Aurelia Butler

How well did you keep up with the news this week? Take our quiz. Stocks sold off sharply in the US on Thursday after Switzerland and the UK joined a global rush to raise interest rates, stoking concerns that central banks’ attempts to tame high inflation could push economies across the globe into a downturn. The S&P 500 stock index slid 3.2 per cent for the day, a move that took the broad gauge to a 6 per cent fall this week. The declines have battered valuations in recent days as pessimism about the global economic outlook has spread, with many investors warning more restrictive monetary policies from central banks could stamp out the recovery.In a sign of the darkening outlook, almost every stock in the S&P 500 declined on Thursday, with losses pushing the share prices of hundreds of companies down to new 52-week lows. The technology-heavy Nasdaq Composite index tumbled 4.1 per cent. The S&P had closed the previous session 1.5 per cent higher after the Federal Reserve raised its main interest rate by a historic 0.75 percentage points, tempered by comments from chair Jay Powell saying he expected rises of this magnitude to be relatively uncommon.More on global inflation: Analysis: The Fed’s full-tilt inflation fight makes a “softish” landing harder to achieve, writes Colby Smith.News in depth: While the past week has revived memories of the eurozone debt crisis, there are big differences between then and now.Opinion: In the fight against inflation, Fed chair Jay Powell is not just waging a battle in the markets, but also with consumers’ minds, writes Gillian Tett. Tracker: See how your country compares on rising prices with our global inflation tracker.

Thanks for reading FirstFT Asia and here is the rest of the day’s news — EmilyFive more stories in the news1. European leaders back Ukraine’s bid for EU membership The leaders of France, Germany, Italy and Romania pledged on Thursday to back Ukraine’s bid to apply for EU membership after travelling to Kyiv and meeting president Volodymyr Zelenskyy to show support in the face of Russia’s invasion. For more on the latest news on how the war is impacting business and the economy, sign up to our Disrupted Times newsletter.2. Trump was told overturning election was illegal Donald Trump pressured his vice-president Mike Pence to overturn the 2020 election despite having been told repeatedly that doing so would be illegal, a Congressional committee has heard. Members of the bipartisan panel investigating the attack on the US Congress were told that Pence made clear his opposition to the former president’s plan, including in a heated telephone call on the morning of January 6.3. Musk tells Twitter staffers his plan for company’s future Elon Musk warned Twitter staffers its business needed to “get healthy” and undergo a “rationalisation of headcount” as he addressed the social media platform’s employees directly for the first time since launching his $44bn takeover bid.4. China to set up centralised iron ore buyer China is moving to consolidate the country’s iron ore imports through a new centrally controlled group by the end of this year, as Xi Jinping’s administration seeks to increase Beijing’s pricing power over the industry — and particularly to counter Australia’s dominance. 5. Reliance targets diesel exports using cheap Russian crude Indian refiners including Mukesh Ambani’s Reliance Industries are using cheap Russian crude to try to boost diesel exports, including to destinations such as the EU with sanctions on Russian oil.More energy news: The US is urging European capitals to seek ways of easing the impact of their ban on insuring Russian oil cargoes, arguing the measure could cause global crude prices to soar.The days aheadJapan interest rate decision The Bank of Japan Monetary Policy Committee will announce its interest rate decision today. Governor Haruhiko Kuroda is expected to remain one of the lone doves amid an increasingly hawkish outlook globally. (Bloomberg) Solomon Islands PM hosts Australian foreign minister Prime Minister Manasseh Sogavare will meet Australia’s Penny Wong to discuss concerns over the nation’s security agreement with China. (Reuters) European officials expected to issue recommendation on Ukraine The European Commission is expected to recommend today that Ukraine should be granted EU candidate status, a first step towards membership.Sunday elections Colombia will hold its second round of voting in its presidential election on Sunday. In France, which is set to hold its second round of voting in its parliamentary election, the contest has been dominated by three individuals. What does this mean for the country’s stability?What else we’re reading‘Let it rot’: China’s tech workers struggle to find jobs Over the past year, China’s once overworked but well-compensated tech workers have seen an erosion of office perks, job cuts, headcount freezes and stalling or falling pay. Trouble at smaller, unprofitable companies gradually expanded to highly profitable groups including social media group Tencent and ecommerce leader Alibaba.Sales slow down in Sydney’s suburbia-on-sea Harder bargains are becoming more common in Sydney as home prices fall. The median sale price for a home dropped 1.5 per cent between January and May, after increasing 25.5 per cent in the previous 12 months, according to the index of CoreLogic, a property data provider. Rising interest rates are an important element of Sydney’s slowdown.Related reads: New Zealand’s housing price boom cools as rate rises bite, while US home mortgage rates jumped by the most since 1987. Sign up here to receive our House & Home newsletter.

