Aurelia Butler

Global stocks yesterday suffered their worst one-day decline since the early months of the coronavirus pandemic in 2020, as investors fret about signs of slowdowns in the world’s large economies at a time when central banks are reining in crisis-era stimulus measures. The FTSE All-World barometer of global equities dropped 3 per cent, its sharpest fall since June 2020, and hit its lowest level since December 2020. Worries over rising rates have been compounded by indications that growth in big global economies could be slowing. Chinese export growth fell to its lowest level in two years last month, according to data released yesterday, which followed reports last week pointing to slowdowns in the German and French manufacturing sectors. Wall Street’s blue-chip S&P 500 index slid 3.2 per cent and the tech-focused Nasdaq Composite dropped 4.3 per cent. Europe’s regional Stoxx 600 index fell 2.9 per cent, while China’s CSI 300 fell 0.8 per cent and Tokyo’s Topix fell 2 per cent. The price swings in US financial markets have probably been exacerbated by a decline in liquidity, the Federal Reserve reported as it warned of a “higher than normal risk” that trading conditions will suddenly deteriorate. Thanks for reading FirstFT Asia. Here’s the rest of the day’s news — EmilyThe latest from the war in Ukraine Russia’s Victory Day parade: In Vladimir Putin’s speech at the annual parade in Moscow’s Red Square, Russia’s president sought to justify his invasion of Ukraine by claiming his country had to defend itself against an imminent attack.Energy: Japan joined a pledge by other G7 countries to phase out Russian oil, while Brussels has shelved its plans to ban the EU shipping industry from carrying Russian crude.EU economy: The boss of Volkswagen has called for the EU to pursue a negotiated settlement to the war in Ukraine for the sake of the continent’s economy, an intervention that challenges the stance taken by European leaders. Five more stories in the news1. Ferdinand Marcos Jr on track to win Philippine presidential election Early results showed Ferdinand (“Bongbong”) Marcos Jr, son of the late dictator, was set to win the Philippine presidential election by a large margin, after a campaign run in tandem with Sara Duterte, the daughter of President Rodrigo Duterte.2. Sri Lanka’s prime minister resigns as protests intensify Mahinda Rajapaksa stepped down yesterday after weeks of violent protests, leaving the government of his brother President Gotabaya Rajapaksa in turmoil amid an economic crisis that has taken the country to the brink of default.3. Goldman Sachs pauses work on new Spacs The US bank has halted new Spac offerings, said people familiar with the matter, in another blow to blank-cheque companies as regulators close in on the once-booming market. Last year Goldman Sachs ranked as the second-biggest underwriter for special purpose acquisition companies, helping sponsors raise almost $16bn, according to data from Refinitiv.4. Crypto market value drops by $1.6tn since November high Cryptocurrencies have shed $1.6tn in market value since hitting an all-time high seven months ago as interest rate rises send investors fleeing from the riskiest corners of global financial markets. 5. BYD’s shares drop after launch of pollution probe Shares of China’s second-biggest automaker BYD have fallen after authorities launched an investigation into claims one of the company’s factories was responsible for harmful pollutants that were causing respiratory problems in children near the plant. Investors had poured into BYD, backed by Warren Buffett’s Berkshire Hathaway, after blockbuster first-quarter results.The day aheadSouth Korea’s president-elect takes office Yoon Suk-yeol will officially take office after being elected in March. Here’s our guide on what you need to know about the new conservative leader.Queen’s Speech at State Opening of Parliament UK prime minister Boris Johnson will put forward legislation for the third, crucial parliamentary session spanning 2022-23 in the Queen’s Speech, which will announce about 20 pieces of legislation including an economic crime bill, financial services bill and a media bill.Earnings Bayer, Coinbase, Fox Corporation, Mitsubishi Motors, Nintendo, Nippon Steel, Pirelli, Sony and Sumitomo Corporation are among the companies reporting results on Tuesday. FT’s Future of the Car summit, which runs through Thursday, features Tesla founder Elon Musk, who will be speaking and taking questions, along with a host of other industry leaders. Register here.What else we’re reading Australia’s ‘climate wars’ After years of record heatwaves, extreme droughts and wildfires, Australian voters of every stripe increasingly see climate change as a priority. Now, the pro-business, pro-environment “teal independents” could help to usher in a greener government in the May 21 vote.

