Economy

DAVOS, Switzerland (Reuters) – Ingka Group, the owner of most IKEA stores, sees demand in Europe to continue rising in the current fiscal year, driven by strong demand for home furnishings that has outlasted coronavirus lockdowns, the company’s CEO said.”We are right now optimistic that this would be a good year for us … we predict growth for this year,” Jesper Brodin said on the sidelines of the World Economic Forum’s meeting in Davos.Interest in life-at-home products, a segment which saw an increased interest during the pandemic as people spent more time in their houses during lockdowns and working from home, has sustained, Brodin told the Reuters Global Markets Forum.”Interest continues to be high. We see that in the numbers of visitations in our web, in our stores and also in our sales number,” Brodin said.”It seems to me that there is a longer effect of the pandemic,” he said. “We see of course the continuous trend that people are investing in their home office.”Ingka Group, the main franchisee to brand owner Inter IKEA, which is in charge of supply, increased prices last year to offset higher input costs, counter soaring inflation and supply chain disruptions, and to compensate for its wind-down in Russia.”While prices were increased last year, IKEA has started investing in decreasing prices of certain products this fiscal year,” Brodin said.Brodin said the business faced multiple risks from geopolitical tension, technological disruptions and climate change.He said the company was investing in renewable energy and electric vehicles as well as looking at the raw materials it uses. “We want to make ourselves climate proof. We want our business to be long-term resilient,” he said. More

LONDON (Reuters) – The dollar was heading for its biggest one-day rally against the yen in two weeks on Friday, after the Bank of Japan governor reiterated there would be no change in the central bank’s handling of monetary policy.The dollar was already up on the day against a basket of currencies, as a slew of data this week from consumer spending to business activity and inflation across major economies highlighted an increasingly fragile outlook for growth.The U.S. currency has lost about 1.3% so far in January, having fallen nearly 8% in the final three months of 2022, when investors began factoring in a higher chance of the Federal Reserve slowing down the pace of interest-rate rises.The Japanese yen bore the brunt of the dollar’s strength. The dollar rose by as much as 1.21% to a high of 129.965 – its largest one-day gain since Jan. 4. The yen, which investors have long favoured as a safe-haven and a funding currency, has had a volatile few weeks.BOJ Governor Haruhiko Kuroda, who was addressing the World Economic Forum in the Swiss town of Davos on Friday, said the central bank will continue its current “extremely accommodative” monetary policy to achieve its 2% inflation target in a stable, sustainable manner.Speculators are betting that the BOJ, the last major central bank to still employ loose monetary policy, is edging towards a shift to a tighter stance. That has driven a rally in the yen that has pushed the dollar/yen currency pair down by 14% in the past three months.Data on Friday showed Japan’s core consumer prices in December rose 4.0% from a year earlier, double the BOJ’s target. “Japan now has an inflation problem that it hasn’t had in nearly 40 years,” CMC Markets chief strategist Michael Hewson said.”For me, the die is cast – dollar/yen will go lower and it’s a question of how quickly,” he said.The BOJ on Wednesday maintained its ultra-loose monetary policy, though investors had thought it could signal a change.A flurry of U.S. data on Thursday indicated the world’s biggest economy was slowing down after multiple rate increases by the Fed. Money markets show traders are preparing for an end to rate rises by the middle of this year.However, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to another month of solid job growth and continued labour market tightness.”Looking at the way the markets are going so far this year, they got off to storming start and at some point there was always going to be a bit of a pullback and we’re certainly seeing that now,” CMC’s Hewson said. With much top-tier data out of the way now, investors are waiting for the first Fed meeting of the year in early February.The central bank raised interest rates by 50 basis points (bps) in December after four straight 75 bps increases, and the market is eagerly anticipating another stepdown. ING economists said the intense scrutiny of U.S. growth means that the dollar remains vulnerable to data releases as markets keep scaling back Fed rate expectations. “The fact that the ongoing dovish repricing is not only a consequence of slowing inflation but also of a worsening economic outlook in the United States has exacerbated the negative implications for the dollar,” according to ING economists.Meanwhile, the euro held steady at $1.0829, while sterling fell 0.3% to $1.2352, after UK data showed a surprise drop in retail sales in December, as British shoppers bought less, but spent more. More

The Cuban government is facing a high-stakes court case over unpaid commercial debt.
If Cuba loses, it could ultimately cost the island nation billions.
The loans in question were denominated in German Deutschmarks, a currency that no longer exists.