Why we trust fraudsters From Enron to Wirecard, elaborate scams can remain undetected long after the warning signs appear. Left behind in the ashes, however, is a much larger question that haunts all victims of such financial fraud: how on earth did they get away with it for so long?Chinese courts flex intellectual property muscle across borders Since 2020, companies in the world’s second-biggest economy have been outpacing their American rivals in the number of new patents they secure each year. There are also signs that Chinese companies are turning the tables on foreign counterparts in aggressive IP litigation — a move that appears to have been backed by the country’s courts.Inside ‘gentle parenting’ Today’s parents largely believe that physical punishment such as spanking does little to change a child’s bad behaviour and should be avoided, in part because toddlers struggle to control their impulses as their prefrontal cortexes are not fully developed. Here’s why the movement is stressing some parents out.Thanks to readers who took our poll yesterday. Forty-six per cent of respondents said President Joe Biden was right to visit Saudi Arabia. TravelJapan’s long-awaited lifting of the ban on foreign tourists coincides with the launch of striking new works — and a new hotel — on Naoshima Island.

One of the six rooms, accessed by a private monorail, that make up the Oval building at Benesse House © © Osamu Watanabe More

WASHINGTON (Reuters) -State securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington are investigating crypto lender Celsius Network’s decision this week to suspend customer redemptions, Joseph Rotunda, enforcement director at the Texas State Securities Board told Reuters on Thursday.Officials met and began investigating the matter first thing Monday morning, Rotunda said, adding he considered the probe to be a “priority.” Celsius said that due to extreme market conditions, it was pausing withdrawals, swaps and transfers between accounts. The company said that doing so would put it “in a better position to honor, over time, its withdrawal obligations.””I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences,” he said. Alabama Securities Commission Director Joseph Borg also told Reuters that Alabama, Texas, New Jersey and Kentucky securities regulators were probing the matter. Celsius has been responsive to questions from the regulators, but that the investigation is in the initial stages, he said. Borg added that U.S. Securities and Exchange Commission has also been in communication with Celsius. The SEC declined to comment. The New Jersey and Washington state securities regulators did not immediately respond to requests for comment. A spokesperson for the Kentucky Department of Financial Institutions said it was their policy to not comment on ongoing enforcement actions and investigations. Celsius and CEO Alex Mashinsky did not immediately respond to a request for comment. Rotunda said he and his team learned of the move by New Jersey-based Celsius to freeze user withdrawals from the company’s blog post and announcement on Twitter (NYSE:TWTR) on Sunday night, which said the company needed to take action to “stabilize liquidity.”In September, regulators in Kentucky, New Jersey and Texas hit Celsius with a cease and desist order, arguing its interest-bearing products should be registered as a security. In February, the SEC and those same state regulators fined BlockFi $100 million for failing to register its crypto lending product. Similar to a bank, Celsius gathers crypto deposits from retail customers and invests them in the equivalent of the wholesale crypto market, including “decentralized finance,” or DeFi, sites that use blockchain technology to offer services from loans to insurance outside the traditional financial sector. Celsius promises retail customers huge returns, sometimes as much as 18.6% annually. The lure of big profits has led individual investors to pour assets into Celsius and platforms like it. Mashinsky said in October Celsius had $25 billion in assets. That figure had fallen to around $11.8 billion as of last month, the Celsius website https://celsius.network/about-us showed.Celsius appears to have stumbled on some of its wholesale crypto investments, according to public blockchain information and analysts who track such data. As those investments soured, the company was unable to meet redemptions from customers fleeing amid the broader crypto market slump, analysts said.Cryptocurrencies have lost more than $400 billion since TerraUSD, a major stablecoin pegged to the U.S. dollar, collapsed in May. Bitcoin sank to an 18-month low on Wednesday to $20,079.72. It has slumped about 70% from its record high of $69,000 in November. More

