Aurelia Butler

Hello and welcome to the working week.Or perhaps I should welcome you to independence week. The big one — the celebration of 1776 and all that — kicks off across the US on Monday. But from Algeria to Venezuela, Argentina to South Sudan, disconnecting from former colonial powers is a strong theme — and a source for public holidays around the world — for the next seven days.For those of us trying to get into (or on with) work, however, this is not going to be a week for celebrations. French rail workers will begin strike action on Wednesday, days before the country’s school holidays begin.Then there is the unfolding drama of the British summer of discontent. Barristers in England and Wales will tomorrow resume their “crime doesn’t pay for advocates” strike. On Tuesday they will be joined by the banking regulators at the Financial Conduct Authority — represented by Unite — who are walking out (again) in defiance of their latest pay offer. Moreover, the range of workers taking action is growing. Also on Tuesday, Whirlpool’s washing machine makers will be balloted for strike action over what the union bosses have called an “insulting” pay offer.This seems a good point to mention that the Financial Times is running a survey on the cost of living squeeze — how are you coping with higher prices? To take part, click here.After last week’s Nato summit in Madrid, the focus for western efforts trying to help Ukraine this week will switch to Lugano in Switzerland. The Ukraine Recovery Conference is the latest in a series of high-level political gatherings first held in London in 2017, originally to discuss reforms that could open up foreign investment in a time of relative peace for the nation. Russia’s invasion has given a new urgency to such support.Is there anything to lighten the mood? Well, the summer season has begun — and by that I mean the FT Live summer season of stimulating talks and gatherings. This Thursday’s event, Capitalising On Disruption To Create Business Opportunities, is free to attend and you can do so by clicking here. Looking further ahead, you can save yourself a seat (and money) at the FT Weekend Festival — happening in London on September 3. Enter the promo code FTWFxNewsletters for a £10 discount on the ticket at ft.com/ftwf.Thank you (again) for your comments about The Week Ahead. Email me at [email protected] dataThe key question for the moment is if, or in some cases, when major western economies tipping into recession. A clutch of business surveys this week will highlight the areas of concern for business owners. Also closely watched will be Wednesday’s minutes of the Federal Reserve’s last rate-setting meeting and the US labour market report on Friday.CompaniesWe are in for another week of UK corporate news dominated by retailers. The trading update from J Sainsbury on Tuesday will in effect be a rerun of Tesco a couple of weeks ago given that it too has taken a strategic decision to accept lower prices that will reduce profits in order to keep customers.Currys could be quite interesting given that the British electrical goods retailer is the clear market leader but its market cap has shrivelled, margins are tight and there is a sense that the pandemic was the company’s high water mark.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayCanada, Bank of Canada business outlook surveyEU, May industrial producer prices dataGermany, May trade balance figuresTuesdayAustralia, Reserve Bank of Australia’s monthly rate-setting meetingChina, France, Germany, Italy, UK, US: Caixin/IHS Markit/S&P Global service sector purchasing managers’ index (PMI) dataEU, eurozone S&P Global composite (manufacturing and services) PMI dataUK, official holdings of international reserves plus trade figuresUS, May factory ordersResults: Sainsbury’s Q1 trading statementWednesdayEU, May retail sales figuresEU, France, Germany, UK: Cips/IHS Markit/S&P Global construction PMI data plus US services PMI data and eurozone productivity PMI dataGermany, May factory orders dataUS, Federal Open Market Committee publishes the minutes of its June meetingResults: Redde Northgate FYThursdayEU, European Central Bank publishes its quarterly financial statementsFrance, May trade balance dataGermany, May industrial production figuresPoland, National Bank of Poland’s base rate-setting meetingRussia, June CPI dataUK, Q1 productivity figures plus Halifax monthly house price indexUS, ADP employment reportResults: Currys FY, Jet2 FY, Persimmon Q1 trading update, RS Group Q1 trading updateFridayCanada, June unemployment dataChina, June consumer price index (CPI) and producer price index (PPI) figuresItaly, May industrial production figuresJapan, May trade balance dataUK, KPMG/REC monthly jobs report plus banking sector Q1 regulatory capital figuresUS, June unemployment figuresResults: OMV Q2 trading updateWorld eventsFinally, here is a rundown of other events and milestones this week. MondaySwitzerland, international Ukraine Recovery Conference begins in LuganoUS, Independence Day celebrationsUK, barristers resume strike action at courts in England and Wales, escalating action begun last week over legal aid fundingTuesdayAlgeria, Independence Day celebrationsAnniversary of the invention in 1946 of the bikini by Louis Réard, a French car engineer and clothing designer, who named his garment after the site used by the US for atomic testsVenezuela, Independence Day celebrationsWednesdayEU, speed limiting technology is set