Aurelia Butler

How well did you keep up with the news this week? Take our quiz.Joe Biden placed the blame for the January 6 assault on the US Capitol squarely on Donald Trump as he vowed to defend the country from a “dagger at the throat of democracy” during a speech to mark the first anniversary of the deadly attack.In an emotionally charged address, Biden, who referred to Trump only as “the former president”, said his predecessor “values power over principle because he sees his own interest as more important than his country’s interest and America’s interest”.“His bruised ego matters more to him than our democracy or our Constitution,” the US president said. Dismissing Trump’s claims that the 2020 election was “stolen”, Biden called on Americans to think seriously about the state of the country’s democracy.Former president Jimmy Carter wrote in the New York Times that he fears for the future of American democracy. Corporate America’s response to the January 6 attack was also in focus as one of Washington’s top business groups condemned those perpetuating “the falsehood of an illegitimate 2020 presidential election”. (FT, NYT) The FT View: Dwelling on legislative or technical reforms avoids the larger issue: the Republican party has become more estranged from civilised politics.Thank you for reading FirstFT Americas. Tell us what you think of today’s newsletter at [email protected] more stories in the news1. Kazakhstan protests Russian paratroopers and allied regional troops arrived in Kazakhstan after the president appealed for help controlling protests in which dozens have been killed in clashes with police. The demonstrations could mark the end of Nursultan Nazarbayev’s long grip on power, but they do not suggest a smooth transition from autocratic rule.Related news: Uranium prices jump as Kazakhstan upheaval stokes supply concerns. Also, Chevron has made a “temporary adjustment” to oil output in Kazakhstan, the first sign of the upheaval affecting energy supplies.

A vehicle burnt in Almaty, Kazakhstan during protests triggered by a fuel price increase © Pavel Mikheyev/Reuters

2. Investors lose ground in fight against supervoting shares A record number of companies including Chobani, Rent the Runway and Sweetgreen went public last year with shares that deny voting powers to most investors, a setback for asset managers pushing back against unaccountable corporate leadership.Opinion: Apple is vulnerable to a new breed of activist It has become easier for shareholders to push for change if they have a solid record or a trendy theme, says Tom Braithwaite.3. Departing Andreessen partner seeks to raise at least $900m for crypto funds The debut of Katie Haun’s new firm, which goes by the name KRH, would be one of the biggest for any new venture capital group.4. Growth equity booms as investors embrace private markets Growth equity has become one of the hottest corners of the private capital industry, as ever-larger companies eschew public markets and find strong demand among investors desperate for higher-returning bets.5. Fed trading scandal rekindled by disclosure Outgoing Federal Reserve vice-chair Richard Clarida was more active in financial markets at the start of the pandemic than he originally divulged, according to new disclosures. Clarida, who was already under fire for trading as the Fed planned emergency support for the economy, blamed “inadvertent errors”.Coronavirus digestSamsung’s profit soars as Covid-19 resurgence fuels semiconductor demand.France and Italy are instituting measures to pressure the unvaccinated to get Covid-19 jabs, such as no longer accepting negative tests to access restaurants.Opinion: Eliminating anti-vaxxers is a pipe dream, writes Henry Mance: “We have to content ourselves with judging them.”Xi’an officials fired hospital workers for denying entry to a pregnant woman who lacked a negative Covid test and subsequently had a miscarriage. The day aheadUS jobs The official non-farm payrolls report is forecast to show the US economy created about 400,000 jobs in December while the unemployment rate is projected to slip to 4.1 per cent, from 4.2 per cent previously. President Joe Biden is expected to address the report.Eurozone inflation Figures are expected to show a dip from 4.9 per cent in November to 4.7 per cent in December, still close to a 13-year high.What else we’re reading and listening toSix FT writers on the best party they ever attended From a 16th-birthday bash hosted by a hip-hop star to a fancy-dress rave in Mumbai, these writers reflect on their most memorable nights.“Sometime well after midnight two actual cops showed up but no one noticed them because there were already so many paunchy, moustachioed men in the joint” — Neil Munshi, FT west Africa bureau chief

