Aurelia Butler

With inflation broadening, Lagarde said this week that the ECB’s minus 0.5% deposit rate should start rising in July and could be at zero or “slightly above” by the end of September before rising further “towards the neutral rate”.Dutch central bank chief Klaas Knot, among the most conservative members of the ECB’s Governing Council said he fully backed this plan and Olli Rehn, Finland’s central bank chief, also voiced support for rate hikes in the summer, as did the ECB’s own chief economist Philip Lane. “I’m fully on board, I fully support everything that is in the (Lagarde) blog, I think it nicely charts the policy course,” Knot told a World Economic Forum panel in Davos.Knot earlier said that a 50 basis point rate hike in July should remain a possibility but his comments on Wednesday suggest support for smaller, 25 basis point moves, in line with Lagarde’s call for gradualism. Speaking in Helsinki, Rehn, considered by some to be a policy “dove” who favours lower rates, said he also supported 25 point rate hikes in both July and September.Lane said the rate hike path sketched by Lagarde for the summer was “clear and robust” but he cautioned that any move beyond September will depend on how inflation pans out and the impacts of the war in Ukraine.Earlier this week, the central bank governors of Austria and Latvia both said that a 50 basis point rate hike should be an option in July, indicating that a 25 basis point increase is not yet a done deal.Fabio Panetta, an outspoken dove, took a somewhat different view, arguing that policy normalisation should not be equated with getting interest rates back to a neutral setting. Instead, he said the aim should be to cement the inflation at the ECB’s 2% target. “Normal does not mean neutral… the normalisation process should not be assessed against unobservable reference points, such as the natural or neutral rate of interest,” Panetta said in a speech in Frankfurt.Others, including French central bank chief Francois Villeroy de Galhau, an influential centrist voice, have also argued that the neutral rate is a key reference point in policy normalisation.The nominal neutral rate is estimated to be between 1% and 2%, or 150 to 250 basis points above the current minus 0.5% deposit rate, suggesting that the ECB could raise rates well into next year before approaching this level.Backing up his argument for caution, Panetta also said that the growth outlook is clearly weakening, a view Rehn appeared so share when he said the ECB was likely to cut its growth projection next month. More

British currency maker De La Rue has warned that profits would be hit by the rising cost of supplies, sending its shares sharply lower on Wednesday.The company, which makes British banknotes, said “further headwinds” would curtail adjusted operating profit for 2023. It added that there was now a “substantial degree of uncertainty in the outlook”, with supply chain inflation set to increase operating costs by £5mn this year.“There is a possibility that disruption may affect revenue,” the company said. “The board now expects that adjusted operating profit for full year 2023 will be broadly flat versus full year 2022, and weighted towards the second half.”De La Rue shares fell more than 8 per cent on Wednesday afternoon to around 102p. The company’s supply chain includes chips used in passports, while it also faces rising costs for raw materials such as the chemicals and polymer sheets, which are oil based, used to make banknotes. Freight costs are rising too and its suppliers are also increasing prices owing to their own energy costs.British businesses have been warning of lower profits this year because of rising costs in their supply chains and the impact of inflation on consumers.Marks and Spencer warned of cost pressures and economic uncertainty on Wednesday, while its Ocado Retail joint venture cut its growth outlook as costs continue to rise. Analysts questioned how much of this could be passed to the consumer, or to what degree it would hit margins.Online estate agent Purplebricks also warned on Wednesday that it would swing to a loss this year, following housing sales slowing as interest rates rise and concerns about the broader economy intensify.De La Rue said it was making progress with its turnround strategy, which includes cost-cutting and streamlining its operations. The company improved its market position across business divisions, it added.Clive Vacher, chief executive of De La Rue, said it was “working hard to bat away” cost pressures but that the wider macroeconomic environment remained uncertain.“We have prudently revised our outlook for the financial year 2022-23 adjusted operating profit, due to further headwinds experienced since the end of our financial year, and a realistic expectation of how far we can mitigate them.”The company had already been forced to admit that a turnround plan started by its new management would take longer than expected after missing analysts’ forecasts for operating profit for this year.Vacher added that while progress had slowed, De La Rue remained “strongly on the right path strategically and operationally to create a strong, cash-generative company in the medium term”.De La Rue reported an adjusted operating profit of £36.4mn in the 12 months to the end of March, down from £38.1mn the previous year. Revenue was also down to £375.1mn, from £397.4mn last year. However, the figures from last year include sales from operations that have now been sold or closed. The company made operating cash flow of £18.3mn, compared with a £5.6mn net outflow last year, while net debt increased to £71.4mn, from £52.3mn. More

