Economy

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.What the Fed taketh away, China could be about to giveth back.Speculation is mounting that China may make substantial changes to its zero-COVID policy soon and begin opening the economy back up. Chinese asset prices were on fire at the end of last week, and the glow is expected to continue burning brightly into Monday. The strong close on Wall Street Friday should also help, but that rally may be vulnerable – the Fed is not pivoting any time soon, implied terminal rates are now above 5%, the yield curve inversion is relentless, and an earnings slowdown next year is highly likely. Could a Chinese pivot on COVID replace the elusive Fed pivot on rates for investors, and spark a year-end rebound across world markets? Some of the moves in China and Hong Kong last week were remarkable.Shanghai stocks rose 6.4%, the biggest rise weekly since July 2020; Hong Kong’s Hang Seng jumped 8.7%, its best week in 11 years, and the Chinese yuan posted its biggest rise against the dollar on Friday since the currency’s one-off revaluation in 2005. (GRAPHIC-China stocks: https://fingfx.thomsonreuters.com/gfx/mkt/gdpzqreolvw/One.PNG) A Hong Kong summit last week in global banking showed the pent up appetite for investing in China. “Risk/reward is still attractive for being long reopening trades in China,” Morgan Stanley (NYSE:MS) analysts reckon. China also grabs the economic data spotlight on Monday, as Beijing releases its trade and FX reserves figures for October. Trade activity is expected to slow and FX reserves, already the lowest in five and a half years, are expected to dip closer towards the $3 trillion mark. Three key developments that could provide more direction to markets on Monday:China trade balance, FX reserves (October)India trade balance (October)Germany current account (September) More

Good morning. Democrats raced to rally their voters yesterday in a bid to avoid sweeping defeats in Tuesday’s midterm elections, with Republicans holding a slim advantage in polling which should be sufficient for them to regain control of the House of Representatives after four years.Early voting data pointed to high turnout across the country and massive spending on political advertising as both parties made their final pitches to Americans, who will cast their verdict on Biden’s agenda as well as the appeal of a Republican party that is still in thrall to former president Donald Trump. The majority in the Senate remains in the balance and will come down to a handful of hotly contested races, including in Pennsylvania, Nevada and Georgia. The party in power at the White House typically loses seats in Congress during its first midterm election. In addition, this year Biden and the Democrats are facing brutally negative ratings on issues ranging from inflation to crime and immigration. During a series of rallies at the weekend, top Democrats including Biden and former president Barack Obama made appearances in states that voted for their party in the last presidential election, a sign of their political vulnerability. Biden campaigned on Saturday in Pennsylvania — the state where he grew up — after a visit to Illinois, then travelled to New York yesterday for an event with governor Kathy Hochul, who is facing an unexpectedly tough challenge from Republican Lee Zeldin. “This election is about the Biden agenda. People don’t like high inflation, high crime, open borders, fentanyl, that’s what we’re talking about,” Rick Scott, the Florida senator and chair of the National Republican Senatorial Committee, told NBC. Scott was campaigning with Trump yesterday on behalf of Florida senator Marco Rubio.Join leaders including Singapore’s Minister of Trade and Industry, the Deputy chair, CEO & Executive Director of Mewah International Inc. and more on November 23 in Singapore at The Westin and online to speak about the future of the commodities industry. Register here for your in person or digital pass today.Five more stories in the news1. Beijing quashes market rumours of quicker end to zero-Covid policy China’s National Health Commission reiterated the country’s commitment to eliminating Covid-19 at a press conference on Saturday, setting up markets for further volitilaty as officials warn of a “severe and complex” winter flu season.2. Sweden distances itself from Kurdish groups to win Turkey’s Nato support Many western countries have backed the People’s Protection