to become mandatory for all new vehicles sold following rules agreed in 2019. The UK has said it will align with these vehicle standards.France, rail workers to go on strike over pay levelsSpain, Running of the Bulls festival begins in PamplonaThursdayItaly, trial begins in Genoa in the court case regarding the collapsed Morandi motorway bridge in 2018UK, deadline for a government decision on whether to go ahead with a new coal mine in Cumbria. Also, the annual Llangollen International Musical Eisteddfod begins in north-east Wales.FridayUK, Hinkley Point B nuclear plant is expected to begin its shutdown despite concerns of blackouts later this yearSaturdayArgentina, Independence Day celebrationsEid al-Adha, one of the most important festivals in the Muslim calendar, beginsSouth Sudan, Independence Day celebrationsUK, Wimbledon women’s tennis championship finalSundayBahamas, National Day commemorating independence from the UK in 1973Ireland, National Day marking 101 years since the signing of a truce ending the Irish War of IndependenceJapan, election of upper house representativesRepublic of the Congo, parliamentary and municipal electionsUK, Wimbledon men’s tennis championship final More

BUENOS AIRES (Reuters) – The abrupt departure of Argentina’s economy minister and lack of a clear successor could threaten to further destabilize an economy already shaken by sky-high inflation, rising energy costs and growing fears over possible new defaults on debt.Martin Guzman, the architect of the South American country’s recent $44 billion deal with the International Monetary Fund (IMF), resigned on Saturday as tensions within the government boiled over as to how to handle the economic crisis in one of the world’s top grain producers.A relative moderate, he had clashed with the more militant wing of the ruling Peronist coalition around powerful Vice President Cristina Fernandez de Kirchner, who had publicly criticized Guzman and called for more public spending.The resignation, the highest profile since President Alberto Fernandez took office in late 2019, has uncovered deep cracks in the government, which threaten to throw into disarray the country’s economic management.”The resignation of Minister Guzman really uncovers the internal rupture in the government,” said Eugenio Mari, chief economist at Fundacion Libertad y Progreso, adding he had been an “anchor” for economic policy despite his struggles.”From the economic side, it amplifies the dynamic of uncertainty which Argentina was already in.”On the table now are policies around the country’s peso currency, which is shielded by strict capital controls that have stemmed parallel exchange rates double the official one. Guzman also oversaw tax regimes around grains and energy policy.Inflation is running above 60% and is set to rise further, while high energy import costs have shackled the country’s ability to increase depleted foreign currency reserves. Sovereign bonds have plunged toward 20 cents on the dollar.Guzman has been set to travel to France for July 6 talks to restructure some $2 billion in debt with the Paris Club of sovereign lenders, seen as key to reopening access to foreign direct investment needed for infrastructure and energy. GRAPHIC-Argentina’s U.S. dollar bonds https://graphics.reuters.com/ARGENTINA-ECONOMY/DEBT/zgpomaegjpd/chart.png GRAPHIC-Argentina’s U.S. dollar bonds (Interactive graphic) https://tmsnrt.rs/3FzHvdH ECONOMIC ‘VOID’Daniel Marx, former finance secretary and debt negotiator, said it had become untenable for Guzman amid strong opposition within the government. The key now: Who replaces him?”It seems important to me to see how the void is filled,” said Marx. “Not only the person but the economic policy direction to get out from all the skepticism and the problems that have been dragging on for quite some time.”On Sunday morning there was no news on a successor and President Fernandez was yet to publicly address the departure, suggesting the government had been caught off guard by the exit.Some investors were concerned about how the departure would impact the country’s ability to meet its obligations with the IMF, which include targets for inflation, reserve levels and the fiscal balance – all already under pressure. GRAPHIC-Argentina: inflation spirals https://graphics.reuters.com/ARGENTINA-ECONOMY/zgpomndbrpd/chart.png GRAPHIC-Argentina: inflation spirals (Interactive graphic) https://tmsnrt.rs/3s8mjZ7 “This is not good and confirms that there is a political problem,” said Maria Castiglioni, economist at C&T Asesores, adding it raised questions if the government would be able to take the necessary measures to exit the crisis.Inside the Economy Ministry, where a large part of Guzman’s team also resigned, the feeling was it had become hard to get things done effectively.”When things were moving at pace, decisions had to be made quickly. When you have no decision at the money table, it is tough,” a ministry source said.Horacio Larghi, economist and director of consultancy Invenomica, said what mattered most was whether the new economy minister was a lame duck or had license to act.”As for who replaces him, the name doesn’t matter so much. What matters is whether or not the person will have the power to do anything,” he said. GRAPHIC-Argentina’s double dollar https://graphics.reuters.com/ARGENTINA-ECONOMY/akvezloqqpr/chart.png GRAPHIC-Argentina’s double dollar (Interactive graphic) https://tmsnrt.rs/3HFqAsJ More

