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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Boeing’s 737 Max crisis may turn out to be the long-awaited break for China’s first homegrown jet maker.The unravelling of Boeing’s reputation, following the mid-air blowout of a Max 9 door plug on an Alaska Airlines flight last month, comes just as Comac, also known as Commercial Aircraft Corp of China, prepares to push its business overseas. This week will be big for the company, whose aircraft include the C919 single-aisle jet. Comac on Tuesday made its international air show debut in Singapore and also signed a significant order from Tibet Airlines for 40 C919 jets and 10 of its smaller ARJ21 aircraft.Beijing has long wanted self-sufficiency in key industries, including chipmaking and aircraft manufacturing. It has made significant progress on the latter. After well over a decade of investment and development in the sector, Comac brought the 164-seater C919 jet into service last year. Two models of its jets, the C919 and ARJ21 made flights outside of mainland China to Hong Kong in December.It has received brisk orders from local airlines such as China Eastern Airlines — the first buyer to use the aircraft to fly between Beijing and Shanghai — and HNA Aviation Group, the parent company of Hainan Airlines, which operates 12 airlines.But until now, challenging the duopoly of Airbus and Boeing has seemed remote, if not impossible. For a start, the production of the C919 still relies on some key components made in Europe and the US. Scrutiny of Boeing following January’s incident, and broader concerns about its corporate and engineering culture, may prompt airlines with frequent flights to China to consider Comac. US aviation regulators have increased inspections and blocked Boeing from expanding production of the 737 Max, its most popular plane. US and European airlines are unlikely to buy Chinese planes. But demand for air travel is booming in south and south-east Asia, regions less sensitive to US-China tensions, where budget carriers are expanding rapidly. This means Comac may find buyers outside China faster than expected.The need for Chinese airlines to find an alternative to Boeing, which has close links to the US government, is rising along with escalating US-China geopolitical friction. There would be cost savings too: the C919 is estimated to cost at least a quarter less than imported counterparts. Given three of the largest carriers, Air China, China Southern Airlines and China Eastern Airlines, are also state-owned, the savings could end up being much bigger.This looks a rare chance for Comac to take market share, albeit a small slice, from the Airbus-Boeing duopoly. State-owned Comac was established jointly with companies including Shanghai-listed Aluminum Corporation of China, China Baowu Steel Group and Sinochem Corporation. These companies, as well as local airlines, are the ones that stand to benefit. Lex is the FT’s concise daily investment column. Expert writers in four global financial centres provide informed, timely opinions on capital trends and big businesses. Click to explore More

Newly-announced measures such as a VAT increase should make it easier for Ecuador get a new IMF programme, the investment bank’s analysts said, adding that authorities won’t want to be in default when elections come around early next year.”That said, we do not see enough reasons to move straight to a like stance,” they added in a note laying out their view on Ecuador’s bonds, most of which are languishing at less than half their face value despite a recent rally.”All financing needs for 2024 are not in place yet and perhaps the IMF is not a done deal yet either,” the note said. Additionally, if the country is still unable to tap funding markets come 2026, “markets will maintain a high risk of a need for another restructuring”.Ecuador, long a haven for foreign retirees, has been gripped by spiralling violence since the coronavirus pandemic battered the South American country’s economy.A group of masked, armed men stormed the set of a TV station during a live broadcast last month, a presidential candidate was gunned down as he left a rally during last year’s elections and hundreds of inmates have been killed in prison riots. More