Germany’s finance minister has challenged the European Central Bank over the spectre of bond market fragmentation in the eurozone, saying he did not see particular hazards in current market conditions. Christian Lindner told the ECB’s president in a closed-door session that he was not worried by recent moves in spreads between bond yields in the euro area, and that talking about fragmentation in the bloc’s financial markets could damage confidence, according to people familiar with the discussion. His words came after the ECB held an emergency meeting on Wednesday in which its governing council pledged to accelerate plans to create a “new anti-fragmentation instrument” — a reference to the widening gap in the cost of borrowing between more stable sovereigns such as Germany and more vulnerable member states such as Italy.The unscheduled ECB meeting came after bond yields of countries such as Italy and Spain shot up to their highest level for eight years in the wake of a decision by ECB rate-setters last Thursday to stop buying more bonds and start raising interest rates.Euro area finance ministers discussed the situation with Christine Lagarde, the ECB president, in a meeting in Luxembourg on Thursday. Not all politicians appeared convinced that recent movements were untoward, and Lindner suggested that the ECB’s hastily convened meeting risked stoking up market nerves. Speaking ahead of the meetings, Lindner said the euro area was “stable and robust” and he did not share concerns over fragmentation in the region. While spreads were rising among some member states, their current levels indicated “no need for any concern”. “Our task as finance ministers is to show that we are going back to sustainable public finances and leave the expansionary fiscal policy of the [coronavirus] pandemic behind,” he said, stressing the importance of tackling inflation. The German finance ministry did not respond to requests for comment. Sigrid Kaag, the Dutch finance minister, said after the meetings in Luxembourg that it was important to “project confidence and calm” and not to “express ourselves prematurely” when monitoring what was happening in the markets. Lagarde defended the ECB’s handling of the situation in the meeting, telling ministers, “we have to address fragmentation risk to enable the implementation of monetary policy throughout the euro area”, according to people familiar with the discussions. She added: “Fragmentation risk is a serious threat to our price stability mandate. Doubting our commitment would be a serious mistake.”Paschal Donohoe, president of the eurogroup, later said recent movements in financial markets were a response to the “understandable” decision by the ECB to begin the normalisation of monetary policy. Ministers, he added, were “absolutely united” in their view that the euro area would continue to be “very robust, continue to be resilient, even as those market conditions change in the way they are”. Lagarde talked tough on inflation last week by unveiling a plan to end eight years of negative interest rates and bond buying. But days later the ECB called an emergency meeting and said it would speed up work on a new policy tool to tackle turmoil in bond markets. The central bank has given little detail on how the new instrument might work, though most experts expect it to involve targeted purchases of the bonds of eurozone countries suffering from an unwarranted increase in their borrowing costs compared with others. Analysts expect the ECB to unveil the tool at its meeting on July 21.Italian central bank governor Ignazio Visco said on Thursday that its emergency meeting did not signal panic. But he also said that any increase in the Italian spread above 2 percentage points created “very serious problems” for the even transmission of monetary policy.The ECB worries that a bond market panic could push up borrowing costs of weaker countries to a level that drags them into a financial crisis and stops the central bank from bringing inflation down from its record level of 8.1 per cent to its target of 2 per cent.One explanation for what the ECB is trying to achieve came from board member Isabel Schnabel, who said in a speech shortly before Wednesday’s meeting that “there is no reason to assume that sovereign bond yields are identical”. 