Units, a Kurdish militia which helped defeat the terror group Isis in Syria, but Sweden’s new centre-right government said it would distance itself from the group because Turkey views the militia as a direct threat.3. Iran’s protests fuel ethnic tensions Mahsa Amini’s death in September after her alleged failure to observe the Islamic dress code triggered some of the biggest and longest-lasting anti-regime demonstrations in Iran. Now, Iran’s hardline politicians fear lengthy unrest makes the country vulnerable to threats from ethnic separatists and Islamist insurgents.4. Japan to sign military pact with UK as allies eye China threat Japan and the UK plan to sign a major defence pact in December that will enable the countries to enhance co-operation with the US in the Indo-Pacific. The pact will make joint exercises and logistics co-operation between the nations easier. It will also set a legal framework to simplify cumbersome bureaucratic red tape for the entry of troops into each other’s countries.5. US oil producers reap $200bn windfall from Ukraine war price surge Aggregate net income for publicly listed oil and gas companies operating in the US came to $200.24bn for the second and third quarters of the year. The figure marks the sector’s most profitable six months on record and puts it on course for an unprecedented year.The day aheadEarnings Ryanair reports H1 numbers today. Lyft also releases earnings today, after announcing significant job cuts at the end of last week.Economic indicators China releases its trade balance figures for October today.Finance in the EU Eurozone finance ministers meet today ahead of tomorrow’s Economic and Financial Affairs Council (Ecofin) meeting of all EU finance ministers.US Supreme Court America’s highest court will hear oral arguments in two important cases for regulators: Axon Enterprise vs Federal Trade Commission; and Securities and Exchange Commission vs Cochran. Should the court side with the plaintiffs over the FTC and SEC, it would become easier for parties to challenge enforcement actions in federal court before regulators have concluded internal proceedings.What else we’re readingCOP27 shines spotlight on Egypt’s rights abuses With the UN Climate Change Conference now under way in Egypt, activists hope to use the event to shine an international spotlight on the country’s dire human rights record, and that western leaders will take the opportunity to put pressure on Cairo’s autocratic rulers.

Sanaa al-Seif, left, is joined by climate activists Greta Thunberg and Andreas Magnusson, and Mona Seif, sister of jailed blogger Abd El-Fattah © Hollie Adams/Getty Images

How Elon Musk’s ‘war room’ of advisers are transforming Twitter In his first week as owner, the billionaire operated with a cast of trusted lieutenants from a secretive “war room” in the company’s San Francisco headquarters to axe management, begin mass job cuts and launch new products.Corporations can no longer remain black boxes Opacity makes it difficult for regulators, investors, workers and customers to figure out important facts. Now, many new laws in the US are requiring companies to publish salary ranges in job listings. Regulation on pay transparency should force openness in other areas, too, writes Rana Foroohar.Further reading: For more news on the latest trends in the world of work and careers, sign up here for the FT’s Working It newsletter.How I saved energy and stopped worrying about light switches As energy conservation becomes a larger issue, life becomes more complicated. For those struggling with bills (as in much of Europe), or hit by blackouts (as in Ukraine), the energy crisis can be overwhelming. For those of us in more fortunate positions, it poses a question: we want to do our bit, writes Henry Mance, but how far will we go?The cost of getting South Africa to stop using coal South Africa is among the world’s most coal-dependent nations — but is also among the most inefficient at turning fossil fuels into economic output. And although rich countries pledged $8.5bn to help the country shift away from dirty energy a year ago, negotiations are strained.TelevisionSeries 5 of The Crown is a long-awaited salacious portrayal of divorce, tell-all interviews and, er, toe-sucking. Although for many viewers it’s the crescendo that the show has been building to, it’s also already sparked a backlash, leading Netflix to add a disclaimer the series is indeed a “fictional dramatisation”.

