Economy

BELLINZONA, Switzerland (Reuters) – The Swiss Federal Criminal Court on Wednesday convicted two executives at an oil exploration company accused of embezzling over $1.8 billion from Malaysia’s state investment fund 1MDB.The verdict was the latest episode in the 1MDB scandal, a complex tale of international corruption that has buffeted a slew of financial institutions and individuals across the globe since allegations of wrongdoing first surfaced in 2015.Prosecutors alleged that Swiss-British national Patrick Mahony and Swiss-Saudi Tarek Obaid, helped to set up a joint venture with 1MDB by creating the impression that their company, PetroSaudi, was backed by the Saudi government.This was not, in fact, the case, but the accused managed to persuade 1MDB’s board into signing up to the scheme in 2009 before going on to defraud the fund, prosecutors said.According to the indictment, the two executives defrauded the wealth fund of $1.8 billion to enrich themselves, with Obaid getting at least $805 million and Mahony at least $37 million. Obaid was sentenced to seven years in prison by the court, while Mahony received a sentence of six years.Prosecutors said the two men created the fraudulent scheme with fugitive Malaysian financier Jho Low, an advisor to former Malaysian Prime Minister Najib Razak, who is already in prison over his role in the multi-billion dollar scandal.Initially extracting $1 billion from 1MDB so it could buy a stake in their venture, the accused took a further $830 million from the fund between 2010 and 2011 as part of an Islamic loan that followed on from their tie-up, prosecutors said.Malaysian and U.S. investigators estimate a total of $4.5 billion was siphoned away from 1MDB following its inception in 2009, implicating figures ranging from Razak, Goldman Sachs staff and high-level officials elsewhere. More

BRASILIA (Reuters) – Brazil’s central bank chief Roberto Campos Neto said on Wednesday that the country’s disinflation process has slowed while inflation expectations have further deviated from the official 3% target recently. His remarks were part of a presentation at a Santander (BME:SAN) event, where he also emphasized that “services inflation, which has greater inertia, plays a predominant role in the current stage of the disinflationary process” in the country. More

