Economy

Investing.com — The dollar fell to its lowest in nine months on rising expectations that the Federal Reserve will revert to mini-rate hikes at its next meeting. Hedge fund Elliott has built a big stake in Salesforce but says it wants to work with existing management. Rival hedge fund Citadel made a record-breaking profit last year. Synchrony is up premarket after an earnings beat but the rest of the calendar is pretty thin. Germany signals it’s willing to let others deliver the Leopard 2 main battle tank to Ukraine as aid, but still isn’t ready to do so itself. And crude oil makes a solid start to the week as speculative momentum builds and new sanctions on Russian diesel exports loom. Here’s what you need to know in financial markets on Monday, January 23.1. Dollar hits nine-month low with rate differentials set to narrowThe dollar fell to a nine-month low on market expectations that the Federal Reserve will only raise interest rates by 0.25 percent when it meets next week.With the European Central Bank still signaling at least one more hike of 50 basis points, the interest rate differential between the euro and the dollar is set to narrow over the next six months. The ECB’s policy-making council also meets next week.The euro rose as high as $1.0927 before retracing after the Deutsche Bundesbank said the German economy likely stagnated in the fourth quarter. Comments from Greek central bank governor Yannis Stournaras urging “more gradual” rate hikes also capped the euro’s gains.2. Elliot targets Salesforce as Citadel makes historySalesforce (NYSE:CRM) stock rose over 4% in premarket trading to a seven-week high after reports saying that hedge fund Elliott has taken a substantial stake in the software provider.The Wall Street Journal quoted Elliott managing partner Jesse Cohn as saying that the group is looking forward to “working constructively with Salesforce to realize the value befitting a company of its stature.”Salesforce is one of a number of Big Tech companies to have recently been jolted into major cost-cutting by a revenue slowdown. The stock is up nearly 20% from its December lows but is still trading at only half its peak value.Elliott wasn’t the only hedge fund making headlines over the weekend: new research suggested that Ken Griffin’s Citadel had made the biggest profit of any hedge fund in history last year with a gain of $16 billion.3. Stocks set for quiet opening; Synchrony up after earnings beatU.S. stocks are set for a quiet opening to the week, in the absence of any major market-moving data and with the Lunar New Year also depressing trading volumes out of Asia.By 06:30 ET, Dow Jones futures were effectively unchanged, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.1%.The earnings calendar is also relatively thin, with Synchrony Financial (NYSE:SYF) – formerly GE Capital – first out of the gate with a 10% earnings beat. Synchrony stock rose over 3% in premarket in response.Oilfield services company Baker Hughes (NASDAQ:BKR) is also due to report early, with Zions (NASDAQ:ZION) and Brown & Brown (NYSE:BRO) due to report after the bell.4. Germany signals movement on tanks for Ukraine, rails with France against Biden’s IRAOnly two days after blocking such a move, Germany signaled it wouldn’t stop other European nations sending modern Leopard 2 battle tanks as military aid to Ukraine.Foreign Minister Annalena Baerbock said that Germany still isn’t ready to send tanks from its own tanks, but added, “If we were asked, we would not stand in the way.”Baerbock was speaking at a weekend meeting between the French and German governments which also resulted in the two countries complaining again about the Biden administration’s Inflation Reduction Act, which they say discriminates against European companies.5. Oil up as speculative bets gain steamCrude oil prices made a strong start to the week as the market focused on new G7 sanctions that are set to come into force on Russia in the coming days. The U.S., Europe, and Japan are all set to ban imports of diesel from Russia, in an effort to further reduce the Kremlin’s revenue stream for conducting its war in Ukraine.Additionally, the prospect of rebounding Chinese demand has reignited speculative buying, as evidenced by the 7% gain in crude last week. The CFTC’s Commitments of Traders report showed speculative long interest in crude hitting a nine-week high as of Tuesday.By 06:45 ET, U.S. crude futures were up 0.5% at $82.08 a barrel, while Brent futures were up 0.6% at $88.17 a barrel. More

