Economy

The result closes the rewrite process but “highlights ongoing political divisions and social polarization and could increase fiscal pressures,” said a report by Fitch Ratings.”Political uncertainty will continue to weigh on investment in key sectors and on economic growth, while social spending is likely to increase to address some of the demands that led to the constitutional reform proposals.”Chile is the world’s largest copper producer and the central bank estimates the country will have zero growth in 2023. The economy is expected to recover in 2024.In a separate report on Monday, Moody’s (NYSE:MCO) said the constitutional process highlights the country’s strong governmental institutions, but failed to address the country’s underlying problems. “Even with the shift towards policies more focused on social aspects after the 2019 protests, discontent continues among Chileans,” said Moody’s, stating that they perceive deficiencies in coverage and quality of services such as education, pensions, transportation and health, in addition to concern about the advance of crime and lower economic growth.President Gabriel Boric said after the vote that his government would not pursue a third rewrite of the constitution and would instead move forward with pension and tax reform through the legislature.”We hope that the Boric government will focus on addressing social unrest through policy changes,” the agency said, highlighting that the main priority will be to approve tax reform. (Report by Natalia Ramos; Writing by Alexander Villegas; Editing by Sandra Maler) More

(Reuters) – A look at the day ahead in Asian markets.The Bank of Japan’s policy decision and subsequent remarks from Governor Kazuo Ueda will dominate Asian markets on Tuesday and maybe give investors an insight into how wide the divergence will be between the BOJ and other major central banks next year.While markets reckon the U.S. Federal Reserve, European Central Bank and Bank of England are at the end of their hiking cycles and pivoting toward interest rate cuts next year, the BOJ is only just emerging from years of negative rates and ultra-loose policy.While no one is expecting the BOJ to raise rates on Tuesday, the landmark move could come sooner than many expect – the BOJ has already surprised markets with tweaks to its ‘yield curve control’ policy and intervened in the FX market buying yen, so who’s to say it won’t raise rates in January?On Monday Japan’s yen weakened, the benchmark Nikkei 225 stock index fell and 10-year Japanese Government Bonds rose, which pushed the yield down around 4 basis points.The yen has been one of the best-performing G10 currencies this month on growing hawkish speculation around the BOJ, appreciating almost 4% against the dollar since the turn of the month. This follows a 2.5% rise last month too.Further yen strength will help the BOJ in its fight to get inflation sustainably back toward its 2% target, and households will welcome the downward pressure on import prices, but it will hurt exports, traditionally a major engine of economic growth.Hedge funds have been net short the yen since March 2021, according to Commodity Futures Trading Commission data, but a shift is underway ahead of that seismic shift on rates from the BOJ, whenever it comes.The latest CFTC figures show that funds’ net short position is now the smallest in four months at 81,000 contracts. That’s an aggregate $7 billion bet against the yen, down from $11 billion only a few weeks ago.Elsewhere on Tuesday, the Reserve Bank of Australia publishes the minutes of its last policy meeting, when it held rates at a 12-year high of 4.35%.Asian stocks fell 0.5% on Monday, the steepest decline in two weeks, but that was perhaps to be expected given the 3% surge late last week after the Fed signaled U.S. rate hikes are over and attention is now on when the easing cycle starts.On the corporate front, Japan’s Nippon Steel (5401.T) on Monday clinched a deal to buy U.S. Steel (X.N) for $14.9 billion in cash, a bet that U.S. Steel will benefit from the spending and tax incentives in President Joe Biden’s infrastructure bill.While Nippon Steel’s shares are off some 15% from their recent peak, they have rallied around 50% over the past 12 months.Here are key developments that could provide more direction to markets on Tuesday:- Bank of Japan policy decision- Reserve Bank of Australia minutes- New Zealand trade (November) (By Jamie McGeever; Editing by Josie Kao) More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesAdobe abandoned its proposed $20bn acquisition of product design software company Figma, as there was “no clear path to receive necessary regulatory approvals” from UK and EU watchdogs. BP is pausing oil shipments through the Red Sea as Yemeni rebels’ attacks on vessels in the area threaten a vital route for global trade. Oil prices rose after the decision.The UK is to follow the EU with a levy on carbon-intensive imports from countries with weaker climate regulations. Iron, steel, ceramics and cement will be subject to the levy to reduce “carbon leakage” in which emissions are displaced to other countries.For up-to-the-minute news updates, visit our live blogGood evening.High borrowing costs and the end of pandemic lifelines for “zombie” companies are leading to a surge in corporate bankruptcies across the world’s advanced economies.The number of US cases is up 30 per cent compared with last year, while in Germany, bankruptcies have risen 25 per cent. In the wider EU, corporate insolvencies are up 13 per cent, hitting their highest level in eight years. The OECD said bankruptcy rates in several countries had surpassed levels during the 2008-2009 financial crisis, while in England and Wales, insolvencies have also hit their highest level since 2009. German financial services company Allianz forecast that global insolvency growth rates would hit 10 per cent next year after increasing 6 per cent in 2023.