Economy

(Reuters) -Micron Technology, the first major chipmaker to sound an alarm about falling demand for PCs and smartphones earlier this year, on Thursday warned of even tougher times ahead and said it was cutting its investments.”We made significant reductions to capex and now expect fiscal 2023 capex to be around $8 billion, down more than 30% year over year,” Chief Executive Sanjay Mehrotra said on an earnings call.Still, Micron (NASDAQ:MU) forecast strong revenue growth in the second half of fiscal 2023 as demand starts to recover early next year.Shares of the Boise, Idaho-based company, which have slumped about 45% so far this year, fell 1.5% in extended trading.Red-hot inflation, rising interest rates, geopolitical tensions and COVID-19 lockdowns in China have led businesses and consumers to rein in expenses, hitting the PC and smartphone market.Micron said it would reduce wafer fabrication equipment investments by 50% in the new fiscal year. Chip equipment maker Applied Materials Inc (NASDAQ:AMAT)’s shares dropped 2% on the news in after-hours trading.”Net times are really bad now, but traditionally production cuts and capex reductions are a sign that memory markets are approaching trough fundamentals,” said Matt Bryson, analyst at Wedbush Securities.Citing a possible turnaround in a few quarters, Kinngai Chan, Summit Insights Group analyst upgraded Micron’s stock to a “buy” recommendation.Micron forecast first-quarter revenue of $4.25 billion, plus or minus $250 million, below Wall Street estimates of $5.62 billion, according Refinitiv data. Adjusted revenue for the quarter ended Sept. 1 was $6.64 billion versus analysts’ expectations of $6.68 billion.Profit outlooks were also grim at 4 cents per share, plus or minus 10 cents, falling below the consensus estimate of 64 cents per share. Fourth-quarter earnings of $1.45 per share beat estimates of $1.30.Micron called the current market challenges “unprecedented” but was confident its scale back would help it navigate the market.Phone brands including Apple Inc (NASDAQ:AAPL) have driven down their production volume targets, which “compounded” the challenges for Micron, said Richard Barnett, chief marketing officer of Supplyframe, a supply chain solutions provider.”What has been surprising is the extent of the sharp decline,” said Sumit Sadana, Micron’s chief business officer, in an interview.Micron has further adjusted down its sales outlook for PCs and smartphones by several percentage points in the last few months, Sadana said. PC sales in calendar 2022 will drop by a high teen percentage range from last year and smartphone sales will be down by a high single-digit percentage range, he said. More

Charities have warned that millions of Britons face a “public health crisis” this winter because of high energy bills, despite the government’s £150bn package to limit costs. Calling for extra state support, anti-poverty groups on Friday said there was already evidence of some families cutting back on the quantity and quality of food they were buying in order to pay gas and electricity bills, which will be almost double the level they were in 2021.Energy analysts said there were also early signs of a reduction in energy demand as households and businesses “self-ration” in response to higher prices.A typical yearly household energy bill will rise to £2,500 from October 1, from £1,971 at present, although the precise amount will depend on usage. Prime minister Liz Truss this month announced an unprecedented support package to ensure average domestic bills remain at around that level for the next two years. Households will this winter also receive an additional £400 deduction.But charities warned that about 6.7mn, or more than a fifth of British households, would still be in fuel poverty this winter, up from 4.5mn a year earlier, given the rise in prices. The energy price cap, which dictates bills for 24mn households, was roughly £1,277 based on typical usage last winter.Adam Scorer, chief executive of the charity National Energy Action, said the rise in energy bills was “unaffordable for millions”, with people “already cutting back on the quality of what they eat as well as the quantity”. “The impacts on health and wellbeing are devastating and will only get worse after Saturday’s price rises. It’s a public health emergency,” he added.A YouGov poll of more than 4,000 households published by the NEA on Friday showed 24 per cent of parents had cut the amount of food they were buying. One in ten said they were eating cold meals to reduce energy usage. Laura Sandys, chair and founder of the charity the Food Foundation, said conditions meant “it may no longer be a question of heating or eating for many” this winter.

