Economy

Standard DigitalWeekend Print + Standard Digitalwasnow $85 per monthBilled Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.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 editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal 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 editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

Standard DigitalWeekend Print + Standard Digitalwasnow $85 per monthBilled Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.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 editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal 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 editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

ISLAMABAD (Reuters) – Pakistan’s finance ministry expects inflation in July to range between 12% and 13%, easing further in August to stand between 11.0% and 12.0%, it said in a monthly economic outlook released on Tuesday. Inflation figures likely to be released on Thursday by the statistics agency are closely watched by the central bank, which cut rates this week for the second time in a row as previously surging inflation was tempered. The government had also cut the fiscal deficit to 4.9% of GDP between July 2023 and May 2024, the ministry said in its report, down from 5.5% last year. Pakistan struck a deal this month with the International Monetary Fund for a $7-billion-loan programme that includes tough measures such as higher tax on farm incomes and electricity prices.This prospect has aroused concern among poor and middle class Pakistanis contending with the threat of further inflation and higher taxes. Inflation has slowed in recent months after hitting more than 30% in 2023. Pakistan’s consumer price index (CPI) rose 12.6% in June on the year. But pressure continues and one Islamist party has held protests in recent days and threatened sit-ins in major cities if the government does not tackle rising prices. More

NEW YORK (Reuters) – Bond investors, expecting the Federal Reserve to hold interest rates steady this week but signal that rate cuts are imminent, are betting that the U.S. Treasury yield curve will become less inverted and eventually return to a normal positive slope. The strategy involves bullish bets on short-dated Treasuries and reducing longer-dated exposure, a trade referred to as a “steepener” which pushes yields on longer-dated Treasuries higher than short-term maturities. Investors are compensated with a higher yield for taking risk over a longer period.The widely watched two-year/10-year yield curve has been inverted for two years, the longest inversion in history, with the gap in yield at minus 22 basis points (bps). With the focus on the yield curve, the Federal Reserve is widely anticipated on Wednesday, at the end of its two-day policy meeting, to keep its benchmark overnight rate in the 5.25%-5.50% range for an eighth straight meeting. Investors expect a “dovish hold” from Fed Chair Jerome Powell’s press conference at the end of the meeting, in which he is likely to signal that rates will be lowered as soon as September for the first time in more than four years. Powell also has the Jackson Hole gathering of central bankers in late August to prepare the market for a rate cut. By then more data on inflation and this Friday’s July employment report could give policy makers the confidence they seek. The rate futures market has priced in about 68 bps of total cuts this year starting in September, LSEG calculations showed, a big jump from 30 bps just before the June meeting. Roughly three more cuts of 25 bps each are expected by June 2025.In the Fed’s June rate forecasts the central bank had penciled in just one cut in 2024. Easing U.S. inflation and a gradually slackening labor market have prompted a shift in rate expectations. “The yield curve moved a significant amount in the last six weeks, but we are at these levels in October last year and it still comes down to an inverted curve, which is not normal,” said Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors, with assets under management of $352.6 billion.”We’re going into a situation where the curve moves to a normal positive slope. There is plenty of room for it to go.” BULL STEEPENERSThe spread between two-year and 10-year yields has narrowed by 30.4 bps since late June. The curve the last few weeks has mainly seen “bull steepeners,” where short-term yields have fallen more sharply than longer-dated ones, a typical prelude to the Fed’s starting an easing cycle.Investors had bet aggressively in January on a steeper yield curve, as the markets priced in multiple rate cuts for 2024 after a dovish pivot from the Fed in December.But those bets unraveled and the curve flattened even more as short-term yields surged above long-term ones amid a surprisingly durable economy and pesky inflation.Going into this week’s Fed meeting, investors in the futures market sharply increased net long bets on short-dated Treasuries, such as U.S. two-year notes, while net long positions on longer maturities have not risen as much or have declined. That mirrored bull steepeners that have been in place the last few weeks.Friday’s data from the Commodity Futures Trading Commission showed asset managers last week increased their net long position on U.S. two year notes to a record high.Asset managers have also remained net long on U.S. 5-year note futures, hitting an all-time peak in mid-July before slipping a bit last week,”There is an urgency to get into the short end of the curve before yields start to fall in a more pronounced way,” said Chip Hughey, managing director of fixed income at Truist Advisory Services in Richmond, Virginia. Net longs from institutional investors on U.S. 10-year futures were largely flat last week.”If the Fed starts its cutting cycle without a recession, buying any duration, or any longer bonds, won’t necessarily give you the same impact of being on the right part of the curve, like the 2s to 7s,” said Mike Sanders, portfolio manager and head of fixed income at Madison Investments in Madison, Wisconsin.The firm, with $25 billion in assets, is currently overweight U.S. three-year to seven-year Treasuries, reflecting expectations their yields will fall. More

The euro zone’s economy grew by 0.3% in the second quarter of 2024, flash figures from the European Union’s statistics office showed Tuesday.
Economists polled by Reuters had expected a 0.2% increase on a quarterly basis.
Germany, the euro zone’s biggest economy, unexpectedly posted a 0.1% contraction in the second quarter.

The lights of Frankfurt am Main’s banking skyline glow in the last light of day.
Boris Roessler | Picture Alliance | Getty Images

The euro zone’s economy grew by more than expected in the second quarter of 2024