Economy

(Reuters) -The Biden administration will extend through year end waivers that make it easier for low-income families to access baby formula through a government program, the U.S. Department of Agriculture (USDA) plans to announce on Tuesday.Earlier this year, the USDA started covering the difference in costs for states to offer a broader range of infant formula products for low-income families, after the closure of Abbott Laboratories (NYSE:ABT)’ Michigan plant exacerbated a national shortage of the vital product.The plant was initially closed due to complaints of bacterial contamination.The current waivers are set to expire on Sept. 30 and the extension will help the government avoid a steep drop in infant formula access as shortages linger in pockets across the country.Reuters was first to report the duration of the extension but Politico reported earlier on Tuesday that an extension was likely.Infants enrolled in the government’s WIC (women, infants and children) program consumed about 56% of all infant formula in the United States in 2018.WIC shoppers typically can only buy formula produced by the company that has a contract with their state, territory, or tribe. Those companies provide rebates to cut the cost of formula to WIC shoppers.Abbott Laboratories, the biggest participant in the WIC program, said on Tuesday it is extending rebates on competitive products to help low-income families through Oct. 31. More

NEW YORK (Reuters) – The S&P 500 will end the year a little above its current level after a recent rally that has lifted the index from its bear market lows, according to a new Reuters poll of strategists.Stronger-than-expected corporate earnings and forecasts, along with optimism the U.S. Federal Reserve may avoid crippling the economy as it hikes interest rates in its fight against decades-high inflation, have lifted the S&P 500 about 13% from lows in mid-June.The benchmark will end this year at 4,280, according to the median forecast of nearly 50 strategists polled by Reuters during the last two weeks. That is 3.4% higher than Monday’s close of 4,137.99. That median forecast for 2022 was down from a forecast of 4,400 in a Reuters poll conducted in late May.Strategists in the latest Reuters poll expected the S&P 500 to continue to rise in 2023, and hit 4,408 by mid-year, according to the poll’s median forecast. Professional investors and analysts have historically had poor track records predicting stock market returns, but their forecasts provide a valuable glimpse of sentiment on Wall Street. The S&P 500 remains down about 13% this year so far after tumbling into its second bear market since the 2020 global sell-off caused by the coronavirus pandemic.Slightly over half the strategists in the poll expected more downside risks to their forecast than upside, while most strategists polled expected market volatility to rise rather than decline in the coming three months.”Going into September, that’s a murky month for equities,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “I would suggest we could then see a pullback somewhat, but nothing that would suggest we would make new lows, because I believe the market has made a low.” Cardillo sees the S&P 500 ending the year at 4,350.”Toward the end of the year, we could begin to rally. The Fed is not going to get overly aggressive. I see signs of inflation coming down, and I believe the labor market will soon begin to weaken, and that should alleviate the Fed from getting overly aggressive.”The Fed has lifted its benchmark overnight interest rate by 2.25 percentage points this year as it tries to curb decades-high inflation, and investors continue to weigh how aggressive the U.S. central bank may need to be going forward.Investors are hoping the Fed may shed light on how big future rate hikes might be and how strong the economy is when central banking heavyweights, including Fed Chair Jerome Powell, meet this week for their annual symposium in Jackson Hole, Wyoming.”We say there’s a 50/50 chance there’s going to be recession next year. Will the Fed stay active if we go into a recession? That’s what we don’t know,” said John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio. “We have to hear more from Powell.”Recent corporate earnings have supported stocks. With results in from most of S&P 500 companies, second-quarter earnings are expected to have climbed 8.8% from a year ago, above the 5.6% estimated on July 1, according to IBES data from Refinitiv IBES.Analysts’ estimates for full-year profit growth have come down slightly since the start of July, but they still forecast growth of 8% for 2022, the data showed.Investors have worried whether profits can grow fast enough to support stock valuations, especially with the recent rally. The S&P 500’s forward 12-month price-to-earnings ratio is now at about 18 compared with 22 at the end of December and its long-term average of about 16, according to Refinitiv data.Based on the poll, the Dow Jones industrial average will finish the year at 34,200, up about 3.4% from Monday’s close. More