Some breaking news to start: the First Movers Coalition, launched last year to help build markets for clean technologies, has unveiled a significant expansion at the World Economic Forum’s annual meeting in Davos. Seven countries are joining, including India and Japan, while the number of companies in emissions-intensive sectors committing to buying zero-carbon technologies has almost doubled.That is “an incredibly important demand signal” to help unleash the trillions of dollars of investment needed for the climate transition, says Rich Lesser, global chair of Boston Consulting Group. It is also a reminder that, for all the rightful attention on the war in Ukraine, Davos has not lost its focus on the climate.Indeed, it is difficult to overstate just how mainstream the environmental, social and governance agenda has become this year in Davos. A decade ago, these topics were a fairly niche area. Now about half of all sessions have some loose ESG theme. Or as one WEF official said: “The people working on ESG used to have to say, ‘Listen to us!’ and there was often a sense we were being patted on the head. Now we are in the centre.”This is not necessarily welcome for all ESG enthusiasts: the prominence of these themes is swelling a backlash in some quarters, and the sheer multitude of sessions means many are overlapping. But, if nothing else, it helps explain why so many ESG teams have turned up in Davos — and are likely to be pitching to return next year. Read on for more highlights of a second day of intense discussions here in the Swiss Alps. (Gillian Tett and Andrew Edgecliffe-Johnson)Davos day two in brief

Mathias Cormann, secretary-general of the OECD, during a panel session on day two of the World Economic Forum © Bloomberg

The OECD’s landmark deal to raise more taxes from multinationals has fallen behind schedule, said Mathias Cormann, the organisation’s secretary-general. Citing “difficult discussions”, Cormann said there was now no chance the deal would be implemented next year, as originally planned.Frozen Russian assets could be used to fund reconstruction in Ukraine after the war, said European Commission president Ursula von der Leyen. “We must leave no stone unturned, including if possible, the Russian assets we have frozen,” she said.European Central Bank president Christine Lagarde played down the risk of recession in the continent, but said the ECB would move cautiously in scaling back monetary stimulus amid surging inflation. “We don’t have to rush and we don’t have to panic,” she said.HKEX: a new green gateway to China?

Laura Cha: ‘We are using this sustainability and green focus as a key connection into China’ © Bloomberg

There is only one delegation from Hong Kong attending Davos this year because of the territory’s Covid-19 restrictions (among other things). That is the mighty Hong Kong stock exchange, which has long been a prominent delegate at the event. Unsurprisingly, the exchange has been telling participants that it remains open for business, notwithstanding the pandemic and political turmoil. However, it has also been seeking to promote another, somewhat striking message: HKEX hopes to be a green gateway for international investors wanting to tap into the ESG-friendly parts of China.More specifically, HKEX is seeking to make itself a bridge to what is known as the “GBA” — Greater Bay Area — of China, which has about 80mn residents and a rich ecosystem of dynamic start-ups, many of which are focused on green tech and other cutting-edge areas of climate transition. “We are using this sustainability and green focus as a key connection into China,” Laura Cha, chair of HKEX, told Moral Money. It may turn out to be a fruitful marketing strategy. But there is competition: John Tuttle, vice-chair of the New York Stock Exchange, told a Davos session that he is constantly telling Chinese companies seeking listings on the NYSE that they need “to have a good grasp of ESG and be reporting on sustainability and carbon footprints, since that will attract institutional investors”. Indeed he estimates that 40 per cent of investors now focus on this when they look at listing. The green battle between HKEX and NYSE is on. (Gillian Tett)Nature accounting heads down the track