Imelda Staunton, centre, brings a quiet dignity to her role as the Queen More

Hello and welcome to the working week.Firstly, thank you Rafe Uddin for shepherding this newsletter last week while I took a look ahead to my eldest son’s future with some university open days. Now, back to this week and this year’s theme of important ballots.The biennial event of a nationally significant American election is upon us with the US midterms. All 435 House seats and 35 of the 100 Senate seats are on the ballot on Tuesday. Joe Biden is so concerned that last week he hit the campaign trail, ramping up the rhetoric.The Democrats are likely to lose control of the House and the upper chamber is on a knife edge. That (or rather the divided government it will create) is bad news for investors, according to Unhedged’s Rob Armstrong. FT columnist Janan Ganesh blames the voters.Want to know more? This Thursday, FT journalists Edward Luce, Rana Foroohar and James Politi will be joined by veteran commentator Norm Ornstein for a subscriber-exclusive event assessing the US midterm results. Register free today and you can submit questions in advance for our panel.You can get also subscribe to the Swamp Notes newsletter, which does an excellent job probing the intersection of money and power in American politics, and is currently free to read. Across the Atlantic, the COP27 gathering in Sharm el-Sheikh, Egypt, provides a focus for climate change news over the coming days (and weeks). More than 100 world leaders will be attending, including Rishi Sunak after he found time in his diary, but not King Charles.Again, you can get more insights from the FT. Starting Monday, FT Live will be hosting a series of in-person, virtual and hybrid discussions with leading thinkers on sustainability and senior FT journalists. Each one will complement the themes set out in the presidency programme that day. Register your interest here.Get in touch by sending me a note at [email protected], or if you have received the newsletter by email, just hit reply.Economic dataInflation is the main theme of economic news this week with consumer price index and producer price index updates from the US, China, Germany and Japan. Whatever the US figure, Fed chair Jay Powell made it crystal clear in his comments last week that his team will do what it takes to squeeze inflation out of the economy. The consensus is for a 0.7 per cent increase in the monthly US figure to create an annual figure of 8.1 per cent.The Bank of England’s gloomy projections last Thursday that the UK is entering its longest recession since the second world war sets the tone for this week’s big UK economic news item: the first estimate of third-quarter GDP on Friday. This is expected to show a contraction of about 0.2 per cent quarter on quarter.CompaniesWith high street sales down in the UK and talk of a prolonged recession, British retail is not in a good place. But this week, might provide some respite — and we’re not just talking about the return of free coffee at Waitrose.Marks and Spencer will on Wednesday present its first results under new management after the retirement of former chief executive and company lifer Steve Rowe over the summer. His replacement, Stuart Machin, has already set out his stall in terms of accelerating the overhaul of the store estate and redoubling cost-cutting efforts so the focus is likely to be on current trading. Rival Next last week stuck by its full-year guidance after sales held up in early autumn. M&S investors — who haven’t had a dividend since November 2019 — will be hoping Machin does likewise.WHSmith profits are set for a bounce as the world’s travel industry recovers from Covid lockdowns. Travel revenue, much of which comes from airport stores, was already running well ahead of pre-pandemic levels at its last update in early September. Meanwhile, there were few hints of a slowdown in quarterly results from airport duty-free group Dufry last week. The key constraint is capacity limits at major airports, notably London Heathrow. No doubt there will be further discussion of this on Monday when Ryanair reports first half numbers. Low-cost airlines like Ryanair are having to adapt to the end of, er, low-cost air travel, the answer to which has been to try to take business from the more expensive carriers.The tail-end of the season’s tech earnings news is likely to continue the gloomy mood. Lyft, reporting on Monday, last week announced significant job cuts, its second round of redundancies in recent months. Lyft is not alone among tech firms having to tighten their respective belts, but it does not look good for the ride hailing service, a smaller rival to Uber, which is also selling its vehicle service business.Elsewhere, we have a clutch of drugmaker updates. BioNTech, which reports on Monday, is among several Covid-19 vaccine producers that have begun raising the price of their jabs amid concerns about falling demand in 2023. Airfinity, a health data analytics group, forecasts sales of Covid vaccines falling by about a fifth to $47bn next year. There are also concerns about AstraZeneca, which reveals third-quarter figures on Thursday, after the nasal version of its Covid vaccine failed in trials. Better news is expected from German drugs and chemicals group Bayer, whose figures are out on Tuesday.