Economy

“We’ve normalized a world where technology products come off the line full of vulnerabilities and then consumers are expected to patch those vulnerabilities. We can’t live in that world with AI,” said Jen Easterly, director of the U.S. Cybersecurity and Infrastructure Security Agency.”It is too powerful, it is moving too fast,” she said in a telephone interview after holding talks in Ottawa with Sami Khoury, head of Canada’s Centre for Cyber Security.Easterly spoke the same day that agencies from 18 countries, including the United States, endorsed new British-developed guidelines on AI cyber security that focus on secure design, development, deployment and maintenance.”We have to look at security throughout the lifecycle of that AI capability,” Khoury said.Earlier this month, leading AI developers agreed to work with governments to test new frontier models before they are released to help manage the risks of the rapidly developing technology.”I think we have done as much as we possibly could do at this point in time, to help come together with nations around the world, with technology companies, to set out from a technical perspective how to build these build these capabilities as securely and safely as possible,” said Easterly. More

NEW YORK (Reuters) -A record amount of price-pinched holiday shoppers are expected to use buy now, pay later services for Cyber Monday to relieve stress on their wallets, according to Adobe (NASDAQ:ADBE) Analytics. Shoppers are slated to spend between $12 billion and $12.4 billion online on Monday, with $782 million of purchases made with BNPL services, including Klarna and Affirm, representing a surge of nearly 19% from last year, the data company said. Affirm shares gained nearly 12% on Monday after Adobe Analytics released the upbeat data. That stock has more than tripled in 2023, boosting its market value to more than $8 billion on the growing popularity of BNPL services. Rival Upstart (NASDAQ:UPST) Holdings rose 2.6% on Monday; its shares have gained nearly 90% so far this year.BNPL has consistently been growing in popularity over the past several years, but its usage is getting a further boost from budget-conscious shoppers trying to avoid the additional fees and interest that come with purchases made through credit cards. “The scale of the adoption (of BNPL) has just gotten so big. It’s become really, really, really popular,” said Dan Dolev, an analyst at Mizuho Securities. Economists anticipated the holiday season would be slower than recent years due to financial pressure on consumers who are dealing with higher interest rates and lingering inflation. However, early indications from Monday’s shopping suggests consumer spending looks to have remained steady even as consumer finances have deteriorated from post-pandemic strength. A survey by Klarna found nearly half of those surveyed worried that they would not be able to pay off credit card bills in full from holiday spending. The buy now, pay later firm saw a 29% increase in orders placed by U.S. shoppers on Black Friday, with some of the most popular items being personal electronics, televisions and kitchen appliances. Average basket sizes on Black Friday orders declined 32% compared to last year, according to a report from Quantum (NASDAQ:QMCO) Metric, a sign that shoppers aren’t making as big of purchases this year. More

(Reuters) – A look at the day ahead in Asian markets.Asian markets are lacking firm direction either way, but bulls will be hoping the combination of a weaker dollar, lower U.S. bond yields and softer oil prices on Monday will provide the impetus for a more positive session on Tuesday.Volatility across major asset classes is low – implied volatility on Wall Street is at its lowest in almost four years, global currency implied vol is the lowest since early last year, and U.S. bond vol is at a two-month low.There are few signs of market stress. But clear ‘buy’ signals aren’t obvious either – the final trading week of November got off to a listless start, with the MSCI World and Asia ex-Japan indexes drifting 0.2% lower on Monday.On aggregate, Asian stocks have under-performed global benchmarks this year. China’s markets, especially, have lagged, although Japanese stocks have outperformed thanks to the weak yen and a historic loosening of wider financial conditions.Financial conditions tightened a bit last week, according to Goldman Sachs calculations, but remain broadly supportive of risk appetite – aggregate emerging market conditions are almost 100 basis points looser than they were a month ago, in large part thanks to lower U.S. yields and a weaker dollar.Asia’s economic, policy and corporate calendars are light