Imani Moise, US banking correspondent: ‘Snooki and the rest of the Jersey Shore cast hung out on a balcony overlooking the dance floor’ © Cristina Spano

Why a private equity newbie is making bets on sport Since its launch, Arctos Sports Partners has become the most prolific buyer of sports stakes around the world, including in English football’s Liverpool FC, baseball’s Boston Red Sox and basketball’s Golden State Warriors. At the same time, the rush of institutional capital is raising questions about how investors will seek returns in exits.Can architecture improve the lives of chronic pain sufferers? The rise of homeworking, which has been embraced by many, has been a double-edged sword for those who suffer from chronic pain. Increasingly, buildings include innovations to accommodate those living with disabilities and health conditions.Sudan’s struggle for democracy The country’s attempt to transition to democratic rule foundered this week with the resignation of Abdalla Hamdok, interim prime minister. On the Rachman Review, Gideon Rachman discusses what happens next with London-based journalist Yousra Elbagir and Sudan-based writer Muzan Alneel.Football’s future is in the metaverse When European football was having conniptions last year over plans for a breakaway Super League, a central theme was the concept of the “real fan”. Technology is about to give this debate an intriguing new dimension, writes Leo Lewis.Thank you to those who took part in our poll on Wednesday. Fifty per cent of respondents said scientists should decide what to say to aliens, rather than civilians.FitnessRunning club numbers are on an upward sprint. One big draw is the sense of on-demand community — a rare chance to expand one’s social horizons at a time when many social touchpoints of daily interaction remain at a low.

