Economy

WASHINGTON (Reuters) – The Biden administration on Monday released details on a new proposal calling for more funding for more air traffic controllers and to speed modernization efforts after a computer outage led to the first nationwide flight grounding since 2001.The Transportation Department’s $108.5 billion budget request seeks funding from Congress, including $117 million to hire another 1,800 air traffic controllers in addition to another 1,500 being hired this year.The National Air Traffic Controllers Association said last year the Federal Aviation Administration (FAA) had 1,500 fewer controllers than in 2011.The FAA wants $115 million to accelerate National Airspace System Modernization saying it will allow the agency “flexibility to adjust to current events in operations and increase capital investments where needed.”A computer system outage disrupted 11,000 U.S. flights in January after contract personnel “unintentionally deleted files.”The Transportation Department wants $3.1 billion in annual funding for passenger railroad Amtrak on top of $4.4 billion in funding from the $1 trillion 2021 infrastructure law. It also seeks $700 million for a key New York Hudson (NYSE:HUD) River tunnel project.In a letter released Friday, Airlines for America, the Air Line Pilots Association, Aerospace Industries Association and others wrote Congress raising “growing concerns about the urgent need for additional human and technological resources.” They added “missed certification deadlines, controller staffing shortages, and slow modernization demonstrate that the FAA is not keeping up with the growing needs and complexity of our aviation system.” The FAA declined comment.The FAA wants $24 million to fund 50 new test pilots, data scientists, safety inspectors and others to oversee Boeing (NYSE:BA) and other airplane manufacturers. The FAA says it has 107 full-time staff members providing Boeing regulatory oversight, up from 82.The National Highway Traffic Safety Administration wants $25.7 million for “automation safety” for expanded rulemaking, enforcement and research; and $12 million for research on Automated Driving Systems as it scrutinizes self-driving vehicles and driver assistance systems. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.After the crash, bang, and wallop of two U.S. banks collapsing and regulators steaming in with emergency measures late on Sunday to prevent contagion from sweeping through markets, the sound you hear now is the screech of economists and investors reversing on their Fed forecasts.If the ratcheting up of U.S. rate expectations in the last few months was almost without precedent, the complete turnaround in the last few days is truly historic.A week ago Barclays (LON:BARC) economists raised their forecast for the Fed’s March 21-22 meeting to a 50 basis point rate hike from 25 bps. On Monday, they changed that to zero.Rates futures markets show traders now reckon the Fed is done raising rates and will cut by 50 bps later this year. The implied ‘terminal’ rate has plunged more than 100 bps since last week to 4.35%, and the year-end implied rate has plummeted more than 150 bps to 3.90%.The two-year Treasury yield’s slide of around 65 bps since Thursday marks the biggest three-day fall since the Black Monday crash in 1987. 2023 implied U.S. interest rates – SOFR futures, https://fingfx.thomsonreuters.com/gfx/mkt/zgpobnqnjvd/SOFR23.png So how will Asian markets open on Tuesday? Equity investors are essentially being pulled in the opposite direction by two competing, and powerful forces. On one hand, huge stress in the U.S. banking system, the collapse of the country’s 16th largest bank and emergency intervention from the Fed, Treasury and FDIC to prevent contagion is a screaming sell signal. U.S. banking stocks tanked 7%, their biggest fall in almost three years.On the other, swift and bold intervention, the most stunning collapse in bond yields and implied interest rates, a sharply weaker dollar, and expectations that the Fed’s tightening campaign is over has clearly tempted a lot of buyers. World stocks fell on Monday and are now down five days in a row, the longest losing streak since October. But Wall Street was mixed – the Dow and S&P 500 ended down 0.3% and 0.15%, respectively, while the Nasdaq rose 0.45%. Hong Kong tech stocks broke a five-day losing streak to jump 3% on Monday, and the Nasdaq’s resilience may provide a springboard for further upside on Tuesday. The weaker dollar and sharply lower U.S. yields could also lead to broader support. But the dust has almost certainly not settled yet, especially if U.S. inflation figures on Tuesday come in hotter than expected.Here are three key developments that could provide more direction to markets on Tuesday:- U.S. CPI inflation (February)- India wholesale inflation (February)- South Korea central bank minutes (By Jamie McGeever; editing by Aurora Ellis) More