on Tuesday. The main economic indicator will be Australian retail sales for October. Economists expect month-on-month growth to slow sharply to just 0.1% from 0.9% in September.The figures will be released just before Reserve Bank of Australia Governor Michele Bullock is scheduled to speak in Hong Kong on a panel jointly hosted by the Hong Kong Monetary Authority and Bank for International Settlements.Bullock is thought to be more hawkish than her predecessor Philip Lowe which, if true, should in theory lend support to the Australian dollar.The Aussie on Monday rose above $0.66 for the first time since Aug. 10 and was one of the biggest winners among major currencies along with the Japanese yen and New Zealand dollar.It has risen 5% in a month, broadly in line with other G10 currencies’ gains against the greenback as traders have moved to price in the end of the U.S. tightening cycle and up to 100 basis points of Fed rate cuts in the second half of next year.But unlike all other G10 central banks – the Bank of Japan being the obvious exception – the RBA is not expected to ease policy in 2024. Bullock’s remarks on Tuesday could shine a light on how much of an outlier the RBA will ultimately be.Here are key developments that could provide more direction to markets on Tuesday:- Australia retail sales (October)- RBA Governor Bullock speaks- Fed’s Waller, Bowman, Goolsbee, Barr speak (By Jamie McGeever; Editing by) More

NEW YORK (Reuters) – The Federal Reserve will need nearly four more years to cover a historic operating loss and start sending profits again to the U.S. Treasury, according to new research from the Federal Reserve Bank of St. Louis. The losses are a product of the Fed’s rate rise cycle which saw the central bank sharply increase its interest rate target while at the same time shrinking the size of its balance sheet, both of which are being done to make monetary policy tight enough to cool high levels of inflation. The pincer movement of these two policy actions drove the Fed to start losing money in September 2022. The central bank captures the net negative income situation in an accounting measure called a deferred asset, which as of Nov. 22 stood at $120.4 billion.As the Fed sees it, the deferred asset is what must be covered before the central bank can again return excess earnings to the Treasury. The Fed has repeatedly stressed that losing money in no way impacts its ability to operate and conduct monetary policy. The research from the St. Louis Fed estimates it will cover the deferred asset by mid-2027.The Fed’s losses are essentially without precedent in its history. The Fed funds its work through services it provides to the financial sector and from interest income generated by the Treasury and mortgage bonds it owns. Whatever the Fed earns beyond its operating expenses is then returned to the Treasury Department. For years, the Fed has been a steady money maker. A rock bottom federal funds rate coupled with the income it earned from a massive balance sheet has allowed the Fed to hand back nearly $1 trillion to the government over the past decade. In 2022, the Fed handed back $76 billion, after returning $109 billion in 2021.But that changed in the fall of 2022 when the federal funds rate moved high enough over the income it derived from bonds and services to tip the Fed over into a loss. The red ink further mounted as the funds rate, now at between 5.25% and 5.5%, rose, while the stock of bonds owned by the Fed and generating income contracted. CLOUDY OUTLOOK FOR LOSSESUncertainty over the monetary policy outlook complicates estimating how great the ultimate size of the loss will be, when it will stop and when the Fed will cover the deferred asset and start handing money back to the Treasury. Some private sector analysts see the net loss peaking in the $150 billion to $200 billion range, possibly hitting that mark in 2025. Earlier this year, the New York Fed estimated the central bank would return to profitability in 2025, which would allow it to start paying down the deferred asset. Joseph Wang, chief investment officer at Monetary Macro, said the Fed numbers may be a little stale in light of recent market events “so it looks like Fed will have negative income a bit longer than initially projected.” That means “the Fed could carry this deferred asset a little longer until 2028.” More