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Allianz said the labour-intensive hospitality, transportation and retail sectors had been hit the hardest, while industries that were more sensitive to interest rate rises, such as property and construction, were expected to come under strain too.The surge in bankruptcies is likely to affect global economic activity and jobs growth in the next few years, analysts say, with healthy start-ups and small businesses being dragged down alongside the zombies under the impact of factors such as high energy prices and elevated borrowing costs.Global investors on the other hand remain optimistic — buoyed by dovish signals from the US Federal Reserve last week — believing that the era of high interest rates is drawing to a close. Whether rates are actually going to fall in the near future, however, is a moot point. Loretta Mester, a senior official at the US Federal Reserve, today tried to dampen expectations, arguing that markets had jumped “a little bit ahead”. She was echoed by Bank of England deputy governor Ben Broadbent who said the uncertain state of the UK’s labour market meant the bank could not yet safely conclude that inflation was on the slide and cut rates.This is not the first time policymakers have felt the need to step in to calm investor exuberance. The problem, reckons columnist Rana Foroohar, is that markets are looking for simplistic yes or no answers to complicated questions. Next year, she argues, economic reality is likely to be even less binary and far more nuanced, with predictions based on old models no longer valid. To take just one example: employment, wages and other key metrics in the post-pandemic era are refusing to follow historic trends. Add to that factors such as the disruption of traditional trade patterns as geopolitical tensions increase, the green transition and hot wars in Ukraine and Gaza, and it becomes clear that forecasting, today more than ever, is a mug’s game.Need to know: UK and Europe economyDespite today’s positive news on carbon leakage, the UK is still being targeted by climate campaigners who are taking legal action to stop the development of the Rosebank oilfield in the North Sea, arguing the project violates legal obligations on emissions. For the UK economy, 2023 was a story of near stagnation, with activity forecast to remain tepid into the new year as high borrowing costs and the legacy of surging inflation take their toll. “Given the UK’s low productivity, I suspect growth will be imperceptible for the rest of the decade,” said one economist. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.German business morale fell more than expected in December, according to the closely watched Ifo index, adding to concerns that the eurozone’s largest economy could shrink for the second consecutive quarter at the end of 2023. IMF chief Kristalina Georgieva told the Financial Times that delays in US and EU funds for Ukraine could jeopardise the country’s tentative economic recovery. A new package of EU sanctions against Russia should be agreed this week.Need to know: global economyThe US raised concerns with Mexico over a wave of Chinese investment in the country including electric vehicle factories being built south of the US border by three of China’s biggest EV makers.The shutdown of one of the world’s biggest copper mines in Panama has highlighted the challenge of securing the supply of raw materials needed for the green transition amid rising anti-mining sentiment, denying developing countries lucrative extraction projects. An FT Big Read examines how the election in the Democratic Republic of Congo could pave the way to a mineral-driven boom that lifts millions out of poverty. The DRC sits on £24tn of untapped resources critical to the world’s green transition.Africa overall, however, remains a problem for global economic growth, writes Ruchir Sharma, chair of Rockefeller International. The continent, now home to 1.5bn people, needs to find a way of employing workers more productively to capitalise on what should be a demographic dividend of healthy population growth, he writes.Need to know: businessRyanair has cemented its position as undisputed leader in European low-cost aviation after bouncing back from the pandemic. So much so that boss Michael O’Leary is on track to earn a €100mn bonus — one of the biggest in European corporate history — after the airline’s shares hit a record high.Silicon Valley-based Zipline is to deliver medical supplies by drone for the UK’s NHS in a pioneering move that is meant to cut costs and improve services to hundreds of thousands of patients. The fixed-wing machines can travel up to 130 miles and parachute packages on to landing zones.The world’s leading food and drinks companies are rushing to reduce their carbon footprint by tackling one of the hidden culprits of emissions: fertilisers. Crop nutrients underpin the production of half the world’s food but contribute significant CO₂ emissions at the same time. Fancy speaker and television maker Bang & Olufsen said it could defy the slowdown hitting the luxury sector on the basis that “the rich will only become richer”.  