Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Prices at the pump are not falling in line with wholesale fuel costs, according to the Competition and Markets Authority, raising concerns that weak forecourt competition is exacerbating the cost of living crisis.In September and October, wholesale costs fell “while retail prices did not”, the competition watchdog said on Thursday, noting that prices increased by 11 pence per litre for petrol and 13.9 ppl for diesel since May 2023.The difference between the average price drivers paid at the pump and the price retailers buy fuel was 17-18 ppl at the end of October, “significantly higher” than the long-term average of 5-10 ppl, the CMA added.For the period from June to August, increasing prices were probably driven by “global factors” such as increased crude oil prices, the CMA said.“Drivers are feeling the pain again as petrol prices at the pump have been on the rise since June,” said Sarah Cardell, chief executive of the CMA. “More recent trends give cause for concern that competition is still not working well in this market to hold down pump prices,” she added.The data is the first monitoring report of the market by the CMA as part of an initiative introduced this summer to boost competition.It comes after the body found in July that Asda and Morrisons had raised their margins on fuel since being taken over by private equity groups in 2020 and 2021 respectively. This led to raised prices across the market, due to the two supermarkets’ size and traditional roles as cost-cutters, according to the CMA.Average fuel margins of supermarkets fell from 11.9 ppl in May to 7.3 ppl in August, according to the data released on Thursday, but this was still higher than the annual average before 2021.Data on margins, which is provided voluntarily by retailers, was not yet available for September to October, the CMA said.“Old habits die hard in the road fuel trade. Failure to pass on the full savings from lower wholesale costs to hard-pressed motorists, their families and businesses is unacceptable in a cost of living crisis,” said Luke Bosdet of the AA, the roadside recovery group.Gordon Balmer, executive director of the Petrol Retailers Association, which represents independent fuel retailers, said his members face pressures that mean margins “have to be higher”.“We’ve had increases in energy costs, increases in wages and increased theft of fuel so all these costs have to be paid for,” he said.The CMA has recommended the establishment of a statutory monitoring body and an online fuel-finder scheme to give drivers access to live, station-by-station fuel prices. The government had said it would consult on the proposals this autumn but consultations have not yet begun. The RAC said the findings showed that the recommended “price monitoring body” was “desperately needed”, but that it should have “the power to take action against major retailers that don’t lower prices quickly enough in a falling wholesale market”.Video: Has Big Oil changed? | FT Film More

TOKYO (Reuters) -Japan’s central bank and the private sector must prepare for positive interest rates and a normalisation of monetary policy, an influential business leader said on Thursday, acknowledging that it could take a year to achieve.Takeshi Niinami, chairman of business lobby Keizai Doyukai and who also heads Suntory Holdings, said the Bank of Japan “must normalise” monetary policy to help weed out incompetent firms and facilitate labour turnover towards growth industries.The BOJ remains a dovish outlier amid a global wave of aggressive central bank policy tightening. Last month, it stuck to its negative interest rate policy targeting short-term interest rates at minus 0.1%.It also kept the 10-year government bond yield target around 0% under its yield curve control (YCC) policy, but redefined 1.0% as a loose “upper bound” rather than a rigid cap.”The BOJ must make a move,” Niinami, who also serves as a private-sector member of a top government economic advisory panel, told Reuters in an interview. “We must live in a world that contains (positive) interest rates.”Many private-sector economists speculate that the BOJ may phase out crisis-mode stimulus if regular wage talks due early next year result in workers’ pay rising more than prices. “There must be quite a lot of political reservation about completely abandoning (current monetary policy settings),” he said. “That’s why the BOJ may be thinking it would be better off falling behind the curve.”That should be taken as a message that the BOJ is leaving the YCC behind gradually,” Niinami said.Niinami, who is also a former chairman of convenience store chain Lawson Inc, said in January that he expected the BOJ to lay out a clear policy roadmap, including criteria for ending its practice of controlling long- and short-term yields. More

(Reuters) -Investors in Hollywood studios on Thursday cheered a tentative deal with actors that could help restart production of movies and shows halted by a series of strikes since spring. Warner Bros Discovery (NASDAQ:WBD) and Paramount Global gained 3% each, Netflix (NASDAQ:NFLX) rose marginally, while Walt Disney (NYSE:DIS) jumped 4%, as it also benefited from strong earnings and a plan to cut more costs. The 118-day work stoppage by actors officially ended just after midnight with a three-year deal that the SAG-AFTRA union said was valued at more than $1 billion and included increases in minimum salaries and a new bonus paid by streamers. The writers, who had gone on strike before the actors in spring, returned to work in late September, but most productions remained halted as the actors were on picket lines. “Its certainly a very encouraging sign the chasm that opened up between actors, writers and studios can finally be closed and work begin in earnest on re-starting productions,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.The actors union’s national board will on Friday consider the agreement, which also includes protections against unauthorized use of images generated by AI, and a final ratification vote is expected in the coming weeks.Streeter warned that “it’s going to take considerable time before new movies, in particular, will appear on screens given the lengthy post-production process.” Warner Bros Discovery executives said on Wednesday they expected the impact from the work stoppages to extend into the last quarter of the year, after a lack of content drove a drop in streaming subscriber numbers in the third quarter.The company, which delayed the release of “Dune: Part 2” from November to March next year, expects a hit of “a few hundred million dollars” to its core profit in the last three months of the year from the strikes. More