(Reuters) -Former Binance chief Changpeng Zhao must stay in the United States for the time being, a federal judge said on Monday, after the founder of the world’s largest cryptocurrency exchange pleaded guilty to violating U.S. anti-money laundering laws.Zhao will be required to stay in the United States until the Seattle court considers whether he should remain through his sentencing hearing in February, or if he should be allowed to return to the United Arab Emirates, where he is a citizen.Zhao, who is also a citizen of Canada, stepped down as CEO of Binance last week after pleading guilty to willfully causing the exchange to fail to maintain an effective anti-money laundering program. U.S. District Judge Richard Jones in Seattle said he would review whether Zhao should have to stay in the United States after the U.S. government appealed a decision by another judge allowing Zhao to return to the UAE before his Feb. 23 sentencing hearing. Zhao agreed to a $175 million bond as part of the bail agreement.Binance Holdings agreed to pay over $4.3 billion and pleaded guilty to breaking U.S. anti-money laundering and sanctions laws.Binance said last week it had worked hard to make the company “safer and even more secure.” Lawyers for Zhao did not immediately respond to a request for comment on Monday.Last week, Zhao conceded: “I made mistakes, and I must take responsibility.”Zhao faces a maximum prison sentence of 18 months under federal guidelines and has agreed not to appeal any sentence up to that length. Prosecutors will take a position on how much jail time to seek closer to Zhao’s sentencing, a Justice Department spokesperson said last week. The government had said it may be unable to secure Zhao’s return to the United States given it has no extradition treaty with the UAE. Lawyers for Zhao disputed that he was a potential flight risk, noting that he paid a “substantial” bail package and voluntarily came to the United States to accept responsibility for his actions. More

NEW YORK (Reuters) – The Federal Reserve will cut rates more aggressively than markets are currently pricing in as a mild U.S. recession arrives in the first half of next year, economists at Deutsche Bank projected on Monday.In an outlook report, the Deutsche Bank economists projected 175 basis points in rate cuts in 2024. With the Fed rate currently at 5.25%-5.5%, that would reduce the rate to 3.5%-3.75% by the end of the year. Traders are currently pricing in a rate of 4.48% by December 2024, according LSEG data.Deutsche Bank expects two quarters of negative economic growth in the first half of 2024, which leads to a “pretty sharp rise” in the unemployment rate to 4.6% by the middle of next year from 3.9% now, said Brett Ryan, the bank’s senior U.S. economist, in an interview with Reuters.“We see the economy hitting a soft patch in the first half of the year that results in a more aggressive cutting profile starting in mid year,” he said.At the same time, the bank expects that the economic weakness “eases inflationary pressures,” Ryan said.In the report released on Monday, the bank said it expected a “mild recession” in the first half of 2024.DB expects an initial cut of 50 basis points at the Fed’s June 2024 meeting, followed by 125 bps of additional cuts over the rest of the year.The U.S. economy so far has appeared to stave off predictions of a recession even as the Fed has hiked rates by 525 basis points since March 2022.Indeed, Ryan said, “if things firm up again going forward, the Fed would be cutting by far less.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Rishi Sunak put a “low tax approach” at the centre of the UK’s pitch to international investors as he launched a charm offensive to court about 200 executives at a summit in London.The UK prime minister on Monday unveiled nearly £30bn of investment pledges and memorandums of understanding with international groups, calling them a “vote of confidence” in the country.Executives at the event held at Hampton Court Palace included JPMorgan’s Jamie Dimon; Blackstone’s Stephen Schwarzman and Yasir Al-Rumayyan, governor of Saudi Arabia’s Public Investment Fund. Guests were greeted by buglers, a red carpet and a fleet of Aston Martin and McLaren sports cars as they arrived at the summit — the government’s latest attempt to attract business and secure foreign investment. Sunak told investors that part of the UK’s attraction lay in his government’s “cutting taxes” along with the country’s record in innovation — stretching back to great scientific minds such as Sir Isaac Newton and Michael Faraday — and its skilled workforce.The UK raised corporation tax from 19 per cent to 25 per cent this year but last week made permanent a temporary measure that allows companies to reduce their tax bills by up to 25p for every £1 of investment in plant and machinery, in a move chancellor Jeremy Hunt described as the “biggest business tax cut in modern British history”.The ruling Conservatives have at times endured a fraught relationship