Economy

The country’s second-biggest lender by market valuation reported a hit to cash earnings due to higher cost pressures, deposit costs and competitive lending, which in turn impacted margins. NAB posted cash earnings of A$1.80 billion ($1.18 billion) for the quarter ended Dec. 31. It had earned A$2.15 billion in the prior corresponding period. First-quarter revenue excluding the bank’s markets and treasury income was broadly flat against the quarterly average in the second half of the previous fiscal year. This led to a marginal decrease in its net interest margin – a key measure of profitability for banks. Persistently elevated interest rates boosted the profits of major Australian lenders over the last year. However, runaway inflation and high interest rates have started to dent borrowing capacity and pressure credit growth. The bank’s common equity tier 1 ratio, a closely watched measure of its spare cash, stood at 12.0% as of December-end, compared with 12.22% at the end of September.($1 = 1.5265 Australian dollars) More

(Reuters) – A look at the day ahead in Asian markets.A fairly heavy sprinkling of Asian economic data and an interest rate decision in Indonesia dominate the regional calendar on Wednesday, as investors digest another uptick in Chinese stocks and brace for Nvidia (NASDAQ:NVDA)’s fourth quarter earnings report.Stocks and risk appetite in Asia could fall at the open on Wednesday after worries over the U.S. chip designer and artificial intelligence leader’s results slammed its shares and pushed the broader U.S. indexes into the red on Tuesday.The 4.4% drop in Nvidia’s shares was the biggest fall since October, and the Nasdaq lost 1%. In Asia, stock markets in Hong Kong, China and Taiwan will be particularly sensitive to the results. These three regions accounted for 46% of Nvidia’s revenue in the third quarter.Investors will be keen to see whether Nvidia warns again that U.S. curbs on selling its chips to China are hurting its business and longer-term prospects. Nvidia has come up with new products for the Chinese market, but there is a risk that they will also be banned like its first round of China market chips.Nvidia is also grappling with supply shortages at its Taiwan-based chip contractor TSMC, the world’s largest contract chipmaker.Hong Kong’s Hang Seng has underperformed this year, and is currently down 4.7% year to date. The performance of its tech sector has been even more dismal – it is down 13%.But the tentative recovery in Chinese stocks from recent five-year lows – the CSI 300 index of leading blue chips is now basically flat year-to-date – should lend support. The Shanghai Composite and CSI300 are gunning for a sixth and seventh straight day of gains, respectively, which would be their longest winning streaks since January last year. China’s interest rate cut on Tuesday could keep that run going.Elsewhere on the policy front, Indonesia’s central bank will keep its key seven-day repo rate unchanged at 6.00% on Wednesday, according to all 30 economists in a Reuters poll.Opinion over the rest of the year is more mixed, but the median forecast is for Bank Indonesia to start cutting rates by 25 basis points in the second quarter, and by the same amount every quarter this year, down to 5.25% by the end of December. Indonesia’s inflation rate has stayed within BI’s 1.5% to 3.5% target range since July, suggesting cumulative rate hikes of 250 basis points are working. The rupiah is down 1.7% against the dollar this year, but has performed better than many of its peers.Elsewhere in Asia on Wednesday Japan releases its latest trade data and tankan surveys of manufacturing and non-manufacturing activity, South Korea publishes producer price inflation figures, and Australia releases hourly wage growth data for Q4 last year.Here are key developments that could provide more direction to markets on Wednesday:- Indonesia interest rate decision – Japan trade (January)- South Korea produce price inflation (January) (By Jamie McGeever; Editing by Josie Kao) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Walmart said prices for some of its products did not decline as much as it had anticipated during the most recent quarter, reflecting the sticky inflationary environment in the US that is prompting investors to reassess when the central bank will start cutting interest rates.Chief executive Doug McMillon said in November that the world’s largest retailer could find itself “managing a period of deflation” in early 2024, in what may have been an encouraging sign for the broader economy given Walmart’s reputation as a consumer bellwether.McMillon said on Tuesday that Walmart’s general merchandise category in its US operations was “there” in terms of a “deflationary position”, but in the three months to January, “the slope of the decline softened”.General