Economy

Refinitiv Lipper data showed investors disposed of a net $1.85 billion worth of global equity funds last week, compared with net purchases of $379 million in the previous week. Rate hike fears increased during the week as reports on consumer prices and retail sales pointed to stubborn inflation and a stronger economy despite higher borrowing costs. Fund flows: Global equities, bonds and money market https://fingfx.thomsonreuters.com/gfx/mkt/egpbyarxgvq/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, hit a three-month high of 4.718 on Friday.U.S. and Asian equity funds witnessed outflows of $3.5 billion and $310 million, respectively, but investors purchased European funds worth $1.5 billion.Tech, healthcare, and consumer discretionary sectors suffered $624 million, $408 million and $319 million worth of outflows, respectively. Meanwhile, weekly inflows into global bond funds slipped to a seven-week low of $2.62 billion. Fund flows: Global equity sector funds https://fingfx.thomsonreuters.com/gfx/mkt/klpygdayypg/Fund%20flows-%20Global%20equity%20sector%20funds.jpg Investors purchased global government and short- and medium-term bond funds worth $3.2 billion and $2.5 billion, respectively. But they offloaded $3.1 billion of high-yield bond funds, marking the biggest weekly selling since Dec. 21.Meanwhile, global money market funds saw $13.3 billion worth of net selling, the biggest outflow in eight weeks. Global bond fund flows in the week ended Feb 15 https://fingfx.thomsonreuters.com/gfx/mkt/xmpjkradzvr/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Feb%2015.jpg Demand for commodity funds remained weak during the week as energy funds received just $34 million, the smallest amount in three weeks. Precious metal funds also got just $2 million. Data for 23,637 emerging market (EM) funds showed that equity funds drew $1.92 billion in a sixth week of net buying, while bond funds faced outflows worth $1.44 billion after seven weekly purchases. Fund flows: EM equities and bonds https://fingfx.thomsonreuters.com/gfx/mkt/zjpqjwrzrvx/Fund%20flows-%20EM%20equities%20and%20bonds.jpg More

A flurry of diplomatic activity over the coming days will aim to improve relations between the US and China following the shooting down of a suspected Chinese spy balloon by an American fighter jet.Yesterday, President Joe Biden said he planned to talk to his Chinese counterpart, Xi Jinping, to “get to the bottom” of the situation involving the balloon that was shot down off the coast of South Carolina two weeks ago.US officials are also trying to arrange a meeting between secretary of state Antony Blinken and his Chinese counterpart Wang Yi at a security conference in Munich this weekend. Three weeks ago, Blinken cancelled a planned trip to China at short notice because of the balloon incident. He had been scheduled to meet Xi.But alongside the diplomacy, the Financial Times reports today that Michael Chase, the deputy assistant secretary of defence, has arrived in Taiwan. The visit is likely to aggravate already strained relations between Washington and Beijing over the island, following last year’s visit to Taipei by then Speaker of the House of Representatives Nancy Pelosi. Chase’s visit is the first by a senior US defence official since the 2019 trip of Heino Klinck, deputy assistant secretary for east Asia, who in turn was the most senior Pentagon official to visit Taiwan in four decades.Concerns about China’s intentions towards Taiwan have grown in the west since Russia’s invasion of Ukraine. China has refused to condemn Russia’s military action while economic and military contacts between the two countries have increased in the past year.China has long claimed sovereignty over Taiwan. Under the US “one China” policy Washington recognises Beijing as the sole government of China and acknowledges, without endorsing, the Chinese view that Taiwan is part of China.The Pentagon declined to comment on Chase’s trip to Taiwan. But it stressed that US “support for, and defence relationship with, Taiwan remains aligned against the current threat posed by the People’s Republic of China”.Five more stories in the news1. US energy groups queue to go public Energy companies are making plans to go public in the US at the fastest rate in six years, as a sector that has long been out of favour benefits from renewed investor appetite for businesses that generate steady cash flows rather than prioritising long-term growth.More IPO news: Online fashion group Shein has predicted its revenues will almost double to $60bn over the next few years, as it prepares for one of the largest ever listings by a Chinese company in the US.2. Britain and the EU near deal on Northern Ireland UK prime minister Rishi Sunak has made a surprise visit to Belfast, fuelling speculation Britain and the EU are nearing a deal to settle the contentious trading arrangements involving Northern Ireland and the rest of the UK and EU. A deal would pave the way for closer relations between the UK and the EU, its biggest trading partner, but Sunak must first win over Eurosceptic MPs in his own party as well as unionist politicians in Northern Ireland.3. China’s top tech dealmaker goes missing Bao Fan, the founder of China’s leading investment bank, has disappeared. Shares in China Renaissance