with business over the way Brexit was implemented and more recently over U-turns on some of the government’s net zero targets.Companies wanted “clear policies” HSBC’s UK boss Ian Stuart told the Financial Times, adding that the event had shown Britain in a positive light. “You want to be able to look forward and know how government is going to work rather than second guessing it.”Investors said stability and planning systems were important factors in whether they did business in the UK.Ignacio Galán, executive chair of Spain’s Iberdrola, owner of Scottish Power, said in an interview that the UK needed to improve its electric grid and cut the time taken to get projects up and running. Both the Tory government and Labour opposition have pledged to speed up planning processes.Blackstone’s Schwarzman said it was “a real achievement” for the UK to have halved inflation from its 11.1 per cent peak in October 2022. Inflation stood at 4.6 per cent in October 2023 but was still well above the Bank of England’s 2 per cent target.Before the summit, about 35 executives had attended a separate breakfast event with opposition leader Sir Keir Starmer at EY’s London headquarters. Some attendees then travelled to the government’s summit.The Labour event, which was attended by shadow chancellor Rachel Reeves and shadow ministers Jonathan Reynolds and Darren Jones as well as executives from Barclays, Blackstone, BP, Citi and Toyota, underlined business’s desire to maintain relations with both of the UK’s largest political parties.Labour, which is leading the Tories by 20 points in the opinion polls ahead of a general election expected next year, said the discussion covered “barriers to investment in the UK” such as planning, electric grid connections and “instability in the corporate tax regime”.Asked about the push for close relations with China during the premiership of new foreign secretary Lord David Cameron, Sunak replied: “China today is not the China that he dealt with over a decade ago. It has changed; it’s right that our strategy evolves to take account of that.”Sunak added China “is an indisputable fact of global economic life” and that tackling challenges such as climate change would require engagement with Beijing.He told delegates “the economic geography of the world is changing and so, for a country like the UK, it’s important that we reorient ourselves to places like the Middle East [and] Asia-Pacific”.Al-Rumayyan and Khaldoon Al Mubarak, boss of Emirati sovereign wealth fund Mubadala Investment Company, praised the UK’s strong rule of law, its universities and life sciences sector as attractions to investors. 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 storiesQatar said mediators had secured an agreement to prolong the temporary truce between Israel and Hamas by two days to allow the release of more hostages held in Gaza.Leaked documents appear to show that the United Arab Emirates planned to use meetings about the COP28 climate summit it is hosting this week to pitch oil and gas deals to foreign governments. Former president of Ireland Mary Robinson warned against backsliding on climate commitments at the summit.The FT revealed that Turkey’s exports to Russia of goods vital for Moscow’s war machine have soared this year, heightening concerns among the US and its allies that the country is acting as a conduit for sensitive items from their own manufacturers.For up-to-the-minute news updates, visit our live blogGood evening.What some have dubbed the fourth industrial revolution — that of electrification and decarbonisation — is well under way, and its key fuel is lithium, the critical component for battery storage.The struggle for control of the resource has sparked huge battles, as illustrated by our report today from lithium’s “corridor of power” in Western Australia, where multinationals have clashed with domestic mining billionaires, triggering memories of the boom in iron ore in the 1960s and the nickel rush of the 1970s. As the new FT film explains, market commentators expect the lithium market to perhaps quadruple in size over the next 10 years.Video: Inside the global race for lithium batteries | FT Film