David Craig is spearheading the Task Force on Nature-Related Financial Disclosures © Charlie Bibby/Financial Times

Right now, many companies are frantically bracing themselves for new accounting reforms emanating from the International Sustainability Standards Board and the Task Force on Climate-Related Financial Disclosures (TCFD). Opinions about the merits of these groups are mixed: while some big companies and banks welcome them, there has been plenty of gossip in Davos about the coming backlash against these new reporting burdens from parts of the corporate world. However, there is another set of standards coming down the track that companies need to be aware of: the Taskforce on Nature-Related Financial Disclosures (TNFD). Officials from this body told Davos delegates this week they will be issuing a preliminary blueprint next month that lays out how corporate boards could, or should, incorporate biodiversity issues into their corporate accounts, to recognise the cost of consuming natural resources and put a price on nature.David Craig, who is spearheading this initiative, freely admits this is not going to be as simple a task as using TCFD since the latter focuses primarily on one metric — carbon emissions — while the former is chasing multiple goals. But the TNFD group is deliberately trying to model itself on the TCFD strategy, albeit with some twists. Instead of using Scope 1, 2 and 3, for example, the TNFD is likely to focus on distinguishing between “upstream” and “downstream” supply chain issues, Craig said.Meanwhile, the pressure on companies to look at these issues is rising, given that 50 per cent of global GDP is closely tied to natural resources, according to the WEF. And some companies, such as the Swiss cement group Holcim, are already embracing the concept — not least because Swiss ministers told the Davos meetings they are likely to look at making TNFD compulsory in some form in the years ahead. Watch this space — and the TNFD report next month. (Gillian Tett)Quote of the day Environmental disclosure standards will do little to improve corporate practice until they are clearly linked to valuations and the effects on cash flow, according to Peter Bakker, president of the World Business Council for Sustainable Development (WBCSD), which represents 230 “forward-thinking” companies ranging from Accenture to Yokohama Rubber.“We are building a massive system of ESG disclosure but it’s all non-cash. Cash is king. Discounted cash flows are core for shareholders and the capital markets. Sustainability has made amazing progress, but it will not scale up until the capital markets are the driver,” Bakker told Moral Money on the sidelines of the World Economic Forum.While praising efforts to measure and harmonise environmental disclosures, he also called for broader social disclosures by companies, warning that “inequality is the next big crisis”. He added that a commission set up by the WBCSD would produce recommendations by the end of this year on how executives could tackle issues including tax, inequality, the living wage, human rights, reskilling and diversity. (Andrew Jack)Elsewhere in ESG: tempers flare at annual meetings

A climate activist wearing a face mask depicting Shell’s chief Ben van Beurden attends a protest outside Shell headquarters © REUTERS

The Central Hall Westminster in London, one of the City’s swankiest event spaces, is well known for hosting the BBC’s annual New Year’s eve concerts. But on Tuesday, the hall was the site of a raucous scene during Shell’s annual meeting, where climate activists allegedly glued themselves to seats.The AGM was delayed by almost three hours as protesters disrupted proceedings. (Read Tom Wilson’s full report for all the details, and Reuters video footage here).Today, the demonstrations are heading for New York. About 100 religious leaders and youngsters are planning to protest outside BlackRock’s annual meeting in midtown Manhattan. The protesters are demanding that BlackRock divest from companies expanding fossil fuel production.Wednesday marks one of the busiest days of the year for annual shareholder meetings in the US. Amazon, Twitter and Facebook will hold their meetings. All three are facing mounting pressure from companies ranging from executive pay to non-disclosure agreements. Amazon, for example, faces a whopping 15 shareholder proposals — the most it has faced since at least 2010. Investor support is already building for the shareholder petitions at these meetings. Asset manager Neuberger Berman said this week it was voting for a content standards shareholder proposal at Meta, Facebook’s parent. Additional disclosures about content enforcement would help shareholders see if risks at the platforms were being addressed, Neuberger Berman said. Facebook recommended shareholders vote against the proposal. Not all meetings will see fireworks. Exxon and Chevron, the climate activists’ top two targets in the US, will hold virtual meetings and conveniently dodge the disruption Shell faced.The votes on Wednesday will indicate the impact of environmentalists’ and social activists’ campaigns at annual meetings, and whether their provocations are changing corporate behaviour. (Patrick Temple-West)Smart ReadAs the controversy continues to rage around remarks by HSBC Asset Management’s head of responsible investment at last week’s Moral Money Summit Europe, the FT’s Pilita Clark argues that Stuart Kirk’s speech has exposed “widespread, muddled thinking around a central aspect of climate change: financial risk”. More

