Economy

A spokesperson for KLM, the Dutch arm of the Air France-KLM Group, which accounts for 60% of flights at Schiphol said the companies involved have sent a summons for the government to appear in a summary suit at Haarlem District Court.In June 2022, as Schiphol struggled with labour shortages, the Dutch government said it would lower the cap on annual flights at the airport to 440,000 from the current 500,000 in order to combat noise pollution and help meet climate goals. The government has recently indicated it may adopt an annual cap of 460,000 from November as an intermediate step.But the airlines joining the suit, which also include Delta, EasyJet, TUI and Corendon, called the decision “unilateral and sudden”.”The airlines maintain that, along with violating national, European and international legislation, the decision is unnecessary, damaging and lacks proper substantiation, given the airline industry is already achieving significant results in relation to reducing CO2 emissions and lowering noise levels,” they said.A spokesperson for the Ministry of Infrastructure, responsible for the decision to cap flights said the ministry was considering its response.Separately, the International Air Transport Association (IATA) said in a statement it supports the airlines’ suit and it plans a parallel challenge on the grounds that the move violates both EU law and the Chicago Convention on noise-related operating restrictions.”The dangerous precedent that this illegal approach creates left no choice but to challenge (the government) in court,” IATA Director General Willie Walsh said in a statement. More

TORONTO (Reuters) – Analysts are sticking to their forecasts for a stronger Canadian dollar over the coming year, expecting an improved global economy and less central bank uncertainty that would boost the commodity-linked currency, a Reuters poll showed on Friday.The loonie has weakened about 8% since March 2022 as aggressive interest rate hikes by the Federal Reserve and other major central banks to tackle inflation cooled prospects for the global economy this year. But analysts say the economic outlook could get better.According to the median forecast of more than 30 currency analysts in the March poll, the Canadian dollar will strengthen 1.5% to 1.34 per U.S. dollar, or 72.63 U.S. cents, in three months’ time, matching last month’s forecast.It was then expected to rally to 1.30 in a year, which is a gain of 4.6% and also in line with February’s forecast.”A supportive growth backdrop boosted by China’s reopening, a stronger European economy, and diminished central bank policy uncertainty will be the catalyst for a capital exodus from the U.S. dollar, which will likely take the loonie along for the ride,” analysts at Monex Europe, including Simon Harvey, said in a note.The reopening of China’s economy could fuel demand for commodities produced in abundance by Canada, including oil. Manufacturing activity in China grew last month at the fastest pace in more than a decade, data showed on Wednesday.Still, there are headwinds that could delay the loonie’s recovery. Canada’s economy is likely to be particularly sensitive to higher borrowing costs after households borrowed heavily in recent years to fuel a red-hot housing market.That point was not lost on the Bank of Canada. It has signaled a pause in its interest rate hiking campaign to assess the impact of its tightening on the economy.Data on Tuesday showed Canada’s economy stalled in the final three months of 2022 but likely rebounded in January.Money markets expect the BoC to keep its benchmark rate on hold at 4.50% at a policy decision next Wednesday.”Over the next few months, we think the Canadian economy is likely to be more susceptible to the impacts of higher interest rates than the U.S. economy,” said Royce Mendes, managing director and head of macro strategy at Desjardins, expecting the rebound in the Canadian dollar to take until next year to arrive. “If we’re able to get inflation under control, if the global economy and the domestic economy have already bottomed out then 2024 should provide a solid backdrop for the Canadian dollar,” Mendes said.(For other stories from the March Reuters foreign exchange poll:) More

