Aurelia Butler

Investing.com –It can be easy to lose sight of it, but whether the number of Russian soldiers that ends up permanently in Ukraine is zero, or 100,000, or anywhere in between, the big risk to the global economy this year remains China.The world’s second-largest economy has to pick a difficult path between the twin risks of Covid-19 and a slow-motion real estate bust: deadening the economy with lockdowns on the one hand, while supporting it with easier monetary and prudential policy on the other.A clear slowdown looks inevitable. As western governments withdraw their stimulus measures and reopen their economies, the dramatic shift in global demand since 2020 toward manufactured goods (mostly made in China) will reverse. The country notched 29.9% export growth last year, generating yet another record trade surplus. That is not sustainable.China needs its global customers to take the strain off its manufacturing sector, not least because its zero-tolerance Covid-19 leaves perilously little margin for safety in the global supply chains it feeds. Reported case numbers are now falling, and the much-publicized lockdown in the city of Xi’an has now been lifted, but Omicron is so contagious that the upcoming Lunar New Year celebrations still carry an obvious risk of spreading it more broadly across the country. At the same time, the real estate sector that has been the other big driver of economic growth over recent years is also slowing. While the authorities have managed to avoid disorderly defaults in the sector, they have been less successful in creating the kind of conditions needed to ensure that fundamentally sound companies can still find credit. At 11.6%, outstanding loans to the economy are growing at their slowest annual rate in 20 years.Markets cheered in December when a committee dominated by state-owned institutions took control of debt restructuring talks at Evergrande, the country’s largest and most indebted developer, thinking that clear political direction would accelerate the cleanup and quickly bring clarity back to the sector.However, that hasn’t happened. Evergrande’s international creditors said last week they will start to enforce their rights against the company after being ignored by the company for weeks, complaining of a “lack of engagement and opaque decision-making…contrary to well established international standards in restructuring processes of this magnitude.”A public letter from the creditors suggests that there will be little left over for them once Evergrande’s politically well-connected restructuring committee has hacked off the juiciest bits of the carcass. “Barely a few days pass without another news story or regulatory announcement disclosing yet further and hitherto undisclosed liabilities, pledges, asset sales and dispositions and/or government appropriations,” the creditors said.Small wonder that international bond markets remain closed to Chinese developers. The lack of refinancing alternatives is generating a steady drip of default notices – Hong Kong-listed Yuzhou Properties (HK:1628) becoming the latest to say it will fail to meet its obligations.The authorities are at least trying to compensate by making domestic financing conditions easier. The People’s Bank of China cut a suite of benchmark interest rates over the last week and talked up the possibility of doing more. It has the room to do so because inflation is falling, both for consumers and for manufacturers (in stark contrast to western economies). The yuan, meanwhile, is in rude health, reaching its highest in nearly four years.Chinese markets may remain susceptible to other shocks, such as the regulators’ campaign against the country’s biggest Internet companies last year. But the authorities have succeeded in avoiding disaster, both with the pandemic and its property developers, in a way that many western nations haven’t. For companies and investors in Europe and the U.S. who depend on that stability continuing, that’s good news. More

