Economy

In the battle for global influence, all sides have their jargon. The US and allies talk of the “rules-based international order” (RBIO). Russia and China prefer a “multipolar” world. Subrahmanyam Jaishankar, India’s astute foreign minister, recently split the difference by talking about the need for a “multilateral rules-based international order”.For the west, the RBIO underpins peace and stability. It demands respect for territorial integrity and international law, and the protection of minorities, small nations, democratic norms and the global trading system.Russia — often supported by China — argues this is hypocritical. The US, in Moscow’s view, writes the rules, imposes them on others and ignores them when convenient. Other nations that emphasise the RBIO are, from Moscow’s perspective, basically US vassals.Russia and China believe the decline of US global power is necessary and inevitable — the result being a more just world in which US power is constrained and multiple centres of power operate. According to the Russians and Chinese, this will allow different civilisations to live by their own rules, rather than having to hew to a Washington consensus.For the US and allies, these arguments are dishonest. The US and the EU believe that, while the idea of multipolarity can sound appealing, it often boils down to a demand from autocracies, in Moscow and Beijing, to have their own poles of influence. That means imposing their will on democratic neighbours like Ukraine and Taiwan.Moscow audience: Xi’s visit to Putin last year marked relations between them having grown closer since Russia’s invasion of Ukraine More

TOKYO (Reuters) – The dollar index hovered at a one-month high against a basket of currencies on Wednesday as remarks by Federal Reserve Governor Christopher Waller dampened expectations for a March rate cut.Waller said that while the U.S. is “within striking distance” of the Fed’s 2% inflation goal, the central bank should not rush towards cuts in its benchmark interest rate until it is clear lower inflation will be sustained.”I will need more information in the coming months confirming or (conceivably) challenging the notion that inflation is moving down sustainably toward our inflation goal,” before backing rate cuts, he said on Tuesday. Market expectations of a rate cut in March have eased to a 62.2% chance versus an 76.9% view in the prior session, according to CME’s FedWatch Tool.While the market’s latest pricing brings the Fed rate curve into more sensible territory, “with 157 basis points of rate cuts still priced in for 2024, there is room for this to ease back,” said Tony Sycamore, market analyst at IG.Remarks by European Central Bank (ECB) President Christine Lagarde later on Wednesday could bring further repricing, he added.”Rate cuts are coming but not as soon as some might be hoping for,” Sycamore said.The dollar index, a measure of the greenback against a basket of major currencies, last stood at 103.35 after climbing as high as 103.42 during the previous session, its highest level since Dec. 13. Tuesday also saw the dollar’s biggest one-day percentage gain since Jan. 2.Meanwhile, the euro was hanging near a one-month low at $1.0875 after its steepest one-day percentage drop in two weeks, following comments from several ECB policymakers this week that maintained uncertainty over the timing of rate cuts.Sterling was last trading largely unchanged at $1.2636, after a sharp fall on Tuesday in the wake of data that showed British wage growth slowed in the three months through November.The yen was under some pressure again. The Japanese currency stood at its lowest since early December at 147.45 per dollar, as U.S. bond yields ticked up to support the greenback.The move in dollar/yen overnight was a “reminder that US Treasury yields remain a big influence on JPY with the (Bank of Japan) likely on the sidelines until at least March (and in our view more likely until mid year),” Rodrigo Catril, senior currency strategist at the National Australia Bank (OTC:NABZY), wrote in a note. Elsewhere in Asia, eyes are on top-tier Chinese economic indicators for December out later on Wednesday, including fourth-quarter growth which is expected to have slowed to 1% in the October-December period from 1.3%. More