The 25-basis point cut to the five-year loan prime rate (LPR) was the largest since the reference rate was introduced in 2019 and far more than analysts had expected.”This is the biggest signal. In other words, the largest interest rate cut cycle in history has begun,” said Yan Yuejin, analyst at E-House China Research and Development Institution. The cut will directly impact the real estate sector by lowering mortgage costs, he said.The five-year loan prime rate (LPR) was lowered by 25 basis points to 3.95% from 4.20% previously, while the one-year LPR was left unchanged at 3.45%.Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.In a Reuters poll of 27 market watchers conducted this week, 25 expected a reduction to the five-year LPR. They projected a cut of five to 15 basis points.The deeper-than-expected cut also suggests Beijing is no longer as concerned about the negative effects of lower lending rates on the currency or banks as they were last year.A central bank-backed newspaper said on Tuesday that the benchmark mortgage rate cut would not create a negative impact on banks’ net interest margins.At the same time, diminished spillover effects from other major economies, particularly the United States where the Federal Reserve is now expected to cut rates, allowed Beijing to provide more monetary policy support.Still, authorities are likely to remain wary of pressure on the yuan from lower domestic rates.The Chinese currency fell to its lowest since Nov. 20 after the LPR announcement but has since trimmed losses.Sources told Reuters that China’s major state-owned banks stepped in to the market selling dollars for yuan, in an attempt to arrest weakness.In stock markets, while the property and banking sectors made gains, the rates decision failed to shore up broader investor confidence.China last trimmed the five-year LPR in June 2023 by 10 basis points.Beijing has stepped up efforts to rescue the ailing property sector, but the measures have come in fits and starts, weighing heavily on a sector that drives a quarter of the economy and on the stock market. New home prices saw their worst declines in nine years in 2023, while the stock market is languishing after hitting five-year lows.Government-backed media last week reported that state banks have boosted lending to residential projects under the “white list” mechanism aimed at injecting liquidity into the crisis-hit sector.Most analysts and investors are waiting for more measures to boost consumption and put a floor under property prices, their hopes higher after authorities replaced the chairman of the market regulator just before the Lunar New Year break.”I think this move is more signal than substance,” said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management in Hong Kong. “Most people aren’t buying houses because mortgage costs are too high, they’re worried about developers going bankrupt and house prices falling.””But it does signal a determination to support the housing market. We need to see if this is followed up with more cash injections into lenders, housing projects and developers.”More easing could be coming. Recent deposit rate cuts and the reduction to bank reserves are giving commercial banks space to reduce borrowing costs to support the economy.While the new mortgage reference rate comes into effect immediately, existing mortgage holders will not benefit from any reduction in loan repayments until next year, as mortgage rate repricing is on a yearly basis.The LPR, which banks normally charge their best clients, is set by 20 designated commercial banks who submit proposed rates to the central bank every month. More

Made famous by former reformist leader Deng Xiaoping in the late 1970s, the slogan “emancipating the mind” also features in a rallying call for reforms by President Xi Jinping, made during his inspection tours of provinces and at key policy meetings.About half of China’s provinces posted lower-than-targeted economic growth in 2023 due to a nationwide property crisis, cautious consumption and falling private sector investment.The International Monetary Fund has said China’s growth would slow in 2024 to 4.6% from last year’s 5.2%, before easing further to about 3.5% in 2028.In an apparent show of its resolve to overcome last year’s difficulties, the government of the southern province of Hunan has set a 2024 growth target of “around 6%”, after last year’s growth of 4.6% missed an official goal of about 6.5%.”Emancipating the mind” is key to coming up with innovative ideas to reverse sluggish development, Hunan’s provincial Communist Party committee said at a meeting on Sunday.Officials must shift away from “simplistic glorification” of growth rates, reverse their unwillingness to endure pain during the province’s transformation, and avoid building up excessive debt, it added.”The ‘lying flat’ mindset of doing nothing to avoid trouble must also be reversed,” it said.The committee’s comments appear to be a call to think out of the box, but China watchers say any new ideas will have to keep within the bounds set by Xi, who has repeatedly voiced concern over uncontrolled expansion of capital markets.The term “emancipation of the mind” also figured in provincial party meetings in northeastern Liaoning and Heilongjiang on Sunday, the first working day after the long Lunar New Year break.Premier Li Qiang called on Sunday for “pragmatic and forceful actions” to boost public confidence, though China has yet to unveil bold measures to turn around its economy.At the annual parliamentary meeting in early March, Li is expected to unveil a national growth target of about 5% for 2024, similar to last year’s. More