fell 50 per cent this morning in Hong Kong as investors reacted to the announcement made by the company after the market closed yesterday. Bao, a former Morgan Stanley and Credit Suisse banker, turned Renaissance into one of China’s most influential financial institutions.4. Tesla to recall 363,000 cars over self-driving tech flaw Tesla is recalling nearly 363,000 of its electric cars because flaws in a version of its full self-driving software could “allow the vehicle to act unsafe” at crossroads, according to a filing yesterday by a US regulator. The recall covers certain Model S and Model X vehicles manufactured between 2016 and 2023, as well as Model Ys made since 2020.5. Jes Staley’s emails with Jeffrey Epstein revealed A cache of 1,200 emails exchanged by former Barclays chief executive Jes Staley and the late convicted sex offender Jeffrey Epstein — including pictures of young women — have been revealed in a lawsuit. Newly unredacted portions of a complaint brought by the government of the Virgin Islands, where Epstein had a home, reveals the email exchanges between the men from 2008 to 2012, when Staley was Epstein’s private banker at JPMorgan.Other legal news: Rupert Murdoch described allegations that the 2020 US election was stolen from Donald Trump as “damaging” and “crazy”, according to filings from a defamation lawsuit against Fox News. Meanwhile, a special grand jury investigating alleged interference by former president Trump in the 2020 US presidential election in the state of Georgia has said some witnesses may have lied under oath.How well did you keep up with the news this week? Take our quiz.The days aheadMunich Security Conference German chancellor Olaf Scholz and French president Emmanuel Macron are due to appear at the Munich Security Conference today. Rishi Sunak is due to travel to the conference where he plans to hold talks with EU leaders, following his trip to Belfast.Markets US stock markets are expected to open lower after recording their worst day in a month yesterday. Robust economic data and hawkish comments from Federal Reserve officials fanned fears that the US central bank would keep interest rates high to combat inflation.Monetary policy Federal Reserve governor Michelle Bowman is set to participate in a conference hosted by the Tennessee Bankers Association in Nashville. Richmond Fed president Thomas Barkin is scheduled to speak about the labour market before the Rosslyn Business Improvement District in Arlington, Virginia.Economic data Canada will report its producer price index for January, which tracks prices paid to businesses for their goods and services. Corporate results The maker of the iconic green John Deere tractors reports quarterly earnings before the opening bell. Investors will be expecting Deere & Co to provide an update on the outlook for commodity prices which have been pushed higher by the war in Ukraine. What else we’re reading Demand for morning-after pill rises in the US Use of Plan B emergency contraception has soared over the past five years in the US while demand for other forms of contraception such as birth control pills and condoms has fallen, according to Financial Times analysis. Health experts said the figures — which are estimates based on commercial insurance claims, retail sales and other data — highlight a big shift in how Americans access reproductive health services.The financial system is alarmingly vulnerable to cyber attack The financial sector has quietly slid in recent years into a state of high dependence on third-party tech vendors, as a recent failure at the US Commodity Futures Trading Commission caused by a ransomware attack shows. But if regulators do not step up scrutiny of tech vendors and other digital companies, the next attack could be much worse, warns Gillian Tett.Wanted: World Bank chief with climate at heart The US, the World Bank’s largest shareholder by far, is racing to assemble a list of contenders with strong credentials in climate finance to lead an overhaul of the institution, following the early exit of Trump appointee David Malpass. Here are the potential candidates.How did Hindenburg short Adani stock? When US short seller Nathan Anderson decided to take on Indian conglomerate Adani Group, he faced the ultimate challenge for someone in his line of business: India’s anti-short selling rules. Those who have looked at the trade say he may have used single stock futures and the help of western banks in Singapore.Related: Adani’s woes will spur a “democratic revival” in India, billionaire George Soros said yesterday, and spell trouble for Prime Minister Narendra Modi.Nigeria’s ‘democracy generation’ makes its voice heard Next weekend, Nigeria will vote in an election analysts say is the hardest to predict since the country returned to democracy in 1999. The largest cohort of eligible voters consists of 37mn Nigerians aged 18 to 34. Their endorsement will go a long way to deciding who triumphs in the presidential and parliamentary polls.Take a break from the newsOn this week’s FT Weekend podcast visual artist Nick Cave, best known for his vibrant, whimsical costumes that entirely cover the face and body, discusses his current exhibition at the Guggenheim in New York. And FT columnist Nilanjana Roy talks about what makes a great book club.