A Cuban pilgrim participates in the San Lazaro procession at El Rincon church in Havana, on December 16, 2022.
Yamil Lage | AFP | Getty Images

Accusations of bribery, an imprisoned Cuban bank official and Interpol all feature in a high-stakes case against the Cuban government set to start Monday in the United Kingdom’s High Court.
The legal battle is over a portion of Cuba’s unpaid commercial debt dating back to the 1980s. If Cuba loses, it could ultimately cost the island nation billions in long overdue payments — and, in a worst-case scenario, lead to the seizure of government-owned assets such as oil tankers and in-bound wire transfers.

Investment fund CRF1, originally called the Cuba Recovery Fund, is suing Cuba for roughly $72 million in principal and past due interest on two loans it now owns. They were originally granted to the Caribbean island nation by European commercial banks in the 1980s, and were denominated in German Deutschmarks, a currency that no longer exists.
This is the first time Cuba is facing legal action for what is estimated to be about $7 billion in outstanding commercial loans from the 1970s and 1980s. If CRF wins this case on this small slice of that debt, it could lead to further lawsuits from creditors with claims rising into the billions. Any unpaid judgments could lead to asset seizures.
If they don’t reach a deal, Cuba could then face yet another court fight over whether it finally has to pay. If CRF is successful, it could lead to many other creditors filing suit, with claims rising into the billions.
Cuba would be unable to borrow in the international capital markets until its debts are settled. According to the World Bank, Cuba’s gross domestic product in 2020 was $107 billion, slightly larger than New York City’s budget. The country has managed to survive for decades on the largess of other sympathetic governments: the former Soviet Union, Venezuela and China. But with Venezuela financially strained and China facing a weaker economy, those lifelines look increasingly undependable.
Because of the U.S. embargo against Cuba, American investors are prohibited from owning and trading Cuban debt, which frustrates some frontier-market hedge fund managers in the U.S. They argue that holding Cuban debt would better serve U.S. foreign policy interests because it would give Americans a seat at some future negotiating table.

An old American car passes by the Floridita bar in Havana on December 27, 2022.
Adalberto Roque | AFP | Getty Images

Beyond the commercial debt, there are still nearly 6,000 claims outstanding from Americans and American companies whose properties were confiscated by the Cuban government after former leader Fidel Castro came to power in a coup in 1959.
John Kavulich, the longtime head of the U.S.-Cuba Trade and Economic Council, a private, nonpartisan nonprofit, says the lawsuit “may prove stimulative” to the U.S. and Cuban administrations “to negotiate a settlement for the 5,913 claims valued at $1.9 billion.”

Details of the case

The trial is expected to last eight days. It will feature remote testimony from an imprisoned former employee of the Banco Nacional de Cuba, Raul Eugenio Olivera Lozano.
According to documents filed in the case, Lozano is serving a 13-year prison sentence after he was convicted in Cuba for accepting bribes of more than $25,000 in exchange for processing paperwork that allowed the loans in question to be reassigned to CRF from Chinese-owned ICBC Standard Bank. 
In filings with the court, CRF says the bribery claims are “scurrilous” and that Lozano was railroaded by the Cuban government for the purpose of not having to pay back the loans. Human rights organizations have long criticized Cuba for arbitrary detention and lax rule of law. Both Amnesty International and Human Rights Watch describe it as one of the most repressive regimes in the world.
There are other costs to consider, too. Thus far, the Cuban government has spent roughly $3 million on legal fees in its defense, and the plaintiffs have spent about $2.6 million. In the U.K., the loser pays the winner’s legal fees, so one of the parties will be out nearly $6 million. 
Cuban officials and their lawyers declined to comment.
Also expected to testify is Jeet Gordhandas. He is a representative of CRF whom the plaintiffs say was prevented from entering Mexico after the Cuban government issued a “Red Notice” through Interpol for his arrest, claiming he initiated the bribe.