merchandise prices were lower than a year ago, he told analysts, “but not as much as the trend line would have suggested” at the end of the preceding quarter. Prices for food and consumables were “slightly higher than a year ago”, he added.McMillon’s comments come a week after official data showed inflation in the US eased less than expected during January, prompting investors to scale back bets that the Federal Reserve would begin easing monetary policy as soon as May.Eggs, apples and deli snacks cost less than they did 12 months ago, McMillon said, but prices for asparagus, blackberries, paper goods and cleaning supplies were up.Having been burdened by rising prices across the economy for several years, bargain-hunting consumers — and even higher-income households — remain on the lookout for deals. Customers had “immediately responded” to Walmart’s moves to lower the price of a rotisserie chicken by $1 and “roll back” the price of French bread to $1, said chief financial officer John Rainey.Walmart reported strong quarterly sales and revenue, buoyed by holiday season spending, but signalled a slowdown in growth over the coming year. The Arkansas-headquartered company brought in about $172bn in consolidated net sales in the three months to January. That was up 5.6 per cent compared with the same period a year earlier, and $1bn more than analysts expected. But it projected growth of between 3 and 4 per cent over the next 12 months, below the 4.5 per cent pencilled in by Wall Street.Fourth-quarter net income of $5.5bn was down 12.4 per cent from a year earlier, but came in at about $1bn above analysts’ forecasts.Rainey said Walmart gained market share across “virtually every category” during its fourth quarter, driven in large part by those in households making more than $100,000 a year. The demographic accounted for two-thirds of market share gains in general merchandise.Walmart also announced a deal to acquire television maker Vizio, a $2.3bn acquisition it hopes will help it expand its media business in the US by integrating the tech group’s ad business with the huge reach the retailer already has via its multiple sales platforms.“Marketplace and advertising are key drivers of profitability growth . . . and this acquisition accelerates the buildout of our advertising platform into the connected TV business, which will be exciting,” said McMillon.Walmart’s move further highlights its intent to further diversify its revenue stream beyond selling goods. The deal comes as advertising has become an important revenue stream for ecommerce giant Amazon.Walmart generated about $3.4bn in advertising revenues in 2023, while Amazon’s ad business had sales of almost $38bn during the same period and is growing rapidly. In the third quarter of last year, the most recent available data, Amazon reported ad sales worth $12bn.Walmart teamed up with tech group Innovid last year to run personalised ads on TVs. It has also partnered with Roku in the past in a move that allowed customers to buy Walmart items directly from their smart TVs.Investors also parsed results from Home Depot on Tuesday for further clues on the state of the US consumer. The home improvement retailer reported another quarterly drop in its key sales measure and forecast an annual decline for the year ahead, as consumers defer spending on big-ticket items against a backdrop of elevated mortgage rates.Shares in Walmart rose 3.2 per cent to close at a record, while those in Vizio gained 16.2 per cent. Home Depot edged up 0.1 per cent.Additional reporting by Anna Mutoh More

Kemi Badenoch, business and trade secretary, was on Tuesday locked in a new political row, this time over her contested claim that she was engaged in trade talks with Canada, negotiations Ottawa insists do not exist.Badenoch told MPs “explicitly” on January 29 that talks with Canada were “ongoing” to avoid a March 31 tariff cliff-edge for UK carmakers, even though she had earlier unilaterally paused wider trade talks with the Ottawa government.But the Canadian high commissioner to the UK, Ralph Goodale, has written to the House of Commons business select committee to insist Badenoch’s claimed talks, which also cover cheesemakers, have not happened.The business secretary is separately engaged in a bitter row with Henry Staunton, whom she sacked as Post Office chair last month, accusing him of making “wild, baseless allegations” over the Horizon IT scandal.Liam Byrne, chair of the business committee, demanded that Badenoch correct the record on the trade talks.