BEIJING (Reuters) – China’s economy likely perked up slightly in the fourth quarter, enabling the government to hit its growth target after the previous year’s miss, but the outlook for 2024 remains shaky amid a protracted property slump and weak consumer confidence.Data on Wednesday (0200 GMT) is expected to show gross domestic product (GDP) grew 5.3% in October-December from a year earlier, quickening from the 4.9 pace in the third quarter, according to a Reuters poll.But on a quarterly basis, the economy is forecast to grow 1.0% in the fourth quarter, slowing from a 1.3% pace in July-September, underlining the weak momentum despite a raft of policy steps.For 2023, the economy likely expanded 5.2%, partly helped by the previous year’s low-base effect which was marked by COVID-19 lockdowns.The economy grew just 3% in 2022 due to strict COVID curbs, badly missing the official target.Confounding most analysts’ expectations, the world’s second-largest economy has struggled to mount a strong and sustainable post-COVID pandemic bounce, burdened by a protracted property crisis, weak consumer and business confidence, mounting local government debts, and weak global growth.Beijing set a growth target of around 5% in 2023 and policy insiders expect it to maintain a similar goal for this year.Analysts polled by Reuters expected growth to slow to 4.6% in 2024, and ease further to 4.5% in 2025, which may raise the heat on policymakers to unveil more stimulus to restore confidence and ride out the property slump.Recent data suggested the economy was starting 2024 on shaky footing, with persistent deflationary pressures and a slight pick-up in exports unlikely to kindle a quick turnaround in lacklustre factory activity. December bank lending was also weak.”Attention will be on the year-end data to be released on Wednesday,” said Matthew Ryan, head of market strategy at global financial services firm Ebury. “GDP growth is particularly worth watching, as it could set the tone for sentiment toward China in 2024.”Investor disappointment with China’s performance last year pushed the yuan currency to a 16-year low at one point. The market capitalisation of stocks listed in Shanghai and Shenzhen fell by a cumulative $258 billion during 2023 and Hong Kong-listed shares lost $592 billion. MORE EASING STILL SEE ON THE CARDSSeparate data on December activity, to be released alongside GDP data on Wednesday, is expected to show factory output growth steadied while consumption growth slowed and investment remained tepid.Retail sales, a key gauge of consumption, are forecast to grow 8.0% in December from a year earlier, slowing from a 10.1% rise in November. Factory output is seen growing 6.6% in December year-on-year, matching November’s rise.The People’s Bank of China (PBOC) has pledged to step up policy support for the economy this year and promote a rebound in prices.On Monday, the PBOC left the medium-term policy rate unchanged, defying market expectations for a cut as pressure on the yuan currency continued to limit the scope of monetary easing.Analysts polled by Reuters expected the central bank to cut the one-year loan prime rate (LPR) — the benchmark lending rate — by 10 basis points (bps) in the first quarter.”Despite the surprise, we continue to expect the PBOC to eventually deliver two rounds of policy rate cuts and one RRR cut in H1 2024, given the ongoing economic dip and the fading of pent-up demand for consumption, which we expect to accelerate following the Chinese New Year holidays in February,” Ting Lu, chief China economist at Nomura, said in a note. The government, which in October unveiled 1 trillion yuan ($139.22 billion) in sovereign bonds to fund investment projects, is likely to press ahead with more fiscal spending to drive growth, analysts said.($1 = 7.1829 Chinese yuan renminbi) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Ministers have warned business leaders there are limits to what the UK government can do to protect critical global supply chains as attacks on ships using the key Suez Canal route continued this week.“It is first and foremost for businesses to manage their supply chains, with government intervention reserved for those areas where it is necessary, such as in cases of market failure,” Nusrat Ghani, business minister, said on Wednesday.Her comments came as she unveiled a report outlining a new critical imports and supply chains strategy that set out ways the government can help industries retain access to critical products such as medicines, minerals and semiconductors against an increasingly unstable geopolitical backdrop.The measures include setting up a Critical Imports Council to work with businesses to improve analysis of potential global supply chain shocks by identifying risks to the most sensitive imports and drawing up a plan of action. The government said it would develop a new programme to “identify, review and where feasible” remove import barriers. It could also assist companies seeking to identify potential new suppliers in third countries, citing recent agreements with Canada, South Korea and Australia to improve access to critical product supply. While there was no fresh funding available, ministers also said they would “explore the case for further supply chain financing interventions for the UK’s most critical supply chains”.The report warned of the vulnerability of transport systems including “where goods transit through maritime chokepoints”.The launch of the strategy comes as attacks in the Red Sea and Gulf of Aden on shipping heading north to the Suez Canal continued this week, despite recent US and UK air strikes on Iran-backed Houthi rebels in Yemen to try to end the threat.The recent spate of attacks has prompted nearly all container shipping lines to reroute vessels away from the affected area, adding up to two weeks to the journey from Asian ports to Europe. The report warned about the “increasing prospect of further deterioration in the international security environment” with “signs of fragmentation” in the global economic and trade order. It highlighted the disruption to global trade caused by Russia’s full-scale invasion of Ukraine two years ago and China’s increasingly belligerent stance on the independence of Taiwan.