Economy

NEW YORK (Reuters) -An expert witness paid nearly $1 million by Donald Trump to testify at his New York civil fraud trial “lost all credibility” by “doggedly” justifying the former U.S. president’s business records, the judge overseeing the case said on Monday.Eli Bartov, a New York University accounting professor, testified on Dec. 7 that he did not see any evidence of fraud in Trump’s family real estate company’s financial statements, which New York state’s attorney general alleges overstated property values in order to win favorable loan and insurance terms.Bartov testified that he spent 650 hours on the case at a rate of $1,350 per hour, meaning his compensation totaled around $877,500. Bartov said his invoices were paid both by the Trump Organization and by Save America, a political action committee supporting Trump’s 2024 election campaign. “All that his testimony proves is that for a million or so dollars, some experts will say whatever you want them to say,” Justice Arthur Engoron wrote in a scathing denial of several requests by Trump for the case to be decided in his favor.”By doggedly attempting to justify every misstatement, Professor Bartov lost all credibility,” Engoron wrote.In an email, Bartov said Engoron was wrong to say the “overarching point” of his testimony was that Trump’s statements were “accurate in every respect.” He pointed to his testimony that Trump’s statements contained inadvertent errors.”No expert rebutted my testimony or testified that they found fraud,” Bartov said. “As to his speculation that my billing rate had anything to do with my opinion, this is my standard billing rate.”Christopher Kise, a lawyer for Trump, said in a statement that Engoron’s ruling “represents a complete failure to address the legal elements of the claims to be decided.”All that seems to matter is arriving at a predetermined destination,” Kise said. The trial has focused mostly on damages, as Engoron ruled before it started in early October that Trump and his adult sons manipulated financial statements to dupe banks and insurers. New York Attorney General Letitia James, a Democrat, is seeking $250 million in penalties and wants Trump banned from the New York state real estate business.Trump, the leading contender for the Republican presidential nomination, has denied wrongdoing and called the case politically motivated.In his three-page written ruling, Engoron acknowledged the defense’s argument that property valuations are subjective and that inaccurate information in financial statements must be “material” to break the law. But he said Trump’s statements were “replete with examples of material misstatements.””A lie is still a lie,” Engoron wrote.Closing arguments in the trial are set for Jan. 11. Trump separately faces four state and federal criminal indictments, including two over charges he sought to overturn his loss to Democratic President Joe Biden in the 2020 election. He has pleaded not guilty to all charges. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is chief economist at Bank of SingaporeThe 2020s are proving to be a disorderly decade for investors. Frequent shocks are shortening fund managers’ horizons. But the crises are also giving rise to new longer term trends. Successful asset allocation, including diversification to Asia, is therefore likely to be markedly different from the 2000s and 2010s.Investors have spent the past few years dealing with the pandemic, Russia’s invasion of Ukraine, a violent attempt to overturn the US elections and now war in the Middle East. In contrast, the first two decades of the century were also startling but the most significant events — the attacks of September 11 2001, the Iraq war, the global financial crisis, the eurozone debt crisis and China’s currency devaluation in 2015 — were more staggered.Portfolio managers have thus been firefighting one shock after another. But the pandemic, war and populism are set to drive a few clear trends for the rest of the decade.First, inflation and interest rates are likely to stay significantly higher over the 2020s. Fiscal spending is increasing sharply on healthcare, defence, energy security and climate change and to counter inequality. At the same time, companies are reshaping global supply chains, further fuelling inflationary pressures. Second, the shocks of the past few years are forcing geopolitical rivals to search for security in sectors as diverse as tech, healthcare, food, energy and metals.Long-term asset allocation in the 2020s is thus likely to differ substantially from the past two decades. Higher interest rates will favour the equities and bonds of companies with superior balance sheets. Fears over security and inflation will benefit commodities as well as tech companies. Increased uncertainty will require globally diversified portfolios.In this new emerging environment, Asia will play a standout role for investors. Strong companies, strategic resources and less synchronised