Cash funds saw inflows of $68.1 billion, BofA said citing EPFR data. As per previous flow reports from the bank, this is the largest influx into cash since a $126.4 billion inflow in the week of April 24 2020.Global shares hit two-month lows while bond yields surged in the latest week, as investors assessed a raft of data that has reinforced the belief that interest rates aren’t going to peak any time soon and no cuts will materialise this year.Investors ditched equities and gold, which tends to suffer in an environment of rising real interest rates.Describing inflation as a “secular reality” rather than a “cyclical theme”, the BofA analysts hailed the end of an “era of extraordinary monetary policy”.In light of higher inflation and higher interest rates, they note cash will be “as good as bonds & stocks” until the bear market comes to an end with an expected credit event.Such a credit event could originate from the “Anglo-Saxon real estate” sector which has been hit by higher rates, the BofA analysts wrote.The bank pointed to U.S. mortgage applications being at their lowest since April 1995, while house prices in the United States, the UK, Canada, Australia and New Zealand were either falling or stagnating.They advise long-term investors to buy assets considered “solutions to society’s problems” such as infrastructure, inequality and climate change, but also to buy assets that lost out under the zero-rate environment such as value stocks, banks and European assets.Bonds saw inflows of $8.4 billion, while global stocks recorded outflows of $7.4 billion and investors pulled $900 million out of gold funds.Investors meanwhile shed $1.8 billion in emerging market debt and bought $2.4 billion in emerging market equities.BofA’s bull and bear indicator – a measure of market sentiment – ticked up marginally to 4.3 from 4.2 the previous week. More

Good morning, and happy Friday.The US has launched a new crackdown on countries and individuals helping the Kremlin evade western sanctions. Meanwhile, Republicans are increasing their attacks on Democrats for dismissing the Wuhan lab leak theory.And scroll down to chart of the day to find out why US borrowing costs have reached their highest level since before the 2007 global financial crisis. Here’s what I’m keeping tabs on today and over the weekend:Scholz meets Biden: The German chancellor makes his first state visit to the White House, with Ukraine on the agenda.Republicans meet: The annual Conservative Political Action Conference resumes today with speakers including ex-US ambassador to the UN Nikki Haley and Georgia representative Marjorie Taylor Greene. Former president Donald Trump and Brazil’s ex-president Jair Bolsonaro close the conference tomorrow.Economic data: The Institute for Supply Management will release its monthly services purchasing managers’ index, which tracks the vast services sector. Chinese politics: China’s rubber-stamp parliament convenes on Sunday. Here’s a preview of what to expect. Thanks for all the feedback so far on FirstFT’s new look. Keep it coming at [email protected]. Have a great weekend.Today’s top news1. The US has renewed efforts to crack down on sanctions dodging amid growing concern that Russia is fuelling the war in Ukraine by funnelling imports through countries such as the United Arab Emirates and Turkey. In other war news: US secretary of state Antony Blinken and Russian foreign minister Sergei Lavrov met for the first time since Russia launched its full-scale invasion of Ukraine.2. Republicans step up attacks on Democrats and the White House over the origins of the Covid-19 pandemic. Republicans, who championed the theory that the virus escaped from a Chinese laboratory, claimed recent comments from US officials vindicated their views. Read why it is a debate that is likely to grow louder ahead of the 2024 presidential election. 3. Adani group shares jumped after a US investment firm bought $1.9bn of stock in four of its companies. The investment by New York-based GQG Partners gives a boost to infrastructure tycoon Gautam Adani after his conglomerate was hit by an attack from short seller Hindenburg Research five weeks ago.4. Koch Industries has appointed a co-CEO from outside the family, with Dave Robertson joining billionaire Charles Koch to lead America’s second-largest private company. Koch will continue as chair, a role he has held since 1967. Learn more about the man with whom Koch is sharing power.5. Brazil’s economy stagnated in the final quarter of 2022. Gross domestic product contracted by 0.2 per cent in the final three months of the year from the previous quarter, when it expanded 0.3 per cent, according to official data released yesterday. How well did you keep up with the news this week? Take our quiz. The Weekend Essay

John Martin’s ‘The Deluge’ (1834) © Yale Center for British Art; Paul Mellon Collection; Bridgeman Images