“There are times, however, when yields rapidly diverge from economic fundamentals, causing financial instability and hence fragmentation”, which Schnabel defined as “a sudden break in the relationship between sovereign yields and fundamentals, giving rise to non-linear and destabilising dynamics”.Ministers attending the eurogroup meeting in Luxembourg separately agreed that they should work on strengthening the region’s common framework for handling bank crises and national deposit guarantee schemes. They did not, however, endorse a detailed work plan for completing the EU’s banking union project, as had been mooted. They instead agreed to review the project down the road, with a view to identifying “possible further measures” addressing outstanding elements of the plan. More

TORONTO (Reuters) -Canada’s main stock index slumped on Thursday to its lowest level in 14 months and its currency weakened as investors grew more worried that aggressive central bank interest rate hikes would trigger a recession, weighing on corporate earnings.The Toronto Stock Exchange’s S&P/TSX composite index ended down 3.1% at 19,004.06, its biggest drop since June 2020 and its lowest level since April 2021.The Canadian dollar was trading 0.3% lower at 1.2930 to the greenback, or 77.34 U.S. cents, after touching on Wednesday its weakest intraday level in more than one month at 1.2995.U.S. stock indexes also tumbled on Thursday as the Swiss National Bank and the Bank of England lifted interest rates following the Federal Reserve’s 75-basis-point hike on Wednesday, with central banks aiming to slow domestic activity in the face of soaring price pressures.”It is becoming increasingly necessary to see a decline in growth in order to stave off inflation,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management.”People have been talking about recession but it’s not in market expectation yet if you look at the forward earnings growth. So that’s the next shoe to drop.”Broadbased declines on the TSX included a decline of 5.3% for the energy sector, extending its recent pullback, even as oil prices rose.U.S. crude oil futures settled nearly 2% higher at $117.58 a barrel after the United States announced new sanctions on Iran.Technology, which tends to be particularly sensitive to higher interest rates, fell 3.8% and heavily-weighted financials were 2.9% lower.One major outlier among individual stocks was LifeWorks Inc. Its shares jumped 66.4% after Canadian wireless carrier Telus (NYSE:TU) Corp agreed to buy the human resources services company in a C$2.9 billion ($2.2 billion) deal.Domestic data showed that Canada’s wholesale trade decreased by 0.5% in April from March, weighed by a drop in fertilizer imports from Russia.Canadian government bond yields were mixed across the curve. The 10-year touched its highest since May 2010 at 3.664% before pulling back to 3.409%, down 5.1 basis points on the day. More

The EU launched new legal proceedings against Britain on Wednesday after London published its new legislation, with both moves expected to take over a year to come into force.The EU could eventually review terms of the free trade deal it agreed with Britain. It has already thrown doubt on its role within the $99 billion Horizon Europe research programme.”We have to keep all options on the table,” Sefcovic, the European Commission Vice President who oversees EU relations with Britain, told Sky News.He said the two sides needed to continue talking to hammer out a solution to improve trade friction on goods moving between Britain and Northern Ireland, and that a unilateral approach by London would only sow uncertainty. London has proposed scrapping some checks on goods from the rest of the United Kingdom arriving in the British province and challenged the role of the European Court of Justice to decide on parts of the post-Brexit arrangement agreed by the EU and Britain.Sefcovic has said the move is illegal. The British province is in the EU single market for goods, meaning imports from the rest of the United Kingdom are subject to customs declarations and some checks on their arrival. The arrangement was set to avoid reinstating border controls between Northern Ireland and EU member Ireland, which are seen as contravening the spirit of the 1998 Good Friday peace agreement. More