economies are likely to induce contrarians to increase exposure rather than retreat because of tense relations between Washington and Beijing.At the start of the century, fund managers looked at the region through a lens of “Asia ex-Japan” as the world’s second-largest economy succumbed to deflation. Two decades later, similar concerns and geopolitical tensions are making fund managers consider strategies for “Asia ex-China”. In the absence of outright military conflict, however, China’s markets will remain important for unconstrained global investors.China’s gross domestic product growth is set to fall from current levels of 5 per cent a year to nearer 4 per cent by the end of the 2020s as debt, demographics and disputes with the US slow trend rates down. But a decade of annual growth exceeding 4 per cent would still increase the size of China’s economy by half. The renminbi is trading at its lowest levels against the dollar since the 2008 financial crisis and valuations for domestic assets are undemanding. That means fund managers seeking quality companies, exposure to sectors deemed key for long-term security, and international diversification will still look to maintain significant allocations to China. In contrast, investors concerned about geopolitical risks may reduce or even eliminate their holdings in Asia’s largest economy. But cautious fund managers will still be able to build diversified portfolios by increasing their allocations to regional economies closely linked to China’s including Japan, South Korea, Singapore, Indonesia and Australia.This year, Japan’s equities have reached three-decade highs as inflation finally returns, the Bank of Japan stays dovish and corporate governance improves. Strong trading links with China, close political relations with the US and the weakness of the yen have also attracted global investors. But fund managers seeking alternatives to China will consider other Asian economies too. South Korea has world-class tech companies; Singapore high quality real estate investment trusts; and Indonesia and Australia energy and metals including nickel, copper and lithium. Last, investors seeking to limit exposure to China and achieve lower correlations with global markets will raise their allocations to India over the 2020s. The world’s fastest growing large economy is expanding at about 6-7 per cent a year owing to favourable demographics and gathering reforms. India’s relatively closed markets are less vulnerable to external shocks.Asia is thus likely to feature prominently despite geopolitical fears. The region’s strong companies, strategic sectors and diverse economies will enable investors to exploit the longer term trends emerging from the shocks at the start of the decade. More

TOKYO (Reuters) -The Bank of Japan concludes a policy meeting on Tuesday at which members are likely to debate whether economic conditions are falling into place for the bank to begin unwinding ultra-loose monetary settings.None of the economists polled by Reuters expect the central bank to end its negative interest rate policy on Tuesday with most projecting such an action to happen next year.However, with some traders projecting a policy shift in January, markets are instead focusing on any hints Governor Kazuo Ueda offers at his post-meeting briefing on how soon the BOJ takes short-term interest rates out of negative territory.”The hurdle for beginning policy normalisation before waiting for the early outcome of (next year’s) wage negotiations is quite high,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.At the two-day meeting concluding on Tuesday, the BOJ is widely expected to keep its short-term rate target at -0.1% and that for the 10-year government bond yield around 0%.Economy Minister Yoshitaka Shindo will attend as a representative from the Cabinet Office, the government said.Two government representatives, one from the Cabinet Office and another from the Ministry of Finance, usually attend the BOJ’s policy-setting meetings. They cannot vote but can submit a request for a delay in the board’s vote.It is rare for a minister to attend as the task is usually assigned to deputy ministers or junior-ranking officials. In the past, meetings where cabinet ministers attended resulted in big policy changes such as the launch of a massive asset-buying programme in April 2013 under former governor Haruhiko Kuroda.Even if the BOJ keeps policy steady, comments from Ueda reinforcing his conviction that inflation will sustainably achieve the bank’s 2% target could heighten market expectations of an end to negative rates in January, some analysts say.Japan has seen inflation hold above 2% for over a year and some firms have signalled their readiness to keep raising wages, increasing the chance of a near-term policy shift.With consumption showing signs of weakness, however, many BOJ policymakers prefer to await more clues on whether wage gains will accelerate enough to keep inflation