Scientists warn we are not just facing a mass extinction event, but that one is already under way. The anxieties surrounding the fragility of ecosystems, however, are as old as time. What can we learn about tackling climate shocks from studying thousands of years of humanity’s response to natural disasters?We’re also reading and watching . . . ‘Panic station at Fox News’ The internal unrest at Fox News that followed Donald’s Trumps outrageous claims about the 2020 election has exploded into public view in recent weeks. Read the latest from the Dominion lawsuit. Who to fire? Tech groups, financial services companies and carmakers are all reducing headcount ahead of a potential recession. Here’s how management experts say companies should handle mass lay-offs.🎥 Drive fast: Formula 1 is undergoing a revolution. Ahead of the season’s first race, the FT goes inside the business of F1.Chart of the dayAn avalanche of hot inflation data over the past month has lifted US borrowing costs to levels not seen since before the 2007 global financial crisis. Recent moves have shocked observers and fuelled a debate about how high interest rates will have to go to cool inflation. Read the latest views of investors and economists.Take a break from the newsIn Bali, plastic bags are getting a second life as homeware. Plastic flip-flops have been transformed into art, and recycled bottle caps have been made into a chair as a wave of designers, artists and environmental advocates turn the island’s copious rubbish into upcycled treasures.Additional contributions by Tee Zhuo and Emily Goldberg More