Investing.com — The selloff in  U.S. equities looks set to resume at the open, despite Monday’s violent short squeeze. Microsoft (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ) and General Electric (NYSE:GE) lead a cast of thousands reporting quarterly results and Nvidia (NASDAQ:NVDA) is set to drop its planned acquisition of ARM. German business gets less gloomy and the Federal Reserve begins a two-day policy meeting. Here’s what you need to know in financial markets on Tuesday, 25th January.1. U.S. stocks set to open lower again as rebound fadesMonday’s late rally may prove to have been nothing but a head fake. U.S. stock futures were clearly down again in the overnight session, after a violent short squeeze on Monday ran out of steam.By 6:15 AM ET, Dow Jones futures were down 127 points, or 0.4%, while S&P 500 futures were down 0.8% and Nasdaq 100 futures were down 1.3%. That more than wipes out the net gains from Monday’s session, although it’s nowhere near the intraday lows seen in the first couple of hours of trading.The market’s big test later will come from the corporate earnings roster, which starts with Johnson & Johnson, General Electric, American Express (NYSE:AXP), Archer-Daniels-Midland and defense giants Raytheon (NYSE:RTN) and Lockheed Martin (NYSE:LMT).However the real test of sentiment will come after the close, when Microsoft and Texas Instruments (NASDAQ:TXN) have to justify their still-high valuations. Microsoft will likely be asked to elaborate on what it intends to do with its $68 billion purchase, Activision Blizzard  (NASDAQ:ATVI).2. Fed meeting to start; Conference Board, Richmond Fed updatesThe data calender, by contrast, is pretty light, with the most interesting updates coming from the housing sector. There’ll be the national house price data along with the S&P/Case-Shiller assessments of prices in November at 9 AM ET (1400 GMT).In addition, there are the regular updates from Redbook Research at 8:55 AM ET and the Conference Board’s Consumer Confidence survey at 10 AM ET, along with the Richmond Federal Reserve’s monthly business survey.The day’s big macro event isn’t actually an event until Wednesday, of course. The Federal Reserve starts its two-day policy meeting later. It isn’t expected to change its monetary policy stance, but that won’t stop intense scrutiny of its forward guidance.3. Nvidia ‘set to drop ARM takeover’While Texas Instruments will give the big update from the chipmaking sector later, there are other developments already afoot.Nvidia is reportedly preparing to drop its $40 billion deal to buy U.K.-based chip design company ARM from Softbank (OTC:SFTBY), having come to the conclusion that various regulators will kill it in any case.Antitrust regulators in both the U.S. and China are against the deal, which also faces a national security review in the U.K.Softbank is now preparing an IPO of ARM in due course, according to Bloomberg News.4. German business confidence turnsWhisper it quietly, but German business is seeing signs of light at the end of the tunnel. Having fallen for the last five months, the Ifo Business Climate index inched up in January as companies reported a slight easing of supply bottlenecks.The index rose to 95.7, defying expectations of stagnation at 94.7. While the ‘current conditions’ assessments deteriorated a little, there was a clear improvement in the ‘expectations’ component.Shortages of chips led companies such as Volkswagen (DE:VOWG_p) to report marked drops in sales last year, and data for new orders and industrial output in the final months of the year had disappointed. The Deutsche Bundesbank said yesterday that Europe’s largest economy probably shrank in the fourth quarter.5. Oil edges higher as supply concerns trump market volatilityCrude oil prices edged higher, as the realities of supply scarcity outweighed concerns about broader volatility in risk assets.By 6:45 AM ET, U.S. crude futures were up 0.6% at $83.77 a barrel, while Brent futures were up 0.7% at $86.00 a barrel.The American Petroleum Institute reports its weekly U.S. inventory data at 4:30 PM as usual, with the market looking to see whether a three-week streak of builds in gasoline inventories will be broken. More

Top Stories Today is a short-form audio digest of the day’s top headlines. Here is the latest episode.The US has placed about 8,500 troops on standby for possible deployment to central and eastern Europe as the military build up in the region continues ahead of a possible invasion of Ukraine by Russia.The announcement by the Pentagon was made ahead of a telephone call by US president Joe Biden to European leaders to agree “massive consequences and severe economic costs” on Russia should it invade its neighbour, according to a White House statement.Boris Johnson, meanwhile, said Russia had amassed enough troops on Ukraine’s border to launch a “lightning war” and seize Kyiv. The British prime minister’s comments follow a warning from his government over the weekend that the Kremlin was preparing to topple Volodymyr Zelensky and install a puppet administration in Ukraine.British and US governments began removing diplomatic staff yesterday from embassies in Kyiv but, as our Europe Express newsletter noted, the withdrawals were not followed by their European allies. French President Emmanuel Macron travels to Berlin today for talks with German chancellor Olaf Scholz to discuss the deepening security crisis. The Kremlin confirmed this morning that Vladimir Putin and Macron would talk by phone later this week.Comment: There is a diplomatic route out of this crisis, writes former US ambassador to Nato Robert Hunter.

