Economy

The Panama Canal is struggling to persuade traders in liquefied natural gas and food commodities such as grains to return to the trade route after they were forced out by a historic drought last year.The 110-year-old canal, through which goods ranging from US LNG to Latin American crops have for decades reached the rest of the world, was forced to cap crossings last July because of a lack of rainfall needed to operate its locks. It hopes to return close to capacity in September after months of higher rainfall.But only 13 LNG ships crossed the canal last month, fewer than half the number in July 2022, according to shipping analysis group Marine Traffic. Transits by dry bulk ships also dropped 35 per cent to 129 over the same period.Officials in Panama have shrugged off the impact, as other types of ships, such as container vessels, used the waterway at normal levels and the canal’s income rose thanks to intense bidding for a limited number of slots.But the development highlights how increasing supply chain disruptions, including those linked to climate change, threaten to reshape and drive up the cost of global trade.It comes amid broader uncertainty over the future of the canal — an important source of income for the Central American nation that handles about 5 per cent of global maritime trade — as officials grapple with lower rainfall and local demands to protect drinking water supplies. Last summer’s drought was blamed on the natural weather phenomenon El Niño, but rising temperatures are expected to continue to affect water supplies.Roar Adland, head of research at shipbroker SSY, said the canal was simply “a less attractive option than in the past” for lower-value goods, as it struggled to offer the same cost and time savings as before.Because the canal has forced all customers to pre-book slots since the drought, businesses faced “an extra cost and a loss of flexibility [compared with] the past when you could just show up and wait in a queue,” he added.“This may mean structurally lower transits for the kind of low-value, time-insensitive cargoes typically transported by [dry bulk ships].”At its peak, the canal allowed upwards of 36 vessels to cross per day, but a lack of rainfall forced restrictions that pushed the number down to 20 in January this year. The cost of transiting the canal also rocketed, with one Japanese shipowner paying almost $4mn to skip the queue, the canal said in November. This meant that despite the drought, the canal’s revenue rose 15 per cent in the year to September 2023, with 3 per cent revenue growth forecast for the following fiscal year.Panama Canal Authority director Ricaurte Vásquez said that while officials could not control the rain, the canal was focused on reliability. The authority will review prices next month.“Continuing to raise prices indefinitely is not the way forward, and we are very careful to keep the Panama Canal as a relevant transit route for the whole world,” he said. Ricaurte Vásquez: ‘Continuing to raise prices indefinitely is not the way forward.’ More

(Reuters) -Commonwealth Bank of Australia, the country’s biggest lender, reported a smaller-than-expected drop in annual cash profit on Wednesday, although it warned that high interest rates were affecting the economy and crimping household incomes.CBA, which writes around a quarter of the country’s mortgages, warned that decade-high interest rates were slowing the economy and inflation, with huge impact still being absorbed.”Higher interest rates are slowing the economy and gradually moderating inflation,” Chief Executive Officer Matt Comyn said in the annual results report.”Australia remains well positioned but downside risks continue around productivity, housing affordability, as well as ongoing global uncertainty.”The results report also highlighted a growing trend of borrowers struggling to meet their loan payments due to the double whammy of sticky inflation and high interest rates, leading to delayed loan payments.”Many Australians continue to be challenged by cost of living pressures and a fall in real household disposable income,” the bank said.”Consumer arrears increased reflecting the impact of higher interest rates and cost of living pressures on some borrowers.”Home loan payments due for 90 or more days were at 0.65% of its total mortgages at the end of June, an increase of 13 basis points from December-end.The bank’s net interest margin, a closely watched measure of the difference between interest earned from loans and interest paid on deposits, fell 8 basis points to 1.99%.The country’s biggest lender by market value said cash net profit after tax was A$9.84 billion ($6.52 billion) for the year ended June 30, ahead of an LSEG estimate of A$9.68 billion.It fell around 3% from last year’s record profit of A$10.16 billion.The bank declared a final dividend of A$2.50 per share, compared with A$2.40 a year ago.($1 = 1.5081 Australian dollars) More

