Economy

The writer is chief executive of AmundiDebate around European strategic autonomy is normally framed around geopolitics and security issues, and driven by politics only. That is odd, since it is more of an economic challenge, and a big one at that. The Covid-19 pandemic, the climate emergency and the war in Ukraine remind us of the consequences of globalisation and dependencies. The EU, as the most open economy in the world, faces big hurdles in the supply of critical goods and is paying the price of lack of self-sufficiency in many sectors. Six sectors stand out as vital for EU strategic autonomy: agriculture, energy, healthcare, materials, technology and defence.After the last two years, Europeans agree that economic autonomy is essential, as is a green energy transition. Yet the question — on which there is little agreement – is how can we get there by the end of the decade?Unless economic reality becomes the bedrock for this political goal of European autonomy — and triggers a new investment momentum in Europe – it will not happen.Strategic autonomy does not mean isolation but lower external dependency with selective reshoring and diversification of supply. It would be economically damaging to do away with the benefits of globalisation, but equally short-sighted to underestimate the costs of Europe’s dependencies. As investors, there is common ground in the pursuit of economic resilience, a green transition and sustainable investing. Europe’s transition to a low-carbon economy can only be achieved with lower dependencies on some critical sectors such as micro-electronics, which demands semiconductor production to be built in Europe, to avoid supply chain disruption. To become reality, this calls for hundreds of billions of euros of capital expenditure, substantial shareholder capital and positive expected returns on investments. The same logic can be applied to energy, agriculture, technology, healthcare or defence.This begs the question of how we can get there — and quickly.Given the scale of the investment needed, public funds alone will not be enough. But if sufficient private capital can be harnessed, the goal becomes achievable. To do that, the current EU regulatory framework must evolve and better incentivise long-term investments to support European strategic ecosystems.That means a fundamental overhaul of the incentive structure of private investment in key sectors. Public funding guarantees or fiscal incentives, consistent with EU policies, could limit uncertainty around the large investments needed, new technologies and the industrial challenges from energy transition. Long-term shareholders in these sectors could be granted additional voting rights or enhanced dividends net of taxes. This would reduce the pressure of short-termism on companies’ boards.Today’s EU regulatory framework also favours investment into public debt over corporate debt or equity. It should be changed to encourage institutional and retail investors to support European champions. Capital requirement directives for banks and solvency rules for insurance companies can be better aligned to the objectives described above. The complexity of Mifid regulation for distributors of investment products to retail investors must be tackled. Europe is not short of capital and ideas, but struggles to close the investment gap in strategic sectors.Asset managers have an important role to play as the natural link between long-term capital needs and savings as well as educating investors on the benefits of investing in the energy transition and in strategic sectors.How we, asset managers, act with our investee companies matters too. Voting rights and engagement with managements bring significant power of action. We have a duty to use it judiciously and with a long-term mindset. That means working with investee companies to support, induce and accelerate a just and socially acceptable transition to a low-carbon economy. That includes, of course, companies in sectors such as oil and gas because they are the first ones needing investment to adapt and drastically transform their business models. If they do not swiftly invest their capex, industrial intelligence and experience in producing renewable energies at scale, who will?To enable investors and savers to support a fair green transition and actively contribute to making Europe’s strategic autonomy a reality, asset managers have their work cut out. Getting them fully on board will unleash the resources and the scale to make this a reality. More

