Economy

Since Russia invaded Ukraine, there has been much talk of the echoes of the second world war and the dangers of a third one. But the current global moment is much more like a return of the cold war.Once again, the US is assembling a coalition of democracies to face off against a Russia-China axis. Once again, the dangers of a nuclear war are central to international politics. And once again, there is a large bloc of non-aligned countries — now generally referred to as the “global south” — that is intensively courted by both sides.Many in the global south insist that Ukraine is a regional conflict that must not be allowed to disrupt or change the whole world. But policymakers in the Biden administration already frame the war in global terms. They see Russia and China as partners in a challenge to the “rules-based order”, upheld by the US and its allies. The battles in Ukraine are currently the central theatre of that wider struggle.Viewed from Washington, security threats in Europe and Asia are now so deeply connected that the two continents are seen by officials as a “single operating system”. That is a pattern of thinking that is very reminiscent of the cold war, when America was always mindful that what happened in Vietnam or Korea could have effects in the divided city of Berlin or in the north Atlantic.One big difference from the last cold war is that this time the Americans see China, not Russia, as their most serious rival. That belief has not been changed by the fact that it is Russian president Vladimir Putin who has launched a war. In fact, the China focus of the Biden administration intensifies the tendency to see the Ukraine war as not just about the security of Europe, but about the wider global order. While there is some glib talk in the west about attempting to “do a Kissinger” — and once again engineer a split between Russia and China, as happened in the 1970s — few in Washington believe that is a plausible near-term prospect. On the contrary, US officials see China as very firmly in Russia’s corner. Dissuading Beijing from translating its pro-Russian sentiments into direct military or economic support for Moscow remains a top American priority. US allies in Asia — in particular Japan, South Korea and Australia — are also very alive to the implications of the Ukraine war for their own security. The worst-case scenarios for them would be that Russia’s aggression emboldens China and distracts America — leading to a region-transforming Chinese invasion of Taiwan. The best case is that the Ukraine war revitalises the western alliance and US global leadership and causes China to back off in Asia.In reality, however, Biden’s people do not think that Russia’s troubles in Ukraine have changed Chinese minds about the wisdom of a possible invasion of Taiwan. The Chinese, they believe, are more interested in figuring out where Russia has gone wrong — and adjusting their own plans accordingly. The need for overwhelming force in any military action is one likely lesson. Another is the need to protect China’s economy from possible western sanctions.In late May, Biden visited Japan and South Korea — and not for the first time suggested that the US would fight to defend Taiwan. (His administration was again forced to qualify the president’s comments.) At the end of June, Nato will hold a summit in Madrid. Significantly, Japan, South Korea, Australia and New Zealand have all been invited to attend. Pulling together a coalition of democracies is meant to improve the west’s security position in both Europe and Asia. Countries such as Japan play an important symbolic and practical role in the struggle with Russia. They are vital to the sanctions effort — making it much harder for Moscow to find easy ways around sanctions. In return, the Asians are keen to see European countries play a bigger security role in Asia. Recent naval visits to the region, by the British, French, Germans and Dutch, have been welcomed.But while the Americans are happy with the response of their most important north Asian allies to the Ukraine war, they are concerned by their failure to win the battle for opinion in south-east Asia. At a recent summit meetingwith the Association of Southeast Asian Nations in Washington, some Asean leaders privately echoed Russian talking points about Nato’s responsibility for the war in Ukraine and alleged “false flag” operations. India is seen as an even more important challenge. The government of prime minister Narendra Modi has been careful to avoid taking sides on Ukraine, abstaining on the key UN votes and increasing oil imports from Russia. The Americans think that hectoring New Delhi on this subject is likely to be counter-productive. Instead, they are intent on gradually drawing India closer to them by emphasising the two countries’ shared security interests in containing Chinese power.Some historians now see the first and second world wars as two stages of the same conflict — separated by a generation of increasingly fragile peace. It may be that future historians will talk about the first and second cold wars — separated by a 30-year era of globalisation. 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 [email protected] More

Under the pilot scheme, companies in eight sectors including electric power, steelmaking, petrochemicals and civil aviation will issue bonds to fund decarbonisation efforts, the National Association of Financial Market Institutional Investors (NAFMII) said in a statement.Such debt instruments supplement green bonds, and are part of China’s sustainable financing, said NAFMII, which is supervised by China’s central bank. China, the world’s biggest producer of climate warming greenhouse gas, has pledged to bring its emissions to a peak before 2030 and to become carbon neutral by 2060.Proceeds from the transition bonds will be used to fund green efforts including cleaner coal production, the application of green technologies and the use of natural gas and clean energy, NAFMII said.Companies including China Huaneng Group Co, Hualu Holdings and Baosteel have already issued China’s first low carbon transition bonds, the Shanghai Securities News reported on Monday. More