(Reuters) – The collapse of two big U.S. regional banks has forced the U.S. bond markets into a near 180-degree turn from pricing in a more aggressive Federal Reserve and is eroding expectations the greenback could resume a new rally to fresh 20-year highs.Emergency measures by the Fed and the U.S. government on Sunday to guarantee bank deposits have failed to reassure markets after Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) collapsed.Since Thursday, the tumble in short-term U.S. Treasury yields, which were at 15-year highs, was the steepest since October 1987, and pulled the dollar down from three-month highs.Two-year yields fell as low as 3.939% on Monday, down more than a percentage point from a 15-year high of 5.084% reached last week, while 10-year yields dipped to 3.418%, from more than 4% last week. The moves come as investors rush for safe havens and adjust for a less aggressive Fed in the wake of the bank failures. The dollar dipped 0.60% against a basket of currencies on Monday. “The market is basically saying that the Fed is done here,” said Mazen Issa, senior FX strategist at TD Securities in New York. “It wouldn’t surprise me if the market now will just try to continuously fade the Fed and won’t believe any kind of realm of hawkishness that emerges, and it’s not clear whether or not the Fed will continue to be hawkish.”Fed Chairman Jerome Powell surprised markets last week when he said that the U.S. central bank might reaccelerate the pace of rate hikes as it battles still-high inflation and benefits from a still strong employment picture. That sent Treasury yields sharply higher and boosted the dollar index.But that prospect now appears off the table.Fed funds futures traders now see the Fed as most likely to leave rates unchanged when it meets on March 21-22, or raise rates by 25 basis points, a dramatic change from last week after Powell’s comments before congressional committees, when a 50 basis points rate increase was viewed as the most likely outcome.Some banks, including Goldman Sachs (NYSE:GS) and NatWest Markets, have also said they no longer expect the Fed to raise rates this month.Traders are also pricing for the Fed to cut rates this year, with the fed funds rate expected to fall to 3.80% in December, from 4.57% now. As of last week, traders had largely given up on the prospect of rate cuts this year. “There are potentially heightened recession risks,” on the back of the financial stability issues, said Jonathan Cohn, head of rates trading strategy at Credit Suisse in New York.While the market may retrace some of Monday’s sharp moves, “there are these kind of prevailing questions around the future provision of credit, of bank lending, that have to be answered before markets are going to price as aggressive of a hiking cycle as they previously were,” Cohn said.Fed officials are in a blackout period before the March meeting, which leaves a dearth of guidance on the extent to which the financial stability risks may alter their view on further tightening.Even if they repeat their commitment to bringing down inflation, investors may be unlikely to embrace the message to the extent they did only last week.“If the market’s assumption as recently as a week ago was the Fed can and will continue to hike no matter what, that’s no longer, I think, the view, (and) it’s going to be very difficult for the market to come back to that view,” said Brian Daingerfield, head of F10 FX strategy at NatWest Markets in Stamford, Connecticut.“From a dollar perspective, that’s very important because the resetting of Fed expectations ever higher was a big part of the dollar rally we had seen before these moves,” he added. More