LONDON (Reuters) – Banks would have to set aside a punitive amount of capital to cover holdings of cryptoassets under a draft law due to be voted on by lawmakers on Tuesday.The European Parliament’s economic affairs committee is due to vote on cross-party compromises, seen by Reuters, on a draft law which implements remaining elements of Basel III, a global accord which forces banks to hold more capital to cope with market shocks unaided by taxpayers.One amendment states that banks would have to apply a risk-weighting of 1,250% of capital to cryptoassets exposures, meaning enough to cover a complete loss in their value.This is in line with recommendations from the global Basel Committee of banking regulators in December.The amendments also introduce a definition of “shadow banking”, the vast sector of insurers, hedge funds and investment funds that make up about half the world’s financial system and typically less regulated than banks.The amendment requires the EU’s executive European Commission to publish a report by June 2023 analysing the possibility of introducing prudential limits on banks’ exposures to shadow banks.Amendments also require renumeration policies at banks should be aligned with their transition plans to address environmental, social and governance (ESG) risks over the short, medium and long term.The draft law introduces a new “fit and proper” regime for appointing bankers, with amendments saying there should be targets for a bank’s management body.They should be “sufficiently diverse as regards age, gender, and geographical and educational background” according to a report from Jonas Fernandez, the committee member leading the negotiations on the draft law in parliament.The amendments generally go further than changes made by EU states, who reached a deal among themselves in December and which generally focused on temporary carve-outs on some of the requirements to give banks more time to adapt, in the teeth of European Central Bank opposition.After Tuesday’s vote the lawmakers and EU states will thrash out a final deal which would come into effect in 2025. More

LONDON (Reuters) – Britain is lagging its peers in the race to spur economic growth and Prime Minister Rishi Sunak must act now to boost green investment, fix a lack of workers and avoid chaos over post-Brexit rules, the head of an employers group said on Monday.The Confederation of British Industry’s (CBI) Director-General Tony Danker praised Sunak for defusing the mini-budget crisis of former leader Liz Truss but said the prime minister must respond to green investment subsidies in the United States and the European Union.The CBI estimated British businesses were set to lose 4.3 billion pounds ($5.3 billion) of European market share by 2030. Other countries were ahead of Britain in rolling out support for investments in areas such as heat pumps, insulation, building retro-fits, electric vehicle charging infrastructure and carbon capture and storage, Danker said.”We are behind them now and seem to be hoping for the best,” he said in excerpts of a speech on Monday. The United States passed legislation in August which will give $370 billion to support energy and climate projects, mostly through subsidies to companies, especially those which manufacture in the United States rather than abroad.The EU announced 300 billion euros ($327 billion) to support renewable energy and decarbonisation in May.Danker said Britain could not compete with the scale of these subsidies, but could promote cheaper reforms such as measures to guarantee markets for hydrogen, carbon capture and sustainable aviation fuel.He also called for more measures to require consumers to make greener choices, similar to the ban on buying new petrol and diesel cars that will take effect in 2030.Last week Britain’s efforts to build a home-grown battery industry suffered a major blow after its leading start-up in the sector, Britishvolt, filed for administration.Finance minister Jeremy Hunt is expected to announce measures aimed at boosting growth in a budget statement in March. But Danker feared the government might temper its reforms as an election, expected in 2024, approaches.”If the government wants to reject using economic migration to fill immediate vacancies – something business disagrees with – then their labour market interventions must be the boldest in the world,” he said.Those reforms should include big changes to welfare and childcare to get people back into work, even if they put further strain on Britain’s already stretched public finances.Danker repeated the CBI’s call for tax breaks to avoid another hit to Britain’s lagging business investment levels when a two-year incentive expires on March 31, shortly before firms are hit with a sharp increase in tax on their profits.Britain’s budget watchdog estimated in 2021 that the two-year “super-deduction” would cost more than 20 billion pounds.Danker also said the government’s plans to scrap all EU-generated laws by the end of 2023 risked “throwing industry into some chaos” at a time when they also face a likely recession.($1 = 0.9181 euros)($1 = 0.8087 pounds) More