Artist Nick Cave discusses the challenge of making art in response to police violence against black Americans More

Investing.com — The hawks within the Federal Reserve, and the European Central Bank, are becoming more prominent, suggesting more rate hikes are on the agenda. President Biden seeks to lower tensions with China, while the U.K. shoppers came out in force in January. Stocks are seen opening lower, along with the crude market, but DoorDash is set to buck the trend after strong quarterly results. Here’s what you need to know in financial markets on Friday, 17th February.1. Central bank hawks fight backThe Federal Reserve decided to hike interest rates by just 25 basis points earlier this month, and this was perceived as signaling that the end of its tightening cycle was in sight.  However, the recent strong economic data, including inflation proving stickier than expected, has provided the hawks within the central bank with the ammunition to fight back.Federal Reserve Bank of Cleveland President Loretta Mester said Thursday she had seen a “compelling economic case” for rolling out another 50 basis-point hike, and St. Louis President James Bullard said he wouldn’t rule out voting for such a move.  Such bellicose talk hasn’t been confined to the Fed. A day after European Central Bank President Christine Lagarde cemented another half-point hike next month, her colleague Isabel Schnabel said investors risk underestimating the persistence of inflation.“We are still far away from claiming victory,” Isabel Schnabel said, citing the strength of underlying price pressures and faster wage increases, adding “we may have to act more forcefully.” 2. Biden seeks talks with XiPresident Joe Biden sought to reduce the political tensions between Washington and Beijing over the shooting down of an alleged Chinese spy balloon earlier this month, saying on Thursday that he expects to speak with China’s president, Xi Jinping, in due course.”We are not looking for a new cold war,” Biden said.In turn, China said Friday it would limit the scope of its register of “unreliable entities”, a blacklist Beijing used against two U.S. defense firms for selling weapons to Taiwan at the height of its trade war with the U.S.Meanwhile, Bao Fan, the chairman and CEO of China Renaissance, has disappeared, resulting in the shares of the investment bank falling by as much as 50% earlier Friday.The high-profile banker is the latest in a series of prominent Chinese businessmen going missing during an anti-corruption campaign spearheaded by President Xi Jinping.3. U.S. stocks to open lower; DoorDash soarsU.S. stock markets are set to open lower Friday, continuing the previous session’s selloff as strong inflation data and hawkish comments by Federal Reserve officials reignited fears about interest rates.By 6:05 ET (11:05 GMT), Dow Jones futures were down 200 points, or 0.6%, S&P 500 futures were down 0.8% and Nasdaq 100 futures were down 1.1%.The Fed is widely expected to raise interest rates by another quarter of a percentage point when it meets next month, but this week’s stronger-than-expected consumer and producer prices suggest the U.S. central bank may continue hiking rates for longer than previously expected.There are more Fed policymakers scheduled to speak later Friday, including  Richmond Fed President Tom Barkin and Fed Governor Michelle Bowman.In the corporate sector, DoorDash (NYSE:DASH) stock traded sharply higher premarket after the online food delivery company reported strong fourth-quarter growth.DraftKings (NASDAQ:DKNG) stock also soared after the sports betting company recorded a smaller loss than expected in the fourth quarter, and lifted its 2023 sales outlook.4. U.K. retail sales show surprising strengthThe U.K. consumer has proved to be pretty resilient as the country’s retail sales rose unexpectedly last month, suggesting shoppers are coping with a severe cost-of-living squeeze better than initially thought. Retail sales rose 0.5% in January after a 1.2% decline in December, the Office for