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayChina, October trade balance figuresGermany, September industrial production dataIndonesia, Q3 GDP figuresUK, Halifax house price indexResults: BioNTech Q3, Lyft Q3, Ryanair H1, Take-Two Q2, Westpac Banking Corp FYTuesdayEU, September eurozone retail sales dataFrance, September trade balance figuresJapan, September trade balance dataUK, British Retail Consortium sales figuresResults: Associated British Foods FY, Bayer Q3, CNH Industrial Q3, Deutsche Post DHL Q3, Direct Line Q3 trading update, DuPont Q3, Henkel Q3, Mitsubishi H1, Munich Re Q3, News Corp Q1, Nintendo Q2, NTT Q3, Pandora Q3, Persimmon trading update, Salvatore Ferragamo Q3, Suzuki Motor Q2, Walt Disney Company Q4WednesdayChina, October consumer price index (CPI) and producer price index (PPI) inflation rate dataMexico, October CPI inflation rate dataPoland, monthly base rate decisionResults: ABN Amro Q3, Adidas Q3, Ahold Q3, Bank of Ireland Q3 trading update, Commerzbank Q3, E.ON Q3, FirstGroup H1, Honda Q2, ITV Q3 trading update, J D Wetherspoon Q1 trading update, Kirin Holdings Q3, M&S H1, National Australia Bank FY, Nissan Motor Corp H1, Tata Motors Q2, Taylor Wimpey trading update, Veolia Q3ThursdayBrazil, October IPCA inflation rate dataJapan, October PPI inflation rate dataPhilippines, Q3 GDP figuresUK, RICS house price surveyUS, October CPI inflation rate dataResults: 3i H1, Allianz Q3, ArcelorMittal Q3, AstraZeneca Q3, Auto Trader H1, B&M H1, Becton Dickinson and Company Q4, Bridgestone Q3, Brookfield Asset Management Q3, Continental Q3, Crédit Agricole Q3, Deutsche Telekom Q3, Grafton trading update, National Grid H1, Qinetiq H1, Ralph Lauren Q2, Tate & Lyle H1, WHSmith FYFridayEU, European Commission economic forecastsGermany, October CPI inflation rate dataIndia, September industrial production figuresMalaysia, Q3 GDP dataMexico, September industrial production figuresUK, Q3 GDP and trade balance figuresResults: Richemont Q2, SoftBank Q2, Toshiba Q2World eventsFinally, here is a rundown of other events and milestones this week. MondayEU, meeting of eurozone finance ministers ahead of tomorrow’s Economic and Financial Affairs Council (Ecofin) meeting of all EU finance ministersUS, the Supreme Court will hear oral arguments in two important cases for regulators: Axon Enterprise vs Federal Trade Commission; and Securities and Exchange Commission vs Cochran. Should the court side with the plaintiffs over the FTC and SEC, it would become easier for parties to challenge enforcement actions in federal court before regulators have concluded internal proceedings.TuesdayA total lunar eclipse, visible in Tokyo, most of Australia and New ZealandTurkey, president Recep Tayyip Erdoğan to meet new Swedish prime minister Ulf Kristersson in Ankara to discuss Stockholm’s bid to join Nato and the extradition of people the Turkish government considers terroristsUS, midterm elections WednesdayEgypt, finance ministers convene to reflect their commitment to climate action at COP27EU, European Commission to publish proposals for changing EU fiscal rules to make them more realistic given high public debt after the Covid pandemicUK, North Sea oil and gas explorer and producer Ithaca Energy starts trading on the London Stock Exchange, seeking to raise as much as $357mn and testing investor appetite for a rare fossil fuel flotationThursdayUK, Guinness World Records DayUS, Nasa and the National Oceanic and Atmospheric Administration to launch the Joint Polar Satellite System-2 (JPSS-2), an extreme weather monitoring satellite, from the Vandenberg Space Force Base in CaliforniaFridayArmistice Day, or Remembrance Day, commemorates the ending of the first world war in various Commonwealth countriesFrance, Paris Peace Forum beginsPoland, Independence Day national holidayUS Treasury secretary Janet Yellen travels to New Delhi for the US-India Economic and Financial Partnership meetingUS, Veterans Day public holidaySaturdayBahrain, parliamentary electionsUK, parade for the new Lord Mayor of London from Mansion House to the Royal Courts of Justice, a tradition to promote the financial district dating back to the 13th centurySundayItaly, Nitto ATP Finals begin in Turin Slovenia, second-round ballot in presidential electionUK, Remembrance Sunday More

