Economy

The median of inflation expectations for the next 12 months fell to 4.3% in August from 4.7% in July, which was the highest since the monthly survey of consumers began in February 2002. Meanwhile, the Consumer Sentiment Index (CSI) rebounded to 88.0 in August, though still below the 100-mark that divides optimism and pessimism, after falling for three straight months to 86.0 in July, which was the lowest since September 2020.The finding comes two days before the Bank of Korea’s rate decision on Thursday, following an unprecedented half-point rate hike to 2.25% in July.Asia’s fourth-largest economy is expected to lose momentum this year as downside risks to exports and consumer spending have risen from slowing global demand and higher interest rates.South Korea’s annual inflation accelerated to 6.3% in July from 6.0% in June, hitting the fastest rate since late 1998, while other figures also indicated the pace of price rises may be near a peak.The survey polled 2,400 households in urban areas for inflation expectations and consumer sentiment among other topics, between August 8-16. More

China has slashed its mortgage lending rate for the second time this year as the country’s central bank seeks to limit the fallout from a liquidity crisis in the property sector. The five-year loan prime rate was lowered to 4.3 per cent from 4.45 per cent yesterday, exceeding the median forecast from economists polled by Bloomberg and equalling a rate cut in May that was the largest on record. The reduction in the benchmark loan prime rate will cut borrowing costs on new mortgages nationwide and boost the country’s debt-laden real estate sector, which accounts for almost a third of annual economic output. Mainland China shares bounced in response to the central bank’s move — with the CSI 300 gauge of Shanghai and Shenzhen-listed stocks closing up 0.7 per cent yesterday. At the close of US markets, however, US stocks suffered their biggest decline in two months, with tech shares falling sharply on worries about the gloomy economic outlook and concerns that members of the Federal Reserve will adopt a hawkish tone at a symposium this week.Thank you for reading FirstFT Asia. — EmilyFive more stories in the news1. Activists say Singapore’s repeal of gay sex ban is not enough LGBT+ activists have dismissed Singapore’s decision to repeal a law banning sex between men as “window dressing”. While the Asian city-state declared on Sunday that it would scrap the colonial-era law criminalising gay sex, it also announced plans to amend the constitution to “protect” the definition of marriage as a heterosexual union from legal challenge.2. China intensifies measures to deal with heatwave Chinese authorities have stepped up emergency measures to deal with extreme heat and a crippling drought in the south-west of the country that has forced cities to dim lights and left electric vehicle drivers struggling to recharge cars. At least 50 mobile generators have been dispatched to help stabilise the local power supply, the State Grid Corporation of China said.

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3. Russia accuses Ukraine in killing of Putin supporter’s daughter Russia’s FSB security service has blamed Kyiv for the car bombing that killed the daughter of a prominent supporter of Vladimir Putin’s, accusing a Ukrainian woman of planting the car bomb before fleeing to Estonia. Ukraine denied any involvement in the attack.4. Kishida tests positive for Covid as public support declines Fumio Kishida, Japan’s prime minister, has tested positive for Covid-19, the government said yesterday. Coronavirus cases across Japan have remained at record-high levels, eroding the approval rating for the Kishida administration which had remained steady since he took office last October. 5. Singapore office rents set to hit pre-pandemic levels The return of workers to the office this year, coupled with lockdowns in China and restrictions in Hong Kong that have forced foreign companies to consider alternative locations, pushed rents for prime office space in the city centre to S$10.74 (US$7.71) per square foot in the second quarter, according to real estate group JLL.The day aheadUK hosepipe ban comes into force South West Water will introduce a ban covering Cornwall and parts of Devon, the first such restrictions in 26 years, while Thames Water’s will affect 15mn customers across the south of England. A ban for Yorkshire households begins on Thursday.S&P Global/IHS Markit composite PMI Purchasing managers’ index data for services and manufacturing is set to publish in the Eurozone, France, Germany, Japan and the US. The reading from the eurozone is forecast to drop from 49.9 in July to 49.5 in August. What else we’re readingThe rise and rise of Korean pop culture Today, Korean culture is so widespread in the west that K-pop idols are invited to the White House, K-pop stars are global ambassadors for luxury brands, and Korean series break viewership records. But this wasn’t always the case. This is how the global spread of Korean pop culture accelerated.Soaring fertiliser prices threaten to spark Africa food crisis The price of nitrogen-based fertilisers has hit record highs in line with natural gas costs in the wake of the war in Ukraine. Growers have cut usage in response, threatening to reduce food production and deepen a global food crisis and raising the prospect of social unrest on the continent.How a 20-year-old student made $110mn riding the meme stock wave He may not have succeeded in his bid to become the youngest US president at the age of 18, but last week Jake Freeman emerged as one of the youngest investors to generate a nine-figure windfall by trading the meme stock frenzy.A war over Taiwan could go nuclear The single most important question about a potential war over Taiwan between the United States and China is whether such a conflict could remain non-nuclear. Policymakers and the US public can no longer ignore the fact that a new nuclear age has dawned, writes Michael Auslin, an author and Hoover Institution fellow at Stanford.Why staff are being sent to bond with nature According to a recent global survey, most workers are unable to explain their own companies’ climate commitments. Could environmental retreats — from sleeping in the woods to hugging trees — solve the disconnect?Food & drinkHave you cracked for the canned wine craze? These six brands of tinned vintages are way better than you think. More