© A graphic asking if Russia will invade Ukraine

Thanks for reading FirstFT Americas. Here’s the rest of today’s news — GordonFive more stories in the news1. Tesla strikes back at JPMorgan The world’s most valuable carmaker has escalated its legal battle with the biggest bank in the US, accusing it of putting “its thumb on the scale” in an effort to gain a windfall from movements in Tesla’s share price.2. 7-Eleven owner faces investor calls to split Pressure is building on the owner of Japan’s largest convenience store chain to split the company as investors grow increasingly frustrated with “outdated” governance and poor share price performance.3. Credit Suisse investment bank warns of trading slowdown The Swiss bank warned that its investment bank will report a loss for the fourth quarter as trading revenues slowed. The bank also said it would take a SFr500m ($545m) provision in the fourth quarter to cover litigation settlements, mostly tied to its investment banking business.4. Unilever to cut 1,500 jobs in management shake-up The consumer goods group is to axe 20 per cent of decision-making roles as it faces pressure from investors to improve performance after a failed £50bn attempt to buy GlaxoSmithKline’s consumer health unit.5. China launches internet ‘purification’ campaign China has launched a month-long campaign to clean up online content during next week’s lunar new year festival, in its latest effort to reshape behaviour on the internet. The campaign will apply the tradition of cleaning house before the new year, the most important holiday in China, to the internet.Coronavirus digestThe US drugs regulator has rescinded its authorisation for the monoclonal antibody treatments made by Eli Lilly and Regeneron, which do not work well against the Omicron variant.The Covax vaccine initiative set up to ensure Covid-19 vaccines reach the world’s poorest people is unable to accept new dose donations because it has nearly exhausted the funds needed to buy crucial accessories, including syringes.The Metropolitan Police is investigating alleged breaches of lockdown rules around Downing Street. The FT has created a timeline of what we know about the parties that have been held at the heart of UK government.Germany’s Lufthansa and Swiss-Italian shipping conglomerate MSC have expressed interest in acquiring a majority stake in ITA Airways, in a sign of how the pandemic could reshape parts of the European aviation industry.Comment: Asian Americans suffered disproportionately on many fronts in the pandemic.The day aheadInterest rates The Federal Open Market Committee kicks-off its two-day monetary policy meeting with a statement expected tomorrow. The Fed is widely expected to confirm its plans to raise interest rates in March for the first time since the onset of the pandemic.Earnings Johnson & Johnson is expected to deliver strong fourth-quarter results boosted by its pharma business. General Electric, which late last year announced plans to split into three companies, also reports results as does Microsoft, which last week agreed to buy game maker Activision Blizzard. Markets Wall Street futures contracts imply renewed selling when US markets open this morning. The latest moves follow a volatile day on Wall Street, where the S&P 500 fell as much as 4 per cent, briefly dropping into correction territory, before erasing its losses to end the day 0.3 per cent higher.What else we’re readingHow Citadel Securities became ‘the Amazon of financial markets’ Founded in the 2000s, Citadel Securities has grown into one of the largest trading houses in the world, involved in roughly one in four of all US stock trades and nearly 40 per cent of all those involving individual retail investors. A decision to float, though, would put it firmly in the crosshairs of the Securities and Exchange Commission.Europe’s navel gazing With most big countries in western Europe — including the UK, France, Germany and Italy — in the midst of destabilising political transitions, they are even less prepared for a confrontation with Russia, writes Gideon Rachman.ANC rival steps up attacks on South Africa’s judiciary South African tourism minister Lindiwe Sisulu launched a rambling attack on Africa’s most independent judiciary and one of the world’s most progressive constitutions. Both have become targets in the battle to wrest control of the African National Congress from President Cyril Ramaphosa.Paul Polman: Critics of ‘woke’ capitalism are wrong In straitened times a more morally conscious business elite must, surely, be a good thing, writes the former chief executive of Unilever. Not everyone agrees, however.How cronyism corrodes workplace relations and trust When a group is under threat, the instinct can be to close ranks rather than act in the best interest of the organisation. After all, our ancestry predisposes us to seek advantage through cronyism. These tips advise on how to outsmart our baser instincts.TravelWith every take-off and landing, something remarkable is happening beneath the plane. Mark Vanhoenacker, author and a Boeing 787 pilot for British Airways, explains why aircraft tyres are a miracle of engineering.