The US’s flagship green technology legislation breaches global trade agreements, risks a global “race to the bottom” on clean energy incentives, and could lead to retaliation, Brussels has claimed. In its first formal response on the Inflation Reduction Act, EU documents seen by the Financial Times state that the $369bn package of subsidies and tax credits for American producers and consumers contravenes World Trade Organization treaties that say countries such as the US cannot discriminate against imported products. Officials in Brussels also believe the package, passed in August, could trigger retaliation from the EU and other US allies. The European Commission comments sent to the US Treasury state that five measures offering tax credits and subsidies “contain provisions with clearly discriminatory domestic content requirements, in breach of WTO rules”.“If implemented in its current form, the Act risks causing not only economic damage to both the US and its closest trading partners, resulting in inefficiencies and market distortions, but could also trigger a harmful global subsidy race to the bottom on key technologies and inputs for the green transition,” the document, which is due to be published on the US Treasury’s website on Monday, said. “Moreover it risks creating tensions that could lead to reciprocal or retaliatory measures.”The response highlights concern in European capitals that the act will hamper investment in green technologies throughout the EU and heightens the risk of a transatlantic trade war at a time of geopolitical uncertainty. A subsidy race has already begun, with Canada saying last week that it would introduce tax credits for green investment to avoid companies being lured to the US. Japan and South Korea have also complained publicly about the IRA.The EU wants changes to nine of the provisions in the legislation, which restrict subsidies and tax credits to products made in the US, or companies operating there. The incentives affect manufacturing and investing in products including solar panels, wind turbines and clean hydrogen.Consumer tax breaks, which offer a $7,500 subsidy for purchases of electric vehicles, are treated slightly differently, with Canadian and Mexican products also qualifying.The commission said the US must “give EU companies the same treatment as other US trading partners”. While the EU welcomed the Biden administration’s commitment to fighting climate change it said “the green transition is not something to be achieved at the expense of others”. US companies would gain an advantage that would enable them to outcompete others, turning the fight against climate change “into a zero-sum game”.It also warned that retaliation “threatens the multilateral trading system at a time when its value is more important than ever for both American and European businesses”.While some EU member states, such as France, are already calling for retaliation, EU trade commissioner Valdis Dombrovskis has so far preferred negotiations.A task force of senior US and commission officials met for the first time last week. The EU response said it “hopes to find constructive and amicable solutions”. “The task force is a clear, senior level commitment by the US to address the serious concerns raised by the EU in relation to the Act,” it added.The US Treasury is responsible for implementing the IRA, but it has not yet stated how much it is possible to change without asking Congress to rewrite sections. Analysts believe that Congress is unlikely to do so as the Act was a delicate compromise that only passed the Senate thanks to vice-president Kamala Harris’ casting vote.US trade representative Katherine Tai defended the subsidies in an interview with the FT last week, but said she was hopeful differences with the EU could be resolved. More