Investing.com — The Federal Reserve will publish the minutes of its latest policy meeting, while durable goods orders for April are also due. The euro falls as ECB policymakers row back talk of aggressive interest rate hikes. Nelson Peltz may be about to launch a takeover of Wendy’s, while Nvidia will report after the close. Russia edges closer to a manufactured debt default, and U.S. government data will show how well-stocked the nation’s gas stations are ahead of the start of the summer driving season. Here’s what you need to know in financial markets on Wednesday, 25th May.1. Fed minutes due as Burry revives memories of 2008The Federal Reserve will publish the minutes of its last meeting at 2 PM ET (1800 GMT). The release risks, being somewhat backward-looking, inasmuch as the meeting took place at a time when markets were still focused on inflation risks rather than recession risks.The latter have been dominant this week, as profit warnings and weak home sales data have pushed bond yields down and punished consumer and growth-focused stocks. Memories of the last recession were evoked on Tuesday by a somewhat Delphic tweet by Michael Burry, famous for his role in shorting subprime credit in 2007-08.“As I said about 2008, it is like watching a plane crash. It hurts, it is not fun, and I’m not smiling,” Burry said, without specifying what “it” was.Before the Fed, there will also be durable goods data for April, which may show a further slowdown on consumer durable spending, in particular, if Best Buy’s profit warning on Tuesday is anything to go by.2. Euro falls as ECB hawks step into line; RBNZ hikes by 50bpsThe euro fell as European Central Bank hawks and swing voters fell into line behind ECB president Christine Lagarde’s call for only gradual interest rate increases.Dutch central bank governor Klaas Knot and his Finnish counterpart Olli Rehn, a key centrist on the governing council, indicated that they would both be satisfied with only a 25 basis point hike at the bank’s meeting in July. Rehn, in particular, flagged the big downward revisions to this year’s growth forecasts that are likely when the ECB meets next month.European data overnight were mixed, with French unemployment rising a little, but Spain’s producer price inflation still roaring ahead at an annual rate of 45%.Elsewhere overnight, the Reserve Bank of New Zealand hiked its key rate by 50 basis points to 2%.3. Stocks set for flat opening; Wendy’s in focusU.S. stock markets are set for a mixed opening, with technology and growth stocks unable to claw back much of Tuesday’s underperformance.By 6:20 AM ET, Dow futures were down 18 points, or less than 0.1%, while S&P 500 futures, and Nasdaq 100 futures were up by a similar amount.Stocks likely to be in focus later include Nordstrom (NYSE:JWN), whose earnings after the bell on Tuesday took the edge of the recent retail sell-off, and Wendy’s (NASDAQ:WEN), after a filing from Nelson Peltz’s Trian suggested that its biggest shareholder is considering a takeover bid. Lyft (NASDAQ:LYFT) may be heading the other way after a report that it, too, is slowing hiring. Pfizer (NYSE:PFE) pressured pharma stocks by saying it would offer branded drugs to low-income countries at cost price, meanwhile.Chipmaker Nvidia (NASDAQ:NVDA) is the highlight of the day’s earnings roster, albeit only after hours.4. Russia edges closer to defaultRussia’s central bank said it will hold an extraordinary meeting this week, amid intense speculation as to what happens next with the country’s sovereign debt.The U.S. Treasury confirmed on Tuesday that it will not renew a temporary waiver on sanctions for processing the Russian government’s debt repayments, something that is likely to put the country officially in default – even though it is both willing and able to pay.Another speculation suggests that it will further relax its capital controls and cut interest rates in order to bring the ruble’s explosive appreciation under control. The ruble hit a four-year high again on Wednesday, supported by a current account surplus that has widened not only because of record energy export receipts but also because of a collapse in imports.5. Oil rises as U.S. gasoline inventories hit 8-year seasonal lowCrude oil prices were higher again after data from the American Petroleum Institute suggested that U.S. demand, ahead of the Memorial Day weekend, is still strong despite record-high prices for gasoline.Crude stocks actually rose by 600,000 barrels last week, according to the API, but gasoline stocks are at their lowest for this time of year since 2014, at a time when peak gasoline demand starts to kick in. The U.S. government’s weekly inventory data are due at 10:30 AM ET.By 6:35 AM ET, U.S. crude futures were up 1.4% at $111.31 a barrel, while Brent crude was up 1.2% at $112.04 a barrel. More