The regulations were meant to prevent dollar transfers to those targeted by U.S. sanctions on Iran, Syria and Russia. But they have ended up harming ordinary Iraqis who need U.S. currency for business or travel.BAGHDAD — When the United States and Iraq put tough new currency rules into effect recently, the intent was to stem the illicit flow of dollars to those targeted by U.S. sanctions on Iran, Syria and Russia, as well as to terrorist organizations and money launderers.But in a country with a primarily cash economy, the changes created unintended hardships for ordinary Iraqis who need dollars for legitimate business purposes or travel abroad. Dollars have run short, and the cost in Iraqi dinars at some local currency traders has surged.Long lines are forming early in the day outside money changers’ shops, where Iraqis planning to travel outside the country often turn up grasping plastic bags stuffed with dinars, which banks outside the country do not accept. These days, it’s not easy to find a money changer who still has dollars. And those who do run out early.“I don’t have any dollars left,” one currency trader, Abu Ali, said last week at his shop in Baghdad’s Karrada neighborhood.The new currency rules, worked out in an agreement between the United States and Iraq, require greater transparency surrounding the transfers of dollars held as foreign currency reserves for Iraq in an account at the Federal Reserve Bank of New York. They went into effect late last year.The agreement was part of a long-delayed modernization of Iraq’s financial system as it begins to conform to the rules that most countries follow and adapts to requirements for more transparency in international financial transactions.U.S. dollars being counted at an authorized currency dealer in Baghdad.Joao Silva/The New York TimesEvery day, the Central Bank of Iraq facilitates the withdrawal of a large sum of dollars from its account at the New York Fed. The transfers are critical because, in Iraq’s largely cash economy, only a few businesses accept credit cards and almost no ordinary Iraqis have one. Even bank accounts are a rarity.Some of the money is wired on behalf of Iraqi businesses to pay for goods from outside Iraq. Some of it is designated for currency exchanges and banks to distribute to Iraqis traveling abroad.But there has been little in the way of electronic footprints to help U.S. officials trace whether some of the transfers were ending up in the hands of parties targeted by U.S. sanctions.A dollar shortage affecting ordinary Iraqis is one of the unintended consequences of new and tougher rules worked out by Iraq’s central bank in concert with the U.S. Treasury and the Federal Reserve Bank of New York.Joao Silva/The New York TimesThe concerns date back to soon after the 2003 U.S. invasion of Iraq.At that time, American authorities tried unsuccessfully to document the chain of custody for billions of dollars transported to the country in cash over a period of years. In one instance, $1.2 billion from Iraq was found in a Lebanese bunker with no record of how it got there, according to a New York Times investigation in 2014.The U.S. Treasury wanted to ensure that dollars were not being sent in violation of U.S. law to fronts or agents for parties under sanctions or terrorist entities. In congressional testimony in 2016, for example, a top Treasury official noted three groups targeted by sanctions that were known to be active in Iraq: Al Qaeda, the Islamic State and the Iran-backed Lebanese militia Hezbollah.With the Islamic State’s takeover of northern Iraq in 2014, it seized of a branch of Iraq’s central bank and those worries became more urgent.The situation underscored the need for more transparency in dollar transfers to Iraq, according to a U.S. Treasury official, who asked not to be named because he is not authorized to speak with reporters.An authorized currency exchange. Joao Silva/The New York TimesAfter the Iraqis finally defeated the Islamic State in 2018, Iraqi and U.S. bankers and the Treasury began to discuss a new system for money transfers.Under the new regulations, both individuals and companies requesting wire transfers of dollars must disclose their own identity, and the identity of whoever is ultimately getting the money. That information is then reviewed by an electronic system as well as by experts at Iraq’s central bank and the New York Fed, before payment is made.The new system allows banks around the world to conduct automatic checks on transfers of money from Iraq to other countries, said Ahmed Tabaqchali, the chief strategist for Asia Frontier Capital’s Iraq fund.“In short, the system heightens the visibility of red flags,” he said.Waiting at a currency exchange in Baghdad.Joao Silva/The New York TimesNow, many requests are being rejected, said Mudher Salih, a former deputy head of Iraq’s central bank and now a financial policy adviser to Iraq’s new prime minister, Mohammed Shia al-Sudani. Sometimes, he said, that is because of suspect identities but other times it is because many Iraqi businesses do not have the requisite licenses to import goods or are not properly registered as commercial entities and therefore are in violation of Iraqi law.The rejections have created a shortage of dollars, which has sharply increased their cost for Iraqis with legitimate needs, he added.Since 2003, there have been two Iraqi dinar rates for buying dollars; an official rate established by Iraq’s central bank and an unofficial street rate, which is higher. And when dollars are scarce, the street price goes up.The difference between the two is creating hardships for Iraqis like Janna, a mother of four. She said she had been saving up to buy a refrigerator and had her eye on a German model that cost about $250. In October, that was the equivalent of 320,000 dinars. Today, because of the scarcity of dollars, the refrigerator would cost 375,000 dinars.“It’s more than I can afford,” she said.Shoppers in Baghdad’s busy Karrada neighborhood.Joao Silva/The New York TimesAfter the new currency rules took effect, the quantity of dollars flowing daily into Iraq fell sharply — on some days down by nearly 65 percent from $180 million to $67 million — compared with the period before the rules were implemented, according to daily cash flow numbers released by Iraq’s central bank.The influx of dollars has since picked up, but it is still often less than half of what it was before the new system was put in place.It is not clear exactly how much of the drop in dollars reflects illicit recipients who have now either stopped requesting money because they do not want to make the disclosures required by the new rules or because the Iraqi central bank or the New York Fed rejected their requests.“I would not put down to fraud the almost 90 percent drop,” said Douglas Silliman, president of the Arab Gulf States Institute in Washington and a former U.S. ambassador to Iraq. “Maybe it’s 45 percent fraud and 45 percent incompetence or just not knowing how to deal with the new regulations.”Iraq’s financial system is going through a long-delayed modernization as it begins to conform to the rules followed in many other countries.Joao Silva/The New York TimesYasmine Mosimann More