In 2022, something good came out of something bad. Russia’s invasion of Ukraine led to a remarkable display of unity and determination from the democratic world.The US, the EU, the UK, Japan, South Korea, Canada and Australia imposed unprecedented economic sanctions on Russia. Ukraine was provided with billions of dollars of military and economic support. In Europe, Germany promised to make historic shifts in its defence and energy policies. Finland and Sweden applied to join Nato. China’s hostility towards Taiwan and its announcement of a “no limits” partnership with Russia also sparked a reaction in the Indo-Pacific. Japan announced a major increase in military spending. The Philippines tightened its ties with America. The Quad nations — India, Japan, Australia and the US — held a summit. Democracies in Europe and Asia also began to work more closely together. For the first time, Japan, South Korea and Australia attended a Nato summit.This year, it will be considerably tougher to maintain the unity of the advanced democracies. Active and engaged US leadership has been crucial to the democratic world’s response to the Russia-China partnership. But serious tensions are emerging between Washington and its allies.In Europe, the key issues are both strategic and economic. The western alliance is openly divided over future military aid to Ukraine. Those divisions were on full display at an allied meeting in Ramstein on Friday, when Germany resisted intense pressure to allow the transfer of Leopard tanks to Ukraine.While the headlines after the Ramstein meeting focused on Germany’s isolation, the divisions within the western alliance are more complex than that. There is a hawkish wing that includes Poland, the Nordic countries, the Baltic states and the UK, and is pressing for the rapid transfer of more advanced weaponry, including tanks, to Ukraine. The US is somewhere in the middle between the hawks and the ultra-cautious Germans. The hawks worry that the Biden administration has allowed itself to be spooked by the threat of nuclear war and so been too timid about the delivery of advanced weaponry, such as longer-range missiles. But the criticisms are muted because the US is by far the largest donor of military and financial aid to Ukraine.These divisions are manageable for now. But, if the war turns against Ukraine this spring, the recriminations could get nasty.The tensions between the US and Europe also have an economic dimension — with many in the EU accusing Washington of protectionism, by providing large subsidies to green industries and electric vehicles inside the US.The common US response — that Europe should simply provide its own subsidies for green tech — may be unrealistic. Letting states subsidise their own industries might blow up the EU single market, while a unified EU subsidy regime would immediately spark arguments about how the money was raised and where it was spent.Lurking behind this is a growing fear that the US is pulling ahead of Europe economically — and that the Ukraine war is hastening this process. European industrialists point to key advantages enjoyed by the US: cheap energy, plentiful land, technological leadership and the world’s reserve currency.Then there is China. Confrontational language and attitudes towards Beijing are now routine in US politics. Most European and Asian governments are still hedging. China is now the largest potential faultline in the relationship between America and its Asian allies. Japan, Australia, South Korea and the Philippines are treaty allies of the US and agree on the need to increase military deterrence of China. But all are wary of how far America may go with economic decoupling. I noticed that division of opinion while chairing a session on Japan at the World Economic Forum last week. An American participant, Stephen Pagliuca, the outgoing co-chair of Bain Capital, argued that the world’s democracies would increasingly trade among themselves — and cited the Ukraine war as a warning about becoming too economically dependent on an autocracy. Tak Niinami, the chief executive of Tokyo-based drinks group Suntory Holdings, was wary of that argument — and welcomed the fact that Japan’s trade with China was increasing.The Singaporeans — key US partners on both trade and security — are openly alarmed about the wide scope of America’s restrictions on tech exports to China. They worry that they will lead to a further, dangerous spike in US-China tensions. There are also concerns that US efforts to “friend-shore” supply chains will make industry less efficient and fuel inflation.All these tensions could spell trouble for efforts to keep democracies in Europe, Asia and the Americas working together over the coming year. But while the splits within the “global west” are discernible, they can be narrowed by intelligent policy shifts. US policymakers are increasingly aware of European angst about the Inflation Reduction Act — and may try to tweak the law. A more tightly defined US policy on tech exports to China would also reassure allies. Above all, the Nato allies need to agree a common position on weapons supplies to Ukraine — and do so fast, before fighting intensifies this spring. The unity between democratic allies that was achieved in 2022 was a precious thing. It should not be frittered away in [email protected] More

Good morning. Ken Griffin’s Citadel made a $16bn profit for investors last year, establishing his company as the most successful hedge fund in history.Citadel, which manages $54bn in assets, made an astonishing 38.1 per cent return in its main hedge fund in 2022, according to research by LCH Investments, run by Edmond de Rothschild.The profit, which was driven by bets across a range of asset classes including bonds and equities, surpasses the roughly $15.6bn made by John Paulson in 2007 through his bet against subprime.Citadel, which Griffin set up in 1990, made a total gross trading profit of about $28bn last year, meaning that it charged its investors — one-fifth of whom are its own employees — roughly $12bn in expenses and performance fees.The $16bn of gains for investors means Griffin’s Citadel replaces Ray Dalio’s Bridgewater, which for seven years had been the all-time most successful hedge fund, at the top of LCH Investments’ list of the top money managers.