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And unrest in Kazakhstan has put geopolitical risks back on the agenda, while China battles to keep its zero COVID strategy on track ahead of the Winter Olympics.Here’s your week ahead in markets from Tom Westbrook in Singapore, Lewis Krauskopf in New York and Dhara Ranasinghe , Tom Wilson https:// and Karin Strohecker in London. 1/QUARTERLY CHECK UP    Massive profit increases from U.S. companies helped fuel last year’s 27% gain in the S&P 500. As the earnings season kicks off in coming days, companies will likely have a difficult time posting similar numbers for the fourth quarter.    Earnings for S&P 500 companies are expected to jump 22.3%, according to Refinitiv IBES — a robust increase, though a lower clip than in the first, second and third quarters.    Big Wall Street banks JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) will be first in line to report. Investors are keen to hear about inflation, whether companies believe the supply chain bottlenecks that helped drive prices up last year will ease in coming months and forecasts for 2022. S&P 500 profit growth is expected to slow to 8.4% from 49.7% in 2021.For a related graphic on S&P 500 overall corporate results, click https://graphics.reuters.com/USA-STOCKS/RESULTS/mopanwjmjva/chart.png2/HOW HIGH? The first week of trading in 2022 has been anything but dull for the world’s biggest bond markets. Short-dated Treasury yields shot up to highs not seen since early 2020, 10-year yields are up over 20 bps, Germany’s -0.06% Bund yield is lurching closer to 0% and sovereign borrowing costs from Britain to Australia are at multi-month highs.The message is clear: tighter monetary policy is likely sooner than anticipated, with the United States leading the way. Until data or central bank speak contradicts this, 10-year Treasury yields could reach the 2% milestone soon. Investors will also keep a close on real yields since a view that inflation-adjusted yields will remain low has fueled the risk asset rally . The first week’s 30 bps jump in U.S. real yields may not make for a happy new year for some.For a related graphic on U.S. Treasury yields shoot up at start of 2022, click https://fingfx.thomsonreuters.com/gfx/mkt/xmpjobrbqvr/themejan7.png3/NEW YEAR, OLD RULESFor millions in China the new year began as the old ended – under lockdown . COVID-19 cases are few, particularly of the Omicron variant, but restrictions are spreading fast as authorities keep a zero-tolerance policy before next month’s Winter Olympics.Xian is more than two weeks into a lockdown and harsh rules are rolling out across central China. All 400,000 residents of Yongji, in Shanxi Province, were ordered to remain indoors this week after the virus was detected on a railway turnstile.The measures could render moot any further easing of zooming producer prices in December data due on Wednesday, especially if they trigger fresh supply-chain disruption around the world.4/KAZAKHSTAN AND BEYONDDeadly protests in Kazakhstan – the worst violence in its 30 years of independence – have added to the list of flare ups in the region being felt well beyond its borders.Once again, Russia plays a key role. The Kremlin deploying troops is widely seen as a gamble to secure its interests in the oil and uranium-producing Central Asian nation.Reverberations are felt throughout commodity markets and weighed on the rouble as Russia finds itself again in the limelight — tensions over Ukraine have loomed large over its markets. The outcome of unrest in Kazakhstan is yet unclear, but markets will have to sift through the fallout for geopolitical risk and diplomatic alignments for some time to come. For a related graphic on Protests in Kazakhstan, click https://graphics.reuters.com/KAZAKHSTAN-PROTESTS/zjvqknwrwvx/chart.png 5/BITCOIN HANGOVERAfter a wild 2021, bitcoin’s new year hangover has lingered into the first week of 2022 – and might get worse.The computing power of its network dropped sharply this week as Kazakhstan’s internet was shut down during its uprising, hitting its cryptocurrency mining industry – the second biggest in the world.The drop in bitcoin “hashrate” might, in theory, hit its price. The more miners on the network, the greater the amount of computing power needed to mine new bitcoin. If miners drop off the network, it becomes easier for the remaining miners to produce new coins – in theory boosting supply.Bitcoin has fallen below $41,000 to its lowest since late September with hawkish signs from the Fed adding to the malaise. Some see it slipping further into the $30,000-range. Crypto investors will be searching for signs bitcoin can get off the ropes.For a related graphic, click https://fingfx.thomsonreuters.com/gfx/mkt/zgpomanwxpd/Bitcoin%20volatility.PNG More

“Rates shock in 2022 to follow inflation shock of 2021 and financial conditions will tighten sharply,” analysts led by Michael Hartnett, chief investment strategist at the U.S. investment bank said in a note.Minutes of the U.S. Federal Reserve’s December policy meeting this week showed that policymakers are preparing the decks for a faster trajectory of interest rate increases. Money markets in the U.S. and the U.K are expecting rate hikes as early as March.BOFA strategists calculated that global central banks have bought $26 billion of assets every trading day in the pandemic era, pushing up global equity market capitalisaton by $133 billion on a daily basis.On a cumulative basis, investors have also pumped a record $949 billion in equity inflows in 2021, more than the cumulative inflow of the past two decades.On a weekly basis, a $2 billion outflow from U.S. Treasuries was the biggest in a year, energy stocks saw large inflows, while European equities registered their first inflows in eight weeks. Cash levels were also building, although there was no risk-off sentiment in equity flows yet. BofA’s ‘private clients’ which manage $3.3 trillion of assets had 11.2% in cash, the highest since last April, and the past week saw the biggest inflow to cash since July 2020, BofA’s note added. More

