Economy

China’s economy grew faster than expected in the first quarter but official data revealed a contraction in consumer activity as lockdown measures to counter the spread of Covid-19 weighed on the country’s outlook. China’s gross domestic product rose 4.8 per cent compared with the same period a year earlier, after expanding 4 per cent in the final three months of 2021. On a quarter-on-quarter basis, GDP grew 1.3 per cent.Retail sales, a gauge of consumer spending, fell 3.5 per cent in March — its first contraction since July 2020 — as authorities hardened restrictions to counter the country’s worst coronavirus outbreak in more than two years.The data will add to pressure on the government of Chinese president Xi Jinping, which has reaffirmed its commitment to a zero-Covid policy despite mounting costs and disruptions in the biggest cities. Infections across China rose in April and Shanghai, its main financial hub, has remained largely sealed off.The lockdown effect: The lockdown in Shanghai began in late March, meaning its full impact will not be recorded in the first quarter report, which did take into account less severe lockdowns in the manufacturing hubs Shenzhen and Jilin. Wealthy seek to leave: Chinese immigration consultants say inquiries from wealthy individuals trying to leave have surged following the lockdown of Shanghai, underscoring frustration with Beijing’s zero-Covid strategy.What do you think of Beijing’s zero-Covid strategy? Share your thoughts with me at [email protected]. Thanks for reading FirstFT Asia. — Emily The latest from the war in UkraineEastern offensive: Russia has launched a full-scale offensive in the Donbas region. The attack follows missile strikes earlier on Monday in Lviv that killed seven people in the western city. (AP, FT) Energy: Soaring oil prices caused by the war in Ukraine could improve Malaysia’s balance sheet, according to its finance minister.Eye on Asia-Pacific: China will welcome a prolonged war in Ukraine as a “rolling strategic diversion” from its own assertiveness, according to former Australian prime minister Kevin Rudd.Five more stories in the news1. Gold rises to highest level in a month Gold prices climbed and US stocks slipped on Monday as worries over a weakening global economy were heightened by signs that coronavirus lockdowns had clouded the outlook for growth in China.2. Whisky on the table as Johnson heads to New Delhi Leading Scotch maker Chivas Brothers says it aims to double exports to India if New Delhi eliminates whisky tariffs, a top UK demand in bilateral trade talks ahead of prime minister Boris Johnson’s visit to India this week.3. Sri Lanka’s president appoints new leaders President Gotabaya Rajapaksa appointed 17 cabinet members yesterday as protests over alleged economic mismanagement continue to roil the nation. Rajapaska chose younger leaders to appease the public, but his 76-year-old brother, Mahinda Rajapaksa, will remain prime minister. (Straits Times) 4. Marine Le Pen rejects reports of EU funds misuse French far-right presidential challenger Marine Le Pen has dismissed allegations that she misappropriated tens of thousands of EU funds as “dirty tricks”, less than a week away from a tight election race against Emmanuel Macron.5. UK braced for prolonged period of stagflation The risk of a prolonged period of low growth in gross domestic product coupled to high inflation in the UK has increased after consumer prices surged more than expected while economic growth slowed to a crawl. Coronavirus digestA US judge has halted the Biden administration’s mask requirement for public transport passengers.China’s zero-Covid policy has taught the world that it is no longer possible, if it ever was, to combat the virus with suppression alone. Ways to live with the virus must be found, our editorial board writes.The number of births in advanced economies has largely rebounded to pre-pandemic levels, an FT analysis shows — a recovery partly due to stimulus policies.The day aheadIndonesia central bank meeting Policymakers at Bank Indonesia will meet and make their interest rate decision.Johnson faces UK parliament A defiant Boris Johnson will face MPs for the first time since being fined over the “partygate” affair, with allies privately criticising the Metropolitan Police’s handling of the issue. The UK prime minister will apologise to MPs but will insist that he was not aware he was breaking his own Covid-19 lockdown rules.IMF World Economic Outlook With inflation hitting a fresh 40-year high in the US and a 30-year high in the UK this week, the IMF said its forecasts set to be released today would also show rapid price increases would be more persistent than it previously thought.Join us for the FT’s Crypto and Digital Assets summit on April 26-27. Register today to be part of a critical conversation with the world’s global financial and corporate elite, as they carve out the path ahead for bridging traditional finance and the crypto leaders of tomorrow.What else we’re readingUS-China Tech Race: Shock and Awe In the latest episode of this Tech Tonic season about US-China tech rivalry, the FT’s US-China correspondent Demetri Sevastopulo tells the inside story of his scoop on China’s secret hypersonic weapon test and how it changed geopolitics.Asian Americans take safety into their own hands after violent attacks Since the pandemic, anti-Asian hate in the US has escalated. Amanda Chu speaks to Asian Americans in New York City, where the police department estimates that hate crimes against them jumped more than 360 per cent in 2021.OK, boomer: generations aren’t real. Class is. Desperate individuals — like marketing professionals or opinion columnists who have passed their deadline — love to talk about “generations” because they are neat ways to sell someone something they might not otherwise buy, writes Stephen Bush. For more from Stephen, sign up here for our latest newsletter, Inside Politics.India’s biggest-ever merger The proposed $40bn merger between India’s biggest private sector bank and mortgage provider has been driven by tighter regulation of the country’s shadow banking sector, Deepak Parekh, chair of HDFC Bank and Housing Development Financing Corporation, told the FT. Donald Trump and the Republicans’ midterm dilemma The Republican Senate primary in Pennsylvania next month is becoming a pivotal event in this year’s midterm elections and could determine which party controls the upper chamber of Congress. US president Joe Biden defeated Donald Trump in 2020 in the state, but only by a razor-thin margin.FashionHard luxury drives the retail market because watches and jewellery tend to retain, or even increase, their value. Historically, clothing has been a poor investment, losing about 90 per cent of its value at the point of purchase. But a boom in online retail and changing attitudes towards pre-owned have given rise to vast online marketplaces for second-hand goods.