Cuban boxers prepare for their fights in the first official women’s boxing program in Cuba at the Giraldo Cordova boxing school in Havana, on December 17, 2022.
Yamil Lage | AFP | Getty Images

In more recent filings, the Cuban government appears to have backed away from the bribery accusation. Instead, it is arguing that the bank executives who facilitated the reassignment of the debt did not have the authority to do so.
Cuba also argues that CRF, which is registered in the Cayman Islands, is a “vulture fund, which invests in distressed Cuban sovereign debt for enforcement purposes.”  David Charters, the chairman of CRF, pushed back: “Characterizing us as a vulture fund is a gross misrepresentation of us.”
CRF, meanwhile, says in court filings that it first reached out to Cuba 10 years ago to settle the debt but were ignored. The fund also says it didn’t file suit until it made multiple attempts over the decade to meet with Cuban authorities.
In 2018, CRF says in filings, the fund offered the Cuban government a better deal than the one the country struck in 2015 with bilateral creditors for billions in unpaid debts. Cuba also ignored that overture, according to CRF. Bilateral loans are government-to-government loans. 
CRF would rather not go to court, Charters said in an interview, days before the trial.
“We are seeking to engage Cuba even at this late stage. Even today we are ready to talk,” he said. “You make offers, and nothing happens, you are either ignored or rebuffed, so what do you do? It’s been a decade.”

What happens to bad old debt

Defaulted loans trade on the secondary market. There are investors who specialize in buying them at discounts to the loan’s face value and then in negotiating with the government in question to finally settle them. Usually, it’s at a discount to face value and some portion of the past due interest. 
Often, the settlement is not in the form of cash, but rather in some other type of long-term financial instrument. One example is a GDP warrant, which pays out based on the growth level of country’s GDP over an extended period.
GDP warrants were used in the Greek debt restructuring in 2012. Sometimes debts are settled via a debt-for-equity swap, in which the creditor receives a concession or ownership of a government-owned property such as an airport or a port, and the creditors receive a share of the revenues generated by the assets.
For decades, Cuban debt has traded around 8 to 10 cents on the dollar, with occasional spikes driven by events such as the death of former Cuban dictator Fidel Castro in 2016 or the temporary thawing of U.S.-Cuba relations under then-President Barack Obama in 2014, in the hopes that a settlement was more likely.  
Getting paid on very old, defaulted debt isn’t without precedent. Iraqi debt traded between 8 and 10 cents on the dollar for a decade, and then settled for roughly 32 cents on the dollar after the U.S. invasion in 2003.
Even though Cuba’s defaulted debt is nearly 40 years old, there’s a precedent for bondholders waiting even longer. More than 300,000 holders of czarist-era Russian bonds, which the Bolsheviks defaulted on in 1917 after the revolution, received payment in 2000. 
Michelle Caruso-Cabrera, a CNBC contributor, has 30 years of experience at the nexus of finance, economic development, and communication.

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DAVOS, Switzerland (Reuters) – Holcim (SIX:HOLN) expects the U.S. Inflation Reduction Act (IRA) to provide strong momentum for its business in North America which is outperforming other regions, the company’s head of Europe said on the sidelines of the World Economic Forum’s annual meeting at Davos.The world’s biggest cement maker expects its North American sales to represent half its business in the next few years, from around 40% currently, Miljan Gutovic told the Reuters Global Markets Forum.”I expect that Europe will be softer in comparison to the U.S., but with the latest Inflation Reduction Act we have, we believe that in the U.S., especially in the second-half, we will have a strong momentum.””To us this (North America) is still the most attractive market,” said Gutovic, who is also Holcim’s global head of decarbonisation.IRA, seen as the biggest climate package in U.S. history, aims to benefit decarbonisation efforts, cut greenhouse gas emissions and create major tax incentives for clean energy.Holcim has set itself sustainabilty goals and two years ago launched a low carbon range of products including cement. “We have cements now where there is up to 90% lower CO2 content versus traditional segment. These products are making momentum in the market,” Gutovic said.In addition the company has several decarbonisation efforts through carbon capture utilisation and storage projects under development. The Swiss company reported stronger than expected third-quarter results in October last year, recording a bumper performance in North America that offset a slight downturn in Europe. Gutovic expects continued softer volumes in Europe, but sees a recovery in its German and French businesses in the second half of 2023.He was also optimistic about the company’s Eastern European business as order books looked “healthy”.”To our surprise, in the neighboring countries of Ukraine we have not seen any significant drop in the volumes. In fact, we have seen strong performance in volumes in countries like Romania,” Gutovic said.Gutovic expects a similar level of activity in the company’s mergers and acquisitions this year as it sees more opportunities for consolidation.”When it comes to emerging markets, we will stay in some of them while the others, depending on what we see in the future, there might be some additional divestments, especially in Africa and some other parts of the world,” he said. More

