Economy

LONDON/WASHINGTON (Reuters) -Police in Britain have arrested seven people following a series of hacks by the Lapsus$ hacking group which targeted major firms including Okta (NASDAQ:OKTA) Inc and Microsoft Corp (NASDAQ:MSFT), City of London Police said on Thursday.San Francisco-based Okta Inc , whose authentication services are used by some of the world’s biggest companies to provide access to their networks, said on Tuesday it had been hit by hackers and some customers may have been affected.”The City of London Police has been conducting an investigation with its partners into members of a hacking group,” Detective Inspector Michael O’Sullivan said in an emailed statement in response to a question about the Lapsus$ hacking group.The ransom-seeking gang had posted a series of screenshots of Okta’s internal communications on their Telegram channel late on Monday.”Seven people between the ages of 16 and 21 have been arrested in connection with this investigation and have all been released under investigation,” O’Sullivan said.News of the digital breach had knocked Okta shares down about 11 percent amid criticism of the digital authentication firm’s slow response to the intrusion.Shares of Okta were trading down 4.8% on Thursday.City of London Police did not directly name Lapsus$ in its statement. A spokeswoman said none of the seven people arrested had been formally charged, pending investigation.WHO ARE LAPSUS$?Last month, Lapsus$ leaked proprietary information about U.S. chipmaker Nvidia (NASDAQ:NVDA) Corp to the Web.More recently the group has purported to have leaked source code from several big tech firms, including Microsoft, which on Tuesday confirmed that one of its accounts had been compromised.Lapsus$ have not responded to repeated requests for comment on their Telegram channel and by email.A teenager living near Oxford, England, is suspected of being behind some of the more notable attacks, Bloomberg News reported on Wednesday.Reached by phone, the father of the teenager – who cannot be named because they are a minor – declined to comment. Reuters confirmed that cybersecurity researchers investigating Lapsus$ believe the teenager was involved in the group, according to three people familiar with the matter.In a blog post on Thursday, Unit 42, a research team at Palo Alto Networks (NASDAQ:PANW), described Lapsus$ as an “attack group” motivated by notoriety rather than financial gain.Unlike other groups, they do not rely on the deployment of ransomware – malicious software to encrypt their victims’ networks, a hallmark of digital extortionists – and instead manually lay waste to their targets’ networks.Along with Unit 221b, a separate security consultancy, the Palo Alto researchers said they had identified the “primary actor” behind Lapsus$ in 2021 and had been “assisting law enforcement in their efforts to prosecute this group”.”The teenager we identified as being in control of Lapsus$ is particularly instrumental,” Allison Nixon, chief research officer at Unit 221b, told Reuters.”Not just for their leadership role, but for the vital intel they must possess on other members”. More

BRUSSELS (Reuters) -U.S. President Joe Biden on Thursday said that China knows its economic future is tied to the West, after warning Chinese leader Xi Jinping that Beijing could regret siding with Russia’s invasion of Ukraine.”I made no threats but I made it clear to him – made sure he understood the consequences of helping Russia,” Biden told reporters of his call on Friday with Xi.”I pointed out the number of American and foreign corporations that left Russia as a consequence of their barbaric behavior.”The Biden administration has been pressuring China to refrain from supporting Russia including by helping it counter Western sanctions and providing military assistance.China has not condemned Russia’s action in Ukraine, though it has expressed deep concern