US jobs growth is expected to have accelerated in December ahead of the surge in Covid-19 cases linked to the Omicron variant, which would reinforce the Federal Reserve’s decision to hasten how quickly it reduces the amount of stimulus it is providing.Employers are expected to have added 444,000 jobs last month, according to a consensus forecast compiled by Bloomberg, more than double the 210,000 positions created in November.The unemployment rate is set to fall further after a sizeable drop the previous month. Economists have predicted an 0.1 percentage point decrease to 4.1 per cent.The data, which will be released by the Bureau of Labor Statistics at 8.30am US eastern daylight saving time on Friday, are also set to show another marginal improvement in the share of people employed or looking for a job.Concerns about catching Covid and childcare issues are chiefly to blame for holding back a more substantial return to work, keeping the so-called labour force participation rate below where economists anticipated it would be at this stage of the recovery. It is expected to have inched higher to 61.9 per cent in December, up from 61.8 per cent in November but still more than 1 percentage point shy of the pre-pandemic threshold. US central bank officials are waiting on further improvements in the labour market before proceeding with plans to raise interest rates in the face of extremely high inflation. The Fed has said it would delay “lift-off” of its main policy rate from its ultra-low levels until it achieves inflation that averages 2 per cent over time and maximum employment. Top officials saw the first goal as “more than met”, according to minutes from the December policy meeting, and “rapid” progress towards the second. Several members of the Federal Open Market Committee and regional branch presidents said labour market conditions were “already largely consistent” with maximum employment.

Some even speculated whether it would be appropriate to raise interest rates before maximum employment is achieved, especially if price stability concerns grow more acute.Christopher Waller, a Fed governor, and James Bullard, president of the St Louis Fed, are among those who support an interest rate increase in March, with additional adjustments appropriate later in the year. Most Fed officials see three rate rises in 2022 and another five by the end of 2024.The economy might also be in a strong enough position for the Fed to begin scaling back the size of its enormous balance sheet after the first interest rate adjustment, the minutes indicated, another substantive step to remove accommodation.The decision stems directly from a sharp acceleration in inflation, which now hovers at the highest level in roughly 40 years. Jay Powell, the Fed chair, recently said the central bank was watching wage growth closely for further evidence that inflation could morph into a more persistent problem. Economists expect average hourly earnings growth to have moderated slightly in December, increasing 4.2 per cent on an annual basis, down from 4.8 per cent in November. That translates to a 0.4 per cent month-on-month increase. More

Samsung Electronics estimated its fourth-quarter operating profit jumped 52.5 per cent on strong demand for server memory chips and increasing orders for contract chip manufacturing, fuelling hopes of a semiconductor price recovery.Operating profit for the world’s biggest producer of computer chips and smartphones was projected at Won13.8tn ($11.5bn) in the quarter ended December, but lower than the Won15.2tn forecast by a Refinitiv, partly because of special bonuses to employees. Sales were estimated at Won76tn, up 23.5 per cent from a year earlier.The South Korean company’s earnings are likely to increase further this year after a bottom in the first quarter, analysts said. Chip prices are expected to rebound in the second quarter, partly thanks to reduced production at Samsung’s plant in Xi’an, China, which is under a Covid-19 lockdown.“Chip prices are likely to fall less than expected in the first quarter and will start rebounding in the second quarter due to reduced supply from the Xi’an plant,” said CW Chung, head of research at Nomura in Seoul.Samsung’s upbeat profit guidance came after Micron Technology reported stronger-than-expected quarterly earnings last month and predicted record revenues for fiscal 2022. Samsung will announce detailed earnings later this month.Expectations of a chip price recovery after a brief downturn have pushed Samsung shares more than 10 per cent higher in recent months, as demand for data centres and streaming services jumped with the resurgence of Covid outbreaks worldwide. Samsung shares rose 1.8 per cent on Friday morning.