National Statistics said Friday. “Discounting helped boost sales for online retailers as well as jewelers, cosmetic stores and carpet and furnishing shops,” said Darren Morgan, director of economic statistics at the ONS.That said, it’s important not to draw too many conclusions from a small data set, and the road ahead looks likely to be a rocky one with prices continuing to climb, albeit at a slower rate.5. Crude slumps on U.S. recession concernsCrude oil prices fell Friday on worries that rising interest rates will cause the U.S. economy, the largest consumer of crude in the world, to fall into recession this year.Additionally, the U.S. dollar soared to a six-week high, meaning that oil, which is denominated in dollars, becomes more expensive for foreign buyers.By 06:05 ET, U.S. crude futures were down 2.6% at $76.44 a barrel, while Brent crude was down 2.4% at $83.06 a barrel. Both benchmarks were headed for a weekly decline of more than 3%.Elsewhere, European natural gas futures fell to their lowest level in 17 months, down more than 80% from their August peak, as the region’s worst energy crisis in decades recedes, impacted by relatively mild weather as well as efforts to reduce energy consumption. The European Commission is set to have talks on whether voluntary demand cuts in the European gas market need to be extended beyond March, Bloomberg reported.“We believe that Europe will need to continue to see demand destruction through the course of the year in order to ensure the market is kept in balance,” said analysts at ING, in a note. “However, we believe demand cuts needed beyond March can be more modest at around 10%.” More

UK retail sales grew in January in an unexpected sign of consumer resilience, as holiday discounts boosted online sales and fuel prices continued to fall, official data showed on Friday. The volume of retail sales, or the amount of goods sold in UK shops, increased 0.5 per cent between December and January, following a revised 1.2 per cent drop in the previous month, according to the Office for National Statistics.“The retail industry is entering a transitionary period as inflation eases and consumer confidence shows early signs of improvement,” said Oliver Vernon-Harcourt, head of retail at Deloitte.The reading was above the 0.3 per cent fall forecasted by economists polled by Reuters, and marked a rebound in sales after two successive months of decline. However, compared with January 2022, which is a less volatile measure, sales volumes were still down by 5.1 per cent, the tenth month in a row that they fell in annual terms. Despite this drop, the value of retail sales — the amount of money that consumers spent — rose 4.1 per cent year on year, as higher prices meant that consumers could buy less with their money.The annual rate of consumer price inflation fell to a five-month low of 10.1 per cent in January, the ONS said on Wednesday, retreating further from the 11.1 per cent peak in October.“Consumers’ real incomes are likely to take a further hit over the next six months as inflation remains significantly higher than wages, more households are forced to remortgage at much higher rates and some government support is withdrawn”, said Thomas Pugh, economist at RSM UK.“As such, we suspect retail sales will resume their downward trend in the first half of this year,” he added. The month-on-month rise in overall sales volumes was driven by a 3.6 per cent rebound in “other stores”, pointing to strong growth in departments such as cosmetics, furniture and jewellery. Sales volumes at non-store retailers, mostly online sellers that do not have a physical shop, went up 2 per cent in the month to January.January promotions supported online sales, which have generally been declining since early 2021, when the UK economy reopened after Covid-19 lockdowns and people could return to shopping in stores.Moreover, “in the latest month, as prices continue to fall at the pumps, fuel sales have risen”, said Darren Morgan, ONS director of economic statistics.Fuel sales volumes rose 1.7 per cent in January, following an increase of 0.3 per cent in the previous month, as average fuel prices fell to their lowest level since February 2022.Meanwhile food sales fell 0.5 per cent in the month to January, marking the fifth decline in seven months, as high grocery prices led people to cut back on the amount they bought.