Economy

ABU DHABI (Reuters) -World Trade Organization (WTO) negotiators failed to break a deadlock on major reforms on Friday despite talks extending deep into overtime in Abu Dhabi, in what some delegates said was a triumph of national interest over collective responsibility.Talks ended early on Saturday after five days of negotiations which failed to see breakthroughs on agriculture, fisheries and other key topics. However, a moratorium on imposing tariffs on e-commerce data transmissions was extended by two years, in a relief to businesses.”On the big ticket items that are essential for the mandate that the WTO wants to sort out, the fisheries, the harmful subsidisation, that just did not happen, because there was not the spirit of give and take,” a senior European official said.On the fifth day of the ministerial meeting, most ministers had already gone home, although India’s trade minister Piyush Goyal and European Trade Commissioner Valdis Dombrovskis remained until the end.BLAME GAMEDombrovskis expressed disappointment over the lack of consensus on fisheries, agriculture and broader reforms, and singled out India for blame. “Agreements were within reach, supported by an overwhelming majority of members, but ultimately blocked by a handful of countries – sometimes just one,” he said in a statement.Goyal, who was a holdout on these topics, was seen smiling and shaking hands outside a meeting room late on Friday as delegates gathered in small groups next to a coffee stand. India insisted on a long promised permanent fix on public holdings of agriculture stocks which some developed countries opposed.”We have not lost out on anything. I go back happy and satisfied,” Goyal told reporters as talks started to wind down.Delegates had described the talks as intense and contentious at times, but WTO Director General Ngozi Okonjo-Iweala sought to put a positive spin on a difficult week, telling a closing session: “We’ve worked hard this week, we have achieved some important things and we have not managed to complete others.”India, along with South Africa, had opposed extending a moratorium on digital trade tariffs – a move that has overwhelming support of most governments and from business – but later relented after an appeal from host United Arab Emirates.WTO ministerial meetings have failed in the past and this year’s negotiations, held in the oil-rich Gulf state the United Arab Emirates, has highlighted fissures between some of the world’s top economies.BRICS DISAGREEMENTU.S. President Joe Biden’s trade chief, Katherine Tai, said in an interview with Reuters late on Thursday that if talks failed, fragmentation among the BRICS group would have contributed.India and China, core members of the BRICS group of nations, have disagreed on key issues including on investment. India’s commerce minister joined the negotiations two days after they started and after his Chinese counterpart had left Abu Dhabi.Pacific island nations have also complained at the talks about feeling marginalized and overlooked by most major powers, arguing that proposals did not go far enough to protect fish stocks.But Fiji’s delegate earned a standing ovation at the end of the closing ceremony after urging countries to support future negotiations on fisheries.U.S. support for global trade and multilateral groups like the WTO has been renewed under Biden. But negotiators were mindful that former President Donald Trump, who disrupted the multilateral system, could win a second term in the U.S. presidential election in November.John Denton, who heads the International Chamber of Commerce, warned that the weak outcomes from the meeting should “serve as a wake-up call on the need for a more nuanced and constructive debate on the role of trade in society – both locally and globally. No country stands to gain from a weakened multilateral trading system.”Earlier in the week, even the formal acceptance of completed negotiations on improving investment was blocked at an organization where all 164 members must agree by consensus. A consensus on major deals would have elevated the UAE’s status as a global interlocutor, as it seeks to place a bigger emphasis on multilateralism and dialogue, a turnaround from the assertive foreign policy it was pursuing a decade ago. More

Fitch forecast the country’s gross domestic product growth to slow in 2024, despite its economy proving resilient in the face of higher interest rates.The U.S. economy grew by 2.5% in 2023, partly reflecting the renewed fiscal policy easing as highlighted by the large general government (GG) deficit in 2023.Fitch estimated that the GG deficit had reached 8.8% of GDP in 2023 and forecast the 2024 GG deficit to narrow to 8% of GDP, on the back of escalating revenue growth, narrower spending, falling off of some large one-off spending on deposit insurance in 2023.”The interest burden, however, will continue to grow given the higher debt burden and impact of higher rates,” Fitch added.According to the agency, the outcome of the upcoming November presidential and congressional elections will be important for policymaking and the ability to pass and implement legislation.In November, peer Moody’s (NYSE:MCO) lowered outlook on the country’s credit rating to “negative”, citing large fiscal deficits and a decline in debt affordability. More