This anticipated move aligns with the pattern of softening economic indicators, with expectations of the rate reaching 3.75% by the end of the year and 3.0% by the end of 2025.The Canadian economy has shown signs of frailty, as evidenced by the modest month-over-month GDP growth of 0.2% in May and a preliminary estimate of 0.1% in June. Retail sales in June declined by 0.3%, although core retail sales increased by 0.4%. However, a preliminary figure suggests a rebound in July with a 0.6% rise. BofA Global Research anticipates a second-quarter GDP growth of 2.0% on a seasonally adjusted annual rate, which is close to the trend but still indicative of an overall sluggish economy.The labor market has not fared much better, with employment numbers falling for the second consecutive month in July and wage growth decelerating. The unemployment rate remained elevated at 6.4%. While full-time employment saw an increase in July, this was offset by a decrease in part-time jobs, signaling a potential shift in employment trends but still underpinning the case for a rate cut in September.Inflation has continued its decline, with July’s headline inflation dropping to 2.5% year-over-year from 2.7%, and core inflation, which includes median and trimmed measures, decreasing to 2.6% from 2.8%. Services inflation, particularly impacted by shelter costs, also showed a significant decrease. These trends in inflation support the BoC’s stance, as Governor Tiff Macklem has previously indicated that easing inflation would likely lead to further rate cuts.The BofA Global Research commentary suggests that while the decline in expectations for the BoC’s terminal rate has contributed to the year-to-date outperformance of Canadian rates, the pace of this outperformance may slow if economic data in the U.S. continues to normalize. In the foreign exchange market, the Canadian dollar is no longer seen as undervalued against the U.S. dollar, and the upcoming BoC decision is not expected to significantly impact the currency pair.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Wednesday’s inquiry, targeting cheese, milk and cream meant for human consumption, came after the EU amended proposed punitive duties on Chinese EV imports to 36.3% from an initial 37.6%. Beijing had urged Brussels to abandon the tariffs.DAIRY PRODUCER ARLA FOODS:The CEO of Arla Foods, one of the world’s biggest dairy producers owned by more than 9,000 dairy farmers in Denmark, Sweden, Britain, Germany, Belgium, Luxemburg and the Netherlands, said the company is not directly impacted by China’s anti-subsidy probe.”I’m confident that the EU and the system can handle this, and that it doesn’t necessarily have to become as dramatic as it initially seems,” Peder Tuborgh said.”(China is) far from self-sufficient, and the exports to China are still reasonable, but they are able to meet their growth consumption nicely through the development they are undergoing themselves… (I see this) as a normal market mechanism, more than being a specifically protectionist thing.EUROPEAN UNION CHAMBER OF COMMERCE IN CHINA:”Regrettably, the use of trade defence instruments by one government is increasingly being responded to seemingly in kind by the recipient government.”The chamber will be monitoring the investigation and hopes it will be conducted fairly and transparently. We expect our affected member companies to co-operate to the fullest with the investigation.”FRIESLANDCAMPINA:Dutch dairy cooperative FrieslandCampina, whose specialised nutrition business sells infant nutrition products in China and which has a small business selling condensed milk products and creamers for the business-to-business market, said it was aware of the announcement of the anti-subsidy investigation. “Naturally, we will provide the necessary information related to the investigation, if requested, in accordance with laws and regulations,” a spokesperson said.THE IRISH FARMERS ASSOCIATION:Tadhg Buckley, director of policy and chief economist at Ireland’s largest farming lobby group the Irish Farmers’ Association, said Chinese authorities are looking predominantly at “cheese, cream and other related processed cheese, blue cheeses and cheeses of that type”.He said that would account for about 45 million of 430 million euros ($478.55 million) worth of Irish exports last year. Specialised powders used for nutritional purposes make up the bulk of exports to China, he added. “If the investigation… expanded outside into powders, it would certainly be a much different and much more significant issue for Ireland,” he said, adding that a trade delegation was heading to China at the end of the month.IRISH MINISTRY FOR AGRICULTURE, FOOD AND THE MARINE:”I will be engaging with the EU Commission to ensure that it has all of the data necessary in so far as Ireland is concerned to resolve any issues raised in the proposed investigation,” Charlie McConalogue, Ireland’s Minister of Agriculture, Food and the Marine, said. JACOB GUNTER, LEAD ECONOMY ANALYST AT MERCATOR INSTITUTE FOR CHINA STUDIES:”EU dairy exports to China come out to around 1.7 billion euros, which is less than 1% of total EU exports to China, so even if tariffs go so high as to de facto block all dairy trade, it will have a relatively small impact on EU exports. “Nevertheless, the pain will be felt more acutely in the biggest exporters to China, from Irish butter to Finnish milk powder to Spanish Manchego to Italian Parmigiano Reggiano.”China has been ramping up its own dairy production for years, and only a small portion of all dairy products consumed in China are imported.”China is important for butter and cheese exports, but considering the size of the country, it is still a minor player.”I expect that more ‘replaceable’ dairy products will be most affected by tariff hikes, as alternatives from the U.S., Canada, Australia, and New Zealand will be more cost competitive – think butter, milk, milk powder, cream, and the most common types of cheese. “For less ‘replaceable’ product types – many of Europe’s high-end and specialized cheeses, for example – the main question will be at (what) point a given product just becomes cost prohibitive.”($1 = 0.8986 euros) More

The average contract rate on a 30-year fixed-rate mortgage fell 6 basis points in the week ended Aug. 23, to 6.44%, the Mortgage Bankers Association said on Wednesday. That was the lowest since April 2023.The decline in mortgage rates, by 38 basis points in four weeks, has kept refinancing applications elevated, as homeowners who bought when rates were even higher moved to lock in lower monthly payments. The MBA 30-year average rate topped out at 7.9% last October.Mortgage applications and purchase applications edged up just 0.5% and 1% respectively, as would-be homebuyers hold out for a further drop in rates.Interest-rate futures reflect bets the Fed will cut short-term rates by a full percentage point by the end of this year.Rising borrowing costs and a limited number of new and existing homes offered for sale have helped make home ownership increasingly out of reach for many. Democratic presidential nominee Kamala Harris and her Republican rival Donald Trump have made housing affordability integral to their pitch to voters in the November presidential election, with both promising to reduce costs for Americans in different ways. More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