SEOUL (Reuters) – South Korea’s mom-and-pop investors are defying last week’s global financial markets rout by pouring even more funds into U.S. stocks, a years-long trend that analysts and investors bet will continue due to the depressed value proposition at home. South Korean retailers have been scooping up Nvidia (NASDAQ:NVDA), Tesla (NASDAQ:TSLA) Inc. and Apple shares (NASDAQ:AAPL) this year fuelled in part by the worldwide AI-frenzy, a move that comes despite government efforts to boost the domestic stock market. Sunny Noh, a 49-year-old who has been investing in Tesla since 2020 and now holds about 85% of his financial assets in the electric-vehicle maker, said he sees the recent market plunge as a long-term buying opportunity. “It can fall in a year or two, but it will rise again in the longer term of 10 years,” he said. Retailers like Noh have been frustrated by the so-called “Korea discount” of lower shareholder returns and depressed valuations in the $1.8 trillion stock market, home to global tech titans like Samsung Electronics (KS:005930) and SK Hynix and automakers such as Hyundai Motor (OTC:HYMTF).For South Korean listed companies, the last 10-year ratio of dividend payment to net income, for instance, stood at an average of 26%, lower than 55% in Taiwan, 36% in Japan and 42% in the U.S., according to the Financial Services Commission. Investors are even more disappointed that Samsung and Hynix aren’t in the forefront of the AI-boom. Shares of Samsung are down 4% so far this year versus a 120% surge for Nvidia. Hynix has fared better, up 25%. The past 10-year price-to-book ratio for Korean companies sits at an average of 1.04 versus 3.64 for the U.S. These numbers partly explain why retailers, popularly known as “ants” because of their massive 14-million number and capacity to act as a powerful collective force, have been investing in droves in overseas markets for well over a decade. Ants like Noh bought $9 billion worth of U.S. stocks between January-July this year, after selling $2.8 billion in 2023 – the first sell-off after three years of a U.S. stock investment boom.They sold a record-high 16.3 trillion won ($11.9 billion) worth of domestic stocks in the same period, driving the KOSPI down 1.3% so far this year when the S&P 500 and Nikkei jumped 13% and 5%, respectively. To be sure, foreign buying of Korean stocks between January-July also rose to a record 27 trillion won, but they accounted for 27% of average daily turnover versus 54% for retailers.FALTERING AMBITIONS? The retail-outflow trends spell trouble for the Yoon Suk Yeol’s government-driven ambitions to boost depressed stock valuations. A planned capital gains tax, slated for next year, is also expected to discourage investors although Yoon has promised to scrap it. Oh Jeong-min, a 42-year old retail investor who lost about 10%, or around 100 million won ($73,012) from his domestic and U.S. stocks during last week’s market shakeout, says he has recouped some of the losses and plans on buying more U.S. shares “when the time is right.””The kind of dividend payout and shareholder return trend I see in U.S. companies is simply hard to spot in Korea,” he said. Noh and Oh are part of a group of eight analysts, investors and government officials who told Reuters they expect the fund-outflows trend to continue as an ageing population seeks higher returns. “We are aware of the trend and the objective of the Value-up Programme is to vitalise investment among not only retail investors but also institutional and foreign investors by making the domestic stock market more competitive,” an official at the Financial Services Commission said. In February, the government proposed a “Corporate Value-up Programme”, mirroring Japan’s capital market reforms, which includes tax incentives to attract retail investors. Many analysts say the programme will probably have only a modest impact due to opaque governance structures of South Korea’s family-run “Chaebol” conglomerates, where controlling families usually pass down stakes to the next generation at low market value. “While in Japan, the mere directive from the stock exchange to make improvements was apparently sufficient to effect change, it is doubtful whether government persuasion alone will be sufficient in Korea, at least for Chaebol groups,” analysts at Mondrian Investment Partners said in a note. In early July, Elon Musk called South Koreans “smart people” in an X post, after data showed Tesla was the top U.S. stock held by South Koreans. Their holdings stood at $13.6 billion as of end-July, followed by Nvidia at $12 billion and Apple at $5.1 billion. “South Korea has become a remarkable market in Asia, with the size of South Koreans’ investment in U.S. stocks now exceeding Japan’s,” said Seungyeon Kim, CEO at Toss Securities. Oh, the retail investor, is betting on more upside for U.S. stocks.”There’s no doubt that as an investor, you should choose the U.S. market if you think long-term.”($1 = 1,369.6200 won) More