“These exciting periods don’t come around too often, these prolonged periods of demand for a commodity. It is driving a frenzy,” said one mining veteran. “There’s only so many seats at the table. It’s like musical chairs — you don’t want to miss out.”The rush for lithium is worldwide. Glencore is making its first investment in a lithium mine in the Democratic Republic of Congo after agreeing a deal with Tantalex, a Toronto-listed group, while GEL, a developer of a geothermal electricity plant is planning to extract lithium from a site in Cornwall. GEL joins a race with Cornish Lithium, Imerys British Lithium and others to revive the region’s mining heritage.Global production is led by Australia, Chile, China and Argentina which together account for 95 per cent of the total, but China dominates lithium processing through its vast network of refineries, leaving the US and Europe struggling to increase their independence.  The EU is planning to lower regulatory barriers to the production of lithium, graphite and cobalt while in the US, the Inflation Reduction Act offers generous tax credits on EVs that source their battery raw materials from the US and free trade partners. That has added pressures for carmakers to source supply domestically. In January, GM announced a $650mn investment in a US lithium mine.Environmental protests have also grown. The Barroso mine in Portugal has been forced to push back several times as it awaits approval while a project in Nevada has also faced years of opposition from conservation groups. At the same time, China is turning to more relaxed regulatory regimes in Africa and Latin America to get feedstock for its domestic lithium refineries.The oil majors are getting in on the act too in an attempt to remain profitable in a new non-fossil fuel age. “It’s a natural evolution for oil companies,” says one market expert. “Lithium brines are an obvious one as unlike charging networks and wind farms, where they have no skills besides project management, they are skilled at subsurface pumping and fluids.”ExxonMobil plans to begin producing lithium in 2027, betting it can use its expertise in drilling and processing to become a leading player. Schlumberger, Occidental Petroleum and Equinor are also exploring whether their core skills of pumping, processing and reinjecting underground fluids such as oil and water could be deployed to process lithium. The scramble for supplies has also opened up a race for alternatives. Swedish start-up Northvolt has developed a battery that has no lithium — or cobalt or nickel — and instead relies on sodium, which is much more abundant. Sodium-ion batteries are cheaper and safer because they work better at both very high and low temperatures, but until now the amount of energy they can produce relative to their size has lagged behind, making them impractical for most EVs.Need to know: UK and Europe economyUK prime minister Rishi Sunak said a “low tax approach” was the key to attracting investors at a London Global Investment Summit to showcase Britain as a business hub, unveiling some £30bn of financial pledges and memorandums of understanding with international groups. Chief economics commentator Martin Wolf has some ideas on how Sunak’s government might revive flagging growth.A parliamentary report called for reform of the Bank of England after its “complacency” about the threat of inflation, recommending that BoE recruits should be drawn from more varied intellectual backgrounds to foster a “diversity of views and culture of challenge”. Hundreds of thousands of tonnes of coffee and cocoa in EU warehouses could be destroyed as an unforeseen consequence of the bloc’s deforestation law, which restricts non-compliant stocks from sale. Need to know: Global economyThe growing belief among investors that the US Federal Reserve is done with increasing interest rates and is turning its attention to cuts has driven the price of gold to a six-month high.Indian Prime Minister Narendra Modi’s ruling Bharatiya Janata party is fighting five state elections in a contest that will set the tone for next year’s national vote, with a resurgent opposition hoping that it can make gains and shock the political establishment. Once dubbed a “fireproof house”, Canada has found itself sucked into a series of foreign policy dilemmas including spats with India and China, the two most populous nations and this century’s rising powers. This deep dive explains.Monterrey, a business-friendly city a few hours’ drive from Texas, is a bellwether for Mexico’s ability to benefit from “nearshoring” as businesses rearrange supply chains in the face of geopolitical tensions.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Need to know: businessThe value of “fine and rare” single malt whiskies has slumped as a faltering global economy dents the taste for luxury, undermining its hitherto status as among the best-performing alternative investments.Anglo-US aviation start-up ZeroAvia has secured backing from the UK’s state-owned infrastructure investment bank to help it develop a hydrogen-electric engine for zero-emission flight.ZeroAvia has now raised more than $250mn in equity investments and grants since it was launched More