Did US consumer price growth cool in October?Investors and economists are expecting the Federal Reserve’s aggressive interest rate rises to eventually curtail inflation, but forecasts suggest it is not likely to be evident in data for October.The Bureau of Labor Statistics will release its US consumer price index report on Thursday, with economists surveyed by Bloomberg expecting a smaller acceleration in consumer prices for the month of October. Wall Street has forecast CPI to have increased 8 per cent year over year in October, down from 8.2 per cent in September. Core CPI, which strips out the volatile food and energy components, is expected to have risen by 6.6 per cent year over year, the same rate as in September.The CPI data come after the Fed raised interest rates by 0.75 percentage points on November 2, the central bank’s fourth consecutive jumbo increase.“Whether it is this month, next month or the one after that, I have increasing confidence that inflation will decelerate,” said Eric Winograd, an economist at AllianceBernstein, citing lower commodity prices, an easing in supply chain pressures and decelerating house prices.Inflation may be a key factor in deciding the results of Tuesday’s US midterm elections to determine control of Congress, according to the latest polling data that highlight how the soaring cost of living and recession fears are weighing on the minds of Americans. Kate DuguidWill Chinese loan growth stabilise?The Chinese government hopes increased loan issuance will help fund infrastructure spending, restart stalled building projects and revitalise the world’s second-biggest economy, which has weakened owing to repeated Covid-19 lockdowns and a property sector slowdown.Wang Tao, chief China economist at UBS, forecasts that renminbi loan issuance stabilised at around Rmb800bn ($111bn) in October, after far exceeding expectations the month before.The September surge — when new loans nearly doubled from the month before to Rmb2.47tn — was in part thanks to recent state support.That included an order from regulators for state banks to extend at least Rmb600bn in financing to developers before the end of the year and a reduction in benchmark lending rates. The People’s Bank of China also said it would lower interest rates on loans granted by a state fund to some first-time homebuyers at the end of the month. But analysts said that economic uncertainty and the zero-Covid policy, which officials have vowed to uphold, could continue to hamper demand for credit in October.“Broad questions about a delayed property market recovery and unfavourable employment conditions still overhang China’s banking sector,” analysts at rating agency Fitch said, noting that issuance this year was driven largely by rising corporate loans to companies in manufacturing and infrastructure, while retail and corporate loan issuance has decelerated sharply. William LangleyDid UK economic output dip in the third quarter?The UK economy is expected to have shrunk in September and in the third quarter, underscoring the Bank of England’s warnings that Britain is headed for a recession next year. Economists polled by Bloomberg forecast UK GDP to have dropped 0.2 per cent between August and September, partially reflecting the national mourning period and the additional bank holiday for the Queen’s funeral. It follows a contraction in the previous month when “there was a general loss of momentum in the economy”, according to Sandra Horsfield, economist at Investec.As a result, UK GDP is expected to have dropped 0.4 per cent in the third quarter compared with the previous three months, as activity suffered owing to high inflation and energy costs. This means a wider gap compared with the pre-pandemic levels of economic output than the 0.2 per cent shortfall registered in the second quarter.In contrast, the eurozone economy expanded 0.2 per cent in the three months to September to 2.1 per cent above its fourth quarter 2019 level, laying bare the large hit of the pandemic and higher inflation on the British economy.As it raised interest rates to 3 per cent this week — the highest level since 2008 — the Bank of England forecast that the UK economy would enter a recession lasting at least through 2023. It attributed the long-lasting downturn to high energy prices and materially tighter financial conditions weighing on spending.Benjamin Nabarro, economist at Citigroup, also expects a two-year recession. “The UK is increasingly facing an outlook characterised by tightening monetary policy, restrictive rates and a large terms of trade shock,” he said. Valentina Romei More