Aircraft tyres are designed to withstand extreme conditions © Getty Images © AFP via Getty Images More

(Reuters) – U.S. central bankers on Tuesday will open their first meeting of the year already in broad agreement that they need to raise interest rates soon, likely in March, to slow the economy.They are likely not to hear a peep about it from the White House. The silence marks a sharp reversal for the Federal Reserve and its chair, Jerome Powell. His four interest rate hikes in 2018 drew blistering criticism from President Donald Trump, who had just installed Powell atop the Fed and felt they undercut Trump’s own efforts to bolster economic growth. Trump waged a public pressure campaign to stop them. President Joe Biden by contrast has endorsed what the Fed has signaled will be at least three interest rate hikes this year and a rapid shrinking of its nearly $9 trillion balance sheet to further raise borrowing costs. Last week Biden called Powell’s retooling of policy “appropriate” and emphasized the decision to do so was up to the Fed. So why the difference? Contrasting presidential styles aside, it comes down to one thing: inflation. In Trump’s four-year term consumer prices mostly rose around a 2% annual pace and never faster than 3%. In Biden’s first year alone they shot up 7% as demand for everything from cars to hamburgers far outpaced the economy’s ability to fulfill it. “Biden understands that the Fed’s performance will influence the course of the economy and thus help to shape his and the Democrats’ electoral fortunes,” said George Washington University’s Sarah Binder, author of a 2017 book on Fed governance.PLUNGING APPROVALThe higher prices are eating in to paychecks and outpacing strong wage growth as businesses try to woo workers after pandemic shutdowns and dislocations. They are also tanking Biden’s approval ratings https://www.reuters.com/world/us/biden-approval-rating-drops-43-lowest-his-presidency-2022-01-20 and have generated comparisons to the 1970s, when President Gerald Ford tried to force businesses into holding the line on prices and his successor Jimmy Carter appointed an inflation hawk – Paul Volcker – to finally end the upward spiral.So, far from fighting the Fed’s pivot to tighter policy, Biden is in fact betting on it. If things go right, the Fed’s raising rates from current near-zero levels will slow demand by making it more expensive to borrow and tempering spending impulses among consumers and businesses. Powell says the economy is strong enough https://www.reuters.com/article/usa-fed-powell-idCNL1N2TR1FJ to handle it and in fact will not be able to grow at its full potential if inflation stays high for too long and gets entrenched in business and household psychology. He also hopes for help in areas he cannot control – supply chains and the pandemic. If supply chains get untangled, businesses can obtain needed parts and materials more easily, reducing upward price pressure. And if the pandemic eases, more workers who stayed out of the job market because of health concerns or childcare burdens may return, reducing upward wage pressure.But in backing Powell, Biden also risks a potentially toxic mix – a Fed that is tightening policy just as government aid that bolstered demand last year drops off, and supply chains that remain tangled. Tensions on the Russian-Ukraine border could add to the uncertainty.And that could mean a scenario where the Fed ends up tightening policy more than the economy can tolerate.FED CREDIBILITY ON THE LINEBiden, who renominated Powell for a second term starting next month, is betting that Powell will pull it off, raising rates fast enough keep inflation from getting entrenched but not so fast they bring economic growth to a standstill.”If there’s no ‘soft landing,’ a recession would put Biden in even greater electoral danger,” Binder said.Meanwhile Biden and Treasury Secretary Janet Yellen are trying to resurrect his stalled spending plans aimed at lowering the cost of childcare and enabling more working parents to rejoin the workforce, among other things. They also hope to fix failed supply chains blamed for driving prices higher.Still, it is not clear that their efforts will pay off, and if the slow rate hikes the Fed has so far signaled will be enough to tamp down inflation.”If the (Fed) wants to be a more active contributor to bringing down inflation – as opposed to playing a more limited role and mainly waiting for the effects of pandemic supply-demand imbalances and fiscal stimulus to fade – then it will need to do enough to tighten financial conditions materially,” Goldman Sachs (NYSE:GS) economists wrote earlier this month. That, they wrote, could mean four or more rate hikes this year.There will be two months more of inflation data before the Fed’s March meeting, enough to show whether it is cooling on its own as policymakers repeatedly but wrongly forecast it would last year. If inflation continues to run hot, the Fed may not only need to do more rates hikes, but may need to deliver them earlier, wrote SGH Macro Advisors’ Tim Duy. “This is especially the case given the growing political costs of inflation,” said Duy, noting that the political risk is not just for the Biden administration, but also for the Powell Fed.”Its credibility with the public and on Capitol Hill requires that it meet its mandate” of 2% inflation on average, Duy wrote. More