The world of workThe UK’s High Pay Centre said the country’s biggest companies were failing to close the gap between bosses’ pay and average earnings. At FTSE 100 groups, chief executives on average are paid 80 times the median salary of the country’s employees.I’ve progressed fast at work — how do I go further? FT readers propose some answers to this week’s question to career expert Jonathan Black.Mispronouncing a colleague’s name at work can be hazardous — and not just if it’s the boss, says columnist Pilita Clark.Some good newsThe US regulator’s approval of two gene therapies for sickle cell disease, including the first CRISPR-based treatment for any disorder, could be transformative for some of the disease’s 7.7mn sufferers worldwide.Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.One of the things that forces a rich country to open its doors to immigrants is the need to find people to do work that their own population is unwilling or unable to do. And increasingly in the developed world, one of the jobs that people are unwilling or unable to do is that of a parent. With the exception of Israel, no country in the OECD has a birth rate above replacement rate — 2.1 births per woman. Even countries like France and Hungary, which have spent large sums to encourage people to have bigger families, have not managed to get above this pivotal figure. It is possible that Hungary’s upward trajectory has not yet peaked and that its generous programme of financial incentives, in which families with more than three children pay little to no income tax, has turned around the country’s long decline in fertility. But given that Hungary spends 5 per cent of its gross domestic product on “pro-childbirth” policies, you would hope that it would have managed to hit a higher birth rate than 1.6. That is no better than the UK, whose government removed child benefit for households earning more than £60,000 and refuses to pay anything additional for households having more than two children. Some people insist that demographic decline isn’t a problem. There are three arguments I hear all the time whenever I raise this topic.The first is that there are too many people on this Earth as it is and reducing the total number will be good for the planet. This misses the point that it is how you live and how your energy is provided that drives your impact on the planet: the world’s biggest population booms are not its biggest polluters. The second is that states should not be preoccupied with what their citizens are choosing to do. This is true up to a point but given that we all, whether we have children or not, have an interest in there being someone around to look after us at the end of our lives, a country’s birth rate is a social issue and not just a personal one. Finally, there is the argument that we already know what the solution to the rich world’s birth problem is: immigration from poor and middle-income countries. There are a number of objections I could raise here, not least that this is a big bet on these countries remaining poor, which is neither guaranteed nor desirable. But the largest is that it is an important signal when the role of parenting is sufficiently unattractive that society needs to turn to people born in poorer countries. The declining rate of childbirth in richer countries is about any number of things, including the high cost of housing and the increasing importance of not just an undergraduate degree but some further form of higher education qualification for accessing the best jobs — in addition to unalloyed positives like reproductive freedom. But it is also an important market signal that having children does not appear to be a very attractive proposition for those who have a choice. And how could it be otherwise? Many rich countries have in effect closed the gender pay gap among adults who choose not to have children — but they have not managed to do so among those who choose to become parents. Forty-five years after Louise Brown became the first human to owe their existence to vitro fertilisation, we are not much closer to the first human to be born without risk to the life and health of its mother. There is no other job in the world about which people in polite society would say, “Sure, it comes with a heavy hit to your career earnings, there’s still a risk that you might die doing it, but don’t worry, we can always find someone from a poorer country to fill the gap.” Almost all of the rich world’s pro-child policies are really just about encouraging people to have children in the first place, but very few are really pro-parent. Hungary may spend a colossal amount on this, yes, but it does very little to improve either the experience of antenatal care nor the career prospects of women after birth. Indeed, quite the opposite: the Hungarian model is expressly about incentivising women to stay at home and take on most of the caregiving burden. This may well be part of why, while the country has raised its birth rate significantly, it has not turned around its declining population, because large numbers of people still leave for a better life (and more social freedoms) elsewhere. Ultimately, a country’s ability to attract people to do anything is a commentary on how attractive people find it. States planning pro-childbirth policies would be better off thinking about what a “pro-parent” policy could look like — whether it is a better standard of antenatal care, better social opportunities for new parents or cheaper [email protected] More