TOKYO (Reuters) – Japan’s household spending fell faster than expected in April as the yen’s sharp decline and surging commodity prices pushed up retail costs, hitting consumer confidence and heightening pressures on the battered economy.Spending improved from the previous month as households showed increasing appetite for services such as eating out, but the month-on-month rise was smaller than expected, suggesting the drag from the pandemic remained.In a sign of trouble for the economy, real wages shrank at the fastest pace in four months in April as prices posted their biggest jump in more than seven years, weighing on household purchasing power.Household spending decreased 1.7% in April from a year earlier, government data showed, faster than the market forecast for a 0.8% decline in a Reuters poll, dragged down by lower spending on cars and vegetables.The month-on-month figures showed a 1.0% increase, also weaker than a forecast 1.3% rise.”Higher energy and food prices are having a big impact and suppressing consumption,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “While a spending recovery remains intact, its pace is slowing.”The data raises some concerns for policymakers worried about the growing hit households are taking from rising prices for daily essentials and a weakening yen, which is pushing up import costs and making consumers hesitant to spend.Households were becoming more accepting of price rises, Bank of Japan Governor Haruhiko Kuroda said on Monday, adding that a weak yen in general was likely to have a positive impact on the economy as long as its moves were not extreme.The yen hit a fresh two-decade low against the U.S. dollar early on Tuesday, last trading around 132.20 yen per dollar.A government official downplayed the impact of price rises on the cutback in food spending, saying it had already been on a declining trend from the spring of last year, a reflection of shrinking demand for eating at home.But the outlook for consumer sentiment was extremely worrying, the official said, adding that it should be watched.Government data on Tuesday also showed inflation-adjusted real wages shrank 1.2% in April, dropping at their fastest pace in four months as a 3.0% jump in consumer prices outpaced a gain in nominal wages.”The problem is structural. It feels like the situation where wages and prices are not rising in line with each other can’t be left behind,” said Minami.Japan’s economy is expected to rebound in the current quarter following a contraction in January-March, though it faces increased pressures from high raw material and energy prices as well as the weak yen. More

Sales decreased 1.1% last month compared with a year earlier, the British Retail Consortium said Tuesday, with big-ticket items such as furniture and electronics hit hardest by the cutbacks. A separate report from Barclaycard showed consumers are cutting down on luxuries such as digital subscriptions and dining out.The figures are the latest sign that rampant inflation, which hit a 40-year high of 9% in April, is taking its toll on shoppers and threatening to heap more misery on retailers after a torrid few years. With consumer spending a key driver of the economy, they also will increase concerns that Britain is heading for a recession, even after the government provided more help with soaring energy bills.Worryingly, the BRC records the value of sales rather than volumes, meaning stores are taking less money at the tills and online, despite surging prices. “It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers spending power,” said the BRC’s chief executive Helen Dickinson. “Supply chain issues including rising commodity and transport costs, a tight labor market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation.” Barclaycard found card spending rose 9.3% in May from a year earlier, a figure that was inflated by the sharp increase in prices. Spending on energy and fuel increased 34.5% and 24.8% respectively, while outlays at supermarkets fell 2% and spending on digital content and subscriptions fell 5.7%.©2022 Bloomberg L.P. More

British consumers cut back sharply on spending last month in almost all areas apart from holidays as the rising cost of living hit budgets hard, according to industry data.Households adopted a more frugal approach in May with inflation running at its fastest annual pace in 40 years, stoked by a 54 per cent jump in the cost of average gas and electricity bills a month earlier.Retail sales fell at an annual rate of 1.1 per cent in May, a sharper contraction than the 0.3 per cent fall in the previous month and the worst since January last year, according to figures compiled by advisory firm KPMG and the British Retail Consortium trade association.BRC chief executive Helen Dickinson said sales continued to see declines “as the cost of living crunch squeezed consumer demand”. She noted that higher-value items, such as furniture and electronics, had taken the biggest hit as shoppers reconsidered major purchases during this difficult time.The BRC warned that sales figures were not adjusted for inflation, meaning that the drop in sales “masked a much larger drop in volumes once inflation is accounted for”.Separate consumer spending data tracked by Barclaycard, the payments company, which monitors almost half of all UK credit and debit card transactions, also showed households tightening their belts across the board last month.Britons reined in their spending on eating and drinking out, with expenditure on restaurants down 5.9 per cent from May last year. It also fell month on month on April, Barclaycard said, without specifying the scale of the decline. There was a similar fall in spending in bars, pubs and clubs alongside a 5.7 per cent drop in digital subscriptions, such as Netflix, from a year earlier.

