Economy

Germany has frozen around 5.25 billion euros ($5.57 billion)in assets belonging to sanctioned oligarchs since Russia’s invasion of Ukraine, according to the German finance ministry. The figure was 4.28 billion euros six months ago. The ministry shared this information in reply to a request from member of the German parliament Christian Goerke.”Since December, only 200 million euros in oligarch assets have been frozen, and for half a year, just one billion. Not a single oligarch has reported his assets since December,” Goerke criticized. Under Germany’s sanctions law, targets of European Union sanctions must declare their assets immediately, under penalty of a fine or up to a year in prison. Eight oligarchs have reported 31 asset positions to the Bundesbank so far, according to government figures. The value equals about 577 million euros. It is distributed among account balances, company holdings and securities.($1 = 0.9422 euros) More

Companies are trying to maintain fat profits as the economy changes, making “premiumization” their new favorite buzzword.Big companies are prodding their customers toward fancier, and often pricier, versions of everything from Krispy Kreme doughnuts to cans of WD-40.It’s evidence of the corporate world’s new favorite buzzword: “premiumization.”Businesses are hoping to keep the good times rolling after several years in which they seized on strong spending by consumers and rapid inflation to raise prices and pump up profit margins. Many firms are embracing offerings that cater to higher-income customers — people who are willing and able to pay more for products and services.One sign of the trend: the notion of premiumization was raised in nearly 60 earnings calls and investor meetings over the past three weeks.It is an indication of a changing economic backdrop. Inflation and consumer spending are expected to moderate this year, which could make it more difficult for firms to sustain large price increases without some justification.The premiumization trend also reflects a divide in the American economy. The top 40 percent of earners are sitting on more than a trillion dollars in extra savings amassed during the early part of the pandemic. Lower-income households, on the other hand, have been burning through their savings, partly as they contend with the higher costs of the food, rent and other necessities that make up a bigger chunk of their spending.“The pool of people willing to spend on small to large premium offers remains strong,” said David Mayer, a senior partner in the brand strategy practice of Lippincott, a consultancy.As products grow more expensive and exclusive, big swaths of the economy are at risk of becoming gentrified, raising the possibility that poorer consumers will be increasingly underserved.Inflation F.A.Q.Card 1 of 5What is inflation? More

TOKYO (Reuters) – Japan’s trade unions are demanding the biggest wage hike in more than two decades at their spring pay negotiations, a national labour tally showed on Friday, as the government and central bank urge firms to raise workers’ wages to support the economy.A survey of more than 2,000 unions nationwide showed an average 4.49% raise request for this year, first time above 4% since 1998’s 4.36%, according to the Japanese Trade Union Confederation (JTUC). This is also the highest since the mid-1990s, a statement by JTUC shows. Workers in the world’s third-largest economy have been emboldened by policymakers’ calls for wage hikes to sustain a frail post-pandemic economic recovery threatened by a four-decade-high inflation.Despite the higher cost burden, major Japanese firms have promised large pay increases to retain skilled workers amid labour crunch. World’s largest car maker Toyota last week accepted a union demand for the biggest base salary growth in 20 years, followed by rival Honda’s agreement with its union requesting a 5% pay increase. Gaming giant Nintendo said it will lift workers’ base pay by 10%, while fashion brand Uniqlo parent Fast Retailing announced an up to 40% raise.The JTUC preliminary survey showed the average union demand during this year’s annual labour talks, called “shunto” in Japanese, was much larger than 2022’s 2.97%.JTUC, commonly known as “Rengo”, is the largest labour organisation in the country representing about seven million workers. Although those working at smaller businesses, on temporary terms or without union membership tend to receive a much smaller, if not flat, pay growth, the result of shunto is seen as a harbinger of the country’s wage trends.According to JTUC, its unions and companies last year agreed on average 2.07% wage hikes, higher than in previous two years but still short of Prime Minister Fumio Kishida’s request for a bigger increase to spur growth. As of January, Japan Economic Research Center estimated big firms would offer pay hikes of 2.85% on average for the year starting April, which would be the fastest pay rises since 1997.Bank of Japan officials have said the outcome of the wage hike talks is an important criterion to determine the future course of its ultra-loose monetary policy. More