“Increased tension in the Taiwan Strait and South China Sea or the deterioration of regional security in the Middle East could directly and indirectly impact the accessibility of critical goods globally,” the report said.A recent survey by Interos, an operational resilience company, found that 85 per cent of senior procurement leaders said geopolitical tensions were their biggest concern. On Monday, UK defence secretary Grant Shapps warned that the world had moved into a “prewar” phase as he called on allies to lift defence spending without committing the UK to any increase beyond repeating the government’s “aspiration” to lift it from 2 to 2.5 per cent of GDP.Additional reporting by Robert Wright More

NEW YORK (Reuters) – Wind and solar are set to lead U.S. power generation growth for the next two years following new renewable energy instillations, Energy Information Administration (EIA) said on Tuesday.U.S. solar power generation is expected to grow 75% to 286 billion kilowatt hours (kWh)in 2025 from 163 billion kWh in 2023 as more generation capacity comes online and amid favorable tax credit polices, the EIA said. The electric power sector is expected to grow solar capacity by nearly 38% this year. Wind power generation will grow moderately to 476 billion kWh in 2025, representing 11% increase, the EIA said, adding that wind capacity will stay relatively flat this year.Coal power generation, meanwhile, will likely fall 18% to 548 billion kWh in 2025 from 665 billion kWh in 2023. Generation from natural gas, the largest source of U.S. electricity, will stay relatively flat at 1.7 trillion kWh in 2024 and 2025.Last year, the U.S. power sector produced around 4 trillion kWh of power. Renewable sources, including wind and solar, accounted for 22% of generation. More

(Reuters) -Elon Musk’s warning about developing AI and robotics outside Tesla (NASDAQ:TSLA) unless he gets more voting control could infringe on his duties as CEO and raise questions about the automaker’s valuation, governance experts and analysts said.The outspoken billionaire said on Monday he would be “uncomfortable” building Tesla into a leader in the technologies unless he has about 25% voting control at the company.”Enough to be influential, but not so much that I can’t be overturned. Unless that is the case, I would prefer to build products outside of Tesla,” he said on his X social media.Shares of Tesla rose about half a percent to $219.91.The move marked an abrupt turn for Musk, who has long touted Tesla as an “AI/robotics company” due to its partially automated “Full Self-Driving” software and prototype humanoid robots.”The problem is his tweets suggest that in his capacity now as CEO and director, he is not only turning down profitable Tesla opportunities based on his personal preferences, but also redirecting them to his private companies,” said Ann Lipton, a professor at Tulane Law School.”That’s a conflict of interest that suggests a violation of his fiduciary duties to Tesla.”Some analysts also said any move to shift technology development outside Tesla would only damage the value of its shares by removing potential growth opportunities.Musk and Tesla could not be reached for comment. CEOs and directors are prohibited from taking any business opportunity for themselves that belongs to the firm, according to a legal principle called the corporate opportunity doctrine.”It would be illegal for him to go ahead with building technologies Tesla has touted without the company’s permission,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.Musk, Tesla’s largest investor with a 13% stake, owns several companies including SpaceX, Neuralink, X and xAI – his latest venture that hopes to compete with ChatGPT-maker OpenAI.But his voting control at Tesla has come down in the past two years as he sold tens of billions of the company’s stock to finance his purchase of platform formerly known as Twitter.Musk’s Tesla stake would grow to nearly 23% if he exercises all his stock options, but he may have to sell a portion of them to pay for taxes related to the exercise.’DEMANDS AS POSTURING'”Musk is attempting to recover control that has been lost from his stock sales to fund Twitter,” CFRA Research analyst Garrett Nelson said. “We view Musk’s demands as posturing ahead of the Delaware court ruling regarding his prior compensation