Economy

FRANKFURT (Reuters) -Euro zone banks are set to repay nearly 300 billion euros ($310 billion) in loans to the European Central Bank next week, the ECB said on Friday, the biggest cash withdrawal from the euro zone’s financial system in the euro’s 22-year history.The move is part of ECB efforts to fight record-high inflation in the euro zone by raising the cost of credit and it is its first step towards mopping up even more liquidity next year by trimming its multi-trillion-euro bond portfolio. The euro zone’s central bank said lenders would repay 296 billion euros worth of the 2.1-trillion-euros, multi-year credit they have taken under its Targeted Longer-Term Refinancing Operations (TLTRO) when they get their first chance to do so on Nov. 23.This is less than the half a trillion euros that analysts were expecting but still the biggest drop in excess liquidity since records began in 2000.The one-week ESTR rate, which measures borrowing costs for banks after the repayment goes through, fell after the ECB’s announcement, as did yields on Italy’s two-year government bonds, albeit briefly.ECB policymakers will look at how the market digests this sudden drop in cash to gauge how fast they can proceed with reversing the ECB’s 3.3-trillion-euro Asset Purchase Programme, which they will discuss at their Dec. 15 meeting.”These sizeable early repayments reduce the Eurosystem balance sheet and thereby contribute to the overall normalisation of monetary policy, which is needed to bring inflation back to target over the medium term,” ECB board member Isabel Schnabel said on Twitter.This is the first voluntary repayment window so analysts had cautioned that some bank treasurers may choose to wait until the next one on Dec. 21 to have better visibility on the state of their balance sheet before year-end results.”The December repayment window may well see larger repayments still,” said Frederik Ducrozet, Pictet Wealth Management’s head of macroeconomic research, estimating reimbursements of 900 billion euros at that window.While this early TLTRO reimbursement is voluntary, the ECB has given banks an incentive to get rid of those loans by taking away a rate subsidy last month. The greatest impact from the repayments was likely to be seen in peripheral countries, which would see a bigger proportion of their government bonds come back on the market after being locked at the ECB as collateral for the TLTRO loans.The other area of focus for the ECB is money markets, in which banks lend to each other for a short time.Those markets have been hampered by the ECB’s policy for years as banks could not find high-quality bonds to use as collateral for borrowing or did not have an incentive to do so when they could simply tap TLTRO for subsidised loans.Antoine Bouvet, a strategist at ING, said the lower-than-expected repayment “deals a blow to hope of near term” relief in collateral scarcity. He and Ducrozet both said the ECB may need to introduce a new long-term funding facility for banks, albeit on less generous terms, if banks come under stress.($1 = 0.9647 euros) More

According to data from Refinitiv Lipper, U.S. equity funds obtained a net $16.65 billion, the biggest weekly inflow since Dec. 29. GRAPHIC: Fund flows: US equities, bonds and money market funds – https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdreqgpm/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg The S&P 500 surged 5.9% last week while the tech- heavy Nasdaq Composite jumped 8.8% to mark its best week since Nov. 2020, as economic data released last week showed that U.S. consumer prices rose less than expected in October. The U.S. large-cap funds attracted $10.08 billion in their biggest weekly net buying since Dec. 1, while small- and mid-cap funds also obtained $2.08 billion and $94 million worth of inflows, respectively. By sector, healthcare funds secured $1.17 billion in a fifth straight week of net buying, while tech, industrials and financials had weekly inflows of $737 million, $723 million and $567 million, respectively. GRAPHIC: Fund flows: US equity sector funds – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqjkwdkvx/Fund%20flows%20US%20equity%20sector%20funds.jpg Meanwhile, U.S. bond funds saw outflows of $662 million, as selling continued for a ninth straight week. Investors sold U.S. taxable bond funds of $999 million after two weeks of net buying in a row, but municipal bond funds recorded inflows worth $513 million. U.S. general domestic taxable fixed income and short/intermediate investment-grade funds suffered outflows of $2.43 billion and $1.93 billion, respectively, but high-yield funds notched a fourth weekly inflow, worth $2.83 billion. U.S. government bond funds also attracted inflows for a second straight week, amounting to $1.9 billion. GRAPHIC: Fund flows: US bond funds – https://fingfx.thomsonreuters.com/gfx/mkt/gkplwgdqdvb/Fund%20flows%20US%20bond%20funds.jpg Meanwhile, money market funds posted a second straight week of outflows, valued at $3.75 billion. GRAPHIC: Fund flows: US growth and value funds – https://fingfx.thomsonreuters.com/gfx/mkt/mypmonkqgpr/Fund%20flows%20US%20growth%20and%20value%20funds.jpg More