The Barclaycard data, which similarly are not adjusted for inflation, supported the BRC’s findings that people were cutting back on bigger-ticket items, with spending in furniture stores down 3 per cent month on month.In contrast, the travel sector showed strong year-on-year growth, driven by consumers making the most of the easing of Covid-19 restrictions. Spending rose almost 180 per cent compared with the same time last year and was also up on April. Travel agents enjoyed a sizeable uplift of 24.2 per cent on the previous month, while spending on direct bookings with airlines rose 6.6 per cent, as more holidaymakers booked trips abroad. Spending at UK hotels, resorts and other accommodation rose by 1 per cent month on month.Surging energy bills drove up spending on utilities per customer by 34.5 per cent in May compared with the same period in 2021. “The cost of living squeeze is clearly influencing discretionary spending habits, with figures showing a decline in subscriptions, and a drop in spending at restaurants, bars, pubs and clubs,” said José Carvalho, head of consumer products at Barclaycard.Separate data from the BRC also suggested that the platinum jubilee bank holiday weekend could provide a boost to spending in early June, with UK footfall for the whole of last week up by 17 per cent compared with the average for May. More

HONG KONG/BEIJING (Reuters) -After two years of hunting, Volar Yip has put his dream of buying a new home in China’s southeastern city of Foshan on ice, anxious about making a major financial commitment amid a significant slowdown in the world’s second-largest economy.The 32-year-old owns a media studio and many of his clients, which include government departments, are now cutting advertising budgets.”The more I read the news, the more concerned I got,” Yip told Reuters. “All this news about China — the economy, property market and pandemic. Not much was positive.”His decision to hold back on a house purchase, which would have moved him closer to his daughter’s school, comes even as banks cut mortgage rates.The growing caution among young buyers in China’s battered property market, which accounts for a quarter of gross domestic product, presents a major challenge for policymakers in Beijing now scrambling to revive housing activity.The weakness in the property sector, already buckling under huge debts, adds to the major disruptions caused by China’s zero-COVID policy, which have upended factory and retail activity this year and cast a cloud over the global economy with international businesses increasingly worried about the outlook.Despite some recent policy relaxation in the property sector, sales plunged 47% in April from a year earlier, the biggest drop since August 2006.For Yip, the mortgage rate cuts would save him around 400 yuan ($59.72) on each month’s instalment for a residential apartment worth 2 million yuan ($298,583) that he’s looking for.”That’s not meaningful at all,” he said. NO QUICK BOUNCEProperty developers, who had hoped for the market to bottom out in the second quarter, revised down investor expectations for full-year sales after the plunge in the first five months, with no demand rebound seen in the near future.China’s strict COVID-19 curbs combined with worries about a deeper property correction and stalled construction now cloud Beijing’s 2022 economic growth target of 5.5%, adding to the risks hanging over the global economy from rising inflation and interest rates.The national jobless rate climbed to 6.1% in April, the highest since February 2020 and well above the government’s 2022 target of below 5.5%. Even high-growth internet and tech companies are laying off staff.In an effort to boost home purchases, China last month cut its benchmark rate for mortgages more than expected, one week after it lowered the mortgage rate floor for first-time home buyers.A senior banker at a large Chinese bank, however, told Reuters a pickup in mortgage applications so far remains elusive.BUYER SENTIMENTWith mortgage rates already at the low end of the range and fresh disruptions from coronavirus lockdowns, it will take time for favourable mortgage terms alone to prop up loan growth, Moody’s (NYSE:MCO) said in a report last week.Household loans, including mortgages, contracted 217 billion yuan in April, versus an increase of 528.3 billion yuan in the same period last year, central bank data showed.”The Omicron wave and draconian lockdowns in around 40 cities have significantly limited mobility, employment, income and the confidence of Chinese households,” said Nomura chief China economist Ting Lu. “A majority of college graduates this year may not be able to find jobs due to the sharp economic slowdown.”Official data showed the unemployment rate for 16-to-24-year-olds hit a record high at 18.2% in April.Weaker home sales would mean reduced cashflow for developers, many of whom are struggling to pay suppliers and creditors, and would hurt local government revenues from land transactions.A credit crunch in the property sector, triggered by tighter debt caps, has pushed some firms such as China Evergrande Group, the world’s most indebted developer with more than $300 billion in liabilities, into default.Very few see any recovery in property developers’ financials any time soon.Andy Lee, CEO at realtor Centaline China, said current buyer sentiment is worse now than the end of last year when credit conditions were even tighter.”In some cities, the streets are basically empty, some shops famous on the internet lost 80-90% of their business – how do you ask them to buy a property?” Lee said.A senior executive at a Shanghai-based developer said after many years of growth in the property market, Chinese investors were now choosing to wait out the macro uncertainty.One 30-year-old who was looking to purchase a home in the eastern city of Hangzhou said she would wait for the economy to improve, even if it means she misses the dip in prices.Her job prospects are her biggest worry.”Even famous corporates like Alibaba (NYSE:BABA) are laying off people,” she told Reuters on the condition of anonymity. “I’m worried I will not be able to make enough money to pay my mortgage.” More