    The law extends one passed last year and sets tax rates of between 5% and 20% for newly declared funds invested in construction, with the rate depending on how soon the funds are declared.”The first objective is to transform dormant savings, which are often not declared before the treasury, into investment and work,” Massa said at a ceremony in Buenos Aires, calling construction the “mother of industries.”The plan also offers state benefits to workers who become formally employed in construction. Massa, who was sworn in at the beginning of the month, said he hopes the plan will bring the number of Argentines employed in construction from 430,000 to 450,000 during its year-long mandate. The government of President Alberto Fernandez is seeking to revive Latin America’s third-largest economy, which is suffering from growing poverty and an inflation rate that could end the year around 90%. Argentina’s economy is slated to grow 3.4% in 2022, according to analysts consulted by the central bank, after recovering 10.3% in 2021.The Federal Administration of Public Revenues (AFIP) and the ministry will provide details in the coming days on the conditions of the plan. More

The outlook for Asian markets on Tuesday is pretty bleak, as investors digest Wall Street’s battering and surge in global bond yields the day before, and look nervously ahead to PMI data from Australia and Japan.Indonesia’s central bank could also add to the gloom, if it delivers a surprise interest rate increase at its scheduled policy meeting. Economists polled by Reuters expect it to hold its 7-day reverse repo rate steady at 3.50%. Rising bond yields – the 10-year U.S. Treasury yield shot back above 3% on Monday – helped slam stocks, lift the dollar, and deepen U.S. recession fears, while Gazprom (MCX:GAZP)’s announcement that it will halt natural gas supplies to Europe for three days later this month blackened the mood there even further. U.S. 10-year Treasury yield: https://fingfx.thomsonreuters.com/gfx/mkt/akpezklqqvr/US10Y.png This is the backdrop to the Asian trading day Tuesday, with local sentiment already wobbling after yet another rate cut in China and the yuan’s slide to a two-year low against the rampant dollar.The latest purchasing managers index data out of Australia and Japan could show the services sectors in the two countries slipping closer to contraction territory, offsetting the relative strength of manufacturing activity in recent months.On the corporate front, China’s e-commerce firm JD (NASDAQ:JD).com releases second-quarter earnings. JD.com is one of the 723 companies the U.S. Securities and Exchange Commission said last December were at risk from finalised rules to potentially prohibit trading in Chinese companies under the Holding Foreign Companies Accountable Act. Also last December, technology giant Tencent announced the divestment of around 86% of its stake in JD.com, worth $16.4 billion.Key developments that should provide more direction to markets on Tuesday: PMI data for euro zone, Germany, UK (August)U.S. new home sales (August) More