about the war as well as about Western sanctions, which it regards as counter-productive and unilateral.Biden’s comments pointed to the economic interdependence of China and the United States, its largest trading partner. That is leverage Washington wants to use to nudge China away from Russia after the two countries touted a “no limits” strategic partnership in February. But any sanctions or other counter-measures against Beijing would have spillover effects for the U.S. economy, too, experts say.Still, there are already signs that the Sino-Russian relationship may be hurting foreign investment in China, including significant capital flows from the country since Russia’s Feb. 24 invasion of Ukraine, according to the Institute of International Finance.”China understands that its economic future is much more closely tied to the West than it is to Russia,” Biden told a news conference on the sidelines of emergency meetings in Europe about the Ukraine war. More

How well did you keep up with the news this week? Take our quiz.Joe Biden said the US and its allies were prepared to respond “in kind” if Russia uses chemical weapons during its invasion of Ukraine. Speaking at a press conference in Brussels, the US president added that the Nato alliance would decide how to react “at the time” if such a scenario arises.Biden spoke after meeting with other Nato leaders to debate the appropriate response to the possible use of weapons of mass destruction by Russia, as well as military aid for Ukraine and tighter sanctions on Moscow. The US president is also trying to drum up support for a united front against China in the event that Beijing decides to assist Russia. If it does, there will be “consequences” as Biden said in his phone call to Chinese president Xi Jinping last week.The Nato summit, called by the US president at short notice, was Biden’s first stop on a multi-day trip to Europe intended to urge the west to sustain pressure on Vladimir Putin and remain unified in its response to the war.More news on UkraineEnergy: The US plans to supply Europe with up to 15bn additional cubic metres of liquefied natural gas to help the continent reduce dependence on Russia.Business: Severstal is on course to become the first main Russian company to default on its debt since the invasion of Ukraine.China: Russia’s invasion of Ukraine has sparked heated controversy among Chinese policy experts as well as the public at large.Sanctions: The UK rolled out a new round of 65 sanctions, targeting Russian individuals including the alleged stepdaughter of foreign minister Sergei Lavrov.Markets: Russian shares rose yesterday after Moscow’s stock market reopened. US stocks were also up, but government bonds slipped lower.Defence: Nato leaders have pledged to step up their military assistance to Ukraine against the threat of Russian chemical and nuclear weapon attacks.Military briefing: The Donbas is where the Russian invasion of Ukraine began eight years ago and it could prove decisive in the outcome of the war. Opinion: Columnists Martin Wolf and Gideon Rachman discuss the pros and cons of western intervention in Ukraine.Thanks for reading FirstFT Asia. Send your feedback on today’s newsletter to [email protected] — SophiaFive more stories in the news1. Beijing nears security pact to allow troops in Solomon Islands A leaked security co-operation agreement has revealed that the Solomon Islands could allow Chinese soldiers and police to be deployed in the Pacific nation, giving China a military foothold in the Pacific Ocean — to the alarm of the US and its allies.2. Tensions are rising after North Korea’s missile launch The US, Tokyo and Seoul have condemned the launch of what appears to be Pyongyang’s longest-range missile yet, which landed in the Sea of Japan yesterday. South Korea’s outgoing president Moon Jae-in described the long-range missile testing as a “serious threat”.