(Reuters) – Federal Reserve policymakers are less confident than at any time since the height of the pandemic about what will happen with the economy, data published alongside their forecasts and the Fed’s hefty three-quarters-of-a-point rate hike this week show. The last time they were this worried they could be underestimating the coming deterioration in the labor market was in the depths of the Great Recession. But they are even more worried they are overestimating a hoped-for decline in inflation, documents https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20220615.htm charting confidence and risks seen in their forecasts show. The data helps underscore why policymakers are so focused on raising interest rates fast even if doing so causes a bigger dent to growth and unemployment than previously hoped, and why it is clarity on the inflation outlook that will drive policy.”It is clear that path of inflation continues to be the key consideration in how quickly the Fed gets to, and how far it moves past, the range of neutral in order to bring inflation down ‘clearly and convincingly,'” wrote Morgan Stanley (NYSE:MS) economists, referring to the standard Fed Chair Jerome Powell has set for declaring victory on price pressures and slowing up on rate hikes.All 18 Fed policymakers are more-than-usually uncertain about their inflation and economic growth forecasts, and all but one note the same about their unemployment rate projections, the data shows. The same documents also show that no policymaker believes their forecasts are too pessimistic, and most believe they could be underestimating the risks.Graphic: Fed uncertainty on the rise- https://graphics.reuters.com/USA-FED/zdpxoedzjvx/chart.pngThat means that though Fed forecasts embody the “softish” landing to which they aspire – inflation dropping to 2.2% by 2024, with the economy motoring along at 1.9% and unemployment rising just half a point to 4.1% – they are worried things could be worse, particularly for inflation. It also means, as with this week’s last-minute decision to deliver a hefty 75 basis point move after worse-than-expected inflation readings, that what Powell calls this “extraordinarily challenging and uncertain time” is sure to leave investors hanging.RAPID PACE OF RATE INCREASESUnquestionably, interest rates will rise, and rise fast: 17 of the 18 Fed policymakers see the target rate at least at 3.6% by next year, two full percentage points higher than today, and five see it above 4%. But is that where they will end up? Not even Fed Chair Powell knows. “I think we’ll know when we get there,” Powell told reporters Wednesday. “With the FOMC looking to remain nimble amid heightened uncertainty, guidance set out by communications should not be regarded as written in stone,” Barclays (LON:BARC) economists said in a note to clients following the this week’s Federal Open Market Committee meeting.Graphic: Is the Fed too optimistic?- https://graphics.reuters.com/USA-FED/egpbkgydmvq/chart.pngIt’s a warning that investors may need to keep in mind as Powell’s colleagues start Friday to make their first public statements after this week’s policy meeting, and when Powell gives testimony next week before lawmakers on Capitol Hill. More

LUXEMBOURG (Reuters) -The head of the European Central Bank briefed euro zone finance ministers on Thursday on a planned tool to fight high spreads between bond yields of the bloc’s nations, but remained vague about how and when the new scheme may kick in, sources said.The ECB had committed on Wednesday to offering fresh support to the currency bloc’s indebted southern countries, in a bid to temper a market rout that threatened a repeat of the debt crisis that almost brought down the single currency a decade ago.On Thursday, Christine Lagarde explained to ministers in a closed-door meeting the rationale for the new tool, which was still being designed by the bank, sources familiar with the discussions said.She told ministers that the goal of the bank’s new tool against so-called “fragmentation” was not to close the spreads on bond yields but to bring them back to normal levels, two officials said.It was not clear when the new tool would be ready and Lagarde offered no timing to ministers, one of the sources said.Earlier on Thursday, ECB Vice President Luis de Guindos told a conference in Milan the bank would “rapidly” implement the scheme.Lagarde told ministers that the tool, once ready, might kick in when spreads increased beyond certain thresholds, but did not give any precise figure about those thresholds, the two officials said.The tool could also be used when spreads increased too fast within a short period of time, the officials added.At a news conference after the meeting, the chair of the Eurogroup of euro zone finance ministers, Paschal Donohoe, said ministers did not discuss any conditions that should be tied to the launch of the new tool.One of the officials said Lagarde told the meeting that fragmentation was a “serious” risk that would be addressed, and warned that the bank’s commitment should not be put into question.Fragmentation refers to a divergence in the borrowing costs of euro zone members.”We have to address fragmentation risk to enable the implementation of monetary policy throughout the euro area. Fragmentation risk is a serious threat to our price stability mandate,” Lagarde told ministers, according to the source.”Doubting our commitment would be a serious mistake,” Lagarde said, according to the source. More

Russia’s annual investment conference in St Petersburg was created by president Vladimir Putin to showcase the country’s businesses and lure global investors to Russia. But with Russia mired in an economic crisis sparked by western sanctions, this year’s forum looks more like a morale-boosting exercise.“The events that are happening now, the way the state, business and people are reacting to economic events, shows we’ve got through it, we’re a strong country,” Maxim Oreshkin, Putin’s economic adviser, told a panel discussion on Thursday. Others were even more upbeat. “This is the best economic year for Russia since the collapse of the Soviet Union,” Kremlin-linked businessman Konstantin Malofeyev insisted.Despite the bold front, the conference, which runs until Saturday, was noticeably more muted than the previous affairs. Then, oligarchs and state-run companies signed major business deals and held lavish parties for a host of global industry and political leaders. This year, western delegates and their allies have largely stayed away as international tensions escalate amid the Ukraine war.