“It is essential the secretary of state now explains why the Canadians’ account of the talks is so utterly at variance with what she told the House of Commons,” the Labour MP told the Financial Times.The dispute started on January 25 when Badenoch halted free-trade talks with Ottawa in a row over Canadian hormone-treated beef, a move that left UK carmakers potentially facing tariffs costing tens of millions of pounds. Cheesemakers also face heavy Canadian tariffs.Badenoch tried to reassure MPs four days later that she was continuing to hold talks with Ottawa, notably over the right of British carmarkers to use EU parts in their exports to CanadaThe UK and Canada have a trade agreement that was rolled over when the UK left the EU. The deal included preferential terms on rules of origin for certain products that are due to expire at the end of March.British-origin cars must be 50 per cent UK-made in order to qualify for export to Canada without paying tariffs, a proportion that rises to 55 per cent in September. Until the end of March, UK carmakers can include parts from their EU supply chains to meet this threshold. Preferential terms for UK cheesemakers expired at the end of last year.“This is a good opportunity for me to state explicitly that the talks have not broken down,” Badenoch told MPs on January 29. “We are having multiple discussions with Canada on cheese, in which we have not come to an agreement.”She added: “We have an ongoing rules-of-origin discussion, and we have an FTA discussion, which I have paused.”But Goodale wrote to Byrne’s committee on February 16 to challenge that account. His letter, seen by the FT, said that Canada was “disappointed with the unilateral pause in these negotiations”.He added: “As far as I’m aware, since the UK announced its pause on January 25, there have been neither negotiations nor technical discussions with respect to any of the outstanding issues — including British access to Canada’s Tariff Rate Quotas for cheese and the approaching expiry of cumulation provisions respecting Rules of Origin.”The UK-Canada disagreement focuses on a relatively small area of trade: while eight out of 10 UK-made cars are exported, Canada accounts for only 1.3 per cent of exports, which are dominated by Jaguar Land Rover. Currently Canada charges a 0.7 per cent tariff on cars, something that left UK exporters paying around £3.2mn last year after selling 9,000 vehicles in the market, according to calculations from Ian Henry of AutoAnalysis. Without a deal, Canada is proposing to charge 6.1 per cent on vehicles, which would see the bill rise to £28mn, still a small sum for the market. This would climb as high as £46mn if Canada instead imposed WTO tariffs of 10 per cent, Henry added.Badenoch, the bookmakers’ favourite to be next Tory leader, is coming under increasing scrutiny — and Labour criticism — as some at Westminster start to look beyond Prime Minister Rishi Sunak’s leadership of the Conservative party.She is known as a combative fighter for what she regards as the truth, as evidenced by her row with Staunton after he claimed he was told by government officials to stall on compensation payments to postmasters. She called the allegation “a disgrace”.  Last December she repeatedly accused Labour MP Kate Osborne of “lying” during a women and equalities committee hearing, which prompted the Tory committee chair to warn Badenoch against using “unparliamentary language”. Osborne had alleged that Badenoch had “compared children and young people coming out as trans to the spread of a disease”. The business secretary, who also holds the equalities brief, had previously likened the surge in referrals to NHS gender identity services to “almost an epidemic”. Badenoch told Osborne: “That is a lie, that is a lie and I think you should withdraw that statement. That is a lie, you are lying, you are lying, you are lying.”Earlier in 2023 she locked horns with the Commons Speaker Sir Lindsay Hoyle, who admonished her for announcing a government policy decision via a newspaper rather than in parliament, as convention dictates.The tone of her apology at the despatch box, in which she said “I’m very sorry that the sequencing that we chose was not to your satisfaction,” drew sharp intakes of breath from opposition MPs.“That is totally not acceptable. Who do you think you’re speaking to, secretary of state?” Hoyle shot back.Her admirers view her style as refreshing, while critics deem it needlessly combative. Sometimes her approach has raised hackles in her own party, including among fellow Brexiters.The Department for Business and Trade did not immediately comment. More