British retail sales dropped unexpectedly in December, as consumers dealt with rising inflation during the crucial Christmas shopping period.The volume of retail sales in Great Britain fell by 1 per cent between November and December, according to figures published by the Office for National Statistics on Friday.The reading was well below the 0.5 per cent rise forecast in a Reuters poll of economists.Retail sales fell despite government payments to help households with the rising cost of living, delivered in mid to late November, which were expected to have “given an extra boost to spending in the lead-up to Christmas”, according to Paul Dales, chief UK economist at Capital Economics.The figure is the second monthly decline in retail sales volumes, following a 0.5 per cent drop in November, when Black Friday failed to produce a significant bump in sales.Food sales volumes fell by 0.3 per cent in December, down from a 1 per cent rise in the previous month. Heather Bovill, ONS deputy director for surveys and economic indicators, said: “After last month’s boost as shoppers stocked up early, food sales fell back again in December.” Non-food sales volumes fell by 2.1 per cent over the month. Within the category, clothing stores sales volumes rose by 1 per cent, while household goods stores, such as furniture stores, increased by 1.5 per cent over the month.But the figure was dragged down by a large drop in the “other” non-food subcategory, which went down by 6.2 per cent because of falls in common gift categories such as toys, cosmetics, jewellery and sports equipment, according to the ONS. “December’s fall in sales suggests consumers didn’t see Christmas or the World Cup as strong enough incentives to loosen the purse strings,” said Aled Patchett, head of retail and consumer goods at Lloyds Bank.Online shopping fell to 25.4 per cent, from 25.9 per cent in November, with some online retailers reporting that they were set back by Royal Mail strikes last month. Latest data from the ONS public opinion survey, covering the period between December 21 and January 8, showed that 65 per cent of adults were spending less on non-essentials as their living costs increased.The ONS findings are in line with separate data by research company GfK, released earlier on Friday, which showed that UK consumer confidence remained below minus 40 for the ninth month in a row in January, marking the longest period of pessimism in nearly 50 years.“With a renewed fall in consumers’ confidence in January”, weak retail sales were “very likely to continue as the broader economy slips into recession in 2023”, said Olivia Cross, assistant economist at Capital Economics.

Nevertheless, the ONS reported that the value of retail sales was up 3.8 per cent compared with December 2021, despite their volume being down 5.8 per cent on the same period. As prices surge to near-record highs, particularly following Russia’s invasion of Ukraine, retailers’ turnover rose but people could buy less with their money.Consumer price inflation eased slightly to 10.5 per cent last month, after hitting a 41-year high of 11.1 per cent in October.“With the UK forecast to enter recession this year, combined with energy bills remaining sky-high and savings starting to run low for many households, retailers face a challenging year,” said Phil Monkhouse, head of sales at financial services firm Ebury. More