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The brokerage raised its quantum of cuts for next year to 100 bps from 75 bps, with the central bank expected to lower rates in March, June, September, and December.It also raised the country’s economic growth forecast on a quarterly average basis by 0.6 percentage points to 1.2% for next year, driven by stronger consumer spending.”Incoming data is signaling the U.S. economy can enjoy both modest growth and disinflation simultaneously,” BofA’s U.S. economist Michael Gapen said.The Fed’s dovish pivot at the December policy meeting further resulted in the advancement of the timing of the central bank’s first rate cut, Gapen added. A slew of Wall Street brokerages last week advanced their expectations over the timing of the first interest-rate cut after Federal Reserve Chair Jerome Powell signaled a likely end to the historic tightening in monetary policy that began in March 2022. 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.This article is an on-site version of our Trade Secrets newsletter. Sign up here to get the newsletter sent straight to your inbox every MondayAnd so another year of Trade Secrets draws to an end. I’m back with the first newsletter of 2024 on January 8 and the first column on January 11. Today, I do the Janus thing and look back at the year that’s coming to a close and the one to come.Reviewing my end-year pieces in years gone past, there’s a clear pattern. Globalisation repeatedly defied all the threats I’d warned about the previous year, and yet somehow it still seemed easier to detail risks for the 12 months ahead than to point at specific causes for optimism. Nonetheless — happily vindicating my longstanding instinct — globalisation has kept chugging along. Next year genuinely does seem to pose the biggest hazard to open trade in a long time (the possible election of Donald Trump), but then we’ve said that about other things before. Charted Waters is on electric vehicles, a subject we all know a lot more about than we did this time last year. A very happy holidays/merry Christmas/cool Yule/blissful break from reading Trade Secrets to you all.Get in touch. Email me at [email protected] in the year gone byTrade itself basically did fine in 2023. Goods trade slowed during a downturn in global gross domestic product. That’s what it does. The World Trade Organization revised down its growth estimate for trade in goods in 2023 in October but thinks it will recover next year. The apparent soft economic landing in the US and the turn of the interest-rate cycle across a lot of countries is really good news for trade in the short- to medium-term.Meanwhile, services trade (though note these are value not volume data and affected by exchange rate movements) is also doing OK.Global foreign direct investment recovered in the first half of 2023, albeit not completely from the big drop in 2022. There’s a really big fall-off in FDI into China, but no reason that other countries can’t scoop it up.Indeed, the value networks in goods trade that have been built up since the cold war are being rejigged but not (yet) degraded. A bunch of low- and middle-income countries (Vietnam, Mexico, India, Bangladesh) are nipping in to interpolate themselves between China and the US or trying to snaffle some of the low-cost manufacturing. Geopolitics isn’t destroying trade. This isn’t a new cold war. It just isn’t. There’s a bit of evidence that value networks are becoming stronger between strategic allies, but the world economy isn’t splitting into blocs. To generate any significant trade or macroeconomic effects you have to assume really extreme and unrealistic degrees of political fragmentation. And the Gaza situation won’t directly affect global trade unless it spreads to more countries or the shipping disruptions (see below) are prolonged.Attempts to control commodity exports (countries’ own and their adversaries’) aren’t really working. The G7 cap on Russian oil prices has been in place for a year but is by now essentially having no effect. Tech sanctions are more important, but news from Huawei suggests China can get round at least some US bans on chip technology.Meanwhile there’s heightened rhetoric about the Global South, a term whose prominence continues to grow despite my best efforts, but most developing and emerging economies are showing entirely understandable opportunism in not definitively joining either the US or China’s camp.Trade policy is unimpressive but not generally malign. As the WTO director-general reported to ambassadors recently, the number of trade restrictions remains at a high level but more liberalising than restricting measures are being added. However, there haven’t been many impressive deals getting done among the big powers. The US has been flailing about with its “Indo-Pacific Economic Framework”, which hilariously manages