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3. SMBC Nikko bankers are charged with market manipulation Tokyo prosecutors arrested the brokerage’s vice-president and brought criminal charges against the company and five bankers yesterday. The trading scandal threatens to sink SMBC Nikko’s equity division.4. Exclusive: DeFi projects rife with hidden ‘risks’ The head of the global umbrella organisation for securities regulators has warned that decentralised finance contains myriad hidden conflicts and risks and its explosive growth warranted “closer attention by regulators”.5. Toshiba shareholders reject management’s plan to split company The pivotal vote hands a fresh defeat to the Japanese company which has been at loggerheads with its shareholders for four years. Shares fell as much as 5 per cent in Tokyo after the result of the vote was made public.The days aheadBank of Japan board nominations Japan’s upper chamber of parliament is expected to approve two nominees today for the central bank’s board, replacing policymakers who will retire in July. (Reuters)UK moratorium lifted on commercial eviction The government’s ban on commercial evictions ends on Friday, the same day that the Commercial Rent (Coronavirus) Bill comes into force. Restaurants could be forced to pay rent for the periods in which they were unable to open.And the Oscar goes to . . .  The ceremony for the 94th Academy Awards, the Oscars, convenes in Hollywood on Sunday. Read up on the nominees for the four main awards here.What else we’re reading The pressure of China’s uncertain future In today’s special edition of our Unhedged newsletter, Robert Armstrong and Ethan Wu are joined by Adam Tooze of Chartbook to debate China’s economic transformation. While the risk of an immediate 2008-style crisis in China is slight, the question still stands: Are we now about to witness a real economic uncoupling between China and the west?New rules for foreign owners of UK property The UK’s new requirement for overseas companies to declare real estate ownership could raise tax issues for some foreigners. Catch up on our explainer of the new law to avoid any potential legal disputes. Roman Abramovich’s yachts sail into Turkish squall The Eclipse, one of the billionaire’s superyachts, arrived in the port of Marmaris this week, epitomising western concerns about Turkish reluctance to sign up to sweeping sanctions against Russia. Abramovich’s US holdings, such as his $50mn estate in Aspen, Colorado, could be seized by US authorities if the country moves to impose tighter sanctions on oligarchs.Does office romance make you a better worker? Working It podcast host Isabel Berwick discusses the way organisations police office relationships. She is also joined by the co-founders of a business who shared a romance before sharing assets.Remembering Madeleine Albright President Joe Biden yesterday led tributes to Madeleine Albright, who has died at the age of 84. She fled Communist rule in eastern Europe as a child and rose through the ranks of US diplomacy to become the first female secretary of state. Edward Luce has written a full appreciation of her life.Food & drinkAfter one sickly encounter with a raw oyster, food and drink writer Tim Hayward spent the next 20 years unable to stomach the delicacy at all. The mental association he’d developed between oysters and the unpleasant night that followed ruined the idea of eating the mollusc. In FT Magazine, Tim explores the idea that how something tastes depends so much on what happens inside the brain. More

A month on, Russia’s currency has lost a large part of its value and its bonds and stocks have been ejected from indexes. Its people are experiencing economic pain that is likely to last for years to come.Below are five charts showing how the past month has changed Russia’s economy and its global standing: ECONOMIC PAINIn 2020, Russia was the world’s 11th-largest economy, according to the World Bank. But by the end of this year, it may rank no higher than No. 15, based on the end-February rouble exchange rate, according to Jim O’Neill, the former Goldman Sachs (NYSE:GS) economist who coined the BRIC acronym to describe the four big emerging economies Brazil, Russia, India and China.Recession looks inevitable. Economists polled by the central bank predicted an 8% contraction this year and for inflation to reach 20%.Forecasts from economists outside Russia are even gloomier. The Institute of International Finance predicts a 15% contraction in 2022, followed by a 3% contraction in 2023.”Altogether, our projections mean that current developments are set to wipe out the economic gains of roughly fifteen years,” the IIF said in a note. (Graphic: IIF on Russia GDP – https://fingfx.thomsonreuters.com/gfx/mkt/jnvwekwagvw/IIF%20on%20Russia%20GDP.PNG) INFLATION BUSTING TURNS TO DUST Since taking office in 2013, central bank governor Elvira Nabiullina’s biggest triumph was curbing inflation from 17% in 2015 to just