Hedge funds that use powerful computers to run their portfolios are making huge profits in this year’s market turmoil, marking a resurgence for a sector trying to recover from a long stretch of weak performance.Trend-following hedge funds, which use mathematical models to try to predict market movements, had struggled for years as central bank bond-buying suppressed much of the volatility on which they thrive.But the $337bn industry is now making its biggest gains since the 2008 financial crisis, according to data provider HFR.These quantitative funds have profited in particular from bets against government bonds, which have been shaken by expectations that the Federal Reserve will keep raising interest rates aggressively to fight high inflation. They have also capitalised on a surge in energy and commodity prices, fuelled by supply chain bottlenecks and Russia’s invasion of Ukraine.“Now is one of those 2008 moments where everyone [in trend-following] is doing well again. The trends are clearer,” said Leda Braga, founder of Systematica Investments and former head of systematic trading at BlueCrest.Thanks for reading FirstFT Americas. Here’s the rest of the day’s news — GordonFive more stories in the news1. Nineteen children killed in Texas school shooting US president Joe Biden made an emotional plea for the country to “stand up to the gun lobby” after a gunman killed at least 19 children and two adults in the deadliest school shooting in America for a decade. Law enforcement officers shot dead 18-year-old Salvador Ramos, who was suspected of carrying out the mass shooting at the Robb Elementary School in Uvalde, Texas.

The archbishop of San Antonio comforts families after the shooting at an elementary school in the city of Uvalde, Texas © AP