Good morning. The fallout from the collapse of Silicon Valley Bank remains the big story today. The Federal Reserve has announced that it will lead a review of how the bank was supervised and regulated, as the US central bank comes under fire.Meanwhile, about 500 miles south of California’s Silicon Valley, US president Joe Biden and his Australian and UK counterparts gathered in San Diego earlier today to announce a historic partnership as they work to counter China in the Indo-Pacific.Here’s what else to keep tabs on today:Bangladesh-England cricket: Today’s Twenty20 International cricket match in Dhaka, Bangladesh will be the final match of the series. Net Zero Industry Act: Brussels unveils the proposal as part of its wider Green Deal Industrial Plan.US inflation: Figures are expected to show that consumer prices rose at an annual pace of 6 per cent in February, according to economists’ forecast compiled by Bloomberg.Today’s top news1. Investors are ripping up their forecasts for further rises in interest rates and dumping bank stocks around the world following the failure of Silicon Valley Bank. The two-year US Treasury yield, which moves with interest rate expectations, recorded its biggest one-day drop since 1987.More markets news: Shares in First Republic and several other US regional banks plunged as investors worried that regulators had not done enough.Explainer: Learn how the Federal Reserve’s rescue package for US banks differs from 2008 bailouts.2. HSBC averted a crisis in Britain’s tech sector by rescuing Silicon Valley Bank’s UK arm, a fire sale sealed after all-night talks led by Prime Minister Rishi Sunak and the Bank of England. The deal, which will see HSBC pay a symbolic £1 for SVB UK, avoids the UK government having to step in to protect depositors.3. The US, UK and Australia unveiled a decades-long project to supply Canberra with nuclear-powered submarines. Under the three-stage plan, Australia and Britain will co-build a new submarine based on a modified version of a next-generation boat the UK was already in the process of designing.4. Xi Jinping has pledged to strengthen China’s security and build the military into a “great wall of steel” to defend the country’s interests as relations with the west reach the lowest point in decades. Read more from Xi’s speech yesterday at the close of the annual National People’s Congress.5. Pfizer has offered to buy the drug developer SeaGen in a deal valued at $43bn. The acquisition will bulk up Pfizer’s cancer treatment portfolio as it faces declining sales linked to its Covid-19 treatment. More deals: US private equity group Silver Lake has agreed to buy Qualtrics for $12.5bn alongside Canada’s largest pension fund in the biggest private equity buyout of the year.Join us on March 15-16 at the FT’s Climate Capital Live, where politicians, business leaders and financiers will discuss how organisations move from climate commitments to real action. Register today and claim 10 per cent off your pass using promo code NEWS10.News in-depth

People queued up outside Silicon Valley Bank branches on Monday, after federal regulators said they would guarantee the failed lender’s uninsured deposits © AP

Venture capital firms and tech start-ups appear to have averted crisis following SVB’s collapse with the Federal Reserve’s emergency measures to support depositors. But relief has made way for a round of bitter recriminations, as VCs contemplate a reckoning: by abandoning SVB, they had helped to create a gaping hole at the heart of Silicon Valley.We’re also reading . . . Saudi Arabia-Iran detente: Despite the agreement to restore diplomatic relations, the old foes remain cautious after decades of mistrust. Alpha males: The similarities between UniCredit chief Andrea Orcel and Bob Diamond, who led Barclays in 2012, are troubling, writes Patrick Jenkins.Chart of the dayAbout 85 central banks are engaged in projects to create digital currencies, according to figures from the Bank for International Settlements. Yet governments’ enthusiasm is not matched by the citizens they represent, many of whom view central bank digital currencies as an encroachment into their private lives.Take a break from the newsThe colours were muted on the Oscars champagne carpet — but there were still plenty of standout looks at Hollywood’s biggest night.

Best Actress winner Michelle Yeoh in white Dior Haute Couture at the 95th Academy Awards © Getty Images

Before you go, what was the last Beatles hit before the band broke up? Try your hand at 2-down in our crossword puzzle on the FT app. Additional contributions by Gordon Smith and Tee Zhuo. More