Argentina has been plunged into further crisis after finance minister Martín Guzmán quit suddenly amid a split within the ruling Peronist coalition, unnerving investors already concerned about spiralling inflation and dire public finances. Guzmán, who had led negotiations with the IMF and private sector debtors, announced his resignation on Twitter on Saturday evening. He published a seven-page letter in which he cited “political agreement within the governing coalition” as a key factor needed by his successor — a reference to government infighting. An ally of President Alberto Fernández, Guzmán is the latest and most senior of four cabinet members to step down in recent months. His departure deals a further blow to the president, who is facing dismal poll ratings, inflation forecast to exceed 70 per cent this year and sovereign bond prices in distressed territory.The minister had come under heavy pressure from the more radical wing of the Peronist coalition, led by Cristina Fernández de Kirchner, Argentina’s powerful vice-president and former leader. The Kirchneristas have repeatedly criticised a deal with the IMF to restructure $44bn of debt, which Guzmán negotiated. They instead want higher spending and more government intervention to combat inflation and poverty. Political commentators noted that Guzmán announced his departure as Fernández de Kirchner was speaking at a rally in memory of Juan Domingo Perón, the general who founded the eponymous political movement. “Perón used his pen to help the people,” she said, hailing his signature welfare programmes. She also denied the budget deficit was causing high inflation and called for Argentina to consider a universal basic income.Guzmán had hailed the IMF deal in March this year as a compromise that would roll over $44bn of debt and allow him to continue to increase spending gradually in real terms. But Fernández de Kirchner wanted him to spend more and drop a pledge to reduce energy bill subsidies.The open split within the ruling coalition raises questions about the future of the IMF programme, which has been criticised as over-lax by some economists for not addressing fundamental structural problems in the Argentine economy.Investors are sceptical that a divided and unpopular government facing elections in 2023 can keep the IMF arrangement on track, stoking fears of yet more restructurings and of a damaging wage-price spiral.Argentina has been left in “great uncertainty” said Ignacio Labaqui, senior analyst at Medley Global Advisors. Whoever replaced Guzmán would “need to bridge the divide” in the ruling coalition or would face the same problems, he said.

Nicolás Dujovne, former finance minister for the centre-right opposition, said the Argentine economy’s problems were deep-seated. “The government has far more problems than the [political] divide: a high deficit, excessive money printing and they’ve lost market confidence,” he said. Despite complaints about spending cuts made by the Kirchnerista bloc, Guzmán “had no fiscal discipline, he wasn’t making the necessary adjustments and he’s lost investor confidence”, Dujovne added. Economists at Citi last month warned Argentina’s authorities were not properly addressing its problems. “We believe that a 1980s-style spiralling of inflation is a real risk for the Argentine economy, and the probability attached to it is rising,” they concluded in a client note. Alberto Ramos, chief Latin America economist at Goldman Sachs, wrote in a note to clients: “Given the low political capital of the current administration, there is the risk that the quality of [its] policy mix could weaken further.” The country’s sovereign bonds have fallen to fresh lows, hovering above 20 cents on the dollar. Pressure on the local currency is building despite exchange controls and a costly energy import bill is preventing Argentina from building dollar reserves. In the first five months of the year, energy import costs surged 205 per cent compared with the same period in 2021, totalling $4.6bn because of rising international fuel prices. Guzmán had been due to travel to France next week to renegotiate more than $2bn owed to the Paris Club of 22 countries, which includes the US, Germany and Japan. The Paris Club granted Argentina more time last year to pay off the debt, allowing time to negotiate a separate IMF deal. More

TORONTO (Reuters) – Canada is persisting with its fairly relaxed approach to regulating funds claiming environmental, social and governance (ESG) credentials despite recent allegations of “greenwashing” elsewhere that have spurred other regulators including the U.S. Securities and Exchange Commission to consider tightening rules.The Canadian Securities Administrators (CSA) issued guidance for ESG funds early this year that simply clarified how existing regulations apply to them. A CSA spokesperson told Reuters this guidance is adequate, but market experts say the lack of firm rules risks eroding confidence in the industry.Canadian responsible equity funds’ assets under management grew 24% from a year earlier to C$22.4 billion ($17.3 billion) in May, according to Refinitiv data. Globally, assets in such funds totalled $3.3 trillion. The CSA has acknowledged the growth has increased the potential for “greenwashing,” an overstatement of ESG credentials by businesses or funds. Recent allegations of “greenwashing” at Bank of New York Mellon (NYSE:BK), Deutsche Bank (ETR:DBKGn)’s DWS Group and Goldman Sachs (NYSE:GS) have prompted greater