DAVOS, Switzerland (Reuters) -Business titans trudging through Alpine snow can’t stop talking about a chatbot from San Francisco.Generative artificial intelligence, tech that can invent virtually any content someone can think up and type into a text box, is garnering not just venture investment in Silicon Valley but interest in Davos at the World Economic Forum’s annual meeting this week.Defining the category is ChatGPT, a chatbot that the startup called OpenAI released in November. The tech works by learning from vast amounts of data how to answer any prompt by a user in a human-like way, offering information like a search engine would or prose like an aspiring novelist.Executives have floated wide-ranging applications for the nascent technology, from use as a programming assistant to a step forward in the global race for AI and military supremacy.Conference goers with a major stake in the development of the technology include Microsoft Corp (NASDAQ:MSFT), whose chief executive, Satya Nadella, said the tech’s progress has not been linear.AI capabilities will “completely transform” all of Microsoft’s products, he said in an on-stage interview with the Wall Street Journal.Microsoft has a $1 billion investment in San Francisco-based OpenAI that it has looked at increasing, Reuters has reported. In an announcement that coincided with the conference, Microsoft said it plans to market ChatGPT to its cloud-computing customers. The company has also worked to add OpenAI’s image-generation software to its Bing search engine in a new challenge to Alphabet (NASDAQ:GOOGL) Inc’s Google.Later on Tuesday, the political sphere gets to weigh in on the craze. French politician Jean-Noël Barrot planned to join a panel discussion with a Sony (NYSE:SONY) Group Corp executive on the technology’s impact.Matthew Prince, CEO of Cloudflare (NYSE:NET) Inc, a company that defends websites against cyberattacks and offers other cloud services, sees generative AI as good enough to be a junior programmer or a “really good thought partner.”In an interview, Prince said Cloudflare was using such technology to write code on its Workers platform. Cloudflare is also exploring how such tech can answer inquiries faster for its free-tier customers as well, he said on the annual meeting’s sidelines.Alex Karp, CEO of Palantir Technologies (NYSE:PLTR) Inc, a software provider helping governments visualise an army’s movements or enterprises vet their supply chains, among other tasks, said such AI could have military applications.Karp told Reuters in Davos, “The idea that an autonomous thing could generate results is basically obviously useful for war.”The country that advances the fastest in AI capabilities is “going to define the law of the land,” Karp said, adding that it was worth asking how tech would play a role in any conflict with China.Businesses including CarMax Inc (NYSE:KMX) have already used Microsoft and OpenAI’s tech, such as to generate thousands of customer review summaries when marketing used vehicles. Proposed venture-capital investment has also exceeded what some startups want to take.Such buzz carried through gatherings at Davos, like talk about a slide-generating bot dubbed ChatBCG after the management consulting firm. The service said on its website that it had too much demand to keep operating.Generative AI is “a game-changer that society and industry need to be ready for,” stated an article on the World Economic Forum’s website. More

The sudden shift in Chinese policy has boosted many different asset classes, from commodities and mining stocks to currencies and equity markets in popular tourist destinations. Hong Kong’s share benchmark, the Hang Seng Index closed on Friday at an over six-month high ahead of the Lunar New Year Holiday. Chinese onshore blue chips went into the break at a five-month peak. The BofA data also showed weekly flows of $14.4 billion into bond funds, $7.5 billion into equities, $0.6 billion into cash and $0.6 billion from gold.European equities witnessed their first weekly inflow in almost a year. BofA said there were $0.2 billion of inflows to European stock funds, the first inflows in 49 weeks. Europe has benefited both from China’s reopening as well as recent declines in gas prices.BofA’s “Bull & Bear indicator” is at 3.5, a 10-month high driven by the inflows into emerging markets. Nonetheless, the note also says that markets are still facing several major uncertainties despite the recent optimism, as central banks near the end of their aggressive interest rate hikes, as well as the possibility of an economic “hard landing” and political tension in the United States around its debt ceiling. “We are in the trickiest part of the investment cycle: tightening ending but easing far from beginning, inflation over but recession not yet begun, China reopen vs US recession…little wonder Wall St narratives (are) changing quicker than a TikTok video,” it said. More