2. Donald Trump’s 2020 nemeses clinch big wins in Georgia Brian Kemp will seek a second term as Georgia governor after securing a convincing win over his Donald Trump-backed rival David Perdue. Meanwhile, Georgia’s secretary of state Brad Raffensperger, whom the former president blamed for certifying Joe Biden’s 2020 election victory in the state, will remain the Republican candidate after defeating his rival. Go deeper: The more Trump’s candidates lose, the less fear the former president will instil in the Republican party, writes Edward Luce.3. UK government clears £4.25bn Chelsea FC sale The UK government has finally signed off the £4.25bn sale of Chelsea Football Club to American financier Todd Boehly. The deal was held up after Boris Johnson’s administration insisted on guarantees that Russian owner Roman Abramovich would not benefit from the sale.4. North Korea fires suspected ballistic missile North Korea launched a suspected intercontinental ballistic missile and two other projectiles earlier today, according to the South Korean government, a day after Joe Biden concluded his first tour of the region as US president. The show of force by Pyongyang came less than a day after Chinese and Russian nuclear-capable bombers flew over the Sea of Japan in an exercise the government in Tokyo called “unacceptable”. 5. Pfizer warns of ‘constant waves’ of Covid-19 Growing complacency about Covid-19 and politicisation of the pandemic response will cost lives as the world is hit by new waves of the virus in coming months, Pfizer’s chief executive has warned. “What worries me is the complacency,” Albert Bourla told the FT.The day aheadMonetary policy The Federal Open Market Committee releases minutes from its May 3-4 meeting, where it raised the benchmark policy rate by 0.5 percentage points. The minutes should provide insight into the pace at which the Fed plans to raise rates to “neutral” territory in an effort to stem inflation. New Zealand’s central bank became the latest to raise interest rates earlier today. Economic data The US Census Bureau will release data on new orders of long-lasting goods such as refrigerators and aircraft, a category that serves as a proxy for business investment. Economists surveyed by Refinitiv expect a monthly increase of 0.6 per cent for April. The European Central Bank publishes its twice-yearly stability review and the OECD publishes its eurozone economic outlook. Company earnings Retailer Dick’s Sporting Goods is expected to report profits of $2.58 a share on $2.6bn of revenues, according to analysts polled by Refinitiv. Computer chip vendor Nvidia is expected to post profits of $1.29 a share on $8.12bn in revenues when it reports earnings after the market closes. Software group Snowflake also reports earnings.Market outlook US equities are expected to open in positive territory when trading begins after a profit warning from social media group Snap and a dramatic fall in new homes sales spooked investors yesterday. Shares in Europe were higher as investors waited for the release of the Federal Reserve minutes. Annual meetings Executive pay will be uppermost in investors’ minds at Amazon’s annual meeting, the first to be presided over by chief executive Andy Jassy. Oil majors ExxonMobil and Chevron also hold their annual meetings as well as BlackRock, the world’s largest asset manager.World Economic Forum ECB president Christine Lagarde, the Irish, Dutch and Slovakian prime ministers and the president of the European parliament join a Davos forum on EU unity in response to Russia’s invasion of Ukraine.Partying in Downing Street The long-awaited report into the “partygate” scandal that has rocked the UK government for months is released today. The report is expected to be highly critical of Prime Minister Boris Johnson after fresh allegations emerged this week of a culture of routine drinks events at Downing Street during the pandemic. Our Inside Politics newsletter has all the background.Remembering George Floyd Today marks the two-year anniversary of the killing of George Floyd. FT reporter Taylor Nicole Rogers returned to the otherwise unremarkable street corner in Minneapolis where Floyd was murdered to find a city still grappling with the legacy of the events of May 25 2020.

The site of the George Floyd memorial at 38th Street and Chicago Avenue in Minneapolis © Kerem Yuce/FT

Yesterday we incorrectly said was the two-year anniversary of George Floyd’s murder. We apologise for the error.What else we’re readingThe Fed must act now to ward off the threat of stagflation Whether there is going to be a recession in leading economies has arisen at Davos. This is the wrong question, Martin Wolf argues, at least for the US. The right one is whether an era of higher inflation and weak growth, similar to the stagflation of the 1970s, looms.Go deeper: The second part of our series on the US labour market looks at the most severe imbalance between labour demand and supply since the second world war.Is the ‘subscription economy’ going to feel the Netflix effect? The rash of businesses offering subscriptions took off in about 2011, led by TV and music streaming services and quickly followed by beauty products, clothes, organic coffee, craft beer, pet food and more. The “subscription economy” is heading into its first serious downturn, Helen Thomas writes.Sombre mood descends on Davos Russia’s invasion of Ukraine, surging inflation, Chinese lockdowns and growing uncertainty about globalisation have conspired to chill the business mood at the World Economic Forum meeting in Davos. “There are three R words right now: It’s Russia, it’s recession and it’s [interest] rates,” said Citigroup chief Jane Fraser.The rise of the Middle East and hope for sustainability One region where executives are more optimistic is in the Middle East. Luxury companies are reporting a flurry of spending in the region thanks to rising oil prices, strong economic growth and a return to shopping locally, executives told the recent FT Business of Luxury Summit.Asset managers divided by HSBC executive’s climate criticism A provocative speech on climate change by HSBC executive Stuart Kirk has split the asset management industry, with many disagreeing with his tone but others welcoming his willingness to prompt debate and highlight inconsistencies in environmental, social and governance investing.Opinion: Stuart Kirk has done the world of green finance a tremendous service, writes Pilita Clark.CinemaThe Cannes Film Festival celebrates its 75th year with Volodymyr Zelensky, Tom Cruise and Sharon Stone all putting in appearances. The FT brings you the highlights.