WASHINGTON — The Biden administration on Monday announced a two-year pause on imposing any new tariffs on the solar industry, a decision that follows an outcry from importers who have complained the levies are threatening broader adoption of solar energy in the United States.The move is a victory for domestic solar installers, who said the tariffs would put at risk the Biden administration’s goal of significantly cutting carbon emissions by the end of the decade by reducing the flow of products into the United States. But it goes against the wishes of some American solar manufacturers and their defenders, who have been pushing the administration to erect tougher barriers on cheap imports to help revive the domestic industry.It was the latest example of President Biden’s being caught between competing impulses when it comes to trying to steer the United States away from planet-warming fossil fuels, as he has pledged to do. By limiting tariffs, Mr. Biden will ensure a sufficient and cheap supply of solar panels at a time of high inflation and attempt to put stalled solar projects back on track. But the decision will postpone other White House efforts that might have punished Chinese companies for trade violations and lessened Beijing’s role in global supply chains.To counteract complaints by the domestic solar industry, the administration said that Mr. Biden would attempt to speed U.S. manufacturing of solar components, including by invoking the authorities of the Defense Production Act, which gives the president expanded powers and funding to direct the activities of private businesses.The prospect of additional tariffs stemmed from an ongoing investigation by the Commerce Department, which is looking into whether Chinese solar firms — which are already subject to tariffs — tried to get around those levies by moving their operations out of China and into Southeast Asia.Auxin Solar, a small manufacturer of solar panels based in California, had requested the inquiry, which is examining imports from Vietnam, Malaysia, Thailand and Cambodia.In 2020, 89 percent of the solar modules used in the United States were imported, with Southeast Asian countries accounting for the bulk of the shipments.If the Commerce Department determines that the factories were set up to circumvent U.S. tariffs, the administration could retroactively impose tariffs on shipments to the United States. But under the tariff “pause” that Mr. Biden ordered on Monday, such levies could not be imposed for the next two years.The decision is the latest turn in a long game of whack-a-mole the U.S. government has played against low-priced imports in the solar industry.While U.S. companies were some of the first to introduce solar technology, China came to dominate global solar manufacturing in recent decades by subsidizing production and creating a vibrant domestic market for solar installation. In 2011, the United States imposed duties on Chinese products to counteract subsidies and unfairly low prices. U.S. installers then started buying more products from Taiwan, but in 2015 the United States imposed duties on Taiwan as well.Trade experts said that pausing the tariffs could undercut trade laws aimed at protecting American workers by allowing companies in China to continue flooding the United States with cheap imports.Auxin Solar, a California manufacturer of solar panels.Anastasiia Sapon for The New York TimesMamun Rashid, chief executive of Auxin Solar.Anastasiia Sapon for The New York TimesOn Monday, Auxin’s chief executive, Mamun Rashid, said President Biden was interfering with the investigation.“By taking this unprecedented — and potentially illegal — action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law,” Mr. Rashid said in a statement.To pause the tariffs, a Biden administration official said the administration was invoking a section of the 1930 Tariff Act, which allows the president to suspend certain import duties to address an emergency. Commerce Department officials said their investigation would continue and that any tariffs that resulted from their findings would begin after the 24-month pause expired.“The president’s emergency declaration ensures America’s families have access to reliable and clean electricity while also ensuring we have the ability to hold our trading partners accountable to their commitments,” Gina Raimondo, the Commerce secretary, said in a release.The possibility of tariffs has touched off an ugly battle in recent months over the future of the U.S. solar industry.American solar companies have said that the prospect of more — and retroactive — tariffs was already having a chilling effect on imports. Groups such as the Solar Energy Industries Association, whose members include several Chinese manufacturers with U.S. operations, have been lobbying the White House against the tariffs and on Monday welcomed news that the administration would pause any new levies.“Today’s actions protect existing solar jobs, will lead to increased employment in the solar industry and foster a robust solar manufacturing base here at home,” Abigail Ross Hopper, the president and chief executive of S.E.I.A., said in an emailed statement.“During the two-year tariff suspension window,” she said, “the U.S. solar industry can return to rapid deployment while the Defense Production Act helps grow American solar manufacturing.”Companies that rely on imported products — and U.S. officials who are prioritizing the transition to solar energy — have been complaining that the Commerce Department inquiry has injected uncertainty into future pricing for the solar market, slowing the transition away from fossil fuels. NextEra Energy, one of the largest renewable energy companies in the country, had said it expected to delay the installation of between two and three gigawatts worth of solar and storage construction — enough to power more than a million homes.“The last couple of months we have had to pause all construction efforts,” said Scott Buckley, president of Green Lantern Solar, a solar installer based in Vermont. Mr. Buckley said his company had been forced to put about 10 projects on hold, which would have resulted in the installation of about 50 acres of solar panels.Mr. Buckley said there was no easy solution to the country’s reliance on imported products in the short term and that the White House’s actions on Monday would allow companies like his to resume installations this year.“This is a get back to work order,” he said. “That’s the way I think about it. Let’s clear the logjams.”Solar panels made in China. Major industry groups, some of which include Chinese manufacturers, had been lobbying the Biden administration to take action against the tariffs.Adam Dean for The New York TimesBut domestic solar producers and U.S. labor unions have said that the recent surge in imports from Chinese companies doing their manufacturing in Southeast Asia clearly violates U.S. trade law, which forbids companies to try to avoid U.S. tariffs by moving production or assembly of a product to another country.The domestic producers have accused importers — who have close commercial ties with China — of exaggerating their industry’s hardships to try to sway the Biden administration and preserve profit margins that stem from unfairly priced imports.“If you have a supply chain that depends on dumped and subsidized imports, then you’ve got a problem with your supply chain,” said Scott Paul, the president of the Alliance for American Manufacturing.“We’re getting dependent on hostile countries without sufficient domestic production to ensure against price hikes and supply shocks,” said Michael Stumo, chief executive of Coalition for a Prosperous America, a nonprofit group that promotes domestic manufacturing. “Whether it’s medicine, or PPE, or solar panels, you’ve got to have domestic production.”Some critics also said the legal rationale for the White House’s moves was specious, arguing that the administration was effectively declaring a state of emergency because of the consequences of its own trade laws.Scott Lincicome, a trade policy expert at the Cato Institute, a libertarian think tank, said that the administration’s actions seemed to be “quite the stretch of the statute.”The trade law provision that Mr. Biden invoked allows the president to “declare an emergency to exist by reason of a state of war, or otherwise,” and during such a state of emergency to import “food, clothing, and medical, surgical, and other supplies for use in emergency relief work” duty free.He said critics of U.S. tariffs had long proposed a “public interest” test that would allow levies to be lifted to mitigate broader economic harm, but Congress had never approved such an action.In a letter late last month, Senators Sherrod Brown of Ohio and Bob Casey of Pennsylvania, both Democrats, complained that solar importers had spent “millions of dollars on advertising and lobbying to urge political interference in the trade enforcement process.” Biden administration officials had previously said that the Commerce Department’s inquiry was immune to political interference, describing it as “quasi-judicial” and “apolitical.”Solar tariffs have been a source of contention for decades, but they have taken on renewed importance in recent years as the consequences of climate change became more apparent. Chinese companies have expanded internationally, allowing them to continue to ship products to the United States, while American companies have struggled to compete.The global solar industry’s dependence on China has complicated the Biden administration’s efforts to ban products linked with forced labor in Xinjiang, the northwest region where U.S. officials say Chinese authorities have detained more than one million Uyghurs and other minorities. Xinjiang is a major producer of polysilicon, the raw material for solar panels.Solar importers complained that a ban last year on solar raw materials made with forced labor by Hoshine Silicon Industry temporarily halted billions of dollars of American projects, as companies struggled to produce documentation to customs officials to prove that neither they nor their suppliers were obtaining material from Hoshine.After the Russia invasion of Ukraine in February, high gasoline prices have also impeded a broader desire to push the country away from oil and left Mr. Biden asking oil-producing nations in the Middle East and beyond to ramp up production.White House officials said Monday that Mr. Biden would sign a suite of directives meant to increase the domestic development of low-emission energy technologies. He is set to make it easier for domestic suppliers to sell solar systems to the federal government. And he will order the Department of Energy to use the Defense Production Act to “rapidly expand American manufacturing” of solar panel parts, building insulation, heat pumps, power grid infrastructure and fuel cells, the administration said in a fact sheet. More