Britain in May removed all tariffs on Ukrainian goods, and is now looking to smooth trade in the digital sphere.”The UK stands shoulder to shoulder with Ukraine and will use trade as a force for good to help the country rebuild its modern economy after this barbaric war,” trade minister Anne-Marie Trevelyan said.”Our partnership with Ukraine will help them seize the brighter days ahead, and we will continue to do everything in our power to protect Ukrainian jobs, livelihoods and families.”  Britain and Ukraine will look to improve efficiency in digital trade, working on areas such as electronic transactions, e-signatures and other technology. British exports of digitally delivered services accounted for nearly three quarters of UK services exports to Ukraine in 2020, the trade ministry said.  More

Earlier this month Colombia’s leftist government proposed a tax reform bill to lawmakers that would raise some 25 trillion pesos ($5.8 billion) in 2023 in an effort to increase revenue to fund anti-poverty programs.The reform targets gradually increasing tax collection via anti-evasion and anti-avoidance measures until hitting an additional 50 trillion pesos per year ($11.4 billion) by the end of Petro’s term in 2026. It has caused concern among businesses and investors.”We want the tax reform to be approved, improving what can be improved, enriching it, even in matters that we have not seen,” Petro said at a meeting with the national council of business associations, adding that the reform’s objectives include financing the state, growing equality and shrinking social inequality. The reform will target ending preferential tax treatment that benefits the wealthy to reduce poverty and inequality, including tackling hunger across the country.Its main proposals include higher taxes for those earning more than 10 million pesos per month ($2,273), a permanent wealth tax and duties on earnings from the sale of shares in companies listed on the stock exchange. The reform would also levy a 10% tax on exports of coal, oil and gold on income earned when each commodity exceeds a certain price threshold. The threshold for oil would be $48 per barrel, while coal exports would see the duty levied when prices exceed $87 per tonne. The threshold for gold shipments would be $400 per troy ounce. Business associations have alternative solutions, which include divesting unproductive state assets and assets seized from drug trafficking in the last two years worth 22 trillion pesos ($5 billion), said Jaime Alberto Cabal, president of the National Traders’ Federation. More

Good morning. A former Twitter security chief has claimed the social network misled US regulators over its cyber security defences and fake accounts, allegations that threaten to hamper the company’s legal effort to stop Elon Musk reneging on a $44bn buyout deal. Peiter Zatko, known in cyber security circles as “Mudge”, was fired by Twitter at the beginning of this year. He was brought in by former chief executive Jack Dorsey in the wake of an embarrassing hack on the company in July 2020. According to Whistleblower Aid, a non-profit legal group representing Zatko, Twitter’s former security lead last month filed a complaint to the US Securities and Exchange Commission, Department of Justice and Federal Trade Commission as well as members of Congress. Zatko alleged that Twitter violated an agreement with the FTC regarding cyber security precautions and accused the company of deception around the detection and deletion of fake or spam accounts — including those that may have been used for foreign interference or misinformation. The dispute over the prevalence of fake accounts on the network is at the heart of Musk’s attempt to cancel his deal to buy the company.Earlier this week, Musk subpoenaed Dorsey for his communications with Twitter’s executives regarding the prevalence of fake or bot accounts on the platform.Go deeper: Legal academics are having their day in the sun as they are called on to explain the intricacies of the Twitter/Musk circus.Which side do you think will win the legal battle? Tell us in our poll. Thank you for reading FirstFT Asia — Emily

Five more stories in the news1. Intel partners with Brookfield to fund chip factory expansion Intel has partnered with Brookfield Infrastructure Partners to fund the development of a $30bn semiconductor fabrication plant in Arizona, following the approval of landmark semiconductor legislation in the US. The expansion is part of Intel’s effort to take back market share from groups such as Taiwan’s TSMC and South Korea’s Samsung.2. Tiger Management founder dies Julian Robertson, the founder of Tiger Management and one of the most influential hedge fund managers of all time, has died at the age of 90. Robertson achieved heroic status both for his record at New York-based Tiger Management during the early days of the hedge fund industry and for the dynasty of hedge fund traders known as the “Tiger cubs” that he helped launch.