to be domestically controversial while largely devoid of content, and is otherwise averse to trade deals. The EU has so far failed to get the trade deal with Mercosur sorted and is busy with unilateral, I mean autonomous, instruments such as its carbon border mechanism, and irritating low and middle-income countries by doing so.Globalisation in the year to comeThe biggest danger to the world trading system is pretty obvious: Donald Trump. It’s bad enough that a second term of Trump as president would most likely see a resumption of trade wars that were both aggressive and hugely uncertain. (Will China be an enemy, or a friend of convenience? Will Mexico now be a full-on adversary because of immigration and stealing American jobs? Will the US just cut funding for the green transition and impose even higher tariffs instead?)It’s also that if Trump pulls out of supporting Ukraine, handing Russia partial or total victory, it will create a very serious problem for the EU and will encourage pro-Putin forces inside Europe. And while governments have generally given up on the idea that America will anchor an open global economy and multilateral trading system, a US actually sliding towards autocracy would be a very different thing. In other words, we really could finally see an impact of geopolitics on globalisation.Rebel attacks and climate change are threatening supply chains. This time it could be real. The big crunch in ports and shipping during Covid — or more accurately when the Covid lockdowns were lifting — was a surge in demand, not any major structural problem with supply.But what we’ve seen over the past few days, with Iran-backed Houthi rebels from Yemen attacking ships in the straits between the Red Sea and the Gulf of Aden and the world’s biggest freight carriers suspending operations there, will be very serious if it’s prolonged. A long-term disruption to Suez Canal traffic (as opposed to the Ever Given ship that got stuck in 2021, which had no long-term impact at all) won’t be pretty.Together with the world’s other great shipping canal, Panama, being severely affected by drought, the supply shock to freight might finally have arrived. I say might because it seems unlikely the Houthi rebels will be able permanently to shut the Suez Canal to shipping without there being some fairly serious reaction. And the Panama drought is somewhat linked to the El Niño weather system, an extreme version of which has come around only once every couple of decades. Then again, it’s likely to come more frequently as the atmosphere continues to heat up.Trade policy won’t do much either way. The big WTO ministerial meeting in February is set to achieve not very much. The US won’t engage properly with reviving the organisation’s dispute settlement process until after November’s presidential election, assuming Joe Biden wins it. As noted in the links below, the EU and US will also try to put their dispute over steel on hold until then. The EU will continue to try to drag the EU-Mercosur trade deal over the ratification line, which probably won’t happen but it might. The EU’s anti-subsidy case against Chinese electric vehicles will come out with something initially quite modest. China will continue to grind slowly through the process of joining the Asia-Pacific CPTPP agreement, while existing members decide if they have the nerve to block it.Charted watersSpeaking of electric vehicles, Washington’s hostility to Beijing means that Chinese investment in EV plants is going into Europe instead. Given China’s lead in the area, that’s a big advantage for EU-based production over the US — the only question is whether you care who owns the company as well as where and what it produces.Trade linksThe remarkable story of a staff revolt at a German consultancy which did a review of labour standards at Volkswagen’s plant in Xinjiang, the Chinese province where the Uyghurs live. (See my Trade Secrets on this issue in June).Javier Milei has surprised anyone expecting libertarian fireworks by adopting relatively conventional conservative economic policy, including supporting the EU-Mercosur deal. He’s also got some unpleasant authoritarian tendencies, though that’s hardly a novelty in Argentina or indeed among Latin American rulers calling themselves free-marketeers and supported by supposed libertarians from the US.A commendable outbreak of political common sense in Brussels as the EU has decided not to impose tariffs on the US over the steel dispute until after the presidential election.My FT colleague Peter Foster’s excellent Britain After Brexit newsletter gives the UK dimension to the issue I wrote about in the column last week — how does the UK achieve its desired light-touch regulation of artificial intelligence given the EU next door has taken a more interventionist route?Speaking of the UK, government ministers can concentrate on signing meaningless bits of paper with individual US states, since it appears that the toxicity of trade deals in Washington ensures that no meaningless bits of paper will be available for signing at a federal level. Still, special relationship and “Atlantic Declaration” and all that.Trade Secrets is edited by Jonathan MoulesRecommended newsletters for youEurope Express — Your essential guide to what matters in Europe today. Sign up hereChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up here More