Boris Johnson has survived a bruising no-confidence vote, but his victory by 211 to 148 in a ballot of Tory MPs left him badly damaged and exposed the scale of the division and animosity in his party. The result means that more than 40 per cent of Johnson’s MPs wanted to oust the prime minister, leaving him seriously damaged; the revolt was far more serious than Downing Street had expected. Johnson told MPs that his victory would end months of speculation about his future and that he would now be able to focus fully on policy delivery, holding out the prospect of future tax cuts. But the vote of no confidence, triggered after more than 15 per cent of his MPs withdrew their support from him, was accompanied by rancour and withering criticism of the prime minister from his colleagues.Go deeper: History shows that incumbents struggle to regain their standing once MPs vote against them in large numbers.To read more on British politics sign up to our Inside Politics newsletter. Thanks for reading FirstFT Asia. Here’s the rest of today’s news — EmilyFive more stories in the news1. Elon Musk threatens to abandon Twitter takeover The CEO of Tesla has threatened to walk away from his $44bn acquisition of Twitter, accusing the social media company of failing to provide enough information about fake accounts.2. Global stocks rise as Beijing eases Covid restrictions Stock markets around the world rose on Monday as a series of positive updates from China including the loosening of some Covid-19 restrictions boosted investors’ confidence. Wall Street’s benchmark S&P 500 rose 0.8 per cent by mid-afternoon, following solid gains in Europe and Asia earlier in the day.3. Apple to offer ‘buy now, pay later’ credit The Silicon Valley company is jumping into the “buy now pay later” market. adding another challenge to fintech companies such as Klarna and Affirm that are already grappling with investor pressure, slower ecommerce growth and rising interest rates.4. US suspends south-east Asia import tariffs on solar panel parts US president Joe Biden will allow solar panel parts to be imported free of tariffs from four south-east Asian nations, offering a cost reprieve to US renewable energy project developers after months of uncertainty. The move by the White House was part of a package of measures designed to boost a transition to clean energy.