Commercial banks were supposed to be big beneficiaries of rising interest rates, but that assumed they managed their balance sheets sensibly. Silicon Valley Bank did not. As a result, the Californian lender to start-ups on Friday became the second-largest bank collapse in US history. Signature Bank, the third-biggest collapse, followed within hours. Authorities on both sides of the Atlantic scrambled over the weekend to limit the fallout. Their actions staved off worst-case scenarios, but systemic risks to markets and the economy remain, and it is regrettable that what amounts to a bailout was needed at all. Widely-flagged vulnerabilities caused by fast-rising rates were allowed to boil over — by both banks and their regulators. Lessons must be learnt.SVB was particularly exposed to higher rates. Deposits soared as money poured into start-ups when rates were still low, which the bank invested in mortgage bonds and Treasuries. But no economic regime lasts forever. The US Federal Reserve jacked up rates by 450 bps in a year to tackle inflation. SVB’s bond portfolio dropped in value and deposits were trimmed as VC funding dried up. To meet outflows it had to sell its bond holdings at a loss, leaving a hole in its balance sheet. Its collapse has sparked fears over similar regional banks, which are less heavily scrutinised than the largest US lenders. Large institutions, while better hedged and capitalised, also face losses. The US banking system has more than $600bn in unrealised losses on investment securities.The authorities responded rapidly and extensively — but that they needed to is a reflection of monitoring failures, especially with regard to smaller banks. The US decision to guarantee all deposits at both SVB and Signature, even above the mandated $250,000 threshold, helped calm a sense of systemic panic. A generous Fed liquidity facility will allow banks to exchange assets as collateral for loans at par value. However, funds will be covered by a bank levy, not by taxpayers, and there will be no support for shareholders or certain unsecured debtholders. Meanwhile, SVB’s UK subsidiary was snapped up by HSBC, guaranteeing deposits without official intervention.Rapid action was needed; in the digital banking and social media age, a single tweet can set off a bank run. But what came was far from ideal. Making depositors whole, along with the new liquidity facility, creates enormous moral hazard. It encourages banks to be less accountable to depositors and protects them from interest rate losses.Rising interest rates are no act of God. The root problem here, SVB’s defective risk management, is rightly in the spotlight. It is fair that tech firms — and their employees — are protected from such negligence. But central banks and regulators are to blame for failing to inculcate better standards, and paid far too little attention to interest rate risks. These were obvious well before the UK pension market crashed because of a surge in bond yields in September. Arbitrary regulatory thresholds based on total assets, which left SVB below stipulations faced by the biggest US banks for more stringent stress tests and capital and liquidity requirements, need to be reviewed.The Fed should not be deterred from raising rates to curb inflation, but it needs to tread carefully. Though the banking system is better capitalised than in 2008, in the coming days similar institutions will come under pressure, and market confidence will be tested. Britain’s pension fund crisis and the crypto chaos of recent months were already emblematic of the risks of rising rates. Trouble will no doubt be brewing elsewhere. This episode is a reminder that regardless of size, when regulators lose sight of systemic risks, even small banks can become too big to fail. More