The space agency said in October that the On-orbit Servicing, Assembly, and Manufacturing 1 (OSAM-1) project continues to face an increase in costs and is expected to exceed its $2.05 billion price tag and the December 2026 launch date.For its decision to discontinue the project, NASA on Friday cited “continued technical, cost, and schedule challenges, and a broader community evolution away from refueling unprepared spacecraft, which has led to a lack of a committed partner”.Much of the project’s cost growth and scheduling delays could be attributed to the “poor” performance of contractor Maxar, NASA said in October.Maxar was previously contracted by NASA in 2019 to help build its Gateway platform in lunar orbit, a crucial outpost for America’s first mission to relay astronauts to the moon. More

ABU DHABI (Reuters) -It was billed as the “reform ministerial” that could lay a platform for updated global trading rules fit for modern challenges, from climate change to rising agricultural and industrial subsidies.But from day one at the World Trade Organization’s biennial gathering of ministers, the warning signs were clear that major trading nations were not in a mood for the sort of compromise required to achieve progress on any track.WTO Director-General Ngozi Okonjo Iweala had curbed expectations as the conference opened, with wars and tensions fragmenting the global economy into separate blocs and the U.S. and other elections limiting room for manoeuvre.The first day of negotiations did not go smoothly.Indian Commerce Minister Piyush Goyal only arrived during the course of Tuesday, by which time his Chinese counterpart Wang Wentao had departed.Almost all members arrived in Abu Dhabi wanting to restore the WTO’s ability to resolve trade disputes, which the United States has hobbled by blocking judge appointments to the appeals body that acts like a supreme court for global trade. Norwegian Foreign Minister Espen Barth Eide sought to broker a compromise and secure a WTO commitment towards a return to this system, but was rebuffed by U.S. Trade Representative Katherine Tai in a meeting sources said ended abruptly.Tai declined to comment on the meeting but was positive about ongoing negotiations. And WTO members did agree to continue talking on the matter in 2024. Light relief did at least come by the evening as the WTO toasted the accessions of East Timor and Comoros with sparkling wine and the jubilant East Timor delegation led a conga line around the room. The WTO treated the two accessions as a success, but it does swell its ranks to 166 members, each of whom have veto rights under its consensus-based system to stymie agreement. Indeed, in its near 30-year history the WTO has only struck two multilateral accords, one to cut red tape and another to curb fishing subsidies.By Wednesday, a multi-nation agreement designed to boost investment in poorer countries was blocked, despite some 120 countries having agreed to a text in November.Meanwhile, language on climate change, expected in a final WTO communique, was parked in an annex with an explanatory note referring to “deep divergences” among members.As negotiations continued behind closed doors on Thursday and into Friday, the United States trade representative departed, leaving trade chiefs from the European Union, India and a handful of other countries battling through to the close just beyond midnight.India had previously signalled it was not in a mood to compromise, particularly towards extending a waiver on digital tariffs, a moratorium developed countries in particular had sought. But it dropped its opposition at the last minute following a personal request from the UAE hosts, a senior Indian official said. At the end, Goyal expressed satisfaction that India had not lost out on anything. But one EU official said the overall impasse was sobering and not good for the future of trade, on which the European Union relies.”I think trade will be more and more characterised by power relations rather than the rule of law, and that I think is a big problem notably for smaller countries and for developing countries,” the official said.”The spirit was really everyone for themselves, zero sum game.” More

BUENOS AIRES (Reuters) – All eyes were on Argentina’s combative libertarian President Javier Milei on Friday ahead of a prime time state-of-the-union style speech set for the evening opening of Congress, even as protests started to build on the streets and markets rallied.The outsider economist and former TV pundit, who wants to shake up Argentina’s embattled economy with “chainsaw” cost cutting, privatizations and market-led policies, is winning over markets but facing push back from workers and lawmakers.His evening speech will be closely watched, after Congress rebuffed his signature reform bill last month and could take their knives to his sprawling decree rolled out when he took office in December as regular legislative sessions begin.Milei could moderate and reach across the aisle – he needs to with only a small share of the legislature – or come out fighting after he slammed lawmakers and governors as “traitors” for opposing his bill and said Congress was a “nest of rats”.”People are waiting to see the content and tone of the president’s words,” local finance firm SBS Group said in a report.”The event is taking place in the context of recent tensions, both with the provinces and with other political actors after the fall of the ‘omnibus law’ a few weeks ago, as well as distorted prices hammering people’s purchasing power.”Inflation over 250%, which predates Milei but rose after he devalued the peso currency sharply in December, has pushed up poverty levels seen nearing 60%, raising tensions among workers and unions, and prompting more strikes and protests.Further protests are expected around the capital on Friday afternoon against subsidy cuts and outside Congress.Some powerful regions have also hit back at Milei over planned funding cuts, including oil- and gas-rich Chubut province and the populous Buenos Aires province. La Rioja province has also warned it will miss bond payments due to the economic situation, a thorn in Milei’s side as he tries to win over long-suffering investors.Markets, meanwhile, edged up on Friday, with the black market peso dropping near 1,000 per dollar, further narrowing the gap with the controlled official rate at 843 pesos.Sovereign bonds, that have been on a bit of rally in the last month as investors have cheered Milei’s austerity measures and fiscal tightening, edged up some 0.2% on average, while the S&P Merval equities index was up 2.3%.(This story has been refiled to fix a typo in paragraph 1) More