Copenhagen-based Ganni is the latest brand to launch a resale marketplace © Sarah Stenfeldt More

US stocks, government bond and gold prices seesawed on Monday as investors grappled with worries over a weakening global economy and looked ahead to a busy week of corporate earnings and speeches from central bankers.The US blue-chip S&P 500 share index swung from gains to losses in thin trading before ending the day almost exactly where it had closed after the previous session. The tech-heavy Nasdaq Composite closed 0.1 per cent lower. Trading volumes in stocks in the S&P 500 were about 20 per cent below recent averages, according to Bloomberg data.Gold, which typically advances during periods of uncertainty, rose as much as 1.2 per cent to $1,998 a troy ounce, reaching its highest level in more than a month, before falling back to $1,977, a 0.1 per cent increase.A broad MSCI index of equities markets in the Asia-Pacific region dropped 1.1 per cent, its second consecutive day of declines. Big European markets were closed for the Easter Monday holiday.Government bonds also struggled for direction, with the 10-year US Treasury eventually gaining 0.03 percentage points to 2.86 per cent. Yields move inversely to price.The cautious start to the trading week followed China’s release of a flurry of economic data. Gross domestic product rose 4.8 per cent in the first three months of 2022 compared with the same period in 2021, exceeding market expectations.But economic activity data for March revealed how Beijing’s zero-Covid policy, including the lockdown of Shanghai, has eroded the growth outlook of the world’s second-biggest economy. Retail sales declined 3.5 per cent in March from the same month in 2021, the first year-on-year fall since July 2020; the annual rate of increase in industrial production slowed; and indicators tracking China’s struggling property market further deteriorated. “While the March data shows notable slowing in growth momentum, with the escalation in zero-Covid policy and broadening disruption on economic activity, the drag on economic activity will likely be larger in April compared to March,” JPMorgan analysts said. JPMorgan reduced its forecast for China’s GDP growth in 2022 from 4.9 per cent to 4.6 per cent. Barclays also trimmed its estimate for 2022 growth from 4.5 per cent to 4.3 per cent. The latest bout of concerns over China added to investor uneasiness over global central banks’ plans to tighten monetary policy in an attempt to rein in raging inflation. Indeed, US natural gas prices rallied 10 per cent to $8.03 per metric million British thermal unit on Monday — the highest level since 2008.Investors will closely watch speeches from Federal Reserve officials this week, including chair Jay Powell, that may give further guidance on how aggressively policymakers will raise interest rates this year.

Jan Hatzius, chief economist at Goldman Sachs, said at the weekend that the US central bank faced a “hard path to a soft landing” as it attempted to push the inflation rate down to its 2 per cent target, from 8.5 per cent, by sharply boosting borrowing costs and reducing the size of its $9tn balance sheet. Hatzius sees a 15 per cent chance that the US will fall into recession in the next year and 35 per cent that it will do so in the next 24 months. Investors also digested the latest batch of corporate results. Bank of America on Monday reported better than expected earnings fuelled by a lending rebound and higher interest rates.First-quarter earnings season in the US started on a decent footing, with companies in the S&P 500 so far reporting earnings 7.5 per cent higher than estimates, according to FactSet. However, less than a tenth of companies on the blue-chip index have updated the market, and investors will have a better picture of the overall outlook by the end of this week, when a further 67 constituents including Netflix, IBM and American Express will have reported results. More