British retail sales grew more than expected in October, rebounding after an extra bank holiday in September kept stores shut, but were below pre-pandemic levels, reflecting the impact of surging prices. The volume of retail sales in Great Britain grew 0.6 per cent last month compared with the previous month, according to data published by the Office for National Statistics on Friday.That was double the 0.3 per cent rise forecast by economists polled by Reuters and followed a revised down 1.5 per cent fall in September, when sales were affected by the additional bank holiday for Queen Elizabeth’s funeral. However, sales volumes fell 2.4 per cent in the three months to October compared with the previous quarter, reflecting the hit to household finances from high inflation.Darren Morgan, ONS director of economic statistics, said October’s rise was “likely a rebound effect after weak sales last month as many retailers closed or operated differently on the extra bank holiday for the Queen’s funeral”.“Looking at the broader picture, retail sales continue their downward trend seen since summer 2021 and are below where they were pre-pandemic,” he added. In October, the quantity of goods sold was 0.6 per cent below February 2020 levels, before the onset of the coronavirus pandemic, even though shoppers spent 14.2 per cent more, laying bare inflation’s impact on household spending power.The consumer price index rate hit a 41-year high of 11.1 per cent in October, according to the ONS on Wednesday. Martin Beck, chief economic adviser to the EY ITEM Club, a forecasting house, said October’s boost in retail sales could be replicated across the service sector, pointing to “decent” economic growth in the month.Separate data published on Friday by research company GfK showed that UK consumer confidence rose marginally to minus 44 in November, up from a 48-year low of minus 49 in September.But Joe Staton, client strategy director at GfK, said the uptick was “likely to reflect nothing more than a collective sigh of relief” as Rishi Sunak entered Downing Street following the market turmoil sparked by Liz Truss’s ill-fated “mini” Budget in September. He added that household budgets remained “shrouded in massive uncertainty with fresh jumps in food prices, energy still uncomfortably expensive, the prospect of new interest rate rises pressurising mortgage and rent payments, potential future hikes in council tax and squeezed real pay”. The figures come the day after the Office for Budget Responsibility said UK living standards would suffer their largest fall in more than six decades in 2022-23. The independent fiscal watchdog, which published its forecast alongside the government’s Autumn Statement, calculated that the drop in household disposable income over the next two years would wipe out the past eight years’ growth.Farah Thalji, director at global consultancy Simon-Kucher & Partners, said retailers would “have a rough road ahead going into 2023” as the sector faced its “most challenging period since the economic downturn of 2008-2009”.Friday’s retail sales figures provide little relief for businesses ahead of the busiest shopping season of the year, with Black Friday next week and Christmas next month.Phil Monkhouse, head of sales at global financial services group Ebury, said the difficult economic climate meant there would “be little to cheer this Christmas for the supermarkets as well as the high street retailers”. More

Masayoshi Son personally owes SoftBank close to $5bn because of growing losses on the Japanese conglomerate’s technology bets, which have also rendered the value of his stake in the group’s second Vision Fund worthless. The billionaire’s ballooning personal liabilities, discovered through a Financial Times analysis of SoftBank’s recent filings, comes as the world’s biggest tech investor was hammered by plunging tech stocks and valuations in private companies over the past year. The 65-year-old chief executive and founder of SoftBank last week said he would step back from running day-to-day operations at SoftBank. His main focus, he said, would be on the company’s British chip subsidiary Arm, after the technology conglomerate posted quarterly investment losses of $10bn.The widening losses in SoftBank’s various investment vehicles have also added billions of dollars to the tab that SoftBank’s founder owes the group in relation to its technology bets. This is because SoftBank fronted Son the money to invest in its technology-related funds, which he is under no obligation to repay for many years.Five more stories in the news1. G20: Japan and China agree to improve strained ties In their first in-person meeting, Fumio Kishida and Xi Jinping agreed to try to improve relations between their nations, even as Japan’s prime minister expressed “grave concerns” about China’s military activities in the region.More from the summit: Xi Jinping’s carefully choreographed return to the global stage took an unprecedented turn on the final day of the G20 summit as he upbraided Canada’s prime minister for allegedly leaking the contents of a conversation between the two leaders.

In a heated exchange on Wednesday, Justin Trudeau, left, told Xi Jinping: ‘In Canada we believe in free and open and frank dialogue, and we will continue to work constructively together’ © Adam Scotti/Prime Minister’s Office/Reuters