Samsung, which competes with contract chipmaker Taiwan Semiconductor Manufacturing Co, has also benefited from an increase in orders for its foundry business, which makes semiconductors for third parties. But the global non-memory chip crunch that has affected everything from cars to consumer electronics has eased more slowly.Analysts said Samsung had won two years’ worth of foundry orders until 2023 and estimated that the division’s operating margin reached 10-20 per cent. The company is also planning to invest $17bn in a new US plant for contract chip manufacturing.“External risks such as the resurgence of Covid-19 and the shortage of components still linger but the worst seems over,” said Park Sung-soon, an analyst at Cape Investment & Securities, in a recent report. “The company is likely to see a continued increase in foundry orders from major customers this year.”Analysts said the lockdown in Xi’an was improving the price environment for both Dram and Nand flash memory chips, prompting suppliers to delay negotiations in anticipation of higher prices. Dram chips enable short-term storage for graphic, mobile and server chips, while Nand flash chips allow for files and data to be stored without power.Samsung has two production lines in Xi’an, which account for 42.5 per cent of its total Nand flash memory production, according to TrendForce.Analysts also expect Samsung’s mobile earnings to increase on easing component shortages. The company’s foldable phone sales are likely to double or triple to 15m-20m units this year, as it expects to ship more than 300m smartphones, up about 10 per cent from last year. More

Worried about inflation? You aren’t alone. A survey by Aegon this week showed that 64 per cent of people are concerned about “the impact of rising inflation on their finances”. Businesses are (very) worried too: the latest quarterly report from the British Chambers of Commerce showed 59 per cent of companies expect prices to increase over the next three months; 66 per cent said that inflation was a “concern.” Both of those numbers are record highs.What’s the driver? Some 30 per cent of firms said pay settlements were part of it (we might think of this as good inflation!) but 94 per cent blamed raw materials (bad inflation).This is in large part about energy prices: wholesale gas prices everywhere have soared — in the UK they are five times what they were a year ago, something that is going to hurt the cash flow of every household.The Bank of America reckons that the average European household spent about €1,200 on electricity and gas in 2020, a number that, based on current wholesale prices, will rise to €1,850 by the end of 2022 — up 55 per cent.Next year is unlikely to be much better. Energy prices will keep on rising. Why? Because too many governments have jumped the gun on renewables — thinking that we can phase out fossil fuels in favour of deeply unreliable renewable energy significantly faster than we actually can — if indeed we ever can.

This is a decarbonisation shock — which one fund manager tells me could even end up causing as much pain as the Opec-driven oil shocks of the 1970s. This should perhaps make you angry with the green campaigners who forced fossil fuel divestment a decade too early, and argued for those painful green levies on energy bills. There is some relief ahead in, for example, the EU’s better-late-than-never acceptance that natural gas and nuclear energy must be part of the transition. But, for now at least, prices will keep rising. It is, say analysts at JPMorgan, a simple matter of supply and demand — as ever . . . There has been a collapse in investment in oil and gas production — capital spending on new projects is 75 per cent down from its peak. But at the same time global demand for thermal energy sources as a whole has “barely declined” — and the demand for oil just keeps rising.JPM expects global oil demand to grow by 3.5m barrels per day in 2022, ending the year both slightly above 2019 levels and at a record high. There will be a new record high in 2023 — there are a lot of record highs in today’s column — more unwanted inflation I’m afraid. JPMorgan’s various research teams forecast oil prices in 2022 to range from $80 to $125 a barrel. The world’s efforts to energy transition are obviously well intentioned. But good intentions often come at an unexpectedly high price. No exception here.