“What we need to do right now is get expeditiously to neutral and then go from there,” Bullard said at a virtual event held by the Council on Foreign Relations. But with economic growth expected to remain above its potential, he added, the economy won’t fall into recession and the unemployment rate, now at 3.6%, will likely drop below 3% this year.The Fed raised its target policy rate a quarter-of-a-percentage point last month, and Fed forecasts released at the time showed policymakers expected rates to rise to 1.9% by year-end. Bullard’s preferred rate path would require half-point interest rates hikes at all six of the Fed’s remaining meetings this year. The likely rate path is probably somewhere in between, based on interest-rate futures contracts, which are currently pricing in a year-end policy rate range at 2.5%-2.75%. Bullard said he also wants to begin reducing the Fed’s balance sheet at an upcoming meeting, though he said he did not see a need to start selling bonds unless inflation does not recede as the Fed expects. More

At least 60 of 200 workers from Amazon (NASDAQ:AMZN)’s DNK5 depot in Bayonne, New Jersey, have submitted cards seeking to organize as part of Local 713 International Brotherhood of the Trade Union, the NLRB said.The news follows growing interest in organizing at Amazon, which for years had resisted unions in its U.S. operations.Just last month, thousands of employees at the JFK8 warehouse in Staten Island voted to organize under a different group known as the Amazon Labor Union, and workers at a second Staten Island warehouse are weighing later this month whether to unionize.An election date and terms have yet to be agreed upon for the delivery station DNK5. Amazon could dispute the validity of this latest petition.The company did not immediately respond to a request for comment. More

WASHINGTON (Reuters) – Wall Street ended the day lower in a choppy trading day on Monday, while U.S. Treasury yields jumped as investors juggled strong earnings with what Russia’s invasion of Ukraine could mean for global growth.A significant cut to global growth expectations from the World Bank, paired with March weakness in China’s latest economic numbers injected some pessimism into U.S. markets, which opened Monday following a holiday-shortened previous week.But a strong quarterly earnings report from Bank of America (NYSE:BAC) offset some of that concern, as investors prepared for more major corporate earnings reports this week.The Dow Jones Industrial Average ended down 0.11%, while the S&P 500 dipped 0.02% and the Nasdaq Composite slid 0.14%. Markets were closed in Australia, Hong Kong and many parts of Europe for the Easter holiday.The World Bank announced it was cutting its global growth forecast for 2022 by nearly a full percentage point due to the impact of Russia’s invasion of Ukraine. The organization now expects economic growth of 3.2% this year, down from a prior 4.1% forecast.China also reported that its economy slowed in March as consumption, real estate and exports were hit hard, worsening an outlook already weakened by COVID-19 curbs and the Ukraine war.”Stocks continued to search for sustained upside momentum amid high inflation readings, interest rates on the rise, and dashed hopes for a cease fire in Ukraine,” said Chris Larkin, managing director at E*TRADE. OIL, BOND YIELDS SURGEOil prices closed over 1% higher, boosted by concerns over tight global supply amid the Ukraine crisis.Those concerns were amplified after Libya’s National Oil Corp said a “painful wave” of closures were impacting its facilities, offsetting any concerns about reduced demand from a locked down China.”With global supplies now so tight, even the most minor disruption is likely to have an outsized impact on prices,” said Jeffrey Halley, analyst at brokerage OANDA.Brent crude settled 1.3% higher at $113.16 a barrel after earlier hitting $114.84, its highest since March 28. U.S. crude ended up 1.2% at $108.21 per barrel.The looming prospect of aggressive interest rate hikes from the Federal Reserve helped push U.S. Treasury yields to three-year highs while boosting other safe havens. The Fed is now expected to hike rates by 50 basis points at its May and June meetings, at least, as it looks to contain rapid inflation. Fed funds futures traders are expecting the Fed’s benchmark rate to rise to 1.28% in June and to 2.67% next February, from 0.33% now.”Despite nascent signs that inflation could be easing and hawkish Fed bets being trimmed, a 50bps rate hike for May looks all but locked in,” wrote Deutsche Bank (ETR:DBKGn) analysts in a note.The benchmark 10-year note was last 2.8373%, after previously hitting 2.884% earlier on Monday, the highest since December 2018.Concerns over economic fallout helped push gold prices to a one-month high Monday, with safe-haven spot gold last up 0.14% to $1,977.35 an ounce.The dollar also got a boost as a safe haven, with the dollar index, which tracks the greenback versus a basket of six currencies, was up 0.47%. More