LONDON (Reuters) -The U.S. Treasury has a lot of debt to place in the next year, but its active management of the maturity profile shows why the oft-heralded U.S. debt “crisis” is unlikely to occur anytime soon.Treasury funding math currently is quite daunting, with more than half a trillion dollars of bills and bonds under the hammer this week alone. But almost three-quarters of this week’s deluge is in bills, which mature in 12 months or less, and these will roll over at progressively lower rates if U.S. interest rates decline as expected.While huge weekly Treasury sales are by now familiar, many investors continue to circulate notes expressing concern about the mounting levels of government debt that need to find willing buyers.Torsten Slok, the chief economist at Apollo Global Management (NYSE:APO), is the latest to warn of potential danger ahead with his “Top 10” list of Treasury factoids. Slok notes that $9 trillion of government debt is maturing over the next year, debt servicing costs have hit 12% of government outlays, trillion-dollar-plus deficits are projected over the next decade, and the debt/GDP ratio is expected to double to 200% by mid-century.His conclusion is simple: Watch out for bumpy auctions, possible credit rating downgrades, and the persistent threat that long-term bond investors will begin to demand a hefty “term premium” to hold long-dated Treasuries.But by front-loading the maturity profile of the debt, the Treasury is revealing one of its main tools to circumvent a debt crunch over the coming year or more.Even though the weighted average maturity of the entire marketable debt stock is still above pre-pandemic levels at close to six years, bills maturing in one year or less make up 22% of the total – well up from the 10%-15% seen both 18 months ago and typical for much of the decade before COVID-19 hit.With policy rates currently more than 5%, that short-term issuance will be costly. But the picture changes considerably if the Federal Reserve moves into rate-cutting mode next month and lops more than 200 basis points off rates over the next year, as the futures markets currently expect.BUILDING BILLSDoes this mean the Treasury is deliberately distorting the U.S. government debt market? Analysts at CrossBorder Capital argue the Treasury is doing just that through a policy of “active duration management” (ADM) designed to suppress yields. In a piece headlined “US Treasury Bribes World’s Smartest Investor,” CrossBorder models what that bill-heavy maturity profile might mean for debt tenors currently receiving less attention, such as the benchmark 10-year Treasury note. The analysts compare the yield on the latter with the much-higher yield on equivalent U.S. mortgage-linked bonds, adjusted for interest rate sensitivity and the related “convexity.”Their model shows a whopping 100-basis-point-plus gap between the two, which they suggest is wholly due to this unofficial ADM policy.CrossBorder says a funding discount of that size knocks a full 35 percentage points off the U.S. 2050 debt/GDP ratio forecast.So win-win? Perhaps not entirely.The negatives are less obvious, but no less meaningful. If 10-year yields are suppressed to the degree suggested, then that’s one reason why the shape of the yield curve has been persistently inverted for more than two years without the recession many say that predicts actually unfolding. But there are costs to losing such a useful tool in forecasting the future course of the economy and inflation.Also, further reduction in the average maturity profile of the entire debt stock from here makes rollover risk a greater concern. Periodic “accidents,” such as debt ceiling rows or temporary default threats in the bill market, could have a disproportionate impact if exposure to bills keeps rising. And even though continuing to jam the bill markets with new paper may reduce debt servicing costs in the near term, what happens when the Fed cycle turns again or the economy truly is in a new world in which higher inflation and elevated rates persist?That risk is especially pertinent given current political realities. Absent a shift in fiscal policy over the coming years, the U.S. debt profile will eventually require some painful adjustments. And, ironically, the lack of market ructions in the interim could actually lessen the chance of political action to rein in the deficits and debt, which will only compound the problem.But what’s also clear is government debt managers have multiple tools and sleights of hand to help them navigate this current period without generating the sort of crisis so many forecast.Whether such moves are just temporary stopgaps is another question. But, given recent history, it would seem dangerous to bet that the Treasury and Fed will fail to keep this particular show playing for the foreseeable future.The opinions expressed here are those of the author, a columnist for Reuters.(by Mike Dolan; Editing by Paul Simao) More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More