“The cost of living crisis and energy bill increases will see children living in homes where there is no longer that choice — they will both go hungry and be cold,” she added.Both Scorer and Sandys urged the government to boost support for low-income households. NEA and energy companies such as ScottishPower have long called for a separate, subsidised “social” energy tariff for the very poorest. According to the energy consultancy EnAppSys, electricity demand in Britain over the past few months has fallen 9 per cent compared with the same period last year and 8 per cent compared with 2019.Truss was criticised on Thursday for telling BBC Radio Leeds that households’ “maximum” energy bill this winter would be £2,500. The government’s energy support scheme limits the price per unit of electricity and gas that households will be charged from October 1 at about 34p per kilowatt hour (kWh) for electricity and 10.3 per kWh for gas, inclusive of value added tax. But a household’s overall bill will depend on use.The Department for Business, Energy and Industrial Strategy did not immediately respond to a request for comment. More

© ALEX PLAVEVSKI/EPA-EFE/Shutterstock

Two closely watched gauges of Chinese manufacturing sector activity diverged on Friday, complicating the outlook for the world’s second-largest economy in September.The private Caixin China General Manufacturing purchasing managers’ index came in at 48.1 for the month, down from 49.5 the previous month and well below the 50-point threshold that separates expansion from contraction. The figure was the lowest since an equivalent reading in March. The official state-compiled manufacturing PMI, which places greater emphasis on larger, state-owned enterprises and tends to be more optimistic, reached 50.1, however, up from 49.4 in August. Analysts had forecast readings of 49.5 and 49.6, respectively.China’s economy has faltered in recent months as it has battled repeated flare-ups of Covid-19 with strict lockdowns that throttle economic activity. Chengdu, a megacity of 21mn in the country’s south-west, was under lockdown for much of September.The economy has also been battered by a property sector slowdown, which has triggered a 50 per cent increase in overdue property sector loans for the country’s four biggest banks. Local government financing vehicles have responded with a spending spree seeking to bail out provinces struggling for liquidity, the Financial Times reported this month.The Caixin survey noted that activity was damped by a decline in new business and falling prices, which dropped at their fastest rate since December 2015 as Covid curbs weakened demand.“The negative impact of Covid controls on the economy is still pronounced,” said Wang Zhe, senior economist at Caixin Insight Group, noting that both supply and demand had declined, the job market remained weak and business confidence had ebbed. “Policy implementation should focus on promoting employment, granting subsidies, boosting demand, and fostering market confidence.” More

WASHINGTON (Reuters) – Democratic and Republican U.S. lawmakers said on Thursday they wanted to continue the flow of money and weapons for Ukraine’s battle against Russia’s invasion, denouncing Moscow’s plan to annex four Ukrainian regions.”We have not won this yet. We need to continue to support the Ukrainians,” Democrat Bob Menendez, chairman of the Senate Foreign Relations Committee, told reporters after a classified briefing on the conflict.The Senate passed a bill funding the federal government through Dec. 16, and sending $12.3 billion in military and economic assistance to Ukraine. The bill, which the House of Representatives is set to pass on Friday, also authorizes President Joe Biden to direct the drawdown of up to $3.7 billion for the transfer to Ukraine of weapons from U.S. stocks.Republican Senator Lindsey Graham said he wanted “to send a very clear signal” that more economic and military assistance would be sent to Ukraine when Congress returns to Washington after the Nov. 8 mid-term elections.”This is a defining moment for the world when it comes to territorial integrity,” Graham told a news conference where he and Democrat Richard Blumenthal introduced a bill to cut off U.S. assistance to any country that recognizes Russia’s annexation of Ukrainian territory.”We’re dealing with Hurricane Putin,” Graham said, after expressing best wishes for U.S. citizens affected by powerful Hurricane Ian.Graham and Blumenthal also called on Biden to designate Russia a state sponsor of terrorism, which the administration says is not the most effective way to hold Russia accountable.Blumenthal and Graham’s bill was one of several seeking to boost Ukraine that was recently introduced in Congress. Some proposals could become law as part of the National Defense Authorization Act (NDAA), a massive bill setting policy for the Pentagon expected to pass by year-end.On Thursday, Democratic Senator Chris Van Hollen and Republican Pat Toomey filed an amendment to the NDAA proposing the Biden administration use secondary sanctions to strengthen a price cap G7 countries plan to impose on Russian oil. More