After years of extreme heatwaves and wildfires, Australian voters increasingly see climate change as a priority © Dan Himbrechts/APHighlight text

Streaming services’ battle for India The country’s movie-loving, value-conscious customers have already humbled streaming godfather Netflix, which initially priced too high and had to shelve plans for India. But Amazon Prime reckons it has India figured out.Henry Kissinger: ‘We are now living in a totally new era’ The cold war strategist discussed Russia, the Ukraine war and China at the FT Weekend Festival in Washington this past weekend. Catch up on the full transcriptof Kissinger’s interview with the FT’s Edward Luce.Money managers in demand The industry for outsourcing investment mandates is booming as challenging markets, compliance regulations and rising costs push big asset owners to seek help. The sector has more than doubled in size since 2016 to $2.46tn in global assets under management.More on investment: The concept of acronym investing is coming apart, Ruchir Sharma writes. The recent unbundling of the Faangs is much like the fall of the Brics emerging markets a decade ago. Bleisure’s moment in the sun The ugly portmanteau describes a cross between business travel and leisure, Emma Jacobs writes. It is hardly new to tack a weekend of sightseeing on to a conference, but as business travel picks up and Covid-19 curbs end, there are reasons to believe this year its time has come. Sign up to our Working It newsletter for the big ideas shaping today’s workplaces. What to watchExplore the best of TV and streaming this week from hard-hitting French drama Oussekine to Our Father, a nightmarish story of a doctor who played god, modern dating explored in Love Life and more.

Sayyid El Alami as Malik Oussekine © Jean-Claude Lother More

The world is increasingly likely to experience global warming of 1.5C within the next five years because of record greenhouse gas levels, according to new research that adds to alarming evidence of how quickly the planet is heating.There is a 48 per cent chance earth’s annual temperature will exceed 1.5C of warming, compared with pre-industrial levels, in one of the years between now and 2026, the World Meteorological Organization and the UK Met Office said in a report published on Tuesday. That probability is likely to keep rising, it added. The chance of a 1.5C exceedance for the subsequent five-year period was close to zero just seven years ago, according to the data. “If we’re going to keep to 1.5C, that may be difficult now,” said Leon Hermanson, a Met Office researcher who led the report. “The 1.5C figure is not some random statistic,” said Petteri Taalas, WMO secretary-general. “It’s an indicator of the point at which climate impacts will become increasingly harmful for people and indeed the entire planet.”Global emissions have been rising as economic activity has rebounded after the pandemic, with carbon dioxide emissions last year reaching the highest levels ever recorded.That makes it even more difficult to achieve the targets set by the 2015 Paris climate accord approved by 197 countries, which aims to limit global warming to “well below 2C” with best efforts to keep it below 1.5C.Scientists have generally been reticent about predicting when exactly the 1.5C threshold will be crossed, with an Intergovernmental Panel on Climate Change report last year saying long-term average temperatures were likely to reach 1.5C higher within 20 years.The Paris climate accord target refers to a long-term average, so it could still be intact even if annual warming topped 1.5C in any single year. The planet has already warmed about 1.1C compared with pre-industrial times. The war in Ukraine has further set back climate co-operation, and some countries are planning to burn more coal to replace Russian gas supplies. At the Glasgow COP26 climate summit last year, more than 80 per cent of the world’s countries had agreed to adopted net zero targets. But there has been scant policy action to implement those target in the months since, and little progress toward improved national targets ahead of the next big summit in the Egyptian resort of Sharm el-Sheikh later this year.The Met Office and WMO scientists analysed about 120 different climate forecasts to calculate the chance of temporarily passing 1.5C. The report concluded that the hottest year on record was very likely to fall within the next five years. “Global temperatures are likely to increase in the five-year period 2022-2026,” it said.Severe heatwaves, fires, droughts and floods are among the impacts that are becoming more likely as the world gets warmer. A prolonged heatwave across north-west India and Pakistan this month led to coal shortages and power blackouts. “For as long as we continue to emit greenhouse gases, temperatures will continue to rise,” Taalas said. More