2. New FTX chief details extent of corporate failure The new chief executive of FTX, an insolvency professional who oversaw the liquidation of Enron, has said that the bankruptcy of the crypto group is the worst case of corporate failure he has seen in more than 40 years.Go deeper: Read the full the Chapter 11 declaration from FTX Trading Limited to the District Court of Delaware.3. Guangzhou struggles to rein in record Covid outbreak A Covid-19 outbreak in one of China’s biggest cities is on a knife edge following public protests and intense political debate among top officials over conflicting guidance from Beijing on how to handle the record surge in cases.The impact of zero-Covid: Alibaba reported sluggish growth in the third quarter as the ecommerce giant continues to feel the effects of China’s lockdowns, which have hammered economic growth and consumer spending.4. Saudi Aramco leads Riyadh’s investment push into South Korea Saudi Aramco has announced a $7bn investment in a petrochemical factory in South Korea, as part of a $30bn package of agreements between Riyadh and Seoul as Crown Prince Mohammed bin Salman forges closer partnerships in Asia.5. Three found guilty of murder over roles in downing of flight MH17 A court in the Netherlands has found three men with links to the Russian military guilty of murder for their roles in the downing of Malaysia Airlines flight MH17 over eastern Ukraine in 2014, sentencing them to life imprisonment.How well did you keep up with the news this week? Take our quiz. The days aheadCOP27 draws to a close The UN climate change conference in Sharm el-Sheikh draws to a close today, but negotiations are likely to continue through the weekend.Asia-Pacific Economic Cooperation Economic Leaders’ Meeting Heads of state from 21 nations including China, Japan, Russia and the US will gather in Bangkok, Thailand today. Elections in Asia and the Middle East Malaysia goes to the polls on Saturday, and on Sunday the Nepalese will vote for parliamentary and provincial government seats. Also on Sunday, Kazakhstan’s general election will represent the most significant constitutional change since it declared independence from the former Soviet Union. (Nikkei)Fifa World Cup The tournament is set to kick off with a game between host country Qatar and Ecuador on Sunday at 7pm in Doha. To say this is likely to be a contentious tournament would be something of an understatement. Our weekly Scoreboard newsletter will be devoted to the World Cup over the next four weeks. Premium subscribers can sign up here.What else we’re readingAustralia’s defence dilemma Competition between China and the US in the Indo-Pacific is driving the biggest military build-up anywhere in the world over the past 70 years. Australia, however, has a difficult line to tread as it strengthens military ties with European and American allies while trying to cool tensions with Beijing.

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Iraq reels from $2.5bn tax ‘heist of the century’ For almost a year, armoured vehicles carrying hundreds of thousands of Iraqi dinar bills have wound their way through Baghdad’s busy streets on a weekly basis. The trucks, laden with tax funds siphoned off from state-owned bank Rafidain, were allegedly pulling off in broad daylight what has since been dubbed Iraq’s “heist of the century”.Ireland learns of its over-reliance on big tech Mass global job cuts at Meta, Twitter, Stripe and other technology giants are bitter news for their staff in Dublin, coming just before Christmas. But analysts said they were a “wake-up call” for the side-effects of Ireland’s over-dependence on big tech.New military tech is the surprise twist in Ukraine’s gutsy defence The collapse of Sam Bank-Friedman’s FTX empire this month has visibly damaged other crypto players. But it has also had another, less obvious, impact: on a network of Ukraine-linked technologists, writes Gillian TettThe true believers saving tequila If you lift the lid off decades of marketing and misunderstanding, tequila is actually one of the most interesting spirits you’ll find behind the bar. It’s time it finally got its due, writes Lilah Raptopoulos.FashionYesterday we launched the first edition of Fashion Matters newsletter, in which editor Lauren Indvik takes you behind the scenes of the $2.5tn fashion industry. Sign up here.

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The firm, backed by U.S. billionaire investor Warren Buffett, posted adjusted net profit up 90% from a year earlier at 163 million reais, well ahead of the 95.7 million reais forecasts by analysts polled by Refinitiv.Its active client base grew 71% from a year earlier to 2.37 million people, helping a drive revenues up to 2.5 billion reais, also a 71% increase.Finance chief Rafael Martins told Reuters that the results were also driven by price hikes, reflecting Brazil’s higher interest rates: “The repricing initiatives proved more successful than in our initial projections,” he said.However, higher interest rates also pushed up the group’s financial expenses 184% to 940.3 million reais.StoneCo said its financial expenses as a proportion of revenues had however “begun to normalize” after growing in the second quarter, pointing to “a positive trend we will continue to see growing forward.”Earlier this month, a Brazil central bank director flagged possible interest rate cuts from next June, after the lender held rates a 13.75% cycle-high in October. More

Shares of the Santa Clara, California-based company rose nearly 3% in trading after the bell.Even though the wider chip industry is seeing sluggish demand for consumer electronics like PCs and smart phones, the growing adoption of 5G and shift to hybrid work still remains positive.Moreover, Applied is also set to benefit from a U.S. push to cut dependency on China and ramp up domestic chip output, prompting chipmakers like Intel Corp (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing to announce plans for new plants. The company posted revenue of $6.75 billion for the fourth quarter ended Oct. 30, compared to analysts’ average expectation of $6.45 billion, according to Refinitiv IBES data. Chief Executive Gary Dickerson said that the company is slowing the “rate of spending growth in the near term amid geopolitical and macroeconomic challenges.” The company forecast current-quarter revenue of $6.70 billion, plus or minus $400 million, compared with analysts’ average estimate of $6.45 billion. Applied said the outlook includes expected impact of recently announced U.S. export regulations and ongoing supply chain challenges.Earlier in October, the company said export restrictions to China would result in a $250 million-$550 million loss in net sales in the quarter ending Oct. 30, with a similar impact expected in the following three months.Excluding items, the company earned $2.03 per share, beating estimates of $1.73 per share. More