COLOMBO (Reuters) – Sri Lanka’s decision to raise interest rates shows the crisis-hit country’s commitment to reducing inflation quickly towards single-digit levels, the International Monetary Fund (IMF) said on Saturday.In a surprise move, the South Asia nation’s central bank raised rates by 100 basis points on Friday to battle inflation, which is at 50.6%. The government is awaiting approval of a $2.9 billion IMF bailout package as it endures its worst financial crisis since independence from Britain in 1948.”Sri Lanka’s inflation is declining but remains at a very high level, which has been disproportionally hurting the poor, the IMF said in a statement. “Upside inflation risks could reverse the trend and lead to persistently high inflation which is extremely costly to the economy.”Durable disinflation would help boost market confidence in the island nation, reduce excessive risk premia of government securities and ease the financing conditions for companies, which supports recovery, the global lender said.The central bank raised its standing deposit facility rate to 15.50% and its standing lending facility rate to 16.50%, and said it would relax its currency band to move towards a market-determined exchange rate as it seeks to secure the bailout.The bank raised rates by 950 bps in the first half of last year to contain the country’s financial crisis. But Friday’s rate hike, the first since July, was largely unexpected by analysts and economists.The IMF also backed tax hikes and power tariff increases implemented this year, which have drawn protests from public workers who have demanded a fairer taxation policy from the government.Sri Lanka is pushing for finalisation of a four-year Extended Fund Facility and is expecting IMF board level approval this month, its central bank chief said on Friday. More

Martin Hamilton sits in the boardroom of his family vegetable processing company in Northern Ireland, black-and-white photographs of his ancestors planting potatoes lining the walls. A fifth-generation farmer, he is “thrilled” by the UK and EU’s new Brexit trade deal.The Windsor framework that Rishi Sunak and European Commission president Ursula von der Leyen triumphantly unveiled on Monday will slash the Brexit red tape for trade from Britain into the UK region.The UK prime minister promised it would “remove any sense of a border in the Irish Sea” — a big bone of contention to the previous deal, the Northern Ireland protocol, which had incensed unionists, harassed retailers and threatened to starve Northern Irish consumers of British sausages by imposing customs checks on goods coming from mainland Britain.Hamilton, founder of Mash Direct in County Down, which processes 1,000 tonnes of potatoes and 1,000 tonnes of other vegetables a month into prepared dishes, said suppliers in Britain would sigh at the onerous customs paperwork required to send goods into Northern Ireland.The bureaucracy, delays and months of uncertainty around the protocol that the Windsor framework will replace, weighed on businesses such as Hamilton’s, which imports a third of its potatoes and a quarter of its vegetables from Britain.The framework “will be wonderful . . . it’s such a release of time and effort”, Hamilton said. “It’s like a light coming on. Please do not touch the switch.”Others also feel a cloud over doing business in Northern Ireland was lifting. But many businesses were poring over the fine print and the government, acknowledging some confusion, said it would spell out more details soon.“We are getting a lot of queries to try to understand the reality of the changes,” said Roger Pollen, head of the Federation of Small Businesses, who said so far there were few answers from London.Selling his deal to the region’s business community, Sunak gushed about Northern Ireland as “the world’s most exciting economic zone”. Critics pointed out the entire UK enjoyed such privileges before Brexit.Nevertheless, Mark O’Connell, head of consultancy OCO Global, believes there is a substantial dividend to be reaped in one of the UK’s poorest regions.Northern Ireland’s gross domestic product per head currently ranks 10th out of the 12 UK regions, but O’Connell forecast that smooth operation of the new trading rules could help overall GDP grow as much as 50 per cent. “This is the transformative opportunity our economy has been waiting for to address after 60 years of under-investment,” he said. Brian Murphy, chief executive of timber manufacturer Balcas, said the deal will bid ‘good riddance to an unnecessary distraction’ © Paul McErlane/FTBrian Murphy, chief executive of timber manufacturer Balcas, near Enniskillen, echoed his enthusiasm. Protocol paperwork was costing him £250,000 a year and the Windsor deal will bid “good riddance to an unnecessary distraction,” he said.The protocol, which came into force in 2021, left Northern Ireland inside the EU’s single market for goods. Anything produced or sold into it needed to comply with the bloc’s rules. But that raised practical problems and turned into a political tug of war.Because of the “Troubles” from the late 1960s to the late 1990s, when republican paramilitaries fought to oust British rule and loyalist groups battled to remain British, erecting customs posts on Northern Ireland’s land border with EU member Ireland after Brexit was considered too sensitive. But so was creating a customs border in the Irish Sea. The Democratic Unionist Party, the region’s biggest pro-UK force, says such checks treat Northern Irish unionists like foreigners in their own country. The DUP has paralysed local politics over the issue since May and is assessing whether the Windsor deal delivers on its demands for sweeping change.Sunak’s deal will create a green lane for goods entering and remaining in Northern Ireland, and a red lane for those travelling on into the EU. Murphy’s company will need to use the red lane because its supply chain and sales are in both the UK and EU.Alan Mercer of Hillmount garden centre said the agreement ‘will really help with plants, they will enter Northern Ireland with a bespoke label bearing a barcode’ © HillmountAlan Mercer, managing director of Hillmount, one of Northern Ireland’s biggest garden centres, will use the green lane to receive items such as seed potatoes that the protocol had made it impossible to import. “This will really help with plants, they will enter Northern Ireland with a bespoke label bearing a barcode,” said Mercer, who imported a third of his plants from England, especially rhododendrons, roses and climbers, before Brexit. Now, 99 per cent of his stock is from Ireland and the Netherlands.But he fears it will be uneconomic for seed suppliers to put a special label on packets of seeds stipulating they will be sold only in Northern Ireland, a region that makes up only a fraction of their sales.Simon Kenney, chief executive of Goodfellow, a Cambridge-based manufacturer and supplier of metals and materials for the British scientific sector, said the potential for better UK-EU relations was as important as the agreement itself. Under the new agreement, the awkwardly long process of exporting to Northern Ireland will be streamlined, made cheaper and quicker. “Brexit added a large amount of complexity,” said Kenney. “What excites us is the chance for being more friendly with Europe.”But prospects for Northern Ireland itself could be pivotal. While the region boasts flourishing services, advanced manufacturing, fintech, film and cyber security industries, productivity remains among the worst in the UK.The Windsor framework could help turn that around, said Stephen Kingon, a former chair of inward investment agency Invest NI. “We have a great story, particularly for the US . . . We’ve got a chance now — but political stability is imperative.” More