The quick rise in U.S. Treasury yields, the war-related trouble in oil markets and other factors have already strained some parts of the financial system, the report cautioned, and while the stress “has not been as extreme as in some past episodes, the risk of a sudden significant deterioration appears higher than normal.” “It is noteworthy that households and businesses have decreased their borrowing as a percentage of gross domestic product, and currently appear to have resources to cover debt burdens, which is an important aspect of resilience in an environment of rising interest rates,” Fed Governor and vice chair-designate Lael Brainard said in a statement accompanying the report.The report is the first to take stock of the rapid shifts in the financial landscape that have taken place since last fall, including a swifter tightening of monetary policy by the Fed and rising interest rates generally, inflation that has threatened to become more persistent, and Russia’s invasion of Ukraine.The volatility has been apparent in U.S. stock markets that have dropped sharply in recent weeks as well as in bond markets that have adjusted to higher U.S. interest rates and tougher financial conditions as part of the Fed’s efforts to slow inflation.”Inflation has been higher and more persistent than expected, even before the invasion of Ukraine, and uncertainty over the inflation outlook poses risks to financial conditions and economic activity,” the report noted.”Financial markets experienced high volatility and some strains on market liquidity,” over the last six months, the report said. “On net, over the period, Treasury yields increased markedly, broad equity prices declined notably, and credit spreads widened considerably in corporate bond markets.”Since closing at a record high on the first trading day of 2022, the benchmark Standard & Poor’s 500 Index has since slid 16.5% and the Nasdaq Composite has fared even worse, losing more than a quarter of its value in roughly six months. Yields on the 10-year Treasury note, influential to a range of consumer and business financing costs, has roughly doubled since the year began.In a survey of economists and market participants about the chief risks facing the U.S. financial system, threats from the pandemic had faded and been replaced a suddenly uncertain geopolitical environment.Survey respondents, the report said, were concerned that “stresses in Europe related to the Russian invasion of Ukraine or in emerging markets – such as those that could arise from China or be driven by inflationary pressures – could spill over to the United States. In addition, elevated inflation and rising rates in the United States could negatively affect domestic economic activity, asset prices, credit quality, and financial conditions more generally.”Overall corporate balance sheets remain healthy, with ample cash flow now to cover interest payment obligations. But, the report said, “the effect of high inflation, rising interest rates, supply chain disruptions, and the ongoing geopolitical conflict on corporate profitability is uncertain. A significant decline in corporate profitability or an unexpectedly large increase in interest rates could curtail the ability of some firms to service their debt.” “In addition, the upward pressure on oil prices, if sustained, could curb the recovery in hard-hit industries such as airlines.” More

(Reuters) -Atlanta Federal Reserve President Raphael Bostic on Monday said he expects the U.S. central bank will deliver two or three more half-percentage-point interest rate hikes but won’t need to use anything bigger, noting some hopeful signs on inflation. “I would say that (a 75-basis-point rate hike) is a low probability outcome given what I expect will happen in the economy over the next three to four months,” Bostic told Reuters during an interview on Twitter (NYSE:TWTR) Spaces. “A number of supply chain challenges that have really been just persistent through the pandemic are starting to show signs of easing,” he said.Trucking companies are no longer turning down business, as they were earlier, and shipping bottlenecks are easing, he said. Meanwhile, Bostic said he sees as yet unrealized downside risks to demand from the war in Ukraine and simply as households react to high inflation by potentially pulling back on spending.”I am going to stay open to the possibility that those sorts of adjustments will work in concert with our policy movements and get us to a place where inflation is approaching our policy … target at a faster rate than maybe some of my colleagues are projecting,” Bostic said. “In which case we will not need to do nearly as much.” The Fed last week raised its target for overnight bank-to-bank lending by a half a percentage point to 0.75%-1%. Fed Chair Jerome Powell said two more such rate hikes are likely at the U.S. central bank’s coming policy meetings as policymakers try to decisively curb inflation that is running at a 40-year high. “That’s very aggressive by historic standards,” Bostic said. “I’m hopeful that will actually do the job in terms of really taking the reins and wrestling inflation closer to our target.”A U.S. government report Wednesday is expected to show consumer price inflation slowed slightly in April, and Bostic said he will be watching month to month data closely. At the same time, he said, the labor market has a lot of momentum. That leaves room for a scenario under which rate hikes slow demand and inflation without forcing businesses to resort to layoffs or stop raising wages. “If we start to see signs that businesses are thinking about reducing their forces that would be a signal that would be quite meaningful, and it would be quite a departure from really anything we hear today,” Bostic said. The April unemployment rate was steady at 3.6% as businesses hired more workers than expected, the latest government job market report showed on Friday. More