Today’s top storiesXi Jinping pledged to strengthen China’s security and build the military into a “great wall of steel” as the president closed the National People’s Congress. In more reassuring news for markets, Xi kept the country’s central bank governor Yi Gang in his post and retained his finance and commerce ministers.Pfizer agreed to acquire oncology-focused biotech Seagen for $43bn, the largest pharma transaction since AbbVie agreed to buy Allergan in 2019. Analysts say the deal signals a rebound in mergers and acquisitions following a dip in activity last year.UK chancellor Jeremy Hunt said his Budget would put Britain on the “hard road to recovery”. Disrupted Times will have all the details on Wednesday, but in the meantime, here are five things to look out for. For up-to-the-minute news updates, visit our live blogGood evening.As you might expect from the FT, one story towers over everything today: the fallout from the collapse of Silicon Valley Bank — the biggest US bank failure since 2008 — and what it means for markets, the tech sector, regulation, interest rates and the politics of bailouts on either side of the Atlantic. The specialist tech lender imploded last week after a sale of $20bn of securities to mitigate a sharp drop in deposits focused investors’ minds on the bank’s vulnerabilities. They dumped its stock, customers withdrew their funds and by Friday morning the bank was bust. Here’s how the saga unfolded.US regulators, which are facing questions over whether they missed signs of mounting problems, yesterday set out emergency measures to protect the banking system, while the Federal Reserve announced a new lending facility to provide funding to eligible institutions and the search began for a potential buyer. (Here’s our explainer on the rescue package and why it differs from the bank bailouts of 2008.)Today began with news that HSBC had bought SVB’s British arm for £1 in a fire sale after all-night talks involving Prime Minister Rishi Sunak and the Bank of England. Meanwhile, in financial markets, speculation grew that the collapse might make the Fed slow down, or even pause, its programme of aggressive interest rate rises. This sent government bond prices soaring, with the yields on two-year Treasuries, which move in the opposite direction to prices, recording their biggest one-day drop since 1987. Fears of contagion meant bank stocks continued to fall in the US and Europe.SVB played an important role in tech investment in the US, where one investor described it as “like a left ventricle” for Silicon Valley’s financial scene. As Michael Moritz of venture capital firm Sequoia Capital writes today, SVB stepped in when everyone else ignored the sector and its collapse leaves a huge hole for the start-up scene. It was also of critical importance in the UK: some start-ups warned before today’s HSBC deal that they might not be able to pay wages and bills.Politicians moved swiftly to reassure the public. US president Joe Biden today vowed to do “whatever is needed” to protect bank deposits and said he would seek to “strengthen the rules for banks to make it less likely this kind of bank failure would happen again”. And in the UK, just 48 hours away from a Budget that is meant to emphasise stability, chancellor Jeremy Hunt was quick to assert that deposits would be protected “with no taxpayer support”.Governments are all too mindful of parallels with the 2008 global financial crisis and in particular the debate around moral hazard. The rescue may be a pragmatic move to protect blameless depositors, says FT Innovation Editor John Thornhill, but some will take exception to helping an industry that often rails against regulation and tycoons who appear to favour the privatisation of profits and the socialisation of losses. Or as Thornhill puts it: “There are few libertarians in a financial foxhole.” Need to know: UK and Europe economyE-bikes and frozen berries are in, and alcopops and king-size fags are out: it’s the annual update of goods and services the UK uses to calculate inflation.Our Big Read explains how UK employers have made much greater use than expected of post-Brexit migration rules to bring in skilled workers. Companies are also turning to TikTok to help ease shortages in a government-backed initiative called Generation Logistics.Economics reporter Valentina Romei examines efforts across the EU to boost women’s employment. Within the bloc, only 68 per cent of women aged between 20 and 64 are in work — 10 percentage points less than the proportion for men, according to OECD data. Need to know: Global economyCentral banks’ digital currency plans are encountering resistance from the public who view them as an encroachment into their private lives and are unsure about their benefits. The third anniversary of the World Health Organization’s declaration of a coronavirus pandemic was marked by an open letter from political figures, activists and academics arguing that vaccine inequality had led to many preventable deaths.China’s share of cobalt production is set to increase from 44 per cent to half of global output over the next two years. The increase comes despite western efforts to gain control over supply chains for critical minerals. Columnist Rana Foroohar says securing rare earth supplies means the US and its allies need to ramp up dirty industries at home or partner with problematic bedfellows abroad.Saudi Arabia and Iran agreed to restore full diplomatic relations under a China-brokered deal, catching many across the Middle East by surprise.South Korea’s plans to boost the working week from 52 to a maximum 69 hours to combat problems posed by an ageing population and a declining workforce are on the end of a backlash. Need to know: businessUS private equity group Silver Lake agreed to buy software company Qualtrics for $12.5bn alongside Canada’s largest pension fund in the largest private equity buyout of the year.Saudi Aramco, the world’s biggest oil major, reported record profits of $161bn in 2022 — described by its boss as “probably the highest net income ever reported in the corporate world” — as it cashed in on surging crude prices. Porsche is pushing for an exemption for cars that run on synthetic or e-fuels from the proposed EU ban on the sale of combustion engine vehicles by 2025. The owners of family businesses are having to adapt to invest and bring in talent as well as plan carefully for succession. Our Big Read explains why. After multiple Oscar nominations for blockbusters such as Top Gun: Maverick, the big Hollywood studios are hoping their box office success could help the fightback against streaming and bring viewers back to cinemas. Our film on how banking and predatory lending has widened social inequality in the US won a best video award from the business journalists’ association, SABEW.