PORT-AU-PRINCE (Reuters) – Thousands of Haitians on Monday joined rallies around the Caribbean country to protest rampant crime and soaring consumer prices as its central bank reported that inflation had hit a 10-year high.Protesters set up burning barricades in some areas including the capital of Port-au-Prince, some of whom said they were angry over the growing scarcity of gasoline and diesel that could force some businesses to close their doors. Jean Baden Dubois, Haiti’s central bank governor, said the economy would likely contract by 0.4% this year, following a sharp depreciation of the gourde currency.”If I take the numbers from June 2022, inflation has reached 29%,” Dubois said in a press conference, referring to annualized inflation. “It’s the highest rate we’ve had in 10 years.”The demonstrations coincided with the anniversary of a 1791 slave uprising that triggered a long struggle for Haiti’s independence from France in 1804. Demonstrators held rallies in cities including Cap-Haitien, Petit-Goave, and Jacmel, many wearing red shirts emblazoned with the word “endepandans” or “independence.”Chronic gang violence has left much of the country’s territory out of control of government authorities, and outbreaks of bloody turf battles between rival gangs have left hundreds dead and thousands displaced.Haitians in recent weeks have also struggled to find fuel, which has left some unable to work. The country’s fuel stocks have run low as fuel importers struggle to get paid for subsidies that keep fuel prices low in Haiti, and due to difficulties in obtaining dollars from the central bank, according to two sources with knowledge of the situation. More

The companies signed up for $10.1 billion in new loans, leases and lines of credit last month, compared with $9.9 billion a year earlier. “Despite higher interest rates, continued supply chain disruptions, and higher inflation, the equipment finance industry continues to deliver value to businesses which rely on it to acquire necessary capital equipment to run their operations,” ELFA Chief Executive Ralph Petta said in a statement.ELFA, which reports economic activity for the nearly $1 trillion equipment finance sector, said credit approvals totaled 78%, down from 78.1% in June.The Washington-based body’s leasing and finance index measures the volume of commercial equipment financed in the United States.The index is based on a survey of 25 members, including Bank of America Corp (NYSE:BAC), and financing affiliates or units of Caterpillar Inc (NYSE:CAT), Dell Technologies (NYSE:DELL) Inc, Siemens AG (OTC:SIEGY), Canon Inc and Volvo AB (OTC:VLVLY).The Equipment Leasing & Finance Foundation, ELFA’s non-profit affiliate, said its confidence index in August is 50%, an increase from 46.1% in July. A reading above 50 indicates a positive business outlook. More

Central bankers will be in the line of fire at their annual symposium in Jackson Hole this week — and they should be ready to engage with their critics. Last year, US Federal Reserve chair Jay Powell used his keynote speech to suggest price pressures would be “transitory”. Annual inflation in the US was then just above 5 per cent. Last month it reached 8.5 per cent. Elsewhere, Eurozone inflation hit 8.9 per cent, and Citigroup now forecasts UK inflation will hit 18.6 per cent in January — nine times the Bank of England’s 2 per cent target.Price pressures have proved anything but ephemeral, and interest rates are rising sharply to bring them down. Central bankers need to engage in some soul-searching if they are to usher economies back towards price stability, and safeguard their own, vital, independence.Politicians are now putting the blame firmly on central bankers for the inflation numbers. Liz Truss, frontrunner to become UK prime minister, has made criticism of the Bank of England a plank of her platform. Australia has already launched a review of its central bank. This may help governments to distract from their own shortcomings. But it further saps the reputations of central banks, which had already been damaged by the financial crisis.The danger now is that monetary policy will be subsumed further into government hands. History offers ample proof that politicians cannot be trusted with deciding monetary policy. Rather than simply parrying criticism and hiding behind their previously largely successful track records since gaining independence, it is in central bankers’, and the public’s, best interest for them to set about restoring their reputations.To blame monetary policymakers wholly for the cost of living crisis would be unfair. A lot has been outside their control, and shrouded in uncertainty. The unprecedented pandemic made it hard to judge where exactly demand and supply capacities were in relation to one another. Supply chain disruptions and new Covid-19 waves muddied estimations further. Vladimir Putin’s unforeseen invasion of Ukraine led to historic surges in oil, gas, and food prices. In hindsight, the mistakes look more obvious than they did at the time. Central banking is at best an art, not a science.Nonetheless, both the technicalities and legitimacy of independent monetary policy are now under scrutiny. With credibility such a vital tool in anchoring inflation expectations of households and businesses, this year’s Jackson Hole meeting should catalyse a re-evaluation of central bank models, approaches, and philosophies.Central banks also need to become more adaptable. The past two years have shown that traditional economic models offer little help when geopolitical, public health and supply chain factors become so decisive. The wisdom of offering forward guidance has been cast further into doubt. And reliance on historic trends — such as the previous decade of low and stable inflation — must not blind policymakers to the idiosyncrasies of present and future trends. Indeed, the Fed and ECB both amended their strategies during the pandemic, essentially making them more tolerant of higher inflation. Visible efforts to learn the lessons will go some way to restore confidence.The former Fed vice-chair Alan Blinder is said to have described price stability as when ordinary people stop talking and worrying about inflation. Right now, that is a distant prospect. Europeans are struggling to pay energy bills, US rents are surging, and politicians are circling monetary policymakers like sharks. Central bankers need to reflect on where mistakes were made and show they can get a grip on the consequences. More