European stocks rose on Friday as investors took an optimistic view of a week of data releases that showed economies in Europe and the US were more robust than expected.The region-wide Stoxx 600 was up 0.7 per cent while France’s Cac 40 climbed 0.8 per cent. Germany’s Dax gained 1.1 per cent and the UK’s FTSE 100 rose 0.3 per cent.For much of February, investors were rattled by a series of stronger than forecast economic data points, which spurred fears that the key central banks will keep interest rates higher for longer to combat lingering inflation.“Equity markets now look to be responding more to the brightening growth outlook, which means they are likely in a better place to absorb the prospect [further rate increases],” said analysts at Barclays.Final European S&P composite purchasing managers‘ index data was revised down on Friday from 52.3 to 52. However, both readings still indicated an expansion in activity over the previous month. “That adds to the sense that the data is improving and that the economic outlook in the eurozone has improved,” said Neil Shearing, group chief economist at Capital Economics. “But since it’s been revised down it will temper some optimism.”Data from the US on Thursday showed jobless claims fell to 190,000 in the week ending February 25, fewer than the 195,000 predicted. Figures on Tuesday showed stronger than expected inflation data from France and Spain, two of the eurozone’s largest economies.Markets were buoyed by comments from Atlanta Federal Reserve president Raphael Bostic, who favoured a “slow and steady” approach to raising rates but was open to supporting higher increases if economic data continues to be strong.Futures contracts tracking the blue-chip S&P 500 climbed 0.3 per cent, and those tracking the tech-heavy Nasdaq rose 0.4 per cent, following Thursday’s rally on Wall Street.A key indicator of inflation in the services sector, the US ISM non-manufacturing PMI will be released at 3pm UK time on Friday. US Treasury yields slipped after hitting their highest level in years on Thursday. Two-year notes, which are more sensitive to monetary policy, fell 0.05 percentage points to 4.86 per cent after hitting 4.94 per cent, their highest since 2007, on Thursday. Ten-year notes fell 0.07 percentage points to 4 per cent. Yields on 10-year German government bonds fell 0.04 percentage points to 2.71 per cent.The dollar index, which measures the greenback against six peer currencies, fell 0.3 per cent. The euro rose 0.2 per cent, while sterling was up 0.5 per cent against the greenback.Brent crude oil and WTI, the US equivalent, were both down 0.5 per cent — at $84.32 and $77.81 per barrel respectively. More

Washington has put 28 Chinese groups on a trade blacklist for allegedly breaching US sanctions by sending technology for nuclear and missile programmes to third countries or procuring banned products for China’s military.The commerce department placed the groups on its “entity list”, which in effect prohibits US companies from supplying them with technology produced in America. Some of the companies were blacklisted for providing technology to an Iranian entity previously targeted by US sanctions.Among the better-known Chinese targets are BGI Research and BGI Tech Solutions, part of BGI Group, the largest genomics research company in the country. The US is increasingly concerned that China could use groups such as BGI to obtain Americans’ genetic data.The move is the Biden administration’s latest effort to punish Chinese groups that allegedly violated export control rules by providing or trying to provide technology that would assist the People’s Liberation Army in its rapid military modernisation.The blacklistings are also a response to a range of other activities, including providing Pakistan with nuclear and missile technology and supplying Myanmar and other Chinese groups with surveillance technology that enables repression and human rights abuses.“When we act to stand against proliferators, oppose military aggression in the case of Russia and the People’s Republic of China military modernisation, and protect and advance human rights, we are putting . . . [US] values into action and enhancing our shared security,” said Don Graves, deputy commerce secretary.The targeted companies included Loongson Technology, a chipmaker that originated in the state-backed Chinese Academy of Sciences. Loongson’s core technology is considered China’s answer to Intel and Arm for chip design.The commerce department also targeted Suzhou Centec Communications for acquiring or seeking to obtain US technology for the PLA, as well as for assisting other groups already on the entity list. Centec designs chips for 5G network equipment, a market that used to be dominated by Huawei in China, and for data centres to support Chinese supercomputing.The US also blacklisted 4Paradigm Technology, a group that specialises in artificial intelligence, and Inspur Group, which focuses on AI, cloud computing and big data, for supporting the PLA’s modernisation drive.