NEW YORK (Reuters) – Investors in interest rate options are paying for trades that benefit from a sharp slowdown in the U.S. economy, contrary to the upbeat outlook held by many bond market participants.Analysts said they have seen increased demand from hedge funds in the U.S. options market for so-called “receiver swaptions,” a type of trade that pays off when interest rates fall. In general, receiver swaptions give buyers the right to enter into an interest rate swap where they receive the fixed rate and pay the floating one. Swaptions, which are options on interest rate swaps, are one segment of the more than $600 trillion over-the-counter interest rate derivatives market. Rate swaps measure the cost of exchanging fixed-rate cash flows for floating-rate ones, or vice versa. Investors use swaps to hedge interest rate risk.Receiver swaptions typically reflect concerns about the U.S. economic outlook, analysts said. This is the opposite of “payer swaptions” where investors buy the right to pay fixed and receive a floating rate, benefiting when rates rise as the Federal Reserve tries to slow a robust economy.”From a macroeconomic standpoint, risks are roughly balanced between a hard landing and no landing,” said Bruno Braizinha, interest rates strategist, at BoFA Securities in New York, referring to economic scenarios that reflect contraction and strong growth.”But the options market is pricing those probabilities more skewed towards a hard landing,” he added. Receivers were notable on shorter tenors, analysts said, such as the one-year at-the-money options on one-year swap rates, that part of the curve in which Fed policy is being priced. Asset managers, on the other hand, are hedging scenarios where the economy stays resilient and interest rates stay higher for longer, Braizinha said. In this case, fund managers have been buying payer swaptions.Overall, the soft landing scenario is still the majority view, analysts said, but the hard landing case is gaining momentum.A soft landing or no landing has been the predominant view after a slew of data that showed the U.S. economy remained stable despite being subjected to a historically aggressive Fed tightening.Jeff Klingelhofer, co-head of investments at Thornburg Investment Management in Santa Fe, New Mexico noted that a hard landing for the U.S. economy is a reasonable expectation having gone through the Fed’s ultra-tight monetary policy.”Just textbook economics: Higher rates mean the bar for future demand is tougher. And because a recession hasn’t come to fruition at this point, a lot of investors are quickly pivoting to, well, it’s not going to happen. I think that’s a mistake,” said Klingelhofer.He added that while there have been pockets of strength in some economic data, the majority of these numbers suggested that a slowdown is indeed occurring.VOLATILITYU.S. implied volatility or “vol” on swaptions has stabilized a little bit from high levels seen at the beginning of the year, but it remains elevated compared to numbers in November last year. Implied vol measures how much the options market believes interest rate swaps will move in either direction over a given time frame.Option demand for hedging or speculative purposes tends to lift vol. The higher the vol, the greater the perceived instability over a given period.For instance, volatility on shorter-dated swaptions such as the three-month expiry on one-year swap rates, which reflect near-term uncertainty, was 36.03 basis points (bps) on Tuesday. That’s down from 40 bps seen around mid-January, but higher than the level hit in late November of about 33 bps. U.S. vols are also higher than in the euro zone where a slowdown is already underway. Gross domestic product growth for the region was flat in the fourth quarter after a 0.1% contraction in the third.Implied vol on Europe’s three-month options on one-year swap rates was 26.6 bps on Tuesday,, down from late January when vols were at 31 bps. Amrut Nashikkar, managing director, fixed income strategy, at Barclays in New York attributed higher U.S. vols relative to Europe to the difficulty in assessing the restrictiveness of Fed policy.”U.S. data has not evolved on the broad front given the big upside surprises,” Nashikkar said. “In Europe, the ECB (European Central Bank) raises rates and Europe hits a slowdown. In the U.S. it’s much harder to put a firmer bound on it and that’s why we have this fear of a big shock.” More

LA PAZ (Reuters) – Bolivia’s government set out on Tuesday a package of measures to spur investment and exports as it seeks to reverse a worsening dollar scarcity that has left shelves empty and workers unpaid.The government of President Luis Arce said its plan, agreed with businesses, would aim to cut red tape for exports, increase investment in grains production, make diesel imports easier, and allow bigger trucks on the roads.Reserves have plunged from a peak of some $15 billion a decade ago to under $2 billion now, eroded by sliding production and exports of natural gas, the mainstay of the Bolivian economy in the last 20 years.Truckers have been striking in political capital La Paz over delayed pay, while Fitch slashed the country’s debt rating deep into ‘junk’ territory earlier this month, citing the slide in reserves levels that it said threatens economic stability.”With these measures