President Joe Biden’s decision will temporarily block tariffs on solar modules and cells from Cambodia, Malaysia, Thailand and Vietnam © Reuters

5. Australia accuses China of intercepting surveillance plane Australia has accused the Chinese military of a “dangerous manoeuvre” after one of its surveillance planes was intercepted in the South China Sea just days after Anthony Albanese’s election as prime minister.The day aheadReserve Bank of Australia meeting Policymakers meeting today are expected to raise interest rates in order to further central bankers’ goal of tamping down inflation. (FX Street) China’s gaokao begins Students will take the nationwide university entrance exam. “It is hard to find anyone, even in government, that thinks the gaokao is good for China,” Patti Waldmeier wrote back in 2012. Address from Sri Lanka PM Ranil Wickremesinghe, who was appointed Sri Lanka’s prime minister this month, will give a speech in parliament to address the country’s debt crisis. FT View: Sri Lanka’s problems are an alarm call for emerging markets, our editorial board wrote last week. Don’t miss FT editor Roula Khalaf’s interview with Ukraine’s president Volodymyr Zelensky at the FT’s Global Boardroom on June 7-9. Register for free today.What else we’re reading The great Tokyo exodus Before the pandemic, the Japan’s decades-old working habits had made the idea of leaving Tokyo seem all but impossible because clients, universities and ministries are all concentrated there. Now, that entrenched belief is being dismantled. And being a pioneer of the relocation boom has brought unexpected benefits.Migrant workers suffer in Singapore’s hidden lockdown Of the roughly 280,000 migrant workers who live in Singapore’s dormitories, a maximum of 25,000 are permitted to travel outside the recreation centres or their workplaces on weekdays — and only on the condition that they tell authorities where they are going and limit their trips to eight hours.