“It is too soon to conclude that the retail sector is coming out of its funk and that the economy won’t yet fall into a recession”, said Paul Dales, chief UK economist at Capital Economics, “The full drag on activity from higher interest rates has yet to be felt,” he added. More

Jay Powell warned last week that the Federal Reserve’s path to getting US inflation down this year was “probably going to be bumpy”.But the Fed chair’s prediction of uneven progress became more tangible this week after the release of new batches of data showing the US economy is not cooling off as rapidly as hoped.The result is that Powell and the rest of the Fed are grappling with a potential new inflection point in the economic outlook that could complicate their task and again wreck their policy plans and expectations.On the one hand, Fed officials are more confident they will avoid a rapid slowdown or even a recession in the short term, which means a “soft” landing is still in sight. More unsettlingly, however, the central bank’s battle against high inflation appears far from over.Having already raised interest rates from near zero to between 4.5 and 4.75 per cent over the past year, it looks increasingly likely the Fed will need to apply even more tightening than expected to cool the US economy.“[The recent figures] just embolden the Fed to do more,” said Kathy Bostjancic, chief economist at the insurer Nationwide. “I think question the markets are wrestling with is: how much more? Will they stop at 5.5 per cent? Will they have to go to six? And whatever terminal rate they get to, they are likely to hold it there for longer.”Economic data in recent weeks has hinted at the work still to be done. On Tuesday, figures showed an unexpectedly modest easing in the rise of consumer price index last month, to 6.4 per cent compared to a year earlier.The following day, data revealed a surprisingly large increase in monthly retail sales in January, suggesting US households were still comfortable spending generously.Both followed a surge in job growth for the month of January that blew past forecasts amid a persistently hot labour market. Price pressures are also proving stickiest in services that are notably labour-intensive, such as car repairs.While the next Federal Open Market Committee is not until late March, and additional jobs and inflation data are expected before that, economists are already anticipating that officials at the central bank will raise their forecast for the path of its main interest rate at the meeting.In their December projection, known as the “dot plot”, Fed officials forecast a so-called terminal rate of between 5 and 5.25 per cent this year, which implied just two quarter-point rate rises in 2023, but it now appears they could go higher.“Pretty soon they will start preparing those March dots and that terminal rate is going to be moving higher,” said Michael Feroli, a senior economist at JPMorgan. He added that the Fed is constantly weighing the risks of “doing too much or too little”, and that “their most recent thoughts” will be concerns about the latter.For Powell, who celebrated the fifth anniversary of his ascent to the helm of the Fed this month, renewed questions about whether the central bank is being sufficiently aggressive on inflation could be disconcerting. After price pressures started surging in late 2021, the Fed was forced to play catch-up, implementing massive 75 and 50 basis-point rate rises throughout last year.By January, the Fed seemed to be back on track: the central bank was ready to dial back the pace of its rate increases to more traditional quarter-point increments, reflecting greater confidence it had price rises under control.