(Reuters) -Federal Reserve Governor Adriana Kugler on Friday signaled she sees the elusive “soft landing” of falling inflation amidst a healthy labor market within reach for the U.S. economy, noting that inflation expectations remain anchored and the Fed has avoided a wage-price spiral.”I am cautiously optimistic that we will see continued progress on disinflation without significant deterioration of the labor market,” Kugler said in remarks prepared for delivery to the Stanford Institute for Economic Policy Research Institute’s annual economic summit. Kugler notably did not lay out her expectations for when or how fast the Fed should cut its policy rate, which it drove up rapidly in 2022-2023 and has held in the 5.25% to 5.5% range since last July. But she said her optimism stems from how quickly Fed interest rate hikes and the reversal of the supply shocks that contributed to inflation have eased price pressures even as the labor market stayed strong. Inflation surged post-pandemic because of sharp and rapid constraints on the supply of both goods and labor, to which businesses were not able to quickly adjust, she noted. But it has dropped nearly as rapidly, as supply of both workers and goods came on line last year. Wage growth slowed as a result, she noted, likely putting to rest the threat of a wage-price spiral that could have allowed inflation to entrench. Meanwhile inflation expectations have remained anchored, with businesses resetting prices less often than at the height of the inflation surge – a sign, she said, of cooling inflation.At 3.7%, the U.S. unemployment rate is only a few tenths higher than it was when the Fed started raising rates in March 2022. Meanwhile the inflation rate by the Fed’s targeted measure — the annual change in the personal consumption expenditures price index — is down by 4.5 percentage points, to 2.4% at its most recent reading. “We have seen inflation cool significantly, falling more rapidly than at any time since the 1980s,” Kugler said. “Yet unemployment remains near the lowest levels seen only a few times since the 1960s.”Kugler said the Fed’s job is not yet done. “We are laser focused” on bringing inflation down to the Fed’s 2% target, she said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.World Trade Organization members clinched a deal on Friday night to continue to exempt ecommerce from tariffs for another two years after India and South Africa dropped their opposition following five days of talks.The moratorium, which is traditionally renewed every two years, was backed by almost all governments and businesses.The deal at a biennial ministerial conference is a boost to the WTO, which has struggled to contain rising protectionism and the use of subsidies by the US, China and other global powers.But ministers are under pressure to complete work to classify which transactions could be covered by customs duties and end the ban at the next ministerial meeting in 2026.“We agree to maintain the current practice of not imposing customs duties on electronic transmissions until the 14th session of the ministerial conference. The moratorium . . . will expire on that date,” a WTO document said.It would require unanimity to continue a ban covering trillions of dollars of trade.Piyush Goyal, India’s commerce minister, had argued that the ecommerce moratorium favoured big tech companies and prevented competitors in developing countries from growing.But he told reporters he had dropped his opposition to the extension at the request of Thani bin Ahmed Al Zeyoudi, the trade minister for the United Arab Emirates who was chairing the conference.Governments say they are missing out on customs revenue as goods such as DVDs are replaced by digital services. But a study by the OECD said low-income countries would suffer a bigger drop in imports and exports of digital goods than richer ones with tariffs.“It’s a relief to see the moratorium survive by the skin of its teeth,” said Tiffany Smith vice-president of the National Foreign Trade Council, a Washington-based business lobby group. “Its collapse would be a significant blow to the rules-based trading system. But it’s incredibly frustrating to see the WTO unable to move forward from this Groundhog Day rut that has been dug on the issue.” “The endless brinkmanship over the moratorium crowds out the ability to make progress on a broader agenda and undermines the viability of the WTO as a useful forum for trade ministers,” she said.But negotiators from more than 160 countries failed to agree to limit subsidies for overfishing and decided to continue talks to address state support for farmers at future meetings.Brazil and India clashed over agriculture policy, with Brasília demanding lower tariffs while New Delhi defended its system of public stockholding, with the government buying food to smooth price volatility and ensure supply.The Thai ambassador to the WTO, Pimchanok Vonkorpon Pitfield, attacked India for driving up global grain prices with its stockpiling, to applause from some diplomats, officials briefed on the matter said.But she was recalled after New Delhi lodged a strong protest and Indian officials boycotted sessions where Thai officials were present.Governments also failed to agree to curb subsidies for overfishing, a key demand for Pacific island states and those in Africa. Industrial fleets are hoovering up stocks on the high seas and putting small-scale fishers out of business.Ernesto Fernández Monge, a senior officer for conservation support at The Pew Charitable Trusts said: “This is a setback to more comprehensively restoring the health of fisheries and the communities that rely on them.”Looking back on how the gathering had gone, an EU official said: “There was clearly a lack of a spirit of co-operation . . . the spirit in the meeting was everyone for themselves, a zero-sum game.” They added that the US had disengaged from the talks. Katherine Tai, US trade representative, left on Friday morning as talks reached their climax. Washington has hamstrung the WTO’s binding dispute settlement mechanism by refusing to allow judges to be appointed to its appeals panel.It blocked any progress, with the conference agreeing just to “accelerate discussions” on a reformed system by the end of the year.“Very often the attitude of the US was, ‘We don’t need this, we don’t care’,” the official said. “The WTO . . . requires that you really care about what other countries need.”Director-general Ngozi Okonjo-Iweala said in closing remarks that “The beauty of the WTO is that each member has an equal voice but that also comes at a cost. Let’s keep going so we can make our voices heard.” More