package.”The Tesla CEO is awaiting a ruling in a shareholder lawsuit that alleges he used his dominance over the company’s board to obtain an outsized compensation package that did not require him to work at the EV maker full-time.The investor, Richard Tornetta, has asked the court to rescind the pay package, which if granted could make it tough for board to agree to a new compensation plan of a similar size.An estimate from executive pay research firm Equilar in 2022 showed that Musk’s package was around six times larger than the combined pay of the 200 highest-paid executives in 2021. Musk said on Monday there was no “feud” with the board over his new compensation package and the pending verdict was holding back the discussions.Some experts believe he will see little opposition from the board for his demands, pointing to his importance at Tesla and close ties to several members such as his brother Kimbal.”Tesla’s board is generally tolerant of his erratic behavior in the past so it is easier relative to other tech firms to push through such a demand,” said Xu Jiang, associate professor at Duke University’s Fuqua School of Business.”He will probably face stiff opposition from major shareholders such as Vanguard and BlackRock (NYSE:BLK). My conjecture is that the opposition, if any, of the board members would stem from their concern of the opposition from shareholders.”J.P. Morgan analyst Ryan Brinkman said Musk’s latest comments raise the odds of his departure as CEO, or at least an award of shares to him that would water down investors’ holdings. He added the public airing of Musk’s views may have been a move to pressure the board.Some Tesla observers feel the company has little choice but to appease Musk or risk hurting efforts around AI and robotics.”If he is not given what he wants, he will sit back and let them die in the vine. That’s not the best interest of investors,” said Gene Munster, managing partner at Deepwater Asset Management. More

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(Reuters) – A look at the day ahead in Asian markets.A raft of top-tier Chinese economic indicators for December, culminating in Q4 and 2023 GDP, takes center stage in Asia on Wednesday, with global markets under heavy selling pressure from a sharp rise in the dollar and U.S. bond yields.The MSCI Asia Pacific ex-Japan equity index slumped 1.8% on Tuesday – its steepest fall in nearly six months – and Wall Street’s slide will help ensure that sentiment remains fragile on Wednesday. Asian stocks ex-Japan are now down 5% this year, and emerging market stocks are off to their worst start to a year since 2016. Global risk appetite was dented after Federal Reserve Governor Christopher Waller on Tuesday indicated interest rate cuts could come later and be implemented more slowly than markets have been positioning for. This is likely to spill over into Asia on Wednesday, where the focus will be centered on the Chinese economic ‘data dump’. Indonesia’s central bank also announces its latest interest rate decision. Reuters polls suggest annual investment and industrial production growth rates in China held steady in December from the previous month, while retail sales growth slowed. The latest house price and unemployment figures will also be released.On the broader GDP level, quarterly growth is expected to have slowed to 1% in the October-December period from 1.3%, while the annual rate of growth rose to 5.3% from 4.9%, largely due to base effects.Chinese Premier Li Qiang in Davos on Tuesday said GDP growth was probably around 5.2% last year. He also said China is open for business, notable comments in light of China recently posting the first quarterly deficit in foreign direct investment since records began in 1998.At a private lunch in Davos on Tuesday Li and People’s Bank of China Governor Pan Gongsheng later met business and finance leaders, including JP Morgan CEO Jamie Dimon, Bank of America CEO Brian Moynihan, and Blackstone (NYSE:BX) CEO Steve Schwarzman.Beijing may be on a charm offensive, but it will need the data to pay ball if it is to have any chance of succeeding.Full-year growth is expected to slow to 4.6% in 2024 from 5.2% last year, with risks probably tilted to the downside – the property crisis is rumbling on, consumer and business confidence is weak, local government debt is high and rising, and deflation looms large over the economy.Bank Indonesia, meanwhile, is expected to keep its key interest rate unchanged at 6.00% on Wednesday. With inflation within BI’s 2023 target range of 2.0% to 4.0% for seven months and falling, markets are pricing in the first rate cut in the third quarter.Here are key developments that could provide more direction to markets on Wednesday:- China house prices, investment, retail sales, industrial production, unemployment (December)- China GDP (Q4 and 2023) – Indonesia interest rate decision – Japan tankan services index (January) (By Jamie McGeever) More