Fewer than 25,000 vehicles were sold last month, according to the Association of European Businesses, the lowest since at least 2006 and less than a tenth of the monthly levels seen in peak months in the past.President Vladimir Putin’s Feb. 24 invasion of Ukraine spurred a wave of sanctions from the US and its allies, as well as disruptions of supplies from a broader range of countries. The isolation hit the foreign-dominated auto sector especially hard, with the exodus of overseas producers worsened by the industry’s heavy dependence on imported components.“A few suppliers still haven’t sold out all their stocks, so that’s what’s selling,” said Azat Timerkhanov of consultant Avtostat. “But they’re running out rapidly.”Only two of Russia’s more than 20 auto factories are operating now, a locally owned one and a Chinese plant, he said. European and most Asian producers suspended shipments of cars, while even companies from countries that didn’t join the sanctions were faced with logistics problems. “There’s a search underway for alternative suppliers — usually Chinese,” he said,  but there’s no certainty yet that it will succeed.The Russian government has taken over some major plants from foreign companies that left, including the legendary Moskvich factory in Moscow. They’ve already announced plans to sell stripped-down models without imported safety and emissions technologies. “Our auto industry relied on foreign components,” said Georgy Ostapkovich, a specialist on the sector at Moscow’s Higher School of Economics. “There were practically no factories that didn’t work on foreign platforms. Russia was just an assembly line.”“We’re facing primitivization and we’ll fall behind the rest of the world by a decade,” he said. More

Global banks have been cautiously moving into crypto for several years, some building it within existing operations and others setting up new businesses.”Currently, 52 percent of affluent investors in Asia hold digital assets of some sort. Accenture’s research indicates this could reach 73 percent by the end of 2022,” Accenture said on Monday.”Digital assets represent 7% of surveyed investors’ portfolios — making it the fifth-largest asset class in Asia — more than they allocate to foreign currencies, commodities or collectables. Yet two-thirds of wealth management firms have no plans to offer digital assets,” Accenture said.The findings were part of Accenture’s report on the future of Asia’s wealth management industry based on two surveys – one of about 3,200 investors and another of more than 500 financial advisors at wealth management firms in Asia. The surveys were done in December 2021 and January 2022.”For wealth management firms, digital assets are a $54 billion revenue opportunity – that most are ignoring,” Accenture said.”Among firms’ barriers to action are a lack of belief in (and understanding of) digital assets, a wait-and-see mindset, and – given that launching a digital asset proposition is operationally complex – choosing to prioritize other initiatives,” it said.Southeast Asia’s biggest bank DBS Group (OTC:DBSDY) launched a standalone cryptocurrency trading platform in December 2020 offering corporate investors and accredited investors crypto trading services for many digital assets.Last month, Nomura Holdings (NYSE:NMR) said it will create a digital asset company this year allowing institutional investors to trade products linked to cryptocurrencies, among others. More

The bank, which previously expected 100 bps of hikes this year, said last week’s euro zone inflation print, which came in far higher than expected at 8.1%, was confirmation that 100 bps was the minimum the bank would deliver. “Our call was already more hawkish than consensus, and is even more so now. We continue to worry this is too much too fast,” analysts said in the note. In a separate note, Barclays (LON:BARC) said on Monday that it now expects the ECB to hike in 25 bps increments at each meeting from July to December.It expects one more hike after that in the first quarter of next year, which would take the ECB’s depo rate to 0.75%.The ECB last hiked interest rates in 2011 and its depo rate is currently at -0.50%.Money markets currently price in over 130 bps hikes by year-end, with a 50 bps move at a single meeting fully priced in by October. More