OTTAWA (Reuters) – Canada’s plan to spend an extra C$6.1 billion ($4.5 billion) in the next five months may undermine the central bank’s effort to curb inflation, despite Finance Minister Chrystia Freeland’s vow not to make the job of monetary policy harder, analysts said. Although the spending package unveiled by Freeland in a fiscal update on Thursday is relatively modest in scope and builds on existing federal stimulus measures and payouts to consumers promised by Canada’s 10 provinces, it has raised concerns about stimulating an already-hot economy. Scrutiny intensified on Friday after the government reported a whopping jobs gain in October, raising the prospect that the Bank of Canada would have to pull the trigger on a sixth straight outsized interest rate hike at its meeting next month. “I would have rather seen them totally toeing the line on spending, if not shrink it somewhat, so that maybe we would have less by way of cumulative rate hikes going forward,” said Derek Holt, vice president of capital markets economics at Scotiabank.Instead, “the onus is still squarely, fully, 100% on the Bank of Canada to tighten,” he said.Money markets are now leaning toward the BoC raising its policy rate by half a percentage point on Dec. 7, a move that would come on top of the 350 basis points worth of tightening it has already undertaken since March. The BoC’s policy rate is seen peaking at 4.5% in early 2023.If interest rates rise more than previously forecast and stay elevated for longer, Freeland’s growth outlook may also prove rosier than warranted, jeopardizing a tax revenue windfall that the Liberal government is banking on to fund spending and cut the deficit to 1.3%-1.8% of GDP this fiscal year, from the previous year’s 3.6%. Indeed, economists said the government’s baseline expectations for 0.7% growth next year were optimistic, and the reality was likely to be closer to the 0.9% contraction forecast in its downside scenario. “I think they’re going to struggle to see any improvement in the coming fiscal year,” said Doug Porter, chief economist at BMO Capital Markets, adding that the fiscal measures were working at a slight crosscurrent to monetary policy.Scotiabank estimates the combined stimulus measures by the provinces over the coming quarters will top C$16 billion, while the federal government has announced C$22.9 billion in new spending for this year and next since its April budget.DELICATE LINEWhile Canadian inflation has eased to 6.9% from a recent peak of 8.1%, it is still well above the BoC’s 2% target, and underlying pressures are proving sticky. “I am confident that we have struck the right approach,” Freeland told reporters on Thursday, as she tried to walk a delicate line between offering targeted help to those suffering from high inflation and the need for fiscal restraint.The fact that Prime Minister Justin Trudeau’s government depends on the left-leaning New Democrats to pass legislation like the fiscal update helps explain the new spending, said Jimmy Jean, chief economist at Desjardins.The government “didn’t come up with anything that would irritate global investors the same way the UK did,” Jean said, adding that it “should have kept more powder dry for when there is a recession. But at the same time, it would have been tougher politically speaking.” ($1 = 1.3499 Canadian dollars) More

Hungary’s budget deficit has ballooned this year after a spending spree ahead of April elections, and with soaring energy prices and additional gas purchases from Russia contributing to expenditures.The proposed amendment to the law regulating the operation of the NBH would allow the government to spread out payments to the bank into five equal sums over a period of five years, easing the immediate burden on the state budget. The NBH posted a loss of 200.9 billion forints ($497.44 million) in the first half of 2022 alone, as its interest rate costs soared and balance sheet had expanded. The goal of the proposed changes is to “ensure the central bank has adequate capital while lowering risks to the budget at the same time,” the Finance Ministry said in the legislation.If the National Bank of Hungary makes a profit then it will pay 50% of that to the government as dividend, it added. The central bank did not immediately reply to questions from Reuters on the proposed changes.The Ministry of Finance said last month that Prime Minister Viktor Orban’s government lifted the 2022 deficit target to 6.1% of economic output from 4.9%.In order to rein in the deficit, the government announced hefty windfall taxes on banks and certain large companies in May. It also scrapped energy price caps for higher usage households since August.($1 = 403.8700 forints) More