Goldman Sachs chief executive David Solomon, Morgan Stanley’s James Gorman and Citigroup’s Jane Fraser will attend a financial forum in Hong Kong designed to restore the city’s reputation as Asia’s top financial hub after years of restrictive coronavirus pandemic policies. The confirmation of the global bank executives’ attendance from the Hong Kong Monetary Authority on Thursday comes less than a week after Hong Kong scrapped mandatory hotel quarantine for international visitors. Many executives attending the forum will be visiting Hong Kong for the first time since Covid-19 struck in 2020. The city’s government hopes that the conference, which coincides with the return of the rugby Sevens tournament next month, will lay the foundation for Hong Kong’s economic revival in the wake of the pandemic and a crackdown on pro-democracy protests in 2019. The Sevens tournament was previously one of the biggest corporate networking events in Asia, but it has been postponed since 2019 because of pandemic restrictions.Thanks for reading FirstFT Asia. Now for the rest of the day’s news — EmilyFive more stories in the news1. Russia to annex four Ukrainian regions Vladimir Putin will annex four regions in south-eastern Ukraine — none of which Russia fully controls — today, in a substantial escalation of the conflict with Kyiv. The Russian president’s spokesman said yesterday that Putin would sign “treaties” with Russia-appointed occupation officials and make a “substantial speech” during the ceremony in the Kremlin, state newswire Ria Novosti reported.Related read: US authorities have charged Russian metals tycoon Oleg Deripaska and his associates with violating sanctions imposed by Washington.2. SoftBank sheds 30% of Vision Fund staff The Japanese conglomerate has laid off 30 per cent of staff at its flagship Vision Funds as it seeks to cut costs after a severe tech rout caused it to suffer record quarterly losses. Of the 500-strong Vision Fund unit, 150 people are set to lose their jobs, said people briefed on the decision.3. Labour party opens 33-point poll lead British prime minister Liz Truss is under mounting pressure to change course on her tax and borrowing plans after a new opinion poll gave Labour a historic lead over the Conservatives. A YouGov poll showed Labour had a 33-point lead over the Tories, the biggest gap since the 1990s.Markets news: The pound clawed back some of its recent losses following the Bank of England’s dramatic intervention, rising above $1.10 against the dollar for the first time since UK chancellor Kwasi Kwarteng’s announced his “mini” Budget.4. Deloitte China allowed clients to do own audit work, finds SEC The US securities regulator has charged Deloitte’s China arm with falling “woefully short” by having clients complete their own audit tasks, as negotiations between Washington and Beijing over setting cross-border accounting standards come to a head. Deloitte China has agreed to pay a $20mn penalty.5. Paraguay calls for Taiwan to invest $1bn to remain allies Paraguay president Mario Abdo Benítez has called on Taiwan to invest $1bn in his country to help him resist “enormous” pressure to switch diplomatic recognition to rival China. “We are working with the president of Taiwan . . . so that the Paraguayan people feel the real benefits of the strategic alliance,” Abdo told the Financial Times during a visit to the US.Related read: The US will provide $210mn to Pacific Island nations to help tackle issues ranging from climate change and maritime security to economic development in Washington’s latest push to counter Chinese activity in the region.How well did you keep up with the news this week? Take our quiz.The days aheadChina manufacturing data Caixin’s general manufacturing and services PMI data is set to be released today. The index is expected to hold steady with figures released earlier this month. (FX Street)Japan economic data Look out for the country’s unemployment rate, industrial production and retail sales data coming today. Economists expect slight improvements in unemployment and factory output along with 2.8 per cent growth in retail sales from a year prior. (Reuters) China’s National Day Tomorrow the country will commemorate the founding of the People’s Republic of China. During this year’s Golden Week national holiday — normally a popular time to travel — many will be staying put due to Covid-19 restrictions. (SCMP) Brazil presidential election Brazilians go to the polls on Sunday for the first round of the presidential election — its most important vote in decades. If no one wins more than 50 per cent of the valid votes, a second-round run-off will be held on October 30 between the top two candidates.

Video: Brazil: a nation divided | FT Film

What else we’re readingXi Jinping’s coronation looms China’s government is increasingly taking a back seat to Xi Jinping, the man who has dominated it for the past decade. The president is set to secure a third term in power next month when the National People’s Congress meets. Is Europe’s energy plan enough to get through winter? With temperatures dropping and Russian gas imports at a fraction of former levels, energy ministers are discussing a package of windfall taxes aimed at curbing energy prices. But a growing number of member states warn that proposals do not go far enough and risk sparking political unrest.