3. Malaysia’s ex-PM fails in final bid to avoid jail over 1MDB scandal Malaysia’s highest court yesterday upheld Najib Razak’s conviction on seven counts of abuse of power, money laundering and criminal breach of trust. Najib, who had been out on bail and remained a member of parliament for Malaysia’s governing United Malays National Organisation, was taken into custody immediately after the ruling.4. Ping An hit by enduring impact of pandemic Citywide Covid-19 lockdowns and nervous consumers continue to disrupt sales at Ping An, China’s largest insurer, hamstringing its agents and reducing demand for long-term protection products.5. Almost half of Europe remains under drought conditions An EU agency has said that nearly half of the EU is experiencing drought conditions, with the weather set to remain hotter and drier until November. This will compound fears about crop shortages and energy supply in a continent already hit by a significant reduction in gas flows from Russia. Related read: Thames Water has launched a probe into the impact of data centres on water supplies in and around London as a hosepipe ban comes into effect this week affecting its 15mn customers in the drought-hit area.The day aheadAsian Development Bank ‘Key Indicators’ report The development bank is set to publish its annual report covering the economic, financial, social and environmental health of its members. Six months of war Today marks six months since the invasion of Ukraine, a sombre occasion occurring on the same date as the country’s independence day — and only two days after Russia’s national flag day celebrations.What else we’re reading and listening toMorrison throws Australia into a ‘mini constitutional crisis’ Shockwaves are travelling through the Australian political establishment after it was revealed that former prime minister Scott Morrison covertly appointed himself to jointly run five ministries without telling most of the officials involved. The flouting of convention has drawn comparisons to authoritarian governments around the world.Revlon’s stock rally complicates its bankruptcy Revlon’s stock price had fallen to about $1 a share when the bankruptcy reorganisation kicked off two months ago but has since soared to more than $8, implying an overall market capitalisation of roughly $500mn. The wacky surge in its price appears to reflect the meme-stock phenomenon that has swept up the likes of AMC Entertainment, GameStop and most recently Bed Bath & Beyond.What explains the surge in methane? Levels of the potent greenhouse gas — which has a warming impact 80 times greater than carbon dioxide — are growing at a record rate. Scientists are unsure of the cause and how to curb it. The implications for climate change are immense, putting “methane hunters” in a race against time.

Hyundai is catching up with Tesla in the global EV race When Elon Musk said Hyundai was “doing pretty well” in June, the South Korean carmaker appeared unlikely to pose a serious competitive threat to Tesla any time soon. But the latest sales figures and parallels with Apple and Samsung in the 2010s suggest the pace of change is quickening, writes June Yoon.More on EVs: A tax credit for electric vehicles contained in Joe Biden’s landmark climate legislation has the potential to make EVs less affordable — at least for now.Betting on crypto to bust Big Tech power Silicon Valley venture capital firm Andreessen Horowitz is betting on cryptocurrencies to break up the excessive concentration of power held by a few Big Tech companies it played a prominent role in creating, the founder of Andreessen’s crypto arm told the FT’s Tech Tonic podcast. Listen to the latest episode here.TravelKenton Cool’s 16th ascent of Everest has confirmed the British climber as one of the world’s most successful high-altitude guides. But now, more than at any other time in a 20-year career, he’s questioning the sustainability of his passion and profession.