1. Futures lowerU.S. stock futures edged down on Tuesday, as investors prepared for a raft of key corporate earnings this week.By 02:52 ET (07:52 GMT), the Dow futures contract had shed 87 points or 0.2%, S&P 500 futures had dipped by 10 points or 0.2%, and Nasdaq 100 futures had fallen by 34 points or 0.2%.Stock markets in New York were closed on Monday for the Presidents’ Day holiday. In the final session of last week, the main indices slipped, weighed down by a spike in Treasury yields following a hotter-than-anticipated producer price index that further pushed back bets for the timing of a potential interest rate cut by the Federal Reserve.Fed officials also expressed caution on Friday, with San Francisco Mary Daly in particular flagging that there is still “more work to do” to bring inflation back down to the U.S. central bank’s 2% target.2. Walmart, Home Depot to reportMajor retailer Walmart Inc is due to report its fourth-quarter earnings before the market opens on Tuesday.The low-cost retailer is usually seen as a key gauge of strength in U.S. consumer spending, which in turn is closely tied to the outlook for inflation.While consumer spending has eased steadily in recent months due to pressure from sticky inflation and high interest rates, Walmart has still clocked earnings growth in recent quarters.Fourth-quarter results are also expected from Walmart peer Home Depot. In the prior three-month period, the DIY chain narrowed its full-year sales outlook, a cautious approach fueled by signs that inflation-squeezed customers were paring back expenditures on big-ticket items. But the company noted that its post-pandemic operations were beginning to normalize.Later in the week, eyes will shift to chipmaker Nvidia (NASDAQ:NVDA), as markets hope to receive hints about the path ahead for a recent spike in demand for artificial intelligence.3. Capital One to buy Discover Financial in $35.3 billion dealU.S. consumer lender Capital One and smaller peer Discover Financial have agreed to merge in an all-stock deal worth $35.3 billion, the companies announced on Tuesday.The tie-up would create the sixth-largest U.S. bank by assets and major American credit card group that could rival industry behemoths like Citigroup and JPMorgan Chase (NYSE:JPM). Crucially, the move would bring together Discover’s vast payments network and Capital One’s popular credit card business.However, the merger is still expected to face heavy scrutiny from U.S. regulators who will be keen to make sure it benefits customers. In a statement, the firms said that the merger will create “scale and investment,” as well as “signficant value” for consumers.Under the terms of the agreement, Berkshire Hathaway-backed Capital One would value Discover at a stock price of almost $140, a 27% premium compared to its closing level on Friday. Discover stakeholders would receive 1.0192 Capital One share for each Discover share.4. China’s central bank slashes mortgage lending rateThe People’s Bank of China cut its five-year benchmark loan prime rate (LPR) by a bigger-than-expected margin on Tuesday, loosening monetary conditions further in a bid to support the country’s ailing property market.The PBOC cut its five-year LPR, which is used to determine mortgage rates, to 3.95% from 4.20%. Analysts had expected a reduction of 10 basis points to 4.10%. The one-year LPR was left unchanged at 3.45%.The decision was somewhat unexpected, particularly after the central bank kept medium-term lending rates unchanged over the weekend. But steadily worsening economic conditions in China, along with a continued slide in the property sector, had seen some investors positioning for more monetary easing in the country.5. Oil prices subduedOil prices were muted in early European trade on Tuesday, as markets weighed a weak outlook for demand against possible supply disruptions stemming from worsening geopolitical conditions in Russia and the Middle East.A dearth of major cues also made for little price action. By 02:53 ET, Brent oil futures expiring in April were mostly unchanged at $83.55 a barrel, while West Texas Intermediate crude futures were largely flat at $78.43 per barrel. Both contracts were close to a three-week high.A strong run-up over the past two weeks in oil prices has appeared to have largely stalled in recent sessions, in a sign of growing pessimism over the outlook for demand.Hot U.S. inflation data has led many traders to further price out the prospect of early interest rate cuts by the Fed, while the International Energy Agency warned of slowing global crude demand in the coming year. Fourth-quarter recessions in the U.K. and Japan have also contributed to a souring in demand expectations. More