Investing.com — Technology stocks rise as Alphabet announces big job cuts and Netflix returns to the kind of subscriber growth that investors had thought was gone forever. Netflix founder Reed Hastings is also ascending to executive chairman position, with COO Greg Peters replacing him as co-CEO. Existing home sales data for December are due and are unlikely to break the flow of gloomy economic data this week. Western defense ministers meet to agree on more arms shipments to Ukraine, with a new German defense minister under pressure to let the country’s main battle tank join the fighting. And crypto lender Genesis files for bankruptcy with debts of more than $3.8 billion. Here’s what you need to know in financial markets on Friday, 20th January. 1. Alphabet announces job cutsGoogle parent Alphabet (NASDAQ:GOOGL) said it will cut 12,000 jobs, in an effort to restore profitability as its growth slows.The cuts, the latest in a series of mass culls of excess staff by Big Tech, will be spread across the group’s business lines and geographies. They come only days after a similar move by Microsoft (NASDAQ:MSFT).CEO Sundar Pichai said in a memo to staff that: “Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”Alphabet stock rose 1.6% in premarket in response.2. Netflix subscriber growth roars backThere was upheaval, too, at another of the previously untouchable “FAANGs” group. Netflix (NASDAQ:NFLX) co-founder said he will leave his position as co-CEO to become chairman of the streaming giant, allowing chief operating officer Greg Peters to step up alongside programming chief Ted Sarandos.Netflix also handsomely beat its own forecasts – and the market’s for subscriber growth in the three months through December, reviving faith in the sustainability of its model after a miserable year for streaming companies.Net subscribers rose by 7.7M, well above the 4.5M it had guided for. Netflix stock rose nearly 6% in premarket in response.3. Stocks mixed as tech outperforms; existing home sales, earnings in focusU.S. stocks are set to open mixed later, with Netflix and Alphabet news supporting technology stocks more broadly.However, the disappointing economic data seen this week continue to cast a shadow, while comments from Federal Reserve vice-chair Lael Brainard and New York Fed President John Williams on Thursday were a reminder that the central bank is still far from being ready to cut interest rates. Existing Home Sales data are the only economic figures of note due Friday.By 06:30 ET (11:30 GMT), Dow Jones futures were down 23 points or less than 0.1%, while S&P 500 futures were up by a similar amount. Only Nasdaq 100 futures were clearly moving, up 0.4%. The main three cash indices all lost between 0.7% and 1% on Thursday and are set for their worst weekly loss in three.Other stocks likely to be in focus later include Schlumberger (NYSE:SLB) and State Street (NYSE:STT), which both report earnings, and T-Mobile (NASDAQ:TMUS), which admitted to a major data breach late on Thursday.4. Tanks but no tanksU.S. and European defense ministers are set to meet for discussions over increasing military aid to Ukraine, aiming to give it the means to recapture lost territory from Russia when the winter is over.Central to the discussions will be the issue of tanks, where Germany is under increasing pressure both to send its Leopard 2 main battle tank to Ukraine and allow its NATO partners such as Poland to send their Leopards too. Chancellor Olaf Scholz earlier this week said he wouldn’t agree to offer Leopards until the U.S. offered its main battle tank, the Abrams M1. The U.S. has also held back from that step, arguing that Leopards dispatched from Europe would have a bigger and faster impact. The U.K. has already approved sending its main battle tank, the Challenger 2.The U.S. approved another $2.5B of military aid this week, hinting heavily that it is now more relaxed about Ukrainian ambitions to retake the province of Crimea, which Russia annexed in 2014.5. Genesis files for bankruptcyCrypto lender Genesis finally bowed to the inevitable and filed for bankruptcy, two months after it was forced to suspend client withdrawals due to massive losses on its exposure to FTX.The move effectively puts a court in charge of the biggest fight going on in crypto land right now, between the Winklevoss twins and Barry Silbert’s Digital Currency Group, Genesis’ ultimate owner. It will have to decide which of Genesis’ creditors get paid first, and who – if anyone – will make whole over 340,000 customers of the Winklevoss investment platform Gemini.Both Gemini and Genesis have been charged by the Securities and Exchanges Commission with illegally offering securities in the U.S. Both the SEC investigation and the bankruptcy process raise the specter of a largely forced liquidation of some of the world’s largest holdings of crypto assets. According to its filing, Genesis owes its 50 biggest creditors some $3.8B, a little more than anecdotal reports had suggested earlier. More