Kenton Cool in his tent on the south-west face of Alaska’s Mount McKinley © Alamy More

Last week the US took another step on its journey towards autocracy, as Liz Cheney lost the Republican primary for her Wyoming district. Her father is former vice-president Dick Cheney, who masterminded the Iraq war under George W Bush. She is also unimpeachably conservative. Yet she has become anathema to Republicans. Her crime? She believes that accepting the outcome of fair elections is a higher duty than promoting the lies of their “great leader”. (See charts.)The Republican party has adopted the Führerprinzip (“leadership principle”) of the Germans in the 1930s. This is the notion that loyalty to a leader who defines what is true and right is the overriding obligation. The Republicans’ embrace of Trump’s Big Lie that he won the last presidential election is a perfect instance of this principle. Here, moreover, it is directly set against a core value of liberal democracy, that of fair elections. Ten years ago, most of us would have thought such a development inconceivable in the US. But with the ascent of Donald Trump it became likely. Now, the reaction not so much of Trump to his defeat as of his party to his lies provides another decisive moment.As Harvard’s Steven Levitsky and Daniel Ziblatt argue in their splendid book, How Democracies Die, it is not hard to subvert a democracy. It has happened many times, in both the past and more recently. First, subvert the electoral system. Second, capture the referees (the judiciary, tax authorities, intelligence agencies and law enforcement). Third, sideline or eliminate political opponents and, above all, the media. Supporting all such assaults will be a fierce insistence on the illegitimacy of the opposition and the “fakeness” of information that does not align with the lies the leader finds most useful today.

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In his first term, Trump made much progress with establishing his lies as the truth for his supporters. But neither he nor his subordinates had yet worked out how to re-engineer the electoral system or the government, partly because he did not yet have the “right” — that is fanatical, competent and devoted — assistants. He was surrounded by people now judged “disloyal”, namely those who had at least some principles.This has changed. He has now made the party largely his own. Cheney’s defenestration is proof of that. As important is the widely shared conviction among Republicans that he is above accountability for his behaviour to the law or, for that matter, Congress. He and his party have, as Robert Kagan has argued, also exploited the lies about the “steal” to justify the subversion of US elections, on which much progress is being made.The crucial next stage for Trumpism is the replacement of the leaders and staff of core institutions of the state by people loyal to him personally. For that to happen, he must first become president. This is why progress in subverting elections is important, as is keeping him out of prison. But in two recent articles, Jonathan Swan of Axios has described something else that would be vital: a plan to ensure that the government will be staffed by true loyalists from top to bottom. A crucial aspect of this, he suggests, is to replace the permanent staff of agencies of the government with carefully vetted loyalists. If the Republicans managed to control Congress, this may become not that hard to imagine.Suppose then that Trump loyalists headed and staffed the FBI, CIA and Internal Revenue Service. Suppose loyalists were also placed in all senior military positions under a devoted secretary of defence. Suppose loyalists were put on the board of the Federal Reserve and all significant regulatory agencies. Imagine what this would mean for the rule of law and civil rights. Imagine, too, the pressure such agencies could put on independent businesses, notably including those of the media.The logic of the market under autocracy is one of crony capitalism. Would the US be so very different? Maybe the federal system and judiciary would protect personal independence. Yet if people whose only principle is loyalty to the leader were to staff the federal government, his will would be hard to resist.Despotism means unaccountable rule. It does not mean competent or intrusive rule. It is possible that the despotism would be incompetent and lazy. There are countless examples of this. But it would be despotism, all the same.

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What would a second Trump administration of such a kind mean for the world? What would it mean above all for its allies? What would rule by an “America-first” nationalist with the sort of administration described above mean for the residual credibility of the liberal international economic system? What would it mean for global co-operation? “Nothing good” is the answer to all these questions. The end of “American exceptionalism” is likely to mean the formation of distinct spheres of interest as the basis of global order. Some might like that. But it would also be a transformation — a catastrophic one, in my view — towards a world of despotism.In 27BC, the Roman republic transformed into the military dictatorship we call the Roman empire. It is not impossible that a similar transformation is under way in the US. That may still seem inconceivable to most people. I hope that is so. Trump is old, after all. He may have no suitable replacement. Yet every day he is exploiting and so displaying the demoralisation of the American republic. American conservatism has become a radical nationalist movement loyal to the truths invented by one man and dedicated to the overthrow of the “Deep State”, by which is meant their own government. Dick Cheney says that Donald Trump is the “greatest ever threat to our Republic”. On this we should believe Cheney: he [email protected] Martin Wolf with myFT and on Twitter More