TOKYO (Reuters) – The dollar remained on the back foot on Wednesday after tumbling versus major peers overnight as a benign reading for U.S. producer prices reinforced bets on Federal Reserve interest rate cuts this year.Risk-sensitive currencies stayed strong after the unexpected softening in inflation buoyed equities, even with crucial U.S. consumer price index (CPI) figures still looming later on Wednesday. The Australian dollar reached a more than three-week peak, while sterling traded near a more than two-week high following its best one-day performance against the dollar since late April. New Zealand’s dollar hovered near a four-week high ahead of a Reserve Bank of New Zealand (RBNZ) policy decision, with markets split over the potential for a rate cut.The dollar index – which measures the currency against six major rivals, including sterling, the euro and the yen – was steady at 102.63 after slumping 0.49% overnight.Traders were already certain that the Federal Open Market Committee (FOMC) would lower rates at its September meeting before the producer price data, but ramped up bets for a super-sized 50 basis point cut to 53.5% from 50% a day earlier, according to CME’s FedWatch Tool.Commonwealth Bank of Australia (OTC:CMWAY) analysts expect the dollar to be in a holding pattern before the release of U.S. CPI data, but then see risks tilted toward further weakness.”We expect the market to double down on large interest rate cuts by the FOMC this year if the core CPI increases by 0.1%/mth or less, (whereas) we expect the market to largely play down the core CPI if it increases by 0.2%/mth or 0.3%/mth,” Carol Kong, a currency strategist at CBA, wrote in a client note.Sterling was steady at $1.2866 following a 0.76% rally on Tuesday when it got an additional boost from data showing a surprise drop in the UK’s jobless rate.The euro was flat at $1.0996 after rising to $1.099975 on Tuesday for the first time since Aug. 5.The dollar was stable at 147.06 yen as it continued to consolidate around the 147 level this week.The Aussie was little changed at $0.6637 after earlier touching $0.66395 for the first time since July 23.The kiwi edged up 0.07% to $0.6081, close to Tuesday’s high of $0.60815, a level last seen on July 18.While a Reuters poll of 31 analysts last week found 19 respondents forecast the RBNZ to hold the cash rate steady at 5.5%, a dozen expected the bank to cut by 25 basis points and many acknowledged it was a line call.Meanwhile, markets have priced in a 69% chance of a cut, increasing their bets after the central bank’s survey on Thursday saw inflation expectations fall to a three-year low.”The RBNZ is renowned for marching to its own beat, and whether inflation declining from 7.3% to 3.3% and the labour market showing signs of cracking (unemployment rate up to 4.6%) is enough to see the RBNZ cut rates today or wait until October remains to be seen,” said Tony Sycamore, a market analyst at IG.  More

TOKYO (Reuters) – Japanese manufacturers turned slightly less confident about business conditions in August and the service sector’s mood eased, the monthly Reuters Tankan survey found on Wednesday, as lacklustre demand from China weighed on corporate sentiment. The poll comes after the Bank of Japan (BOJ) last month raised interest rates to levels unseen in 15 years and released a detailed plan to slow its massive bond buying. The sentiment index for manufacturers slipped to plus 10 in August, down one point from July, according to the Reuters Tankan survey, which closely tracks the BOJ’s quarterly business survey.Manufacturers expect the index to decline further to plus five over the next three months, the survey showed.”Auto sales are sluggish, especially in China,” a manager at an auto and transport machinery firm wrote in the survey. Managers from a wide range of industries such as chemicals, steel and electronics machinery said that subdued demand in China affected their business sentiment.Higher inflation and volatile markets were also among worrying issues, the survey found.”Uncertain factors such as the cost of raw material and foreign exchange rates are increasing,” a manager at a rubber company wrote. The Reuters poll was conducted from July 31 to Aug. 9, during which Japanese stocks plunged in their biggest single-day rout since 1987’s Black Monday selloff, after weak U.S. labour data raised recession fears, and the yen surged against the dollar as investors unwound the carry trade. The Reuters Tankan service-sector index eased for a second month to plus 24 in August from plus 26 in July. Non-manufacturers expect the index will rebound to plus 26 in November. Solid inbound demand underpinned the sector’s confidence.The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones. A positive figure indicates optimists outnumber pessimists.A total of 506 large non-financial firms were surveyed and 243 firms responded on condition of anonymity for the August poll. More

