021, from $7.455 trillion in April.”It’s another month of selling by foreign investors. But it seems like the selling is starting to slow because in May, the move higher in interest rates faded a little bit,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York.”Japan and China were selling which is real a continuation of recent trends. We got another month of selling from Japan, but if you look at the pace, there was certainly a deceleration. Nothing like we saw in March at the end of Japan’s fiscal year.” On a transaction basis, U.S. Treasuries saw net foreign inflows of $99.84 billion in May, the largest since March 2021, from outflows of $1.153 billion in April.The Federal Reserve raised benchmark interest rates by 50 basis points in May and in June lifted rates by a hefty 75 basis points to curb stubbornly strong inflation. Investors have priced in another 75 basis point rate hike at the Fed meeting later this month.In other asset classes, foreigners sold U.S. equities in May for a fifth straight month amounting to $9.15 billion, from outflows of $7.04 billion in April. The S&P 500 has been down nearly 20% since the beginning of the year.U.S. corporate bonds posted inflows in May of $4.46 billion, compared with inflows of $22.5 billion the previous month. Foreigners were net buyers of U.S. corporate bonds for five straight months.The data also showed U.S. residents once again reduced their holdings of long-term foreign securities, with net sales of $22.8 billion in May from sales of $36.7 billion in April. More

The potential move would see Apple – the world’s most valuable company – join a growing pool of American corporations including Meta Platforms and Tesla (NASDAQ:TSLA) Inc in slowing hiring. Apple shares (NASDAQ:AAPL) reversed course to trade down 1.6% at $147.6. The company did not immediately respond to a Reuters request for comment.The Bloomberg report said the changes would not affect all teams and that Apple was still planning an aggressive product launch schedule in 2023 that includes a mixed-reality headset, its first major new category since 2015.”Apple’s move reflects a broader slowdown in investing in new things, new companies and new products,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh. “It signifies that inflation is an issue for these companies.”Fears have risen in recent months that aggressive interest rate hikes by the Federal Reserve to tame an unabating surge in inflation could tip the economy into a recession. The price pressures have also raised worries that customers could curb spending on discretionary items like smartphones.Smartphone shipments declined 9% in the second quarter, according to data from Canalys. Still, Apple’s iPhones remain among the most sold phones in the world, with the company holding a 17% market share just behind market leader Samsung (KS:005930), the data showed.Apple typically launches a new version of its iPhone and other wearable products in September ahead of the busy holiday season. As of its last annual report, the Cupertino, California-based company had about 154,000 full-time equivalent employees. More

Nadhim Zahawi, the new chancellor, will on Tuesday commit to bringing down inflation and rule out borrowing for tax cuts, in a sign that he will continue with the fiscal policies of his predecessor Rishi Sunak.In his first speech since being appointed, Zahawi will also endorse Sunak’s plan for a radical overhaul of post-Brexit financial regulation to ensure Britain remains “one of the most dynamic financial centres in the world”. Sunak quit earlier this month in protest at outgoing prime minister Boris Johnson’s leadership style and over differences on economic policy, particularly over Johnson’s insistence on tax cuts.Zahawi was swiftly drafted in to replace Sunak, but the new chancellor will insist in his Mansion House speech in the City of London that tackling inflation remains a core priority for the government.“The country should feel confident that we can, and we will, get inflation back under control,” he will say. “That means delivering sound public finances to avoid pushing up demand still further, providing help for households as they deal with the worst price rises in over a generation.”Zahawi’s tenure as chancellor could be shortlived; a new prime minister will be in place by September 5 and is likely to appoint their own choice as chancellor.In the interim period, Zahawi’s Mansion House speech will indicate that Sunak’s policies will continue, not just in tackling inflation but also on overhauling regulation of the City.Zahawi will say: “We want to make sure the UK remains the most open, inclusive, welcoming, competitive, safe and transparent place to do financial services business in the world.”He will commit to repeal “hundreds of pieces of retained EU law and replacing them with a coherent and agile approach to financial regulation that is right for us”.A Financial Services bill will be published on Wednesday setting out the government’s insistence that regulators must treat “growth and competitiveness” as secondary objectives alongside maintaining financial stability and sound institutions.It will also contain controversial powers to allow ministers to “call in” regulatory decisions with which they disagree — a move which has provoked bitter disagreement with the Bank of England.Andrew Bailey, BoE governor, has insisted on the importance of maintaining regulatory independence: he will also speak at the Mansion House banquet on Tuesday.Sunak, as part of his bid for the Tory leadership, said he saw Brexit as a chance to shift accountability for regulation to parliament and away from “faceless regulators”.Zahawi will say that reforming the EU’s Solvency II regime, which covers insurers, is an early example of the government’s new approach. Solvency II, which was introduced when the UK was part of the EU, stipulates how much capital companies should hold and where they can invest.The chancellor will say that he wants UK insurers to have “more flexibility to invest in long-term assets like infrastructure”. More