Over the past week, however, Fed officials have had to revert to more hawkish messaging. “It is clear that overall demand remains well in excess of supply and inflation is running far above our 2 per cent target. When it comes to monetary policy, we must restore balance to the economy,” said John Williams, the president of the New York Fed, on Tuesday. “We will we stay the course until our job is done.”David Wessel, a senior fellow in economic studies at the Brookings Institution, said the Fed could no longer be accused of being behind the curve on price pressures, having restored its inflation-fighting credibility with its campaign of sweeping interest rate rises over the past year.Instead, he said, the central bank is now back to more conventional policymaking, where it will be making moves in quarter-point increments depending on the data.“They are back to the standard, which is feeling the stones with their feet as they cross the river,” he said. “They’ve raised rates a lot, and there are lags in monetary policy. You want to be careful that you don’t overdo it.”That caution may be particularly warranted because January data can be especially unreliable — and the jobs, inflation and retail sales figures recorded last month may yet be reversed.“January was very warm and very unsnowy compared to normal and weather effects like that do not persist,” said Ian Shepherdson of Pantheon Macroeconomics. “It does not follow that there is permanent strength.”One bright spot for Powell in the recent patch of economic strength is that market expectations, which were starting to price in a more rapid end to tightening than the central bank, have now changed course and are more in tune with the Fed’s views.“The market was in a sense behind the curve and has caught up to the Fed,” said Don Kohn, the former Fed vice-chair. More

Restructuring experts in the UK have been predicting an uptick in activity for several years — but even the worst effects of the pandemic were mostly averted by the £370bn government business support package. Until now, this funding — combined with stimulus measures after the 2008 financial crisis, which ensured a long period of low interest rates — has helped to keep corporate distress low.However, as the support is wound down, restructuring and insolvency consultancies are gearing up for their busiest year for some time.“We have constantly been thinking the wave will break but there has been a long period of low levels of defaults,” says Peter Marshall, co-head of European restructuring at investment bank Houlihan Lokey. “Last year was active but government support meant that most economies weathered that storm.”In December, though, corporate insolvencies rose sharply in England and Wales to reach 1,964 — a third higher than the same month of 2021, and 76 per cent higher than in December 2019, before the pandemic.

Behind these stark numbers, published by the Insolvency Service, are companies seeking help with restructuring, or advice on how to refinance their operations to avoid being forced into insolvency.“There is definitely a pick-up in activity,” says Sam Whittaker, managing director for the investment bank Lazard’s restructuring business. “We would expect this to continue through 2023, and into 2024 and 2025.”Marshall pinpoints rising inflation, which is pushing up costs for businesses, as the catalyst for greater company defaults. “Companies are struggling to deal with everything that is hitting them,” he says.Inflation is also affecting consumer demand, which again has a knock-on effect, particularly on sectors such as retail and construction, which are simultaneously facing high costs of raw materials, energy and labour.Restructuring experts expect this will continue as rising interest rates, spiralling energy costs and supply chain issues continue to squeeze company finances.Jo Robinson, EY-Parthenon’s turnaround and restructuring strategy leader in the UK and Ireland, sees companies taking early action to address cash flow problems due to pressures on costs. “A lot of boards and management teams haven’t been through anything like this before”, she points out, given the last recession was in 2008.

“We’re starting to see distress coming through a bit more,” agrees Issy Gross, a restructuring and insolvency partner at PwC in the UK. While this is not yet widespread, as most companies still have access to cash and debt, she is concerned about what will happen when interest rate hedges drop away and companies need to refinance at higher levels.According to Whittaker, one reason for the low level of corporate distress is that many businesses managed to refinance any outstanding debts over the past two years while interest rates were very low.This means the new rates environment is more likely to cause issues for companies in the medium term. “The cost of borrowing has gone up and will remain higher,” he observes, adding that this will mostly affect midsized companies that lack the financial firepower of their larger rivals.Mark Addley, a PwC UK partner in the deals team, says lenders are generally quite sympathetic to companies and willing