scrutiny of ESG funds. Regulators in the U.S. and Europe are considering introducing mandatory disclosure requirements for ESG funds, given the surge in interest.The CSA’s guidance calls for alignment between a fund’s name and investment objectives; disclosure of investment strategies used to achieve objectives; and explanations of how ESG factors are evaluated and monitored.It doesn’t explicitly define ESG, or require measurable ESG outcomes, allowing funds to label themselves as such even when they don’t materially further ESG objectives, said Murray Gold, partner at law firm Koskie Minsky.”The essential greenwashing problem is that people are buying into these funds because they believe they’re going to improve something,” Gold said. When regulators allow funds to use words “as they wish,” they look “embarrassingly weak,” he added.The CSA spokesperson said current disclosure requirements are broad enough in scope to cover ESG-related funds and that the regulator will consider future policy initiatives as needed.ESG Global Advisors Senior Advisor Dustyn Lanz said if the SEC’s proposal is enacted, expected in fiscal 2023, it will be easier for Canadian funds to label themselves ESG than U.S. ones and could hurt the credibility of Canada’s ESG funds industry.The lack of requirement to disclose quantifiable ESG impact for funds making such claims in Canada, in contrast to the SEC’s proposal, could also lead to “impact washing,” he added.A CSA review of ESG-related funds’ regulatory disclosures before issuing the guidance found gaps including failure to disclose how ESG factors were evaluated and holdings that did not fit with fund names or objectives.”It just means they haven’t caught up with the new guidelines yet,” Lanz said. “But it raises the question: When will the CSA start enforcing its guidance?” But the guidance is a good first step, allowing the regulator to determine if rules are needed, said CFA Societies Canada Managing Director Michael Thom.The CSA has also separately proposed climate-related reporting requirements for companies to help inform investment decisions, which Thom said would be a “critical building block” for funds’ disclosures. The CSA spokesperson said staff are reviewing comments received and proposals by counterparts including the SEC and the International Sustainability Stands Board to help inform their recommendations to regulators.”Corporate disclosure improvements relating to ESG… would be a massive step forward in then enabling investment product disclosure,” Thom said.($1 = 1.2915 Canadian dollars) More

Will a weak US jobs report change the Fed’s calculus for July? US hiring is expected to have slowed in June, as economists bet that higher interest rates, slowing growth and a sharp pullback in stocks will have bitten into labour market growth. The labour department is expected to report that the US added 275,000 jobs in June, according to a poll by Bloomberg, a step down from the 390,000 added in May. The unemployment rate is expected to remain steady at 3.6 per cent. Average hourly earnings are expected to have increased by 0.3 per cent month over month, also in line with May’s figure.The Fed has argued that there is room to aggressively raise interest rates because of the strength of the US economy, including the jobs market. Evidence of a slowdown could potentially curb the Fed’s appetite for jumbo rises. Weak data in the US, including Institute for Supply Management manufacturing data on Friday, have helped bring market expectations of Fed policy lower. The market is currently betting that the Fed’s main rate will be 3.2 per cent by year-end, compared to 3.4 per cent a week ago. On the jobs report “we are apprehensive even a single payrolls print would materially shift the [Fed’s] thinking,” said Ian Lyngen, head of US rates strategy. What’s more, “the prospect for this to be the month that hiring turns is limited.” Kate DuguidHow high will Turkish inflation go?While the US and Europe fret about annual inflation approaching 10 per cent, the official rate in Turkey is expected to climb towards 80 per cent when June data are announced on Monday. President Recep Tayyip Erdoğan’s refusal to allow the central bank to raise borrowing costs — combined with high global commodity prices and a weak lira — has set prices on a seemingly never-ending upward trajectory. Where will it stop? Turkish officials claim that the rate will come down around the start of next year thanks to the numerical impact of high inflation at the end of 2021. They have also taken steps aimed at curbing credit growth and unveiled savings schemes seeking to prop up the lira. Goldman Sachs predicts that the inflation rate will fall slightly to 65 per cent by the end of 2022. But Per Hammarlund, chief emerging markets strategist at the Swedish bank SEB, warns of the dangers of an alternate scenario. “I see a great risk that we will see accelerating inflation given that the government is more focused on sustaining growth than containing inflation,” he said. The government’s decision last week to raise the minimum wage for the second time in six months could make the problem worse. Hammarlund said: “He [Erdoğan] is trying to compensate for the loss of purchasing power but it means you will have inflation ratcheted up. Every time they do this, it feeds into new inflation.” Laura PitelWill the Reserve Bank of Australia raise rates?The Reserve Bank of Australia became one of the first central banks in an