However, while it is easy to get hung up on gas bills and pump prices — UK politicians have all but forgotten Covid in their eagerness to row about these — rising energy prices may impact your long term wealth way more than they do your short term cash flow.Why? Because energy, and the transformation of that energy into goods and services, is the basis of most economic activity. That makes how much it costs and how efficiently we can transform it into absolutely key variables when it comes to stock market valuation.So much so that you can, says Gavekal’s Charles Gave, use the relationship between oil prices and the S&P 500 to forecast both bull and bear markets. All “structural bear markets in the US have all started when the S&P 500 was significantly overvalued versus energy”, says Gave. This was the case in 1912, 1929, 1968 and 2000. In each of those years valuations reflected investors underestimating the future cost of energy and hence overestimating the future profitability of listed companies.Those who aren’t nervous enough yet might also note that all these bear markets, bar that of 1929-34, took place with inflation on the up and “lasted as long as inflation endured”.This makes sense if you think of it in terms of rising energy prices pushing up costs and companies then not being able to add value or improve efficiency fast enough to absorb the costs without raising prices or suffering severely collapsing profits. The first creates inflation and causes a fall in demand — which hits profits anyway — so either way stocks valued with low energy costs baked into the models begin to look nastily overvalued.One additional point to make here. For the past few decades, one of the disinflationary impulses in the west has been the cheap goods coming out of China. Those goods were cheap partly because they were made with cheap labour — now getting more expensive — but also because they were made with the cheapest thermal fuel there is — coal. That’s something that is also shifting. China, keen to reduce pollution and maybe even to decarbonise, aims to get coal down to 20 per cent of its energy mix by 2026. This is far from certain of course, given the domestic political and economic pressures, but you can see which way things are going.The key point here is that energy prices matter even more than you think. Bull markets start when energy is plentiful and cheap (1922, 1949, 1982, 2010 says Gave). Bear markets start in times when it is not. Times like these. The investment implications are clear. Energy stocks performed very well last year. They will probably do the same this year. But their strength may well be reflected in serious weakness elsewhere. You should hedge the former with the latter. The simplest way to get exposure to oil and gas in the UK is with an exchange traded fund, such as the iShares S&P Commodity Producers Oil and Gas ETF. Otherwise, there is the TB Guinness Global Energy Fund, which is all about old energy, or if you want to hedge your energy bets a little look at the BlackRock Energy and Resources Income Trust, which is about 33 per cent invested in old energy, or the diversified Temple Bar Investment Trust with 15 per cent (which I hold).Merryn Somerset Webb is editor-in-chief of MoneyWeek. The views expressed are personal; [email protected]; Twitter: @MerrynSW More

TOKYO (Reuters) – Japan’s household spending posted an annual drop for the fourth straight month in November, a weaker-than-expected reading that threw into doubt hopes that a consumer demand recovery will give a major boost to the economy in the final quarter of 2021.Household spending fell 1.3% in November from a year earlier, government data showed, a surprisingly weak outcome compared with the market forecast of a 1.6% gain in a Reuters poll and dropping at a faster pace than October’s 0.6% decline.The month-on-month figures were also negative, losing 1.2%, weaker than a forecast of a 1.2% gain as households remained hesitant to increase spending despite lower COVID-19 infections than during the summer months.”Coronavirus infections had already come down, so this suggests consumers remain cautious about the outlook,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.The weak figures raise some concerns for policymakers hoping a rebound in consumer demand will support the economy as companies struggle with higher import cost due to a rise of raw material prices that have fuelled global inflation.Consumer spending, however, was still expected to stage a fourth-quarter rebound after the heavy hit they took in the quarter before it, said Tsunoda.”There will be sharp growth, but private consumption won’t recover to pre-pandemic levels as it will be coming from a low base,” he said.Declining spending on overnight stays and eating out weighed on the headline figure, a government official said, adding those items got a boost from a campaign last year to stimulate domestic tourism and dining out.Spending on clothes and transportation increased compared to a year earlier, the data showed. Separate data on Friday showed core consumer prices in Tokyo rose at the fastest pace in nearly two years in December as electricity and fuel cost surged due to higher global energy prices, while prices of overnight stays also increased.The core consumer price index (CPI) for Japan’s capital, which includes oil products but excludes fresh food prices, rose 0.5% in December compared with a year earlier, the biggest year-on-year gain since February 2020, government data showed.Inflation-adjusted real wages, meanwhile, slumped 1.6% year-on-year in November, falling for the third straight month and boding ill for a stronger economic recovery.Japan’s economy is expected to have grown sharply in the October-December quarter of 2021 after coronavirus cases declined, though the increasing cost of goods and the recent spread of the highly infectious Omicron variant are sowing some doubts for the outlook. More