to help where they trust the management and its longer term prospects.He says there is still a huge amount of deployable capital in funds that could be used to support, or buy out, struggling companies and acquire assets such as real estate.While traditional corporate debt has been harder to find — and more expensive since the Bank of England began raising rates — private equity firms still have tens of billions of pounds to spend from their funds.Companies with better prospects will be able to use consultants to help them refinance and restructure their operations, and even engage with the mergers and acquisitions teams to find new investors or buyers for their operations, if necessary.But, where restructuring existing operations is not enough, more companies will fail — which means a wave of activity for insolvency practitioners could be about to start.PwC found there were 474 winding up petitions made last November — about four times as many as November 2021, when there were only 120. In the first 11 months of 2022 there were 2,990 — over three times more than in the same period in 2021. These formal applications from creditors to shut down companies are a leading indicator of future distress and creditor sentiment, PwC says.Gross says the distress is mainly among smaller companies: “It’s difficult to say exactly what caused that. Is it lack of access to capital? Or is it actually that people were just really knackered after the last few years and just don’t want to do this anymore?”PwC has also invested in its team in the cryptocurrency sector, where Addley predicts further distress in future. The firm is working as the provisional liquidator overseeing the bankruptcy process for collapsed crypto business FTX.Others see the tech sector as a new area for activity. Many lossmaking start-ups are struggling to raise new funds as their existing investors see a sharp decline in valuations.David Fleming, a managing director in the restructuring practice at consultancy Kroll, says consumer-facing industries are becoming busiest, with several retailers already working to raise new money or look at options for the future. Some, he says, are struggling to refinance because of outstanding debts and government-backed loans. But the prospect of a recession is also looming, he says. “It could be quite scary.” More

ISLAMABAD (Reuters) – The United States is concerned about debt owed to China by Pakistan and other countries, U.S. State Department Counselor Derek Chollet said on Thursday during a visit to Islamabad as the country dealt with an economic crisis.Pakistan, historically a close ally of Washington, has become increasingly close to China, which has provided billions in loans and is Islamabad’s largest single creditor. Pakistan faces a crippling economic crisis, with decades-high inflation and critically low foreign exchange reserves depleted by continued debt repayment obligations.”We have been very clear about our concerns not just here in Pakistan, but elsewhere all around the world about Chinese debt, or debt owed to China,” Chollet told journalists at the U.S. Embassy in Islamabad after he met with Pakistani officials. China and Chinese commercial banks held about 30% of Pakistan’s total external debt of about $100 billion, according to a report by the International Monetary Fund released in September last year. Much of that debt has come under the China-Pakistan Economic Corridor, part of Beijing’s Belt and Road Initiative. Cholett said Washington was talking to Islamabad about the “perils” of a closer relationship with Beijing, but would not ask Pakistan to choose between the United States and China.Relations between Islamabad and Washington had turned frosty over the war in Afghanistan, but there has been a thaw in recent months, with an increasing number of high-level visits.Officials from China and the United States will be part of a multi-country meeting of a new sovereign debt roundtable on Friday. G7 and multilateral lending institutions have long pushed for broad efforts to deliver debt relief to heavily indebted nations to help them avoid cuts in social services that could spur social unrest.U.S. Treasury Secretary Janet Yellen and other G7 officials see China, now the world’s largest sovereign creditor, as a key stumbling block in debt-relief efforts. Chollet said the U.S. was working with Pakistan to navigate through the current crisis. More