In his famous book The Big Short, Michael Lewis writes that “when, in 1981, [John Gutfreund] turned Salomon Brothers from a private partnership into Wall Street’s first public corporation . . . from that moment, the Wall Street firm became a black box”. Though Lewis was writing about banking, he was referring to a problem that existed not just at Salomon, or even just within the financial sector, but in nearly all American corporations, even public ones. In all too many areas, with the exception of basic financial information, corporations remain black boxes.Opacity makes it difficult for regulators, investors, workers and customers to figure out important facts, from the full financial risk positions of big companies (a 2018 IMF paper notes that off balance sheet funding had grown since 2007), to whether they live up to their espoused values, to if they treat individual employees fairly. As the economist Milton Friedman said back in 1970, the social responsibility of managers is to “make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom”. Fair enough. But what if companies don’t even release enough data to let people know whether they are living up to law or custom? It’s an issue spotlighted by the new rules on corporate pay transparency which came into effect in New York state last week. The rules, which force companies with four or more employees to include salary ranges when they advertise listings, follow on from similar laws already introduced in California, Colorado and Washington state. Already, they’ve exposed a huge bifurcation between lower level employee pay and those in the upper ranks, while demonstrating how broad (and nebulous) the range of salaries at the top of an organisation can be.“Employees will have questions about their own pay as a result of seeing pay ranges posted on jobs similar to their own,” says Tauseef Rahman, a partner in the consulting firm Mercer’s career practice. The issue will be particularly pressing at a time when, according to Mercer, over 80 per cent of employees think it’s important that employers adjust salaries to reflect the current economic environment (in which wage inflation hasn’t remotely kept pace with overall inflation, and even less so with skyrocketing housing inflation) — but only 21 per cent of US employers say they’ve adjusted pay to align with living wages.Pressure for transparency will rise, even if unemployment does too. Companies will be pushed for more information beyond fixed pay — what about non-cash compensation, stock options and differing benefit regimes? All of these issues are being targeted by a growing number of workers, particularly younger ones, who feel quite rightly that they haven’t got their fair share of the corporate pie (the private sector share is still at near record highs compared with labour). But pay transparency is just the tip of a much bigger iceberg of corporate opacity. There is an entire body of law, around things like trade secrets and patents, that is meant to keep information inside companies. Sharing intellectual property around vaccines became a huge, worldwide legal battle during the pandemic, as US and European companies didn’t want to give up their patent secrets, even in the face of a global crisis. They were quietly compelled to do so by governments, in order to speed up vaccine production, even as they fought in public to keep legal protections.The issue isn’t resolved, nor is it going away. While the US constitution itself allows companies to keep patents, and trade secrets are protected by state laws, there are going to be more and more global health crises that will necessitate such information sharing. Governments will have to find a way to ensure that smaller firms and innovators can protect intellectual property, while making sure that corporate monopolies aren’t locking it up at society’s expense. What’s true for patents may soon be true for supply chains as well. Companies are often reluctant to reveal what information they have about suppliers for competitive reasons. But as any number of recent supply chain disasters have shown, they often don’t know enough themselves, having outsourced so much production to other companies and countries. That’s about to change. As climate rules requiring full disclosure of carbon loads in the supply chain eventually take hold, reporting standards will rise. What’s more, in an age of decoupling, in which governments are scrambling to understand whether they can make crucial products at home, companies will be compelled to learn more — and share more — about where risk lies, with both the public and private sector.Part of what has allowed such opacity in the US is that companies are legally persons, and enjoy all the privacy allowed to individuals. But that’s changing too. In September, the Treasury finalised a rule requiring companies to give much more information about who their owners really are. It’s about time, say academics like Stanford’s Anat Admati, who researches corporate power and opacity. “A corporate ‘person’ shouldn’t have so much ability to operate in the dark. The forces of ‘free markets’ are undermining trust in democratic institutions to police them.”Indeed, when even Friedman’s standards aren’t being upheld, things have gone very dark [email protected] More