WASHINGTON (Reuters) -The U.S. Treasury this week will call on international policymakers to take steps to mitigate the impact from Russia’s war in Ukraine on developing economies, which are paying high costs through increased food and energy prices, Deputy Treasury Secretary Wally Adeyemo said on Monday.”We must not allow Russia’s invasion of Ukraine to further burden countries still struggling to deal with a global pandemic,” Adeyemo said in remarks to a virtual event hosted by the Washington-based Peterson Institute for International Economics think tank.Adeyemo said that the coalition of more than 30 countries supporting sanctions against Russia would continue to ratchet up pressure on Moscow. “As long as Russia’s invasion continues, our sanctions will continue. Even as we continue to pursue rigorous financial sanctions against Russia and its key financial institutions, the next phase of our work will be to take apart Russia’s war machine, piece by piece, by disrupting their military industrial complex and its supply chains.”China is outside of that coalition, but is continuing to comply with the sanctions now in place, “for the same basic reason of China’s business with the rest of the world is far greater than its business with Russia,” Adeyemo said.But Treasury is calling on China to press Russia to end its invasion of Ukraine because China values sovereignty and economic stability, Adeyemo said.Asked about whether sanctions on Russia will drive some major economies to find substitutes for the dollar, he said he expected the dollar to remain the world’s reserve currency as long as the United States continues to invest in its future and maintains a dynamic economy that attracts investment.He emphasized the multilateral approach to the Russia sanctions was important for the dollar, as the coalition of partners supporting them includes nearly every major convertible currency in the world. More

A senior official at the Treasury department has pushed back on warnings that the sweeping sanctions package announced by the US and its allies against Russia risks fracturing the international economy, vowing instead to take further retaliatory action if necessary.In a speech delivered on Monday, Wally Adeyemo, the deputy Treasury secretary, defended the unprecedented penalties imposed on Russia following its invasion of Ukraine, which have included sanctioning its central bank and restricting its access to the dollar-dominated global financial system.One concern is that by wielding these financial weapons, the US and its allies risk encouraging adversaries to spurn the dollar and seek out alternatives as well as create new systems that lead to a more fragmented global economy — criticism Adeyemo countered directly in his speech.“We have shown not only how indispensable this [global financial] system is and how costly it is to be excluded from it, but also the futility of trying to avoid it,” he said at an event hosted by the Peterson Institute for International Economics. “Russia’s efforts to insulate itself from sanctions have failed because of the strength of the financial system we have collectively built.”Adeyemo highlighted the multilateral nature of the sanctions package, which he said involved more than 30 countries that represent more than 50 per cent of the global economy and are “issuers of the world’s most widely used convertible currencies, and producers of the world’s cutting-edge technologies”.When asked specifically about the dollar’s role as the world’s reserve currency, Adeyemo noted that the US has the “deepest, most liquid” capital markets, a “dynamic” economy and a “stable” set of laws.“The dollar is going to remain ubiquitous, even for countries that are attempting to escape it,” he said during a discussion that followed his speech.

The sheer size of the coalition has meant Russia has had limited options to blunt the impact of the sanctions, which have caused a sharp recession and soaring inflation in the country. Energy and food prices globally have also jumped, exacerbating inflationary pressures that have ratcheted higher across advanced economies.Adeyemo said the US is prepared to take further action against Russia, with other top officials warning separately on Monday that the Treasury will also go after those who attempt to evade sanctions or facilitate such moves.“As long as Russia’s invasion continues, our sanctions will continue,” he said. “Even as we continue to pursue rigorous financial sanctions against Russia and its key financial institutions, the next phase of our work will be to take apart Russia’s war machine, piece by piece, by disrupting their military industrial complex and its supply chains.”He later added that he expects China to abide by the sanctions regime given that “China’s business with the rest of the world is far greater than its business with Russia”. More

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen plans to skip some sessions of this week’s G20 finance meeting in protest at Russia’s assault on Ukraine and will urge International Monetary Fund and World Bank members to increase pressure on Moscow, two senior U.S. Treasury officials said on Monday.The Treasury Department will concentrate on cracking down on those seeking to evade sweeping sanctions imposed on Russia over the war, and those who facilitate such efforts, one of the officials said.Yellen’s decision to avoid some sessions joined by Russian officials underscores the U.S. view that Russia should be excluded from global financial institutions because of its invasion, the official said.Russian Finance Minister Anton Siluanov may attend at least portions of the G20 meeting virtually, the official said, repeating Yellen’s recent comments that it can no longer be “business as usual” for Russia in the G20 and other international institutions.Yellen will attend the opening G20 finance session on the economic impact of Russia’s war in Ukraine, including the IMF’s forecast of a 35% contraction in Ukraine’s economic output this year. Even if Russian officials attend that session, the official said it was important for Yellen to participate in and stand with American allies in support of Ukraine.Washington and its allies will further pursue consultations on sanctions imposed on Russia, including a focus on thwarting evasion of sanctions previously imposed, one official said.The official declined to discuss specific next steps, but added that additional sanctions, including measures targeting Russian industries, would seek to further restrict Russia’s economy and ability to project power.Yellen will convene a high-level panel on Tuesday to discuss the global response to a food security crisis exacerbated by Russia’s invasion, the Treasury Department said.Moscow calls the assault on Ukraine a “special military operation.” More