(Reuters) – Congress overhauled disclosure rules for federal judges last April to bolster public confidence that judicial decisions haven’t been tainted by secret financial considerations.But the new law does not undermine longstanding precedent that allows judges to invest in index funds without worrying about the funds’ ownership of shares in public companies, according to a ruling on Wednesday from U.S. District Judge Yvonne Gonzalez Rogers (NYSE:ROG) of Oakland, California.In notably fiery language, Rogers denied a recusal motion by patent holder Cellspin Soft Inc, which argued that the judge had a financial stake in Alphabet (NASDAQ:GOOGL) Inc through her husband’s jobs — formerly as a partner at McKinsey & Company Inc and then as a contract partner for venture capital firm Ajax Strategies — and through her multimillion-dollar investment in two broad-based Vanguard index funds. Alphabet owns Fitbit (NYSE:FIT) Inc, one of the half-dozen defendants Cellspin accused of infringing its patents on the automated distribution of multimedia content.The judge, who granted summary judgment to the defendants last June, after more than five years of litigation, explained at length why, in her view, Cellspin’s “speculation” about her husband’s financial connections to Alphabet and its subsidiary Google LLC was utterly specious. In a nutshell: He left McKinsey before Google acquired Fitbit and is not an equity partner at Ajax, where his sole role is to advise the boards of two portfolio companies in which Google has no stake.“The accusations are frivolous and devoid of any evidentiary merit,” the judge wrote. “Plaintiff’s attack on the integrity of the judiciary … not only demonstrates a measure of desperation but is divorced from the law and the facts.”It’s always fun to read indignant judicial opinions, but in the larger context of judicial ethics, the most important part of Rogers’ opinion is her discussion of the investments that she and her husband have in two Vanguard funds whose underlying stock portfolios are calibrated to reflect stock indexes. One of the Rogerses’ investments is in a fund linked to the Standard & Poor’s 500 Index. The other is in an index fund for internationally traded stocks.The federal statute governing judicial recusals includes a safe harbor provision that says judges need not step aside if they have a financial interest in a party through a “mutual or common investment fund,” as long as the judge does not have a role in managing the fund. In several reported decisions between 2011 and 2015, judges have held that index funds – including the very Vanguard S&P 500 fund in which Rogers and her husband invested – are, in essence, mutual funds and therefore included in the safe harbor.Cellspin’s lawyers at Garteiser Honea argued, however, that by investing in the Vanguard funds, Rogers had chosen to take a financial interest in the shares of the large public companies that dominate the underlying indexes, including Fitbit owner Google and other defendants.“Owning index funds is just another way to hold/own Google and Apple (NASDAQ:AAPL) stocks,” Cellspin argued. “Investing in an index fund … provides a foreseeable investment in Google.”Cellspin said that 2022 precedent from the Federal Circuit in Centripetal Networks, Inc. v. Cisco Systems (NASDAQ:CSCO), Inc. sets a more demanding standard for judges who own stock. (In that case, the appeals court ruled that a West Virginia judge was required to recuse based on his wife’s ownership of about $5,000 in Cisco stock, even though he and his wife moved the shares into a blind trust partway through the litigation.)Cellspin’s lawyers also said that by passing a new judicial disclosure law last year, Congress signaled how seriously it expects judges to think about their financial conflicts.Fitbit’s counsel at Desmarais pointed out the potentially seismic consequences of Cellspin’s index fund theory in their brief opposing Rogers’ recusal. “Cellspin’s flawed interpretation of the law,” Fitbit said, “taken to its logical conclusion, would likely exclude Judge Gonzalez Rogers — along with many, if not most, other federal judges — from presiding in almost every case involving publicly traded corporations.”Rogers was having none of it. The new law, she said, did not change the statutory provision offering a safe harbor for mutual fund investments. Nor, she said, did the Federal Circuit’s Centripetal decision, which involved direct ownership of stock in a litigant before the judge. Rogers said the Vanguard funds in which she has invested “are prototypical examples falling into the safe harbors for mutual or common investment funds.”In an email statement Cellspin counsel Scott Fuller of Garteiser insisted that the recusal motion was “neither baseless nor illogical,” since the recusal standard requires judges to step aside even if there is an appearance of partiality, including bias from a financial conflict.Fuller added that policy concerns about a potential parade of recusals if judges were required to step aside based on index fund holdings cannot dictate the outcome of specific recusal demands. “Judges are free to make whatever investments they see fit to make (including owning specific stocks or funds) but the impact of such investments will necessarily require recusal in some cases in order to maintain and protect the public trust in the court system,” he said.I reached out to defense lawyers for Fitbit, Nike Inc (NYSE:NKE), Under Armour Inc (NYSE:UAA), Fossil Group Inc (NASDAQ:FOSL) and Garmin (NYSE:GRMN) International Inc. All opposed Rogers’ recusal. None got back to me.Read more:Justice best served by leaving intact a conflicted judge’s ruling: 5th CircuitCongress approves tougher financial disclosure rules for U.S. judgesJudge’s stock portfolio didn’t taint class rulings: tuna plaintiffs to 9th Circuit More