The writer is chair of the International Sustainability Standards BoardGovernment action is essential if we are to tackle climate change. However, no single jurisdiction can succeed by only imposing rules on its local market participants. There must be a global approach but multilateral policymaking is currently at a low ebb. To address challenges of this magnitude, nations must harness what Gelsomina Vigliotti, vice-president of the European Investment Bank, has called the “power and ingenuity” of markets. Markets are the self-generating sources of financing that shape business models and transform economies. Properly harnessed, they can deliver solutions at scale. Ahead of this November’s COP27 climate talks in Egypt there is debate around the $100bn funding commitment made by developed countries to support poorer nations in transitioning to lower carbon economies. However, Pascal Lamy, former director-general of the World Trade Organization, has argued that the creation of the International Sustainability Standards Board (ISSB) is “a real breakthrough”. Capital markets can move trillions if properly guided and informed. But they can only play this pivotal role if they operate with high-quality, comparable sustainability information that can be relied upon to make investment decisions. The ISSB, supported by G20 leaders and other international institutions, is responsible for providing such language and developing standards that establish a comprehensive global baseline of sustainability disclosures for the capital markets. The ISSB has also created forums to deliver multilateral solutions — such as a Jurisdictional Working Group that brings together China, the EU, Japan, UK and USA — and specific bilateral dialogue, including with the EU. The need for international alignment is clear. A recent EU directive states that the bloc’s standards should “contribute to the process of convergence of sustainability reporting standards at global level” and integrate the ISSB’s global baseline if it is consistent with EU objectives.The objectives of the European Green Deal will not be met without putting global capital markets to work, and this requires interoperability between the two approaches. Conversely, there is a lot that the EU can contribute to the work of the ISSB. Currently, there is a debate in the market around different approaches to “materiality” — in other words, what should be disclosed. This concept, as it is used in accounting requirements and in the language employed in the capital markets, should not be ignored. The standards proposed by the ISSB require a company to clearly disclose information that provides a robust basis for investors to consider sustainability matters in making their investment and voting decisions. This information will align with the established definition of materiality in accounting standards, ensuring completeness and clarity. The definition requires companies to disclose all information which, if missing, misstated or obscured, could reasonably have been expected to influence an investment decision. Its application requires judgment and regular analysis. What is considered material in the area of sustainability is constantly evolving. The term “dynamic materiality” is an acknowledgment that capital markets, policymakers and scientific researchers are making rapid advances in their assessment of the importance of sustainability.In the standard accounting model, for example, we do not fully incorporate the fact that enterprise value, the measure of the total value of a company, is a function of the demand and supply of capital, not disconnected from investors’ choices. The multi-dimensional nature of sustainability might shed a different light on the nature of those choices.This evolution is a necessary part of our work because what matters to investors is dynamic and changing. The consultation period on the ISSB’s first two proposed sustainability disclosure standards has just finished. The rich feedback we have already received will allow us to create a set of standards that can enable capital markets to be a true ally of global efforts to deliver a just climate transition. More