(Reuters) – Last week, artificial intelligence server maker Super Micro Computer (NASDAQ:SMCI) achieved something not seen since 2021: It paid 0% interest rate on a $1.7 billion capital raise. Its secret: it issued a bond that can convert to shares.The offering shows how the market for such convertible bonds is getting a second wind, as investors adjust to the idea that the Federal Reserve will keep rates higher than they expected this year and a benign growth environment drives up stocks.In just the last two weeks, eight U.S. companies, including Global Payments (NYSE:GPN), NextEra Energy (NYSE:NEE), Lyft (NASDAQ:LYFT) and Sunrun (NASDAQ:RUN), have raised nearly $7 billion through convertible bonds, making it the busiest period for the hybrid securities in over two years.To make convertibles more attractive to companies, banks are selling insurance and other services to reduce the risk that they give away shares at a discount to the market price. While the services add to the costs of issuance, the savings on interest are higher. Companies can save on average 3% to 4% in interest costs, according to an investor and an analyst said.”There are significant coupon savings that a company can get in a convertible bond versus a regular bond,” said Santosh Sreenivasan, head of the equity-linked and private capital markets business in the Americas at JPMorgan, the top underwriter of such bondsBofA Global analysts expect $90 billion to $100 billion of global convertible bond issuance this year, a 20% increase from a year earlier. Some $60 billion to $65 billion is expected in the United States.David Clott, portfolio manager at Wellesley Asset Management, said he expects volumes to get a boost from companies looking to refinance a wall of maturities in the next few years. LOWERING DILUTIONLike a regular bond, convertibles pay a coupon and their yields change with interest rates. But their value also depends on the company’s stock price, as they can convert to shares.The risk of diluting existing shareholders through convertible bonds had kept many companies away, but bankers are offering other products to reduce that impact.Of the deals done in the last two weeks, many included an option called net share settlement, which allows the company to settle bonds converting to stock primarily in cash – and only some stock.In all the deals, companies also bought a capped call, a derivative used to increase the share price at which the bonds are converted to stock.Global Payments’ new $1.75 billion bond, for instance, was set to convert into shares at a 20% premium to the current share price. But the capped call raised the conversion premium to 75%. Global Payments spent $222.3 million on buying the capped call.Super Micro also increased the conversion premium on its deal from 37.5% to 100% by buying the derivative. Companies typically pay about 10% of their issuance proceeds to buy the capped call, according to JPM’s Sreenivasan.COUNTERING HEDGES Typically, investors in convertible bonds tend to simultaneously place bets that the stock of the company would fall, a strategy called hedging. In a short bet, they borrow stock and sell it, looking to buy it back later at a lower price. The short bets can put pressure on the stock. To counter that in the recent deals, many issuers used proceeds to buy back their own stock from bond buyers entering into such short bets. Global Payments, for example, bought back $185 million of stock concurrently with the convertible bond. These ways to eliminate dilution risk have been around for years but more companies are showing commitment to use them now, JPMorgan’s Sreenivasan said.”Companies want to clearly signal to their shareholders that while they have selected a product that has some dilutive effect, they have managed that risk appropriately,” he said. More