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Five more stories in the news1. Elliott takes multibillion-dollar activist stake in Salesforce Another big activist investor has joined the shareholder roster of the enterprise software group Salesforce, raising the pressure on co-chief executive and co-founder Marc Benioff. Elliott Management joins fellow activist Starboard Value, which disclosed a stake in Salesforce in October with a call to increase profit margins. Elliott is yet to reveal its position on the company or whether it has made recommendations to the board.2. Brazil and Argentina to start preparations for a common currency Brazil and Argentina will this week announce that they are starting preparatory work on a common currency, in a move which could eventually create the world’s second-largest currency bloc. The initial focus will be on how a new currency, which Brazil suggests calling the “sur” (south), could boost regional trade and reduce reliance on the US dollar, officials told the Financial Times.3. Eurozone set to avoid recession this year as economists’ gloom lifts The eurozone will avoid a recession this year according to a widely-watched survey of economists which illustrates the sharp about-turn in global economic sentiment in the past couple of weeks. The improved outlook is linked to lower energy prices, bumper government support and the earlier-than-anticipated reopening of the Chinese economy.More news on the EU economy: Top US investment management firms are going on a hiring spree in Europe as they search for growth opportunities outside of China.4. Joe Biden set to appoint new White House chief of staff The White House is planning to appoint Jeff Zients as chief of staff after the expected departure of Ron Klain, people familiar with the matter said yesterday. The appointment, if confirmed, would be a pivotal reshuffle at one of the most delicate moments in Joe Biden’s presidency after it was confirmed that a new batch of documents were discovered at his private residence. 5. Suspected Los Angeles gunman takes own life Huu Can Tran, 72, suspected of killing 10 people and injuring 10 more in the Los Angeles area on Saturday night, died from a self-inflicted gunshot wound yesterday afternoon, authorities said. The attack in the Asian-majority community was the deadliest instance of gun violence in the US since 21 people were killed in a school in Uvalde, Texas, in May 2022.

The shooting occurred in Monterey Park, a predominantly Asian-American neighbourhood of Los Angeles © David Swanson/EPA-EFE/Shutterstock

The day ahead Markets update The dollar weakened in trading today as equity markets in Europe rose. Contracts tracking Wall Street’s blue-chip S&P 500 and those tracking the tech-heavy Nasdaq 100 traded in a tight range ahead of the New York open. Stocks rallied on Friday but ended the week lower. EU foreign ministers meet in Brussels The meeting takes place amid a row over whether to supply Ukraine with modern tanks. Germany on Friday refused to commit to sending its prized Leopard tanks to the frontline but Poland’s prime minister said today he would seek Germany’s permission to send the tanks. Read more on the row. Nigerian legal trial The African country is due to mount a high-stakes legal trial at London’s High Court. The case involves a long-running attempt to overturn an $11bn arbitration award that left the Nigerian government owing more than a quarter of its foreign reserves to an obscure oil and gas company.European Space Agency address Director-general Josef Aschbacher gives the ESA’s annual address, providing an overview of its achievements in 2022 and highlighting new opportunities in 2023.Financial markets in China closed for new year China’s biggest annual holiday continues today and runs until January 27. Chinese citizens are expected to make more than 2bn trips as they travel for the celebrations for the first time since 2019.Read more: Rural parts of China are at risk from Covid-19 as drug supplies are critically low.What else we are readingCan Big Tech make livestreams safe? Platforms such as Instagram and TikTok prohibit content that promotes self-harm, but graphic videos still get broadcast to users in the form of livestreams. To better moderate dangerous videos, tech companies are looking to stricter requirements for age verification and the use of AI in moderation.

Artificial intelligence may be able to report and halt livestreams that violate the guidelines © FT montage

We, the people, are to blame for Britain’s economic woes On almost all relevant international comparisons, the UK’s economy looks sickly, writes Economics Editor Chris Giles. If the UK’s economic problem is relative decline and chronic weakness, we first need to be honest about the causes before thinking about solutions, he says, identifying three proximate causes.Luxury boom shows the staying power of the ultra-rich We may be heading for a global recession, writes Rana Foroohar, but the world’s richest people cannot seem to stop splashing the cash, with spending on luxury goods and experiences growing by about 20 per cent in 2022.All bets are off on Japan’s sports gambling craze Legal betting is only allowed on four sports in Japan and has thrived to a remarkable degree during three years of lockdowns. Now as the country prepares to relax mask-wearing restrictions the question is whether the gambling craze will continue.Forget the central business district Business districts, which are often dead in the evenings and at weekends, have fallen quieter still with the rise of remote and hybrid work. Now, a push to create more vibrant central districts is taking off, centred around socialising rather than just going into the office.Take a break from the newsCan you predict the year ahead better than superforecasters? The FT has teamed up with a forecasting organisation to craft 10 questions about how 2023 will play out. Complete our interactive quiz to find out how your answers compare with those of professionals, as well as other FT readers.