sustainably around their target, sources have told Reuters.Still, markets remain jittery given the BOJ’s history of surprises. In July, the central bank abruptly relaxed its grip on long-term borrowing costs by raising a cap set for the 10-year bond yield. The cap was watered down to a loose reference in October in a sign Ueda was moving steadily toward dismantling his predecessor’s radical stimulus.Analysts say the BOJ may find it easier to move in months like January and April, when it releases a quarterly outlook report with fresh growth and price projections.But a sharply changing global monetary policy environment may complicate the BOJ’s decision with U.S. and European central banks signalling that they are done hiking rates.Raising rates at a time other central banks are cutting them could spark a spike in the yen that would hurt big manufacturers’ profits and discourage them from hiking wages, analysts say.Political factors also muddle the BOJ’s policy path with persistent inflation blamed for pushing down Prime Minister Fumio Kishida’s approval ratings to historical lows.”While the BOJ persists in stably achieving its 2% inflation target, Kishida’s administration is probably hoping for a more flexible monetary policy management,” said Ryutaro Kono, chief Japan economist at BNP Paribas (OTC:BNPQY).”There are not just economic but political factors that could push forward the timing of a BOJ policy shift,” he said, adding there was a 50-50 chance of the BOJ tweaking its dovish policy guidance on Tuesday and ending negative rates in January. More

HONG KONG (Reuters) – China’s disappointing post-COVID recovery has raised significant doubts about the foundations of its decades of stunning growth and presented Beijing with a tough choice for 2024 and beyond: take on more debt or grow less.The expectations were that once China ditched its draconian COVID rules, consumers would burst back into malls, foreign investment would resume, factories would rev up and land auctions and home sales stabilise.Instead, Chinese shoppers are saving for rainy days, foreign firms pulled money out, manufacturers face waning demand from the West, local government finances wobbled, and property developers defaulted.The dashed expectations have partly vindicated those who always doubted China’s growth model, with some economists even drawing parallels with Japan’s bubble before its “lost decades” of stagnation starting in the 1990s.China sceptics argue Beijing failed to shift the economy from construction-led development to consumption-driven growth a decade ago, when it should have done so. Since then, debt has outpaced the economy, reaching levels that local governments and real estate firms now struggle to service.Policymakers vowed this year to boost consumption, and reduce the economy’s reliance on property. Beijing is guiding banks to lend more to high-end manufacturing, away from real estate.But a concrete long-term roadmap for cleaning up debt and restructuring the economy remains elusive. Whatever choices China makes, it will have to account for an ageing and shrinking population, and a difficult geopolitical environment as the West grows wary of doing business with the world’s No.2 economy.WHY IT MATTERSChina likely grew 5%-or-so in 2023, outrunning the global economy. However, beneath that headline is the fact China invests more than 40% of its output – twice as much as the United States – suggesting a significant portion of that is unproductive.That means many Chinese don’t feel that growth. Youth unemployment topped 21% in June, the last set of figures before China controversially stopped reporting.University graduates who studied for advanced-economy jobs are now taking up low-skilled positions to make ends meet while others have seen their wages cut.In an economy where 70% of household wealth is parked in property, home owners are feeling poorer. Even in one of the few bright spots of the economy, the electric vehicle sector, a price war is causing pain downstream for suppliers and workers.The national pessimism could present President Xi Jinping with social stability risks, analysts say. If China does slip into a Japan-style decline, it would do so before ever achieving the kind of development Japan did.That would be felt widely as most global industries depend significantly on suppliers in China. Africa and Latin America count on China buying their commodities and financing their industrialisation.WHAT IT MEANS FOR 2024China’s problems give it little time before it has to make some tough choices.Policymakers are keen to change the structure of the economy, but reform has always been difficult in China.A push to boost welfare for hundreds of millions of rural migrant workers, who could – by some estimates – add 1.7% of GDP in household consumption if they had similar access to public services as urban residents, is already stalling due to worries about social stability and costs.China’s efforts to