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Pakistan’s foreign minister says he hopes the country can renegotiate a deal with the IMF in response to the surge in global food and fuel prices, as mounting political unrest piles pressure on Shehbaz Sharif’s new government.Officials are in talks with the IMF to resume lending under a $6bn loan programme agreed in 2019 but in limbo since a dispute with the previous government over energy subsidies. Pakistan is struggling with a shortage of foreign reserves that has prompted some analysts to warn that the country is at risk of defaulting on its foreign debts.Bilawal Bhutto Zardari, who took over as foreign minister under Sharif last month, said the government would “abide” by the terms of the frozen IMF deal for the time being. But he hoped it could ultimately be renegotiated in light of the hardship caused by rising inflation in the wake of the Ukraine conflict.“This is a pre-Afghanistan situation deal, this is a pre-Ukraine deal, this is a pre-pandemic deal and pre-current global economic trends,” he told the Financial Times at Davos. “In light of that it would be important for the government of Pakistan at some point to renegotiate with the IMF”.Zardari said that the situation in Pakistan, which depends on imports of energy and staples such as wheat, has deteriorated to the point where people are going hungry. “This is already happening,” he said. “This is a daily concern.”His comments came as the economic situation stokes domestic political turmoil in Pakistan. Sharif’s government is facing a growing challenge from ousted prime minister Imran Khan, who was removed from office in a no-confidence vote last month and is now pressing for early elections.Pakistani authorities this week launched a crackdown on the former prime minister’s supporters, arresting hundreds of people and banning a march on Islamabad by Khan’s Pakistan Tehreek-e-Insaf party that was due to take place on Wednesday. IMF assistance has in effect been suspended since Khan, while still in office earlier this year, reintroduced controversial fuel subsidies that the fund had sought to remove. But Sharif has so far declined to scrap them as Pakistanis struggle with the cost of living.Zardari said he hoped the government would review and scale back the subsidy which might be a precondition for the resumption of IMF assistance. “Our economic situation in Pakistan is precarious,” Zardari said, calling inflation his “number one priority”.Pakistan’s liquid foreign currency reserves with the central bank have fallen to about $10bn, enough to meet the cost of only two months of imports. Growing speculation that Pakistan will eventually be forced to follow Sri Lanka in defaulting has prompted a sell-off in the rupee, which has lost about 9 per cent of its value since early April.Analysts warn that the economic pressures are exacerbating an increasingly ugly stand-off between Sharif and Khan, whose popularity has surged since his removal from office. The former celebrity cricketer claims, without evidence, that his ousting was the result of a “conspiracy” hatched by Sharif and the US.Maleeha Lodhi, a former Pakistani ambassador to the US and the UN, said that Pakistan was in danger of falling into “an unprecedented and uncontrollable crisis”. “This could not have come at a worse time given Pakistan’s fragile economy,” she said.Zardari dismissed concerns about the arrests of Khan supporters. “There have been some cases where activists have had some tiffs with the police,” he said. “But unlike in Mr Khan’s time, they’ve got access to the courts, more often than not got bail, and managed to go through the judicial process.” More