advanced economy to move against post-lockdown inflation when it abandoned its yield curve control policy in November last year. In June, it raised its benchmark interest rate by 0.5 percentage points, the most in 22 years.Despite the policy tightening, the RBA has had to bump up its forecast for headline inflation, which it now expects to peak at around 7 per cent at the end of this year, well above its target range of 2 to 3 per cent. Analysts at Bank of America say that number is still too conservative and that the RBA will move to increase rates by another half percentage point, to 1.35 per cent, when it meets on Tuesday. Considering the country’s labour market tightness, the bank has ample room to do so, argue analysts at Westpac, who add that a cash rate below 1.5 per cent would remain in the “stimulatory zone”, something noted by the RBA itself in its last meeting minutes. William Langley More

During the pandemic, the central banks of the US and of the eurozone reformed their monetary policy strategy in a major break with earlier practice. After a decade of below-target inflation, and employment taking achingly long to return to earlier peaks, interest-rate setters promised to be relaxed about inflation running temporarily above target so long as ongoing monetary stimulus was otherwise warranted.This should have steeled central bankers’ nerves in the face of several bad supply-side surprises. And for a while they did keep their cool during the resulting inflationary burst. But they have not sustained the courage of their new convictions. Instead they let criticism bully them into rejecting the possibility that high demand pressure could draw more resources into the economy than previously thought and thus over time help contain price pressures while maintaining growth.Central banks now seem determined to restore that monetary version of toxic machismo that says if it doesn’t hurt, it’s not working. Leading policymakers are increasingly explicit about intending to bring inflation down even at the cost of slowing growth or putting people out of work. Markets have taken their cue and are bracing for recessions. Central bankers take no pleasure in this, of course. Their case relies on thinking there is no better alternative. But if so, they had better be absolutely right and unfortunately their argument is weaker than many think. At first the rise in inflation was near universally attributed to supply shocks. But despite the obvious role of Vladimir Putin’s attack on Ukraine and the subsequent tightening of gas supplies, prevailing opinion has somehow shifted to blaming excessive demand.Yet it is only this year that nominal spending surpassed the pre-pandemic trend in the US; and it still has not done so in the UK or eurozone. Even in the US, the total volume of goods and services bought (as opposed to their market value) is right on the pre-pandemic trend. Not so much demand running amok, then, as recovering demand (itself a triumph of crisis policymaking) facing higher prices for supply-side reasons.The obvious retort is that even if demand is near a normal level, supply may not be, either because of the pandemic or energy and commodity price spikes. But how certain can we be that these are durable problems? (It makes little sense to cause a recession to deal with temporary supply hiccups.)The pandemic could have damaged the economy’s capacity to produce by reducing the number of healthy workers. But not in the eurozone, where many countries enjoy record-high employment rates. And while the US economy still employs almost a million fewer people than in February 2020, the current boom keeps adding jobs at rates more than twice the pre-pandemic average. Job growth remains strong in continental Europe too. There is little sign of this fizzling out. But central banks could arrest it with their determination to curtail demand growth. So the question arises: is what our economies most need now really to have fewer people in work? Even with the lens of inflation, isn’t letting employment and hence supply continue to grow strongly what is needed to sustainably reduce price pressures?The same goes for the energy crisis. For net energy importing economies, high oil, gas and power prices make them poorer, so they will have to export more and consume less to provide for their energy needs. How is that problem ameliorated by reducing their own production as well, when contractionary policy hits both employment and investment? (As for countries that are not net importers, higher energy prices cause inequality that monetary tightening can only worsen.) The last line of argument for tightening into a supply-triggered recession is to avoid a wage-price spiral. But the rationality of this depends on the risk being more than theoretical. By themselves, wage increases are of course something to welcome — and robust profit margins suggest wage costs are not driving prices up. It is also worth noting that countries with the greatest collective bargaining coverage (France, Italy, the Nordics) have the lowest inflation rates. None of this should belittle the real suffering caused by the cost of living crisis. But monetary contraction on the cusp of a recession will make things worse for no benefit. Governments have to put in place support for those worst hit by the jump in prices. But maybe central banks — for the very sake of monetary and economic stability — should treat inflation with more benign [email protected] More