China is at risk of more frequent lockdowns and mass testing as officials struggle to contain the spread of the highly transmissible BA.5 Omicron subvariant despite the damage pandemic restrictions have already wrought on the world’s second-biggest economy. Forty-one Chinese cities are under full or partial lockdowns or district-based controls, covering 264mn people in regions that account for about 18.7 per cent of the country’s economic activity, according to an analysis released on Monday by Japanese investment bank Nomura.That marked a deterioration from the situation a week ago, when curbs were imposed in 31 cities covering 247.5mn people and representing 17.5 per cent of the economy. China’s zero-Covid policy, which aims to eradicate coronavirus completely, has heaped pressure on officials to stamp out chains of transmission and hampered economic growth.If you live in China, are you making preparations for another lockdown? Share your plans and thoughts with me at [email protected]. Thanks for reading FirstFT Asia. — EmilyFive more stories in the news1. Sri Lanka declares state of emergency Acting president Ranil Wickremesinghe has declared a nationwide state of emergency, two days before the country’s parliamentarians are set to pick a replacement for a president who had fled the country after months of unrest. Interview: Sri Lanka opposition leader called on IMF for “humane” treatment of the country as it recovers from its economic and political crisis.2. Europe hit by record heatwave Record-breaking temperatures across parts of the UK caused disruption to travel, schools, hospitals and the electricity grid on Monday, as infrastructure experts and climate change scientists called on the government to plan better for extreme weather. Four other European nations declared states of emergency or issued red alerts as temperatures break records across the continent.Related read: Our climate graphic of the week explains how sleep fares during climate change. Learn more on how we created this graphic in our Climate Graphic: Explained newsletter. Sign up here.3. US bank earnings reflect recession fears Goldman Sachs on Monday warned it would slow hiring and may cull underperforming staff, even as the Wall Street giant’s traders helped it overcome a slump in dealmaking and report better than expected profits in the second quarter. Bank of America reported a 32 per cent drop in net income — a fall that was cushioned, at least for now, by consumer spending. 4. Khan demands early elections after dominating Punjab poll Imran Khan has won a critical victory in by-elections in Pakistan’s most populous province, putting the former prime minister on track to force early parliamentary polls just months after he was ousted from office.5. Volodymyr Zelenskyy fires security chiefs over ‘treasonous’ officials Ukraine’s president dismissed his head of the state security service and chief prosecutor yesterday for allegedly allowing collaboration with Russian forces by scores of officials in occupied territories.The day aheadUS Treasury secretary visits South Korea Janet Yellen is set to meet President Yoon Suk-yeol and other senior officials in Seoul today. During her meetings Yellen will push for a price cap on Russian oil. (Reuters) Earnings Companies reporting results today include Halliburton, Hasbro, Johnson & Johnson, Lockheed Martin, Netflix, Novartis, Swedbank, Telenor and Volvo Cars. US lawmakers vote on subsidies for chipmakers Chuck Schumer, the Democratic leader in the Senate, will call a vote on a long-awaited $52bn package of subsidies to US chipmakers as soon as Tuesday as he tries to put pressure on others in Congress to back it.Putin in Iran for trilateral Syria talks Putin will meet Turkey’s president Recep Tayyip Erdoğan and Iran’s president Ebrahim Raisi in Tehran on Tuesday to discuss Syria. A Black Sea access deal could also be sealed when Putin and Erdoğan meet. (Euro News, FT) What else we’re readingJapan struggles with self-regulation during crypto meltdown While the industry’s most important annual conferences celebrated the opportunities of blockchain technology in a “alcoholic and optimistic” manner, industry executives, lawyers and current and former financial regulators sounded the alarm over a spiralling regulatory crisis in Japan’s multibillion-dollar virtual asset business.‘Power of Siberia 2’ to break down in 2024, Mongolia says The central Asian country expects Russia to begin construction of the “Power of Siberia 2” gas pipeline through its territory to China within two years, as Moscow moves to connect its Europe-supplying gasfields to Asia for the first time.Related read: Amid rising tensions between Moscow and the west over the war in Ukraine, Berlin now fears a winter gas crisis that could paralyse industry and leave millions freezing in their homes.Half a trillion dollars wiped from once high-flying fintechs Digital companies that boomed during lockdowns have been hit by fears they cannot withstand a recession. Their cumulative market capitalisation has fallen $156bn in 2022. If each stock is measured from its all-time high, around $460bn has been lost.‘Could we just adapt to climate change? The answer is no’ For Corinne Le Quéré, one of the world’s experts on global emissions, there is no great revelation in the UK’s record-breaking temperatures. “It is so predictable how climate change is unfolding,” she says, in her office at the University of East Anglia, in Norwich, eastern England. “It’s like a train moving forward,” she said in an interview with FT’s Henry Mance. How to solve the productivity paradox Since the computer age dawned in the 1970s, we have lived with a sense of accelerating progress and innovation. Yet the postwar productivity boom has ended: except for a revival at the turn of the century, productivity has trended downward for more than 50 years. Ruchir Sharma asks, what can we do about it?FashionIn the Tory leadership race, there are no style winners, write Carola Long and Robert Armstrong. From Liz Truss’s Thatcher throwbacks to Rishi Sunak’s too-slick suits: how the frontrunners’ wardrobes are — or are not — helping their campaigns.

Penny Mordaunt, Rishi Sunak and Liz Truss on the campaign trail © FT montage: Jonathan Hordle/ITV/Getty Images More