“Every year I would sign something with the Italians or the Japanese or whomever. Now there’s nothing to sign and nobody to sign it with,” said an oligarch who is under western sanctions.Instead, organisers have turned to allies such as China’s Xi Jinping and Egypt’s Abdel-Fattah al-Sisi for Friday’s keynote event. But both will send video messages instead of taking the stage alongside Putin. The Russian leader will speak alongside the leaders of the Donetsk and Luhansk People’s Republics, the Moscow-backed Ukrainian separatist enclaves.Other foreign dignitaries attending include the presidents of Kazakhstan and Armenia, the prime minister of the Central African Republic and officials from Cuba, Venezuela and Myanmar, as well as representatives of Afghanistan’s ruling Taliban.Officials at Thursday’s main economics panel did not mention Ukraine or the war, instead outlining ways Russia could muddle through the economic fallout.Western sanctions have cut off capital markets access for most Russian companies, battered import supply chains, prompted an exodus of foreign businesses from the country and forced the government to limit Russians’ access to hard currency. Addressing Thursday’s main economic session, central bank governor Elvira Nabiullina warned that “external conditions have changed for a long time, if not forever”, calling on businesses to abandon their export-focused approach and concentrate on the domestic market.Russia’s central bank chief Elvira Nabiullina urged businesses to abandon their export-focused approach and focus on the domestic market © Olga Maltseva/AFP/Getty ImagesMeanwhile, Russia’s oligarchs are reluctant to criticise Putin’s invasion for fear of domestic reprisals and are keeping a low profile. Some have stayed away entirely, including sanctioned industrial magnate Oleg Deripaska, who last week posted a video online of a cherry orchard and wrote that it was “time to collect the harvest” instead. Others tried to attend the forum incognito and asked organisers not to print their names on their badges. “There aren’t that many people, noticeably fewer this year. Everyone is going up to everyone and asking: ‘How are you doing under sanctions?’” said an executive at a leading Russian industrial firm. “It’s a sad sight.”Western executives who did attend said they were worried the sanctions were hurting the west more than Russia by encouraging countries in the global south to do business with Moscow on improved terms, even as the US and Europe struggled with spiralling inflation as energy prices soared because of the war. “If you’re losing an export market and you’re going to be paying 30 per cent more for energy, and energy’s half the unit manufacturing costs of your product, you know, you’re going to get screwed,” a western businessman attending the forum said. “Your Chinese competitor is getting a 40 per cent discount on energy. That’s a shift in the terms of trade.”Others said they feared leaving money behind amid the corporate stampede to exit Russia in the weeks after the Ukraine invasion. “Why should I hand over a billion-turnover business to Russia as a gift?” Vincenzo Trani, president of the Italian-Russian chamber of commerce, told a panel while discussing UniCredit’s plans to divest its Russian subsidiary. “Is this definitely in Italy’s interests?”Russia has vowed to find new international partners even if more western companies leave.

Sergei Chemezov, a close associate of Putin’s who leads the Rostec state industrial conglomerate, told Russian newspaper RBC: “The west’s treachery isn’t a reason to slam the windows and doors shut. We will go [our] separate ways with the proponents of sanctions, but we have partners in other regions of the world who are behaving in a consistent and principled manner.” Malofeyev said the economic pain to Russia caused by western sanctions was outweighed by their effects on the west.“Western businesses and countries are suffering from rising energy prices,” he said. “And Russian businesses are winning because they’re taking over market niches they never could have dreamed of,” he added. “The only shame is [officials] waited for the west to cut them off instead of doing it themselves first.”However, not all foreign delegates shared Russia’s confidence, with one senior western businessman saying: “How convincing is it when you replaced the biggest global corporates with a delegation from the Taliban?” Additional reporting by Polina Ivanova in London More