The Biden administration’s work on the new rules would in practice largely deal with U.S. investments in China though the report given to lawmakers did not identify any countries, the WSJ said.The new rules are expected to cover private-equity and venture-capital investments in advanced semiconductors, supercomputing and some forms of artificial intelligence, the WSJ reported quoting people familiar with the matter as saying.The Treasury and Commerce departments expected to finalize their policy in the near future, it added.Reuters reported last month that Biden administration was planning an outright ban on investments in some Chinese technology companies and increased scrutiny of others.The United States passed a sweeping set of regulations last year that aimed at hobbling China’s semiconductor industry. More

NEW YORK (Reuters) – Investors searching for safer areas in the U.S. stock market are finding that traditional shelters that held up in last year’s selloff, such as consumer staples, utilities and healthcare, may be more problematic this time.After rebounding sharply in January, the benchmark S&P 500 is wobbling again as investors worry the Federal Reserve will take interest rates higher than previously expected and keep them elevated for longer to thwart inflation. Sell-offs can send investors looking for safety in so-called defensive names, which tend to have solid dividends and businesses that can weather rocky times.”Last year it was really easy to hide out in defensives,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial (NYSE:AMP). “It worked really well last year. I think it’s going to be more complicated this year.”In the initial weeks of 2023, the argument for defensives has been weakened by evidence the economy remains strong as well as by competition from assets such as short-term U.S. Treasuries and money markets that are offering their highest yields in years.Sectors such as utilities are known as bond proxies as they typically provide stable earnings and safety in the way government bonds have done in the past. When compounded by the fact that some defensive stocks carry relatively expensive valuations, investors may avoid them even if the broader market sours.Utilities, healthcare and consumer staples held firm in last year’s punishing markets, posting relatively small declines of about 1%-3.5% as the overall S&P 500 tumbled 19.4% in 2022. So far this year, those groups have been the three biggest decliners of the 11 S&P 500 sectors, with utilities down about 8%, healthcare off 6% and staples dropping 3% as of Thursday’s close. The S&P 500 was last up 3.7% in 2023, but had pulled back since posting its best January performance since 2019. Defensive differences https://www.reuters.com/graphics/USA-STOCKS/WEEKAHEAD/gkplwlabyvb/chart.png Fears of a recession induced by the Fed’s swift rate-hiking cycle hovered over markets last year, and investors gravitated toward defensive areas, confident of spending on medicine, food and other necessities continuing despite economic turmoil. Strong recent economic data, including stunning employment growth in January, has prompted investors to rethink expectations of an imminent downturn.”If you look at the equity market, it’s telling you there’s no recession risk basically,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, adding that defensives so far this year have been a “pain trade.”The health of the U.S. economy is set to become more clear with the release of the February jobs report next Friday, while investors will also be watching Congressional testimony next week from Fed Chair Jerome Powell.High dividends helped defensive shares as a place to park money in turbulent times over the last decade, especially since traditionally safe assets yielded little. That dynamic changed in the past year as soaring inflation and the Fed’s rate hikes pushed up yields on cash and Treasuries.The utilities sector has a dividend yield of 3.4%, staples stands at 2.7%, while healthcare offers 1.8%, according to data from S&P Dow Jones Indices this week. By contrast, the six-month U.S. Treasury note yields nearly 5.2%.“You can get a pretty attractive yield in the bond market now, which hasn’t been the case,” said Mark Hackett, chief of investment research at Nationwide. 10-year US Treasury yield vs utilities sector yield https://fingfx.thomsonreuters.com/gfx/mkt/gdvzqmbkrpw/Pasted%20image%201677788091733.png Meanwhile, valuations in some cases are also relatively expensive. The utilities sector trades at 17.7 times forward earnings estimates, a nearly 20% premium to its historic average, while staples trade at a P/E of 20 times, about 11% above its historic average, according to Refinitiv Datastream.Healthcare’s P/E ratio of 17 times is slightly below its historic average. However the sector’s financial prospects this year are relatively weak; S&P 500 healthcare earnings are expected to fall 8.3% against a 1.7% increase for the overall S&P 500, according to Refinitiv IBES.To be sure, other factors could aid the prospects of defensives. For example, a pickup in volatility in the bond market could improve the lure of defensive equities as a safe haven, said Nationwide’s Hackett.Should concerns about recession spike, as they did last year, defensives could outperform again on a relative basis, according to investors.Ameriprise is overweight healthcare and staples, said Saglimbene, who sees an uncertain macro environment. But more broadly the firm is underweight equities and is more favorable toward fixed income.“I think bonds are a better defensive position today than the traditional defensive sectors are,” Saglimbene said. More