above 2% in early-2018. As price pressures rose in the post-pandemic months, she defied industrialists by raising interest rates eight months straight.Nabiullina also resisted calls in 2014-2015 for capital controls to stem outflows following the annexation of Crimea. But those achievements have been torn to shreds in less than a month.Annual price growth has accelerated to 14.5% and should surpass 20%, five times the target. Households’ inflation expectations for the year ahead are above 18%, an 11-year high. While panic-buying accounts for some of this, rouble weakness may keep price pressures elevated.With Russia’s reserves warchest frozen overseas, Nabiullina was forced to more than double interest rates on Feb. 28 and introduce capital controls. The central bank now expects inflation back at target only in 2024. (Graphic: Russia inflation – https://fingfx.thomsonreuters.com/gfx/mkt/zgvomyrkmvd/Russia%20inflation.PNG) INDEX ELIMINATIONSanctions are forcing index providers to eject Russia from benchmarks used by investors to funnel billions of dollars into emerging markets.JPMorgan (NYSE:JPM) and MSCI are among those that have announced they are removing Russia from their bond and stock indexes respectively.Russia’s standing in these indexes had already taken a hit following the first set of Western sanctions in 2014 and then in 2018, following the poisoning of a former Russian spy in Britain and investigations into alleged Russian meddling in the 2016 U.S. elections.On March 31, Russia’s weighting will be dialled to zero by nearly all major index providers. (Graphic: Russia’s weighting in JPMorgan bond indexes – https://graphics.reuters.com/RUSSIA-BONDS/INDEXES/dwpkrlkwovm/chart.png) RATINGS RUPTUREWhen Russian troops stormed into Ukraine, their country had a coveted “investment grade” credit rating with the three major agencies S&P Global (NYSE:SPGI), Moody’s (NYSE:MCO) and Fitch.That allowed it to borrow relatively cheaply and a sovereign debt default appeared a distant prospect.In the past four weeks, Russia has suffered the largest cuts ever made to a sovereign credit score. It is now at the bottom of the ratings ladder, flagging an imminent risk of default. (Graphic: Russia’s credit rating sees largest cut ever seen globally – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkdeedpx/Pasted%20image%201648133122095.png) ROUBLE TROUBLE A month ago, the rouble’s one-year average exchange rate sat at 74 per dollar. Trading on different platforms showed the ample liquidity and tight bid/ask spreads expected for a major emerging market currency.All that has changed. With the central bank bereft of a large portion of it hard currency reserves, the rouble plunged to record lows of more than 120 per dollar locally. In offshore trade it fell as low as 160 to the greenback.As liquidity dried up and bid/ask spreads widened, pricing the rouble has become haphazard. The exchange rate is yet to find a balance on- and offshore. (Graphic: Pricing the rouble amid a liquidity crunch – https://graphics.reuters.com/RUSSIA-ROUBLE/TRADING/zdvxojyympx/chart.png) More

The investment bank now expects benchmark 10-year yields to rise to 2.7% by year-end, up from its previous forecast of 2.25%. It also expects two-year yields to rise to 2.9% and 3.15% at year-end 2022 and 2023, respectively.For 30-year bonds, the bank expects a more gradual increase, with the yields likely to end 2022 at 2.75%.Goldman also expects the yield curve between two-year and 10-year notes to invert modestly by year-end, but said that should not necessarily be taken as an indicator that a recession is likely to follow. “The nominal curve tends to invert more easily in a high inflation environment, and we could see earlier and/or deeper curve inversions this cycle. In such an environment, a deeper nominal curve inversion may be needed to produce the same recession odds in models as seen in more recent business cycles,” Goldman said.Risks to Goldman’s view include if the war in Ukraine deescalates or if inflation is more persistent, which could lead to even higher yields, while the opposite scenario could result in lower yields, the bank said. More

Policymakers are wrestling with the reality that the pandemic may mark a turning point in the nation’s economic plot.The pandemic, and now the war in Ukraine, have altered how America’s economy functions. While economists have spent months waiting for conditions to return to normal, they are beginning to wonder what “normal” will mean.Some of the changes are noticeable in everyday life: Work from home is more popular, burrito bowls and road trips cost more, and buying a car or a couch made overseas is harder.But those are all symptoms of broader changes sweeping the economy — ones that could be a big deal for consumers, businesses and policymakers alike if they linger. Consumer demand has been hot for months now, workers are desperately wanted, wages are climbing at a rapid clip, and prices are rising