Video: US bank branch closures widen social inequality | FT Film

The World of WorkDo corporate cutbacks threaten to reverse diversity gains? Have CEOs lost patience with hybrid working? And should we be more worried about remote monitoring? Read more in our special report: The Modern Workplace.The quiet radicalism in Cal Newport’s books on productivity and his coping strategies for stressed workers have helped him sell more than 2mn copies in 40 languages, making him a celebrity in the field. What does he know that we don’t?Leaks of WhatsApp conversations among politicians during Covid have shone some light on the UK’s handling of the pandemic. But has the pervasive app helped make work more unpleasant for its 2bn-odd users? Do you hold grudges against certain colleagues? Miranda Green says keeping a shitlist can help you survive the humiliations of office life.Some good newsCambridge university’s spurting mussel movie may have missed out on Oscar nominations but the observation for the first time of how the unio crassus squirts jets of water to increase the chances of its larvae attaching to the right host fishes brings new understanding of how the species completes its life cycle and implications for its conservation. More

The additional gross expenditure for the same period will be 2.71 trillion rupees ($33.06 billion), the statement said.An additional amount of 363.25 billion rupees has been sought for fertiliser subsidy and 337.18 billion rupees have been earmarked to meet the pension liabilities of defence forces.The government has also sought extra spending of 250 billion rupees to provide telecom services in rural and remote areas.The Indian government will spend 41.87 trillion in 2022/23, according to the Union budget it presented on Feb. 1.The government will stick to the spending target it specified in the budget and any unused funds will be reallocated, said a government official, declining to be named.The government’s fiscal deficit target would be met through savings, extra tax and other receipts, the official added.The government’s fiscal deficit target for the ongoing financial year, which will end on March 31, is set at 6.4% of GDP (gross domestic product). ($1 = 81.9675 Indian rupees) More

Investing.com — Bond yields in the U.S. and Europe plunged on Monday as markets abruptly reassessed the outlook for central bank action in the wake of weekend bailouts for two big U.S. banks.Market participants are betting that fears for financial stability will stop the Federal Reserve and the European Central Bank from raising interest rates further, even though inflation is still running well above the 2% targets of both central banks.By 07:15 ET (12:15 GMT), the yield on the benchmark 3-month Treasury bill yield was down 30 basis points at 4.66%, effectively ruling out a rate hike from the Fed at its meeting next week. Until the problems at Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) had become apparent, most people had expected the Fed to hike the fed funds target range by 25 basis points to 4.75%-5.0%.At the same time, the 3-month German bill yield fell 17 basis points to 2.70%. The decline in euro yields was smaller because the European Central Bank has already guided very firmly that it will raise its key rates by 50 basis points each at its meeting on Thursday, taking its deposit rate to 3% and its refinancing rate to 3.5%.”Massive central bank repricing of peak policy rates since Thursday,” said Danske Bank strategist Piet Haines Christiansen on Twitter. “Fed is 85bp lower and ECB is 74bp lower.”While officials at both central banks have been adamant that further action is needed to tame inflation, many see them pedaling a softer line at least until it becomes clear that they have contained the fallout from the collapses of Silicon Valley Bank and Signature Bank. That seemed uncertain on Monday morning in New York, as stock prices of west coast banks in particular continued to fall sharply in premarket trading.Marc Ostwald, chief strategist at ADM ISI in London, said that the Fed’s ability to constrain inflation with interest rate hikes “is now heavily encumbered by SVB’s collapse.””The scale of the fall in U.S. and other government bond yields is not a reflection of the risks that market attaches to the fall-out from the SVB collapse,” Ostwald said, “but rather a violent short squeeze on prior Fed rate hike bets, as well as the lack of underlying market liquidity.”In both the U.S., the front end of the yield curve fell more sharply than the long end. While 2-year yields fell by some 50 basis points, the benchmark 10-year Treasury note fell only 22 basis points to 3.47%, while its German counterpart fell 30 basis points to 2.19%. More