resolve its property and debt problems come up against similar concerns.Who pays for their bad investments? Banks, state-owned firms, the central government, businesses or households?Any of those options could mean weaker future growth, economists say.For now, however, China appears hesitant to make choices that would sacrifice growth for reform.Government advisers are calling for a growth target of around 5% for next year.While that’s in line with its 2023 target, it won’t have the same flattering year-on-year comparison with the slump caused by the 2022 lockdowns.Such a target might push it into more debt – the type of fiscal looseness that prompted Moody’s (NYSE:MCO) to cut China’s credit rating outlook to negative this month, pushing Chinese stocks to five-year lows.Where that money gets spent will tell us if Beijing is changing its approach or doubling down a growth model many fear has run its course. More

“Starting from tomorrow, the bank’s monetary policy interest rate will become the rate for one-day reverse repos, a rate that since Dec. 13 has been established at 100%,” the bank said in a statement.The move, days after libertarian President Javier Milei took office as South America’s No. 2 economy battles inflation nearing 200%, aims to clarify monetary policy decisions but analysts said it could push up the cost of U.S. dollars.Fund Corp economist Roberto Geretto said the measures would push banks and savers toward treasury bills with an aim to indirectly cut the fiscal deficit, but could push up the cost of dollars in parallel foreign exchange markets.Invenomica director Pablo Besmedrisnik added that if successful, the move could cut public debt and lead to more breathing space to gradually redirect loans to companies.”There will be incentives to redirect funds towards dollarized assets, putting pressure on their prices,” Besmedrisnik said. “We will have to wait for the reaction.””It’s a strong bet,” said Maria Castiglioni, director at C&T Asesores Economicos. “The bet only works if the government achieves a financial fiscal balance so it does not have to keep placing debt, or this scenario will be very hard to manage.”The central bank, under the new presidency of Santiago Bausili, added that it considered it “prudent” to maintain a minimum 110% interest rate for fixed-term deposits.In terms of liquidity injections, the bank said it would continue to carry out certain operations on Treasury instruments which the bank considers appropriate.Milei’s campaign pledges include dollarizing the economy and eventually shutting down the central bank. More

WASHINGTON (Reuters) – The International Monetary Fund’s governing body has approved a 50% increase in quota resources to be contributed by member countries in proportion to their current IMF shareholding, bringing total quotas to $960 billion, the IMF said on Monday.Governors representing nearly 93% of the total voting power of the fund voted for the 50% increase the IMF’s executive board recommended last month, exceeding the 85% required. The voting deadline ended on Friday.The quota increase, which follows years of extensive discussions among members, will become effective by Nov. 15, 2024 once member countries agree to their respective quota changes, which requires legislative approval in many cases.The decision largely follows a U.S.-backed plan that would enhance IMF lending resources but delay any IMF shareholding increases for China, India, Brazil and other fast-growing emerging market economies.But the governors asked the IMF to develop possible approaches for a new quota formula by June 2025, in line with the executive board’s recommendation.The 50% increase in quota funding — equivalent to about $320 billion at current exchange rates — will not increase the fund’s overall lending firepower of about $1 trillion, but would shift the composition to about 70% more permanent resources while reducing reliance on borrowed resources, the IMF said.IMF Managing Director Kristalina Georgieva called the decision “a strong vote of confidence for the work of the Fund. It will reduce the reliance of the Fund on borrowed resources, restore the primary role of quotas in our lending capacity and reinforce the role of the IMF at the center of the Global Financial Safety Net,” she said. Georgieva said the move would strengthen the IMF’s capacity to help “safeguard global financial stability and respond to members’ potential needs in an uncertain and shock-prone world.” Currently, the IMF relies on bilateral borrowing arrangements and pledges to a crisis lending fund called the New Arrangements to Borrow. The executive board will discuss proposals for reducing the crisis lending fund in early 2024.Zuzana Murgasova, deputy director of the IMF’s finance department, told Reuters that work on the guidance for a further quota realignment would begin very soon, but declined to provide further details since the discussions were confidential.”What is really important is that the membership has recognized that this is an urgent priority, and the work will start very soon,” she said.Murgasova said the governors’ votes were also confidential, and declined to say which country or countries did not approve the quota increase. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The Pentagon has convinced more than a half dozen allies to join a strengthened naval task force in the Red Sea amid mounting attacks by Iran-backed rebels on commercial shipping that have driven oil prices higher.The announcement of what Lloyd Austin, US defence secretary, called Operation Prosperity Guardian came just hours after UK oil supermajor BP said it was halting all shipments through the waterway, citing the “deteriorating security situation”. BP is a large producer of oil in Iraq and gas in Oman.More than 9mn barrels a day of oil shipments, or almost a tenth of global demand, pass through the Red Sea, making it one of the world’s busiest energy chokepoints.The naval deployments, which will include ships from more than a half dozen Nato countries, including the UK and France, as well as regional allies like Bahrain, come as Iranian-backed Houthi rebels in Yemen have increased their attacks on US assets in the region. The Houthi attacks on commercial shipping, which rebel leaders said were in retaliation for Israel’s offensive against Hamas, have steadily increased in recent weeks, with more than 11 since mid-November. On Sunday, the US said one of its warships, the USS Carney, shot down 14 attack drones launched by the Houthis.BP’s decision to bypass the Red Sea pushed oil prices higher on Monday, with international benchmark Brent settling up 1.8 per cent at $77.95 a barrel.The new naval task force would work together “to tackle the challenge posed by this non-state actor launching ballistic missiles and uncrewed aerial vehicles at merchant vessels from many nations lawfully transiting international waters”, Austin said. He will convene a virtual meeting of international partners in Bahrain on Tuesday to discuss the Houthi escalation. “We’re taking action to build an international coalition to address this threat,” Austin said during a stop in Israel on Monday.After visiting Bahrain, where the US Navy’s Fifth Fleet is stationed, the defence secretary will stop aboard the USS Gerald R Ford aircraft carrier, currently in the eastern Mediterranean, and also travel to Qatar.Operation Prosperity Guardian would be formed as part of the 39-member Combined Maritime Forces and its existing Task Force 153, which focuses on the Red Sea, Austin said. The expansion of the Red Sea task force comes amid a broader diplomatic effort by Washington. General CQ Brown, chairman of the US joint chiefs of staff, was also in Israel on Monday, following a visit by national security adviser Jake Sullivan last week. CIA chief Bill Burns also met with Qatari and Israeli officials to discuss the release of more hostages held by Hamas in Gaza.During his visit to Israel, Austin said the country must be “more surgical” in its military campaign. He and his counterpart also discussed a shift in the Gaza offensive away from high intensity operations.The US had not ruled out military action against Houthi targets if the attacks on ships continue, officials said. It would “take appropriate action . . . at a time and place of our choosing”, Sullivan said earlier this month.Even before BP’s announcement, global energy suppliers and commercial shippers had been avoiding the narrow Bab el-Mendeb strait at the southern end of the Red Sea, where tankers sail within easy striking distance of the Houthi rebels.BP’s pause came after commodity trader Trafigura said it was taking “additional precautions” for its owned and chartered vessels. Several of the world’s biggest shipping companies, including MSC, Hapag-Lloyd and Maersk, have also paused travel through the Red Sea due to security risks.Traders are also anxious about threats to supplies of Qatari liquefied natural gas to Europe as winter sets in. The UK’s benchmark gas price jumped by more than 8 per cent on Monday, while the European hub price rose by more than 7 per cent.The US has blamed Iran for enabling these attacks. Sullivan told Israel’s News 12 last week that it was Iran’s responsibility to end the threat. Analysts said the attacks raised the prospect of a new and prolonged disruption to global energy and goods shipments, less than two years after Russia’s full-scale invasion of Ukraine — and sanctions on Russian energy exports — forced a reordering of decades-old oil and gas trade routes. Raad Alkadiri, a managing director at Eurasia Group, said the move by big shippers, including BP, to bypass the Red Sea would heighten risks and costs.“Firms have the option of using the longer and costlier route around the Cape of Good Hope,” he said. “The heightened political risks will add to underlying uncertainty about the outlook for oil supply and demand in 2024.” More