In Latin America’s second-largest economy, 12-month headline inflation hit 4.26% last month, down from 4.45% in September and the lowest since February 2021, although still above the central bank’s target of 3%, plus or minus one percentage point.That makes it unlikely for Banxico, as the Bank of Mexico is known, to deliver any interest rate cut at its meeting later in the day, as the monetary authority has been citing a still complicated and uncertain inflationary outlook.Consumer prices rose 0.38% in October, according to non-seasonally adjusted figures, mainly driven by core inflation including higher food, beverage and service costs.”The fresh rise in services inflation will alarm officials at Banxico,” Capital Economics deputy chief emerging markets economist Jason Tuvey said in a note to clients.”We doubt this will prompt a restart to the tightening cycle – interest rates are likely to be left unchanged later today – but there is a growing risk of rate cuts starting later and being even more protracted than we currently anticipate.”Banxico has kept its benchmark interest rate at 11.25% since March following a nearly two-year rate-rise cycle during which it added 725 basis points of hikes to combat increasing consumer prices, which reached a two-decade high last year.The annual headline inflation reading came in slightly below economist forecasts in a Reuters poll, which stood at 4.28%.The closely monitored core index, which strips out some volatile food and energy prices, rose 0.39% during the month, while annual core inflation came in at 5.5%, in line with market expectations.”This report strengthens our view that headline inflation will remain under control over the coming months,” said Pantheon Macroeconomics chief Latin America economist Andres Abadia, but “admittedly services inflation is still a bit sticky.”Today’s core service numbers suggest that policymakers will likely delay the start of the easing cycle to mid-first quarter, once the disinflation story is broad-based,” he added. More

Shares of the company rose more than 4% in premarket trading.    Novavax reported revenue of $187 million for the quarter, down from $734.58 million a year ago, but above analysts’ expectations of $158.5 million, according to LSEG data. “We’ve really optimized that U.S. grant opportunity, which was something that was uncertain at the beginning of the year,” Novavax CEO John Jacobs said in an interview, adding that the government had shortened the timeline for being able to tap into those funds. The Maryland-based biotech has flagged concerns about its ability to remain in business and has been banking on cost cuts and commercial sales of its retooled COVID shot to help it stay afloat. Novavax said it had reduced liabilities by $128 million in the third quarter and was prepared to cut costs by an additional $300 million in 2024 to better align itself with the smaller-than-expected COVID-19 vaccine market.”We and many others thought there would be 80 to 100 million doses in the U.S. market this year and it turned out to be significantly smaller than that,” said Jacobs. The company said it expects the 2023-2024 U.S. market for COVID shots to be between 30 million and 50 million doses.Over 15 million people in the United States, around 4.5% of the population, had received the updated COVID-19 shots by Oct. 27, according to a Department of Health and Human Services spokesperson, lagging behind last year’s vaccinations.Novavax said it had $666 million in cash as of Sept. 30, up from $518 million at the end of June.The company’s updated COVID shot, using a more traditional technology than the mRNA-based vaccines of rivals Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA), was authorized in the U.S. in October. It has since been made available in pharmacies, including CVS and Rite Aid (NYSE:US90274J5618=UBSS), Novavax announced last month.Novavax missed out on the COVID vaccine windfall that benefited rivals due to manufacturing issues that delayed its filing for approval when the pandemic was raging.Its stock plunged 93% last year and is down about 34% this year.The company has said it expects to reduce its annual research and commercial expenses by 20% to 25% from last year through a series of cost-cutting initiatives, including layoffs. More