The addition of Chinese entities to the list, which has been used to target big groups such as Huawei, comes as relations between Washington and Beijing have hit new lows in the wake of a suspected Chinese spy balloon that flew over the US.Over the past two weeks, senior US officials have warned that China was considering sending ammunition to Russia to support its war in Ukraine. On Thursday, the US also blacklisted DMT Trading, a company in Belarus, and Neotec Semiconductor in Taiwan for helping Russia bolster its defence industry.Six companies — including Galaxy Electronics and Arttronix International — were also added to the list for supplying or trying to provide technology without a required licence to Pasna, an Iranian group that is on a separate Treasury department list of companies that have been hit with sanctions.The Treasury alleges that Pasna has previously tried to obtain metals used in anti-submarine warfare and ocean surveillance.Chinese foreign ministry spokesperson Mao Ning said it “firmly opposed” the new US blacklisting, and called on Washington to maintain “non-discriminatory treatment for Chinese companies”.Additional reporting by Maiqi Ding in BeijingFollow on Twitter: Demetri Sevastopulo More

In case you hadn’t noticed, an incredibly bold experiment in social dirigisme is unfolding not in France, where linguistically and spiritually it belongs, but in the land of the free.The Frenchwoman writing these lines confesses she has been flabbergasted by the conditions, unveiled this week, attached to $39bn in grants and loans in the US Chips act, which is designed to encourage the development of an entire semiconductor manufacturing ecosystem in America. What US commerce secretary Gina Raimondo has outlined is a far-reaching attempt to bend employer behaviour, not only in the field of industrial and financial strategy — chipmakers must agree not to expand in China for a decade and refrain from stock buybacks — but also in how they treat their staff.Among some of the most striking features — and after the administration had to scale back its legislative plans on childcare — companies applying for the funds will have to demonstrate that they will provide “affordable, accessible, reliable and high-quality child care”. Child care should be within reach for low- and medium-income households,” states the documentation, “be located at a convenient location with hours that meet workers’ needs, grant workers confidence that they will not need to miss work for unexpected childcare issues, and provide a safe and healthy environment that families can trust.” Applicants must also “describe any wraparound services — such as adult care, transportation assistance, or housing assistance”. They are “strongly encouraged” to sign collective bargaining deals with unions ahead of building new plants. This is language that France’s pre-eminent Socialist president François Mitterrand would have been proud of.In the US, companies have so far refrained from complaining publicly about these provisions but they have not gone unnoticed.“Affordable childcare is an admirable goal but it has nothing to do with semiconductors,” tweeted Steven Rattner, former auto industry adviser to Barack Obama. “If we want the CHIPS act to work, it can’t be used as a pack mule for unrelated policy priorities.”Economist Joseph Stiglitz expressed a more positive view. “Worker scarcity is a significant challenge in our economy, especially in high-tech industries. The provision that companies receiving CHIPS money provide childcare for workers is an important component,” he said. “We need a market economy that not only reflects values but encourages and develops these values from the outset.”In Europe, the initiative will be closely watched. “They are using industrial policy to push social policies,” said Shahin Vallée, former EU adviser to Emmanuel Macron and now senior fellow at DGAP, the German Council on Foreign Relations. “There has been a profound ideological shift in the US, and in Europe, we still haven’t adjusted to it.”The statist Charles de Gaulle would also have been envious of Joe Biden’s industrial volontarisme: broadly that where there’s a will, there’s a way. The Chips act, combined with the Inflation Reduction Act and its $369bn in grants, loans and tax credits for the rollout of renewable energy and clean technologies, are the most significant attempts to revive industrial policy in the western capitalist world since the aftermath of the second world war.This sea change has deeply unsettled European companies and policymakers, triggering a rethink of industrial policy at EU and national level, and spurring attempts by Brussels to loosen state aid and national subsidy rules.European business leaders, who complain that the EU is about sticks and not enough carrots, have called for similar incentives in the form of direct funding and tax credits. But they would surely be less keen on the significant strings that the US has also attached.As one French government official pointedly said: “If we were doing this in France, we would be described as communists.” More