Leicester’s communal violence reverberates across continents Tensions between sections of the Muslim and Hindu communities had been building since May, but the scale of disturbances sent shockwaves all the way to India. Violence in Leicester has served a warning of how extremist agendas are threatening a relatively harmonious tradition of multicultural coexistence.China’s Big Fund corruption probe casts shadow over chip sector An investigation of the semiconductor sector by the deeply feared and highly secretive Central Commission for Discipline Inspection has led some analysts to believe that the state has laid the groundwork for graft and wasteful spending to flourish — delivering a setback to China’s aim of achieving self-sufficiency in chips.Opinion: A fresh wave of global government investment in the semiconductor industry, triggered by US-China tensions, might well stimulate broader innovation, writes John Thornhill. Why are musicians cancelling tours? This year was supposed to mark the triumphant return of concerts. But following the cancellation of live appearances by some of the world’s biggest performers — including Shawn Mendes, Justin Bieber and Adele — the return to live shows is looking more precarious, writes Anna Nicolaou.

Santigold performs at a concert in 2019. The singer cited rising inflation as one reason for cancelling an autumn tour © RMV/Shutterstock

DesignLaunched in 2014, Singapore Design Week returned in 2022 after a two-year break. From S$25,000 ($17,000) sculpted glass exercise bikes and crystal chandeliers to objects made from cow dung, cigarette butts, old newspapers and sweepings from dog groomers, here are the highlights from a week showcasing the best design. More

Banks and building societies are withdrawing hundreds of mortgage deals in anticipation of further interest rate rises — but where does this leave borrowers and those wanting to get on to the housing ladder? The Bank of England raised interest rates aggressively last week to try to address the market turmoil in the wake of chancellor Kwasi Kwarteng’s tax-slashing “mini” Budget. The fallout caused chaos in the mortgage market, with lenders, including HSBC and Santander, suspending new deals as they attempted to reprice them.What does this mortgage tumult mean for individuals? Will borrowers be able to remortgage? How high could rates go? Will there be a property crash?FT consumer editor Claer Barrett, FT House and Home editor Nathan Brooker and mortgage expert Andrew Montlake, managing director of broker Coreco, will answer your questions about mortgages, moving home and the wider outlook for the housing market throughout the day on Friday September 30.Post your queries in the comments box below and our experts will drop in regularly on Friday to answer them. Banks in the UK withdrew a record number of mortgages this week in the wake of the chancellor’s mini-Budget.⁠What does this mean for the UK housing market? Join @ClaerB and @ncbrooker for a Twitter Space on Friday at 11.30am BST.Set a reminder 👇 https://t.co/3uQxFUp5Ku— Financial Times (@FinancialTimes) September 29, 2022 More

Europe’s top financial regulators have issued an unprecedented warning about “severe risks to financial stability” after concluding Russia’s invasion of Ukraine could create a toxic combination of an economic downturn, falling asset prices and financial market stress.The European Systemic Risk Board, which is responsible for monitoring and preventing dangers to the region’s financial system, issued the alert after meeting last week and deciding the energy crisis triggered by the war in Ukraine had put the financial system in a precarious position. This is the first “general warning” about risk the ESRB has issued since its creation in 2010 on the eve of the eurozone sovereign debt crisis. The authority, which is chaired by European Central Bank president Christine Lagarde, called on regulators in the 30 countries it oversees to prepare for a potential crisis by requiring the financial institutions they supervise to build up bigger buffers of capital and provisions that can absorb losses.The ESRB’s warning was agreed on September 22, several days before the new UK government’s unorthodox fiscal plans caused turmoil in financial markets and forced the Bank of England to intervene by buying bonds. People briefed on ESRB discussions said the UK’s problems were not part of the discussions, however they acknowledged that they were likely to now be an additional worry for regulators in Europe.Concerns about the health of Europe’s financial system have increased since the Ukraine conflict pushed energy prices up, driving inflation to multi-decade highs, prompting central banks to raise interest rates aggressively and triggering a sell-off in bond and equity markets. “Rising geopolitical tensions have led to an increase in energy prices, causing financial distress to businesses and households that are still recovering from the adverse economic consequences of the Covid-19 pandemic,” the ESRB said. “In addition, higher-than-expected inflation is tightening financial conditions.”It identified three key sources of systemic risk: “The deterioration of the macroeconomic outlook, risks to financial stability stemming from a (possible) sharp asset price correction and the implications of such developments for asset quality.”The housing market — a recurring concern for the ESRB — was still a potential weakness, it said. “Rising mortgage rates and the worsening in debt-servicing capacity due to a decline in real household income can be expected to exert downward pressure on house prices and lead to a materialisation of cyclical risks,” it warned.It also listed rising default risk in the commercial property sector, cyber attacks on financial institutions and the increased cost of high government debts as interest rates rise among other areas of concern.Europe’s financial system has come through the pandemic relatively unscathed, but that was in large part due to significant support for households and businesses from governments and central banks. The ESRB warned the probability of “tail-risk scenarios” had risen since the start of the year, pointing out that house prices had been increasing at rapid rates for years and overall debt levels in Europe had surged by almost a fifth since early 2020 to €27.5tn.  More