BENGALURU (Reuters) – The U.S. Federal Reserve will hold its federal funds rate steady through most of the first half of next year, according to the latest Reuters poll of economists who appear settled on the risk of the first reduction coming later than they expect.As widely predicted, the central bank left the fed funds rate in a 5.25%-5.50% range for a second consecutive meeting last week and kept the door open to another hike, although apparently with less conviction than before. “In our base case, the Fed is done hiking, inflation will remain above target and rates will remain elevated across the curve,” said Andrew Hollenhorst, chief U.S. economist at Citi.”The plan now is to be ‘careful’ – a word used multiple times in the press conference – in further rate increases.”But since then, financial conditions have loosened, with 10-year Treasury note yields falling around 40 basis points and Wall Street shares up for eight straight sessions.All but 13 of 100 economists polled Nov. 3-9 said the Federal Open Market Committee was done raising rates in the most aggressive tightening cycle in four decades that took them up 525 basis points from near zero.That compares with 26 of 111 in an October survey. While 86% of economists forecast no rate cut through the first quarter of next year, a 58% majority said rates would fall by mid-year. That was similar to 55% in last month’s survey, which had slipped from more than 70% in a September poll.Respondents mostly stuck to their views around the risks on the timing of the first rate cut for the third month in a row, with more than 70%, 31 of 42, saying the bigger risk was for the first reduction to come later than they expect.All inflation measures polled by Reuters – the consumer price index (CPI), core CPI, personal consumption expenditures (PCE) and core PCE – were predicted to remain above the Fed’s 2% PCE target until at least 2025.Fed officials have consistently said interest rates need to remain higher for longer to bring price pressures down. One thing that might justify an earlier rate cut is a severe economic downturn. But that is looking unlikely any time soon after the world’s largest economy posted a near 5% annualized growth rate last quarter. Still, gross domestic product (GDP) growth was expected to slow to an annualized pace of 1.1% this quarter and average just 1.1% in 2024. The unemployment rate, which rose slightly to 3.9% last month and has barely increased throughout the Fed’s historic policy tightening campaign, was expected to rise modestly to 4.4% by the end of next year.RBC economist Claire Fan said that even though “softer conditions are showing up more significantly” in payrolls data, there was “still momentum left in hiring activity”.”But clearer signs of moderating wage growth and low inflation readings mean the Fed should not need to hike again in the current cycle, while waiting for softening economic conditions to emerge elsewhere,” she wrote.(For other stories from the Reuters global economic poll:) More

However, the intangible nature of the term premium presents challenges in its measurement, leading to a variety of estimates among central bank economists. This focus on the elusive term premium further complicates predictions about future interest rates.The rise in the term premium is being held responsible for triggering bond sell-offs, shifts in debt auctions, and changes in interest-rate policy. It includes all aspects other than expectations for the path of near-term interest rates, making it a critical factor for market observers. Nevertheless, this focus on the term premium adds to traders’ struggles in predicting the Fed’s next moves in the complex U.S. government debt market.Despite its complexity, understanding this new force is becoming increasingly crucial for market observers and traders alike as it continues to impact long-term rates and influence Federal Reserve policy decisions.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Nvidia has developed three new chips tailored for China that aim to meet the region’s growing demand for artificial intelligence technology while complying with US export controls, according to leaked documents and four people familiar with the situation.The latest effort marks the second time in little more than a year that Silicon Valley-based Nvidia has been forced by new US regulations to reconfigure its products for Chinese customers, as it strives to maintain its foothold in one of its most important markets. Nvidia is preparing to launch the new chips just weeks after the US restricted sales to China of high-performance chips that can be used to create AI systems, in the Biden administration’s latest salvo in a tit-for-tat tech war between the two superpowers. The three new Nvidia chips are named the H20, L20 and L2, according to a document distributed by the company to prospective customers that was obtained by the Financial Times. The overall performance of these chips has been moderated compared with those that Nvidia had previously sold in China. Nonetheless, the new graphics processing units were expected to remain competitive in the Chinese market, said the people familiar with the situation.“Nvidia is perfectly straddling the line on peak performance and performance density with these new chips to get them through the new US regulations,” wrote analysts at SemiAnalysis, a chip consultancy, in a note to clients on Thursday. Nvidia did not immediately respond to a request for comment.Nvidia was co-founded by Jensen Huang, who is also its chief executive. The company’s market value soared to more than $1tn this year driven by investor enthusiasm about its dominant role in the processors needed to develop AI systems. Its A100 and H100 chips have become the most sought-after components for AI companies around the world that want to create large language models, the technology that underpins chatbots such as OpenAI’s breakthrough ChatGPT. As the US sought to constrain China’s AI development, the Biden administration blocked sales of the A100 and H100 GPUs in October 2022. In response, Nvidia developed two alternative models for China, the A800 and H800, which fell below the performance threshold set by US sanctions. But the US last month tightened its restrictions so that they also caught the A800 and H800.The latest export restrictions took effect immediately as the US government speeded up the deadline, leaving Chinese tech groups dependent on outdated and stockpiled chips to pursue their AI ambitions. The rules were seen as forcing Chinese groups to turn to six-year-old technology to develop AI systems. But Nvidia, which has held a dominant share of China’s AI chip market, is moving quickly too. The manufacturing process of its latest chips for China was less complex than the development of the A800 and H800, said a person familiar with the situation. Nvidia has already sent samples of the chips for customers to test, suggesting it expects mass production to begin very soon, according to two people close to the company. In the interim, Chinese companies have redoubled their efforts to source AI chips from domestic suppliers, reducing the risk of relying on Nvidia and accommodating the escalating AI chip ban. Prominent Chinese Nvidia competitors include Huawei, Cambricon and Biren. The founder of Chinese AI company iFlytek said in August that Huawei’s Ascend AI chip could achieve performance comparable to Nvidia’s A100. However, Nvidia’s Chinese rivals are all constrained by geopolitical conflicts that prevent them from producing chips outside of China, while international sanctions have also sought to limit their access to advanced chipmaking equipment from suppliers such as Netherlands-based ASML. Video: The race for semiconductor supremacy | FT Film More