at the fastest pace in four decades as vigorous buying clashes with roiled supply chains. Interest rates are expected to rise higher than they ever did in the 2010s as the Federal Reserve tries to rein in inflation.History is full of big moments that have changed America’s economic trajectory: The Great Depression of the 1930s, the Great Inflation of the 1970s and the Great Recession of 2008 are examples. It’s too early to know for sure, but the changes happening today could prove to be the next one.Economists have spent the past two years expecting many of the pandemic-era trends to prove temporary, but that has not yet been the case.Forecasters predicted that rapid inflation would fade in 2021, only to have those expectations foiled as it accelerated instead. They thought workers would jump back into the labor market as schools reopened from pandemic shutdowns, but many remain on its sidelines. And they thought consumer spending would taper off as government pandemic relief checks faded into the rearview mirror. Shoppers have kept at it.Now, Russia’s invasion of Ukraine threatens the global geopolitical order, yet another shock disrupting trade and the economic system.For Washington policymakers, Wall Street investors and academic economists, the surprises have added up to an economic mystery with potentially far-reaching consequences. The economy had spent decades churning out slow and steady growth clouded by weak demand, interest rates that were chronically flirting with rock bottom and tepid inflation. Some are wondering if, after repeated shocks, that paradigm could change.“For the last quarter century, we’ve had a perfect storm of disinflationary forces,” Jerome H. Powell, the Fed chair, said in response to a question during a public appearance this week, noting that the old regime had been disrupted by a pandemic, a large spending and monetary policy response and a war that was generating “untold” economic uncertainty. “As we come out the other side of that, the question is: What will be the nature of that economy?” he said.The Fed began to raise interest rates this month in a bid to cool the economy down and temper high inflation, and Mr. Powell made clear this week that the central bank planned to keep lifting them — perhaps aggressively. After a year of unpleasant price surprises, he said, the Fed will set policy based on what is happening, not on an expected return to the old reality.“No one is sitting around the Fed, or anywhere else that I know of, just waiting for the old regime to come back,” Mr. Powell said.The prepandemic normal was one of chronically weak demand. The economy today faces the opposite issue: Demand has been supercharged, and the question is whether and when it will moderate.Before, globalization had weighed down both pay and price increases, because production could be moved overseas if it grew expensive. Gaping inequality and an aging population both contributed to a buildup of savings stockpiles, and as money was held in safe assets rather than being put to more active use, it seemed to depress growth, inflation and interest rates across many advanced economies.Japan had been stuck in the weak-inflation, slow-growth regime for decades, and the trend seemed to be spreading to Europe and the United States by the 2010s. Economists expected those trends to continue as populations aged and inequality persisted.Then came the coronavirus. Governments around the world spent huge amounts of money to get workers and businesses through lockdowns — the United States spent about $5 trillion.The era of deficient demand abruptly ended, at least temporarily. The money, which is still chugging out into the U.S. economy from consumer savings accounts and state and local coffers, helped to fuel strong buying, as families snapped up goods like lawn mowers and refrigerators. Global supply chains could not keep up.The combination pushed costs higher. As businesses discovered that they were able to raise prices without losing customers, they did so. And as workers saw their grocery and Seamless bills swelling, airfares climbing and kitchen renovations costing more, they began to ask their employers for more money.Companies were rehiring as the economy reopened from the pandemic and to meet the burst in consumption, so labor was in high demand. Workers began to win the raises they wanted, or to leave for new jobs and higher pay. Some businesses began to pass rising labor costs along to customers in the form of higher prices.The world of slow growth, moderate wage gains and low prices evaporated — at least temporarily. The question now is whether things will settle back down to their prepandemic pattern.The argument for a return to prepandemic norms is straightforward: Supply chains will eventually catch up. Shoppers have a lot of money in savings accounts, but those stockpiles will eventually run out, and higher Fed interest rates will further slow spending.As demand moderates, the logic goes, forces like population aging and rampant inequality will plunge advanced economies back into what many economists call “secular stagnation,” a term coined to describe the economic malaise of the 1930s and revived by the Harvard economist Lawrence H. Summers in the 2010s.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