Migrant workers in Singapore remain subject to strict Covid-19 controls © Suhaimi Abdullah/NurPhoto/Getty Images

The impact of Russia’s Donbas advance Russian advances have made it “very, very difficult” for Ukraine to win its war with Moscow, Oleksiy Danilov, Ukraine’s chief of the national security council, told the Financial Times. Danilov said Ukraine could win “because we are fighting for our freedom”. But he said a drawn-out war to drive out Russia’s invading army could only succeed if western countries accelerated supplies of advanced weapons.Opinion: The first cold war ended with the fall of the Berlin Wall in 1989. The second, it seems, began with the Russian invasion of Ukraine in February 2022, writes Gideon Rachman.Rumours that Xi is losing his grip on power are greatly exaggerated As China enters its version of the political silly season, the commentariat says President Xi Jinping is in trouble. But this proposition is unconvincing because it ignores how Xi has bent China’s one-party system to his advantage, writes Christopher Johnson CEO of China Strategies Group.How ESG investing came to a reckoning The acronym is less than two decades old, but it may already be coming to the end of its useful life. With allegations of greenwashing at the highest levels, should funds still package together environmental, social and governance factors? Sign up here to receive our ESG newsletter, Moral Money.TravelIn line with Dubai’s rollercoaster history, the city’s services-and tourism-oriented economy is on the way back up, buoyed first by an influx of wealthy people thanks to the United Arab Emirates’ successful handling of the pandemic and, more recently, a flood of rich Russians seeking a financial haven.

A suite at the Anantara World Islands resort with a view of the Dubai mainland More

The collective amount of money mortgage holders could pull out of their homes while retaining 20% equity rose by an unprecedented $1.2 trillion in the first quarter of this year, according to Black Knight, a mortgage software and analytics firm.
In total, the nation’s so-called tappable equity stood at $11 trillion, or two times the previous peak in 2006.
That boils down to an average of about $207,000 in tappable equity per homeowner.

Houses in Hercules, California, US, on Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade.
David Paul Morris | Bloomberg | Getty Images

Homeowners are in the money, and it just keeps coming. Two years of rapidly rising home prices have pushed the the nation’s collective home equity to new highs.
The amount of money mortgage holders could pull out of their homes while still keeping a 20% equity cushion rose by an unprecedented $1.2 trillion in the first quarter of this year, according to a new analysis from Black Knight, a mortgage software and analytics firm. That is the largest quarterly increase since the company began tracking the figure in 2005.

Mortgage holders’ so-called tappable equity was up 34%, or by $2.8 trillion, in April compared with a year ago. Total tappable equity stood at $11 trillion, or two times the previous peak in 2006. That works out to an average of about $207,000 per homeowner.
Tappable equity is largely held by high-credit borrowers with low mortgage rates, according to Black Knight. Nearly three-quarters of those borrowers have rates below 4%. The current rate on the 30-year fixed mortgage is over 5%.
The flipside of rising home values is that prospective buyers are increasingly being priced out of the market. Mortgage rates have also been rising sharply, putting homeownership further out of reach for some.
“It really is a bifurcated landscape – one that grows ever more challenging for those looking to purchase a home but is simultaneously a boon for those who already own and have seen their housing wealth rise substantially over the last couple of years,” said Ben Graboske, president of Black Knight Data & Analytics. “Depending upon where you stand, this could be the best or worst of all possible markets.”
The housing market, however, is showing slight signs of cooling. Home prices, as measured by Black Knight in April, were up 19.9% year over year, down from the 20.4% gain seen in March. The slowed growth could be an early indication of the impact of rising rates.”April’s decline is more likely a sign of deceleration caused by the modest rate increases in late 2021 and early 2022 when rates first began ticking upwards,” Graboske said. “The March and April 2022 rate spikes will take time to show up in repeat sales indexes.”

Rising interest rates historically cool home prices, but supply remains pitifully low in the current market. Active listings are 67% below pre-pandemic levels, with about 820,000 fewer listings than a typical spring season.
Given the current market conditions, homeowners are less likely to sell their homes and more likely to tap some of that vast equity for renovations. Home equity lines of credit are preferable now, as an owner likely wouldn’t want to refinance their first mortgage to a higher rate, even to pull out cash.
A recent report from Harvard’s Joint Center for Housing projected home improvement spending to increase by nearly 14% this year.
“Record-breaking home price appreciation, solid home sales, and high incomes are all contributing to stronger remodeling activity in our nation’s major metros, especially in the South and West,” said Sophia Wedeen, a researcher in the Remodeling Futures Program at the Center.

WATCH LIVEWATCH IN THE APP More