Speaking to journalists, Haddad said the announcement date will depend on a meeting between Lula and Senate President Rodrigo Pacheco. The two will discuss the timing of the Senate hearing for the nominee, whose name must be approved by the senators, Haddad said.Haddad also told journalists the central bank must analyze various factors before making its policy decision.His comments followed hawkish remarks from central bank monetary policy director Gabriel Galipolo about a rate hike being on the table amid a scenario considered uncomfortable for reaching the 3% inflation target.Galipolo, who previously held a second-in-command position at the Finance Ministry, is seen as the frontrunner to succeed Campos Neto and has already been praised by Lula as a “golden boy.””Raising rates is not always the best answer,” said Haddad. He noted that keeping rates at a restrictive level is sometimes better, while pointing out that the central bank’s rate-setting board members have the mandate to make the best decision. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning. Today we’re covering:India’s controversial broadcast bill withdrawnBangladesh’s vigilantesAI-generated job applicationsBut we start with a shake-up at Starbucks. The world’s largest coffee chain has ousted chief executive Laxman Narasimhan, replacing him with Chipotle’s Brian Niccol, as it responds to falling sales and pressure from an activist investor and its former boss.Niccol will leave US burrito chain Chipotle at the end of this month and start his new role on September 9, Starbucks said yesterday. His appointment sent the coffee giant’s stock soaring a record 24.5 per cent in New York.The Starbucks board made the decision to oust Narasimhan after it came under attack from activist investor Elliott Management and Howard Schultz, who spent three stints as the company’s leader, publicly criticised the management’s strategy.Narasimhan oversaw Starbucks’ first decline in comparable sales since 2020. China, a crucial growth market, has been a particular challenge as the economy slows and competitors make inroads. Schultz, the company’s biggest independent shareholder, had publicly criticised the chief executive and privately expressed his opposition to a settlement with Elliott. The activist investor had been holding talks with the chain over a number of demands, including board representation, the FT reported previously.Here’s how Schultz and Elliott responded to the CEO change.And here’s what else I’m keeping tabs on today:Economic data: The US and UK report July inflation data. The EU publishes second-quarter growth and employment figures, alongside June industrial production.RBNZ policy meeting: Economists are unsure whether New Zealand’s central bank will begin cutting interest rates amid signs the economy is at risk of another recession. (Bloomberg)Thailand: The Constitutional Court will rule on the potential dismissal of Prime Minister Srettha Thavisin for appointing to his cabinet a former lawyer who was once jailed over an unproven bribery attempt. (Reuters)Results: Foxconn, Tencent Holdings, UBS and Commonwealth Bank of Australia report. Robert Armstrong of Unhedged and other FT experts from London to Tokyo will break down the recent trading turmoil in a subscriber-only webinar today. Register here.Five more top stories1. Narendra Modi’s government has withdrawn a draft broadcasting services bill after facing a backlash from online content creators and civil liberties groups. Analysts said the government’s climbdown was a stark reflection of its reduced parliamentary mandate. 2. Exclusive: Russia has trained its navy to target sites deep inside Europe using nuclear-capable missiles in a potential conflict with Nato, according to secret files seen by the FT. Maps of targets as far-flung as the west coast of France and Barrow-in-Furness in the UK are detailed in a presentation for officers that predates the full-scale invasion of Ukraine.3. German direct investment into China has risen sharply this year, in a sign that companies in Europe’s largest economy are ignoring pleas from their government to diversify into less geopolitically risky markets. Guy Chazan reports what’s driving the uptick in investment.4. Brussels has accused its internal market commissioner of going rogue by sending a letter to X owner Elon Musk threatening punishment if content posted on his social media site was found to place EU citizens at risk of “serious harm”. Thierry Breton, the French commissioner, had posted the warning letter on X hours before Musk interviewed Donald Trump on the platform.5. Cargill, the world’s largest crop trader, said annual revenues dropped by a tenth as ample crop supplies have pushed down prices. The decline in revenues comes as the company overhauls its operations, and after it closed its steel trading operations in China.News in-depthSyed Bipro says he and his neighbours only use force in self-defence More

(Reuters) – A look at the day ahead in Asian markets.Markets have bounced back nicely from the recent volatility, and it’s becoming clearer each day that the recent turbulence was likely due to the unwinding of large leveraged positions, like yen-funded carry trades, rather than deeper concerns about global growth.Now, everyone’s eyeing Wednesday’s U.S. inflation report, which could test the market’s new calm.The July CPI numbers might not show much improvement from the previous month, but as long as there isn’t a big surprise, investors might still hope for the Fed to start easing in September. Futures markets currently show a 54% chance of a 50 basis point cut by the Fed, with a 46% chance of a 25 basis point cut, and traders are pricing in a full percentage point of easing by year-end.Keeping these expectations intact might be key to not scaring away investors’ risk appetite just as Japanese shares have rebounded after last week’s violent selloff. Japan’s Nikkei rose more than 3% following a holiday on Monday.Ahead of the CPI report, the mood on Wall Street was upbeat, with the S&P 500 and Nasdaq Composite both continuing to rebound from recent dips. U.S. Treasury yields slipped as data revealed that U.S. producer prices rose less than expected in July, which supports the case for the Fed to cut rates in the coming months.Meanwhile, Brent and U.S. crude oil futures dipped on Tuesday as the market perceived a reduced risk of a broader conflict in the Middle East.Investors will also keeping an eye on New Zealand’s central bank, which might cut interest rates on Wednesday, a full year ahead of its previous guidance. Slowing inflation, rising unemployment, and sluggish economic growth have led investors to bet on this easing move.India’s wholesale price data will also be in the spotlight, as investors are eager to see if inflation slowed in July after climbing in recent months. Notably, India’s retail inflation dropped in July to its lowest level in nearly five years, according to government data released on Monday.Here are key developments that could provide more direction to markets on Wednesday:- Reserve Bank of New Zealand meeting- India Wholesale Price Index (July)- U.S. Consumer Price Index (July) More