TOKYO (Reuters) -Urgent steps will be taken to ease pain caused by the surging cost of living in Japan, and to help the economy recover from the ill-effects of COVID, Finance Minister Shunichi Suzuki said as he presented a supplementary budget to parliament.Lawmakers began debating on Wednesday the proposed extra budget – worth 2.7 trillion yen ($21 billion) – to help households and small firms cope with high energy and food prices.The government plans to spend 1.17 trillion yen of it on mitigating the effect of rising global oil prices. This will include subsidising gasoline wholesalers. “Uncertainty about the outlook is rising, mainly because Russia’s invasion of Ukraine has destabilised crude oil and commodity prices,” Suzuki told the lower house of parliament.”That could hamper the pace of economic recovery from the coronavirus.”The supplementary budget also includes 1.52 trillion yen for budget reserves that the government will be able to spend later as necessary.Suzuki said he would encourage firms to smoothly pass on rising costs and raise wages to generate a virtuous cycle of growth that will help to ensure Japan’s economy recovers from the impact of the pandemic.The extra budget will be funded by bond sales, which could further strain a public debt that is already more than twice as large as annual economic output.To prevent the huge debt from becoming unmanageable, Suzuki’s fiscal advisory panel urged the government to stick to its aim of achieving a primary budget surplus, which excludes new bond sales and debt servicing, by the end of fiscal year in March 2026.”As a trade deficit may take hold from now on, market confidence in the yen and the fiscal situation will be called into question more than ever,” the panel said in its fiscal reform recommendations. “If the primary balance target takes a step backward, the risk is large for Japan to lose market trust.”The finance ministry wants the government to include the balanced budget target in its mid-year policy roadmap, but there are divisions over the plan within the ruling Liberal Democratic Party (LDP).($1 = 127.0200 yen) More

Global stocks struggled for direction on Wednesday as investors balanced recession risks with hopes the US central bank may soften its plans for aggressive interest rate hikes.Europe’s regional Stoxx 600 share index added 0.2 per cent in morning trades, following a bruising session across equity markets on Tuesday after social media group Snap warned on macroeconomic conditions and investors took fright over disappointing US housing data and business surveys. London’s FTSE 100 added 0.3 per cent, while futures trading implied Wall Street’s S&P 500 would edge 0.2 per cent lower at the New York open. The Federal Reserve, which influences monetary policy worldwide and releases minutes of its early May rate-setting meeting later on Wednesday, has sent strong signals that it will raise borrowing costs until it has tamed inflation, which is running at four-decade highs. However, some analysts are questioning how far the US central bank is prepared to lift rates. “Markets are telling us that the risks of a recession are rising,” said Mary Nicola, multi-asset portfolio manager at PineBridge Investments. But if the Fed’s account of its latest rate-setting meeting included “language that suggests a pause, or that they are concerned about growth, that could obviously really change how markets are priced”, she added. Salman Baig, portfolio manager at Unigestion, said: “I wouldn’t be surprised if we started seeing more language about looking at the data, and a little bit of a pivot towards hiking [rates] in June and July and then starting to maybe reassess. “It’s unlikely to be a really meaningful shift at this point, as they are going to want some pretty clear indications that inflation has turned and we are not there yet.” US new home sales fell almost 17 per cent in April, month on month, a report on Tuesday showed. Purchasing managers’ surveys also indicated that growth in business activity in the US and UK decelerated during May. Stocks sold off heavily on Tuesday in response to the flurry of disappointing data, with Wall Street’s tech-heavy Nasdaq Composite closing 2.3 per cent lower. Treasury bonds, which tend to react positively to expectations of lower interest rates on cash deposits, also rallied. The S&P 500 last week dipped into bear market territory, defined as a 20 per cent drop from a recent peak, while the Nasdaq is about 30 per cent below its November 2021 high. The yield on the 10-year Treasury note, which underpins borrowing costs worldwide and falls as the price of the debt instrument rises, dipped 0.03 percentage points to 2.73 per cent in European morning trade on Wednesday, around a one-month low.The two-year Treasury yield, which closely tracks interest rate expectations, traded at 2.51 per cent, having risen above 2.8 per cent in early May. Elsewhere in markets, a broad FTSE index of Asia Pacific shares added 0.2 per cent as bourses in Hong Kong, mainland China, South Korea and Australia all closed higher. The euro lost 0.6 per cent against the dollar to just under $1.07, as a bounce fuelled by European Central Bank president Christine Lagarde signalling the end of negative interest rates in the eurozone faded out. Brent crude, the oil benchmark, rose 1 per cent to $114.7 a barrel. More