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“We’re seeing those supply-chain problems significantly mitigate, inventories are being built, shipping costs have come down,” Yellen told reporters after visiting a community health center in Lusaka, Zambia’s capital. “And so that part of inflation is no longer really contributing very significantly.”Several measures of inflation have shown encouraging signs in recent weeks, including declines in the consumer price index, which fell to 6.5% in the year through December, off its high of 9% in June. Producer prices have also declined faster than expected.In response, Treasuries have surged, with investors betting the Federal Reserve will stop raising rates and begin reducing borrowing costs sooner than policymakers are currently projecting.Yellen also said that goods prices moved down late in 2022 and that she expected housing inflation — a particularly strong contributor to price pressures in the second half of the year — to cool by mid-2023.“Over the next six months, that should largely cease boosting US inflation,” she said. “I do think in the US we’re continuing to see a strong labor market and progress on inflation. And so those are very helpful signs.”Yellen is on a three-stop Africa trip aimed at boosting US ties with the continent. She’s set to hold discussions later Monday with Zambian President Hakainde Hichilema, with the country’s debt woes being the central focus.©2023 Bloomberg L.P. More

LUSAKA (Reuters) – U.S. Treasury Secretary Janet Yellen said on Monday during a visit to Zambia that it was critically important to restructure Zambia’s debt, and she believed progress could be made after her frank talks with key creditor China last week.Yellen added that Zambia’s debt overhang was a drag on its whole economy and that China had been a barrier to reaching a resolution on the southern African country’s debt problem.However, she said she was encouraged that progress could become possible shortly following her meeting with Chinese officials in Zurich last week.”I specifically raised the issue with Zambia (with Chinese officials) and asked for their cooperation in trying to reach a speedy resolution. And our talks were constructive,” Yellen said.She said it was also critically important for Zambia to address corruption and human rights, and create a business environment that would promote investments and trade.She said it was very important that President Hakainde Hichilema, who took charge in August 2021, had made addressing corruption an important part of his agenda and had logged some progress.”It’s something that needs continued focus in dealing with ongoing problems that may exist,” she said. “I would say the work isn’t done, but there clearly has been an important focus on it.”Yellen is on a three-country visit to Africa. In Senegal she said Russia’s war in Ukraine was hitting Africans particularly hard by exacerbating food insecurity and putting an unnecessary drag on the continent’s economy. More

LONDON (Reuters) – European stock indexes edged higher on Monday, while Wall Street futures struggled to make gains as investors weighed up recession fears with hopes that inflation could be past its peak.Liquidity was thin during Asian trading hours as markets in China, Hong Kong, Singapore, Malaysia, South Korea and Taiwan were closed for the Lunar New Year holiday.At 1234 GMT, the MSCI World Equity index was up 0.2% on the day, holding just below last week’s highs.Europe’s STOXX 600 was up 0.2% on the day and London’s FTSE 100 was up 0.4% .Wall Street rallied at the end of last week, after a jump in Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) shares. Ahead of another week of earnings, U.S. stock index futures were little changed. Nasdaq e-minis were up 0.1% and S&P 500 e-minis were flat.Signs of inflation softening, falls in commodity prices and the easing of China’s COVID-19 restrictions have raised hopes so far this year that a global economic downturn may not be as severe as feared.Money markets are pricing in a 98% chance that the Fed will raise rates by 25 basis points next month, and have steadily lowered the likely peak for rates to 4.75% to 5.0%, from the current level of 4.25% to 4.50%..”The market’s still quite buoyant at the moment,” said Peter Chatwell, head of global macro strategies trading at Mizuho, who said markets were being driven by the idea that U.S. inflation has peaked.”On the surface, it looks like inflation has been dealt with and the most likely path ahead is lower. I’m still cautious about the inflation outlook for the second half of the year,” he said.Investors are waiting for euro zone and U.S. flash PMI data on Tuesday, which are expected to show less severe economic contractions than the previous month, according to analysts polled by Reuters. The data is forecast to show more improvement in Europe than in the United States.The U.S. dollar index was steady at 101.96 . The euro was up 0.2% at $1.0875, having hit a nine-month high of $1.0927 earlier in the session. Analysts say the euro’s strength has been helped by an easing of recession fears amid a fall in natural gas prices, as well as hawkish comments from European Central Bank governing council member Klaas Knot in an interview on Sunday.The British pound was down 0.2% at $1.237 and the Australian dollar, seen as a liquid proxy for risk appetite, was up 0.4% at $0.69985.The dollar edged higher against the yen, up 0.5% at 130.165, having fluctuated last week after the Bank of Japan defied market pressure to ease its ultra-loose monetary policy.Euro zone bonds were little changed, with the benchmark 10-year German yield at 2.181%.Oil prices edged higher, with Brent crude up 0.9% and U.S. crude up 0.8% . More