G7 countries and allies have already stripped Moscow of its privileged trade treatment at the WTO, known as “most favoured nation” status, clearing the way for them to hit Russian imports with higher tariffs or ban them entirely.The western group halted work on Belarus’ WTO accession process after President Alexander Lukashenko crushed protests following his 2020 re-election that opponents say was fraudulent.The group on Thursday said in a document filed at the WTO that it strongly condemned Russia’s unprovoked military aggression against Ukraine, enabled by Belarus. Russia, which calls its actions in Ukraine a “special operation,” has used Belarusian territory to launch its attack.”We condemn Belarus for its complicity in Russia’s aggression, which is incompatible with the values and principles of the WTO and of a just rules-based order,” the filing said.”For these reasons, we have concluded that Belarus is unfit for WTO membership. We will not further consider its application for accession,” the filing said.The group’s members include Albania, Australia, Britain, Canada, Iceland, Japan, Montenegro, New Zealand, North Macedonia, Norway, South Korea and Ukraine. More

Mexico’s President Andrés Manuel López Obrador on Thursday rattled the country’s financial sector by declaring the central bank’s interest rate decision before the official announcement.López Obrador told reporters on Thursday morning that the five-member board had voted to raise rates by a half percentage point to 6.5 per cent, in a pre-emptive announcement that was seen as a blow to the bank’s independence.“Yesterday’s decision was taken unanimously and we respect the bank’s autonomy,” he said at his daily morning news conference.Hours later on Thursday afternoon the central bank raised rates by a half-percentage point, as the president had said.It is not the first time the president has taken financial markets by surprise. Late last year, López Obrador spooked investors when he abruptly changed his nominee to lead the bank, choosing an obscure public sector economist and raising fears at the time over the institution’s independence.In 2020 a bill proposed by the ruling Morena party sought to force the bank to buy excess dollars, in another move that critics said undermined the central bank’s autonomy. The proposal was eventually shelved after strong opposition.Experts lined up to criticise the president’s announcement on Thursday, which has again stoked fears that he wants to interfere with monetary policy.“Since López Obrador entered the presidency, there were a lot of concerns about the autonomy of the Bank of Mexico,” said Gabriela Siller, head of financial and economic research at Banco Base. “With today’s announcement these worries have resurfaced again.”The Bank of Mexico declined to comment on the news. The Bank of Mexico became independent in 1994 and has built a reputation in markets for competence. Its new governor, Victoria Rodríguez Ceja, the first woman to ever hold the post, has sought to reassure markets and opposition lawmakers that she would uphold its autonomy.Like other central banks around the world, the Bank of Mexico is trying to tame high inflation, which hit 7.29 per cent in Mexico in the first half of March. Analysts have been revising down their expectations for growth.“I think that this puts the central bank in a bad position,” said Alonso Cervera, chief economist for Latin America at Credit Suisse. “People will be questioning the bank’s autonomy, why does the president know the policy decision ahead of time, who leaked it?”Thierry Wizman, global interest rates and currencies strategist at Macquarie Capital, said the rate hike was in line with expectations and that the pre-emptive announcement was an extension of López Obrador’s second-guessing and nudging of the central bank over the past three years.The Mexican peso reached 20.11 per US dollar, its strongest level since September 2021. Yields on Mexican government bonds across maturities were broadly higher, with the two-year bond yield, which moves with interest rate expectations, rising to 8.46 per cent, its highest since January 2019.Due to a banking conference taking place in Acapulco — where López Obrador, Mexico’s finance minister and the central bank’s governor are expected to speak, among others — there had been a departure from the standard timings for central bank processes, Bloomberg reported, which had potentially given the president earlier access to the information.Gabriel Casillas, chief economist for Latin America at Barclays, said that he did not think this would happen again as the bank resumed its typical schedule. More