we will try to gradually moderate the shortage of dollars in the private sector,” Minister of Economy Marcelo Montenegro said on Tuesday, adding the government aimed to bring in up to $5 billion via the farming and mining sectors.The problem is stark. Net total reserves have halved in the last year, and the cash amount is now under $200 million, according to the latest data. Most of the reserves are in gold.Jaime Ascarrunz, president of Bolivia’s national chamber of commerce, said the business sector had been pushing measures to bolster exports and bring in hard currency.”The lack of dollars is something that greatly worries us, especially in the import sectors,” he said.In banks and on the streets many people said they could not access dollars, leading some to buy them on the black market, where the price of dollars is near 8 bolivianos, above the official rate of 6.96. Others said they could not get imported materials they need.”Unfortunately we can’t bring in more at the moment due to the lack of dollars,” said La Paz veterinarian Fabiola Navia, pointing to half-empty shelves where medicines and medical supplies would normally be. “This is all the stock we have.”Striking truckers in the city said the reserves slide was affecting the government more widely and holding up payments. “The losses are in the millions,” said Ramiro Barrero, leader of the trucking union. “It’s been months that we’ve been without payment.” More

Microsoft (NASDAQ:MSFT) CEO Satya Nadella has tapped Pradeep Sindhu, who co-founded networking gear developer Juniper Networks (NYSE:JNPR), to spearhead the network card effort, the report said citing a person with knowledge of the matter. Microsoft acquired Sindhu’s server chip startup, Fungible, last year.The new network card is similar to Nvidia’s ConnectX-7 card, which the chip developer sells alongside its graphic processor units (GPUs), the report added.The equipment could take more than a year to develop and, if successful, could lessen the time it takes for OpenAI to train its models on Microsoft servers as well as make the process less expensive, according to the report.Microsoft did not immediately respond to a Reuters request for comment.Microsoft has invested billions of dollars in ChatGPT-maker OpenAI and has incorporated its technology in a wide variety of products, giving the Windows-maker a leg up in the race to sell artificial-intelligence software.The company had introduced Maia, a chip meant to run large language models and support AI computing, in November. More

(Reuters) -TripAdvisor can proceed with its planned move to Nevada but shareholders can seek damages, a Delaware judge ruled on Tuesday in a case billionaire Elon Musk highlighted as an attempt to “lock the doors” on firms leaving the state.Two shareholders had sued directors at TripAdvisor (NASDAQ:TRIP) and its parent company last year and asked the court to block the move, claiming it was designed to benefit Greg Maffei, CEO of parent company Liberty TripAdvisor, at their expense.They argued it would let Maffei, the online travel advice site’s controlling stockholder, avoid accountability for potential self-dealing because Nevada sets a lower bar for such transactions, without offering compensation to minority shareholders.The directors argued that they complied with the Delaware law, which required a majority vote of shareholders to convert the company to a Nevada corporation. They said the shareholders were improperly seeking to limit TripAdvisor’s right to reincorporate in another state.Delaware Vice Chancellor Travis Laster wrote that while Delaware’s Chancery Court has the power to block companies from reincorporating elsewhere, he called it an “extreme” measure not warranted in the case.While Laster said the move can go forward, he found that it will be subject to a review for “entire fairness” to shareholders, which he called the “most onerous standard” under Delaware law.The judge suggested that shareholders may seek damages if TripAdvisor’s stock sinks on its reincorporation.But the directors can also try to show that Nevada law does not benefit Maffei as shareholders claim, he said.Attorneys the shareholders declined to comment. A TripAdvisor spokesperson did not immediately reply to a request for comment.The case has gotten publicity from Musk, who has blasted Delaware after a judge there ruled to invalidate his $56 billion pay package from Tesla (NASDAQ:TSLA).The carmaker’s CEO has said on social media that companies should leave Delaware, which is home to much of corporate America, “before they lock the doors, as they just did with Tripadvisor .”Musk has said Tesla would hold a shareholder vote to move its legal home from Delaware to Texas.The TripAdvisor ruling comes as a committee of the company’s board explores a potential sale to an undisclosed bidder. More