Higher prices in the UK will not only squeeze the pocketbook of the average Briton. It will also hit the government hard. Talk of double-digit inflation this winter — Citigroup now thinks the rate could surpass 18 per cent — comes as energy prices continue to soar. But the country’s over-reliance on inflation-linked debt will mean punitively higher financing costs too. Britain pioneered the issuance of index-linked bonds, or “linkers”, in the 1980s with the rationale that the government’s commitment to reducing inflation directly lowers borrowing costs. This would remove any temptation to inflate away debt. That premise has proved flimsy in 2022. UK government debt now equals its annual economic output, one of the highest proportions of any developed economy. Soaring inflation, through inflation adjusting, has exacerbated the pain of excessive debt. Linkers make up almost a quarter of total UK central government debt of £2tn. Compare that with just 8 per cent in the US and less than 5 per cent in Germany. UK government interest payments in June more than doubled to £19.4bn this year. This increase was entirely due to the rise in semi-annual linker payments connected to a surging retail price index (which includes mortgage rates). This measured inflation rising at 12.3 per cent in July. In March the UK’s Office for Budget Responsibility had forecast interest costs to hit £83bn this fiscal year, about double what it expected at the end of last year. That burden will continue to pile up. Capital Economics expects an extra £30bn to be paid on top of that. An average RPI rate of 15 per cent next year would boost the cost to almost £130bn, Lex calculates. And that does not include the impact of any additional interest rate rises by the Bank of England. Even without these, borrowing costs alone would equal about 5 per cent of GDP. That could push spending on debt servicing above that of Europe’s most indebted country Italy if the latter’s interest costs rose by 3 percentage points, thinks S&P. Those kinds of numbers should send a message to UK policymakers to clamp down on inflation, and soon. More

Nigel Hollyer, the broker to the Admiralty marshal of the supreme court of Gibraltar who led the auction, told the Guardian newspaper last week that there had been an “unexpected late surge by prospective buyers” around the world, with more than 30 flying to Gibraltar to inspect the yacht in person.Given the yacht was being sold through the courts, he said, prospective buyers seemed to believe they could pick up a “bargain.” The boat, which can sleep 12 people in six cabins, has a swimming pool, a jacuzzi, a spa, 3D cinema, jet skis and scuba diving equipment.According to court papers seen by Reuters, JP Morgan lent 20.5 million euros to British Virgin Islands-listed Pyrene Investments Ltd which was owned by Furdberg Holding Ltd. Furdberg’s owner was Pumpyansky, who acted as guarantor for the loan. The papers said Pyrene Investments defaulted on the terms of the loan after Pumpyansky on March 4 transferred all his shares in Furdberg to a third party, and was then covered by sanctions. The 58-year-old, who has an estimated fortune of $2 billion according to Forbes magazine, was sanctioned by Britain and the European Union shortly after the invasion of Ukraine.”The occurrence of the guarantor’s sanctions listing constitutes an event of default under…the loan agreement since it renders the guarantor a prohibited person, making it unlawful for him to perform any of his obligations under the finance documents,” the papers read. The Axioma is the first seized luxury yacht known to be auctioned since sanctions were imposed by the West on powerful Russians following the invasion of Ukraine in February, which Russia refers to as a special military operation.JP Morgan did not immediately respond to a Reuters request for comment. Pumpyansky was, until March, the owner and chairman of steel pipe manufacturer OAO TMK, a supplier to the Russian state-owned energy company Gazprom (MCX:GAZP). The company said he had since withdrawn from the firm. More