LONDON (Reuters) -Arm, the chip designer owned by Japan’s SoftBank, said on Friday it would pursue a U.S.-only listing this year, dashing the British government’s hopes that the tech giant would return to the London stock market.The company did not completely rule out an eventual London listing, saying it intended to consider a subsequent IPO there in due course, without providing further details.But the decision is a blow to London, where Arm was listed for 18 years until it was bought by SoftBank in 2016 in a $32 billion deal that received the minimum level of scrutiny by the government, leading to criticism that it had allowed Britain’s biggest tech success to be bought by foreign investors.London worked hard to get the listing, with Prime Minister Rishi Sunak and Arm Chief Executive Rene Haas meeting in Downing Street last month, according to reports. SoftBank’s founder Masayoshi Son was said to have joined by video call.The loss follows a decision by Dublin-based building materials giant CRH (NYSE:CRH) on Thursday to move its primary listing from London to the United States.The London Stock Exchange said Arm’s decision showed Britain needed to speed up plans for reform.”The announcement demonstrates the need for the UK to make rapid progress in its regulatory and market reform agenda, including addressing the amount of risk capital available to drive growth,” said Julia Hoggett, chief executive of London Stock Exchange, part of London Stock Exchange Group (LON:LSEG).Arm designs the processor technology used in nearly every smartphone, selling intellectual property to companies such as Apple Inc (NASDAQ:AAPL) and Qualcomm (NASDAQ:QCOM) Inc. “After engagement with the British government and the Financial Conduct Authority over several months, SoftBank and Arm have determined that pursuing a U.S.-only listing of Arm in 2023 is the best path forward for the company and its stakeholders,” Haas said in a statement. A British government spokesperson said: “The UK is taking forward ambitious reforms to the rules governing its capital markets, building on our continued success as Europe’s leading hub for investment, and the second largest globally.”Arm, which was founded and is based in Cambridge, east England, with another base in San Jose, California, said it would maintain its headquarters, operations and material IP in Britain.The company said it would increase its British workforce and would open a new site in Bristol, west England. Arm has pushed into markets beyond smartphones, such as data center servers, where its low-power designs can cut energy use. Its sales grew 28% in its most recent quarter to $746 million, making it one of the few growth areas for SoftBank.The Japanese conglomerate decided to list Arm after a deal to sell the chip designer to rival Nvidia (NASDAQ:NVDA), valued at up to $80 billion, collapsed in the face of anti-trust concerns last year. It immediately identified New York as its preferred destination, where the company will join the likes of Intel (NASDAQ:INTC), Qualcomm and Nvidia. More