Investing.com — The U.S. administration is getting more creative in finding ways to bring down inflation before the midterm elections. China is easing up on its tech giants, but its service sector remains deep in contraction in May. U.K. Prime Minister Boris Johnson faces a revolt from his own party lawmakers, and oil prices rise after Saudi Arabia indicates the market is going to stay tight in July whatever OPEC+ says or does. Here’s what you need to know in financial markets on Monday, June 6.1. Desperate DemsThe administration of U.S. President Joe Biden is showing itself ever readier to take politically controversial steps to reduce inflation ahead of the midterm elections in November.Commerce Secretary Gina Raimondo told CNN that the administration is looking at removing some of the tariffs on Chinese imports imposed by Donald Trump during his presidency. She said that the move would reduce price pressures for household goods but added that tariffs on steel and aluminum would remain in place.Elsewhere, Reuters reported that the administration is prepared to give Spain’s Repsol (BME:REP) and Italy’s Eni (BIT:ENI) waivers from the sanctions on Venezuela, allowing them to ship Venezuelan crude oil to Europe to alleviate its fuel shortage. That may in turn reduce – if only marginally – European demand for U.S. crude and refined products that is contributing to the squeeze on domestic gasoline prices.2. China relents on Didi, othersChina’s regulators are set to end their probe into the cybersecurity practices of Didi Global (NYSE:DIDI) and two other U.S.-listed Chinese companies, according to The Wall Street Journal. If confirmed, that would be the first tangible relaxation of government pressure on the technology sector in a year.The news came too late to help Chinese stock indices but lifted the offshore yuan by around 0.2% against the dollar. The yuan was also supported by reports that Beijing is preparing to lift its COVID-19 restrictions after a steady decline in cases.China’s services sector has been ravaged by lockdowns in Beijing, Shanghai, and elsewhere in recent months. The Caixin Services purchasing managers index, a bellwether of services activity, remained deeply in contractionary territory in May at 41.4, albeit that was a rebound from a two-year low of 36.2 in April.Didi ADRs, meanwhile, jumped over 50% in premarket but are still more than 80% below their listing price from last year.3. Stocks set to open higher, building on jobs reportU.S. stock markets are set to open higher, extending gains after Friday’s labor market report that suggested ongoing strength in job creation without any further acceleration in wage growth. As such, the report – for once – lacked any fresh evidence for tightening monetary policy faster than already planned. The Conference Board’s employment trends survey adds a coda to that at 10 AM ET.By 6:30 AM ET, Dow Jones futures were up 270 points, or 0.8%, while S&P 500 futures were up 1.0% and Nasdaq 100 futures were up 1.5%.Stocks likely to be in focus include Tesla (NASDAQ:TSLA), after Elon Musk tried to limit the damage done by a report suggesting large-scale layoffs at the electric vehicle maker on Friday.4. Johnson faces no-confidence voteU.K. Prime Minister Boris Johnson is to face a vote of no-confidence from his party’s lawmakers later Monday, after enough backbench Members of Parliament demanded the move.The development comes only a couple of weeks after a damning report into illegal parties at 10 Downing Street that violated the lockdown rules under which the rest of the country was living at the time. The affair has badly dented the Conservatives’ support in opinion polls and contributed to heavy defeats in local elections last month.Sterling was little changed on the news, rising 0.4% against the dollar amid speculation that the Bank of England will have to tighten monetary policy more than it guided for at its last meeting.5. Oil higher as Saudi lifts OSPs for JulyCrude oil prices touched $120 a barrel again as Saudi Arabia, the world’s largest producer, raised official selling prices for its July crude shipments by more than had been expected.The move was taken as a sign that supply remains extremely tight, despite the commitment by the OPEC+ group of producers to quicken the planned pace of output increases from next month. OPEC+ has agreed in principle to lift its output by 632,000 barrels a day from July, but that will depend largely on the ability of Russia’s oil sector to cope with a gradually tightening western sanctions regime.By 6:25 AM ET, U.S. crude prices were up 0.7% at $119.75 a barrel, while Brent prices were up 0.7% at $120.56 a barrel. More

“The U.N. Security Council has never authorised any country to carry out military surveillance in the seas and airspace of other countries in the name of enforcing sanctions,” foreign ministry spokesman Zhao Lijian said at a media briefing.Canadian Prime Minister Justin Trudeau said last week that Canada was an active member of “an important mission” in the North Pacific to ensure that sanctions on North Korea are properly enforced.Chinese aircraft had sometimes forced Canadian planes to divert from their flight paths, Canada’s military said last week.Wu Qian, a defence ministry spokesman, said the Chinese military took reasonable measures to deal with Canada’s actions and have made “solemn representations” via diplomatic channels.China’s defence ministry said in a statement that Canadian military jets have stepped up reconnaissance and “provocations” against China “under the pretext” of implementing U.N. Security Council resolutions, endangering China’s national security. More

BANGKOK (Reuters) – Thailand’s fiscal and monetary policies must continue to align to ensure the economy will recover fully, the finance minister said on Monday.The central bank, however, may consider raising its key interest rate when the economy recovers strongly, Finance Minister Arkhom Termpittayapaisith told a business seminar, in the face of surging inflation.”But for now, fiscal and monetary policies must go together,” he said, as the government tries to support an otherwise slow economic recovery.”The central bank must strike a balance between capital inflows and outflows, and economic matters to ensure that our economy can fully recover,” Arkhom said.The Bank of Thailand (BOT) is expected to leave its policy rate at a record low of 0.5% when it meets on Wednesday, and for the rest of 2022, according to a Reuters poll, despite headline inflation in May hitting a high of nearly 14 years.Southeast Asia’s second-largest economy could grow 3.5% this year, with expected yearly growth of 5% each in the remaining three quarters, he said. Last year’s expansion was 1.5%, among the slowest rates in the region.The government is aiming for export growth of 10% this year which will be a key driver of growth this year, along with government spending and a recovery in tourism, Arkhom said.The finance ministry has maintained its fiscal discipline, with the country’s public debt at 60.58% of GDP at the end of March, which is below the set ceiling, he added. More