This spring, just after Russia’s invasion of Ukraine, Washington’s Institute of International Finance made a bold and idiosyncratic prediction: the euro was about to weaken dramatically from its $1.11 level because the region was heading for a current account deficit.Not many investors agreed. Data from the Commodity Futures Trading Commission suggests that there was a net “long” speculative position in the markets then — in other words, investors were betting the currency would strengthen — because the European Central Bank was raising interest rates.But the euro is now worth $0.98, and Europe’s traditional trade surplus has indeed turned into a current account deficit, due to the soaring cost of energy imports and falling industrial exports.The IIF’s projections about sterling have been equally prescient. In recent months, Robin Brooks, IIF chief economist, has also warned that the pound looked overvalued at its then $1.35 level, since markets were ignoring that the UK current account deficit had quietly risen above 8 per cent, from the 3 per cent levels seen in recent years. This week the British pound duly crashed to near-parity with the dollar, after the UK government unveiled a surprise tax-cutting plan. “These moves [in the euro and sterling] aren’t irrational or overshooting,” argues Brooks. “The fair values of both have shifted to reflect higher energy costs and far weaker trade balances.”Indeed, Brooks thinks that at present levels “the euro is still 10 per cent overvalued [and] the pound is 20 per cent overvalued”. Yikes.Moreover, his model suggests that the Turkish lira and New Zealand dollar are also overvalued (by 15 and 22 per cent respectively), while the Chinese renminbi, Brazilian real and Norwegian krone are undervalued by 11, 13 and a whopping 47 per cent.Investors should take note. Some foreign exchange analysts might mutter that this type of analysis looks very retro. Economics 101 has always argued that current account balances affect currency values because they determine the degree to which a country has to attract external financing.However, the trading models used by asset managers in the recent era of ultra-loose monetary policy have typically focused on other issues shaping capital flows. Relative interest rates, say, have tended to dominate debate, particularly since investors have been engaging in carry trades (borrowing cheaply in one currency to invest in higher-yielding assets in another). And “the carry trade has had a sudden resurgence in performance”, as the GMO group recently noted. (The fair value models it uses, which give less weight to current account balances, imply that sterling and the euro are under — not over — valued.) Then there are the issues of political risk and safety. The IIF’s analysis suggests that the dollar was overvalued, given its current account deficit. But it has actually strengthened this year since, as my colleague Martin Wolf has pointed out, the dominance of American capital markets — and currency — has made it a safe haven. But while the behaviour of the dollar shows that it is a mistake to treat currency analysis as anything other than an art, not a science, the sterling saga shows something else: it is even more dangerous to ignore economic gravity. After all, arguably the best way to frame this week’s sterling crash is to think of the Wile E Coyote cartoon character. Just as that animated figure runs off a cliff and keeps pedalling at the same height — until he looks down and panics — investors have spent most of the year acting as if the pound were destined to stay elevated, because they trusted British policymaking and rising UK rates. Now economic gravity has taken hold.If you believe in the mean regression principle which underpins many trading models — that asset prices eventually resort to a recent mean after a wild swing — then it is possible to hope that sterling’s slump will be temporary. But if you think that an 8 per cent current account deficit puts the UK in a new era, past models may not apply. Either way, investors should ponder if there are other places where a reckoning might occur. The IIF chart highlights strains in the currency world. Debt data offers additional clues. There has been remarkably little public debate in recent years about the astonishing fact that global debt has doubled since 2006 — and tripled since 2000. That is because interest rates were ultra-low. But now rates are rising and the fiscal burden in many countries is soaring amid energy subsidies and pandemic spending (and, in the UK, unexpected tax cuts). There are also signs that investors are getting more nervous: quite apart from this week’s visible Treasury and gilt market tensions, JPMorgan reports that global investors now plan to allocate a mere 17 per cent of their portfolios to bonds. This is a remarkably low level, given they have been overweight for the past 14 years.This does not mean that investors should panic. But they should ask themselves why they ignored the data in charts such as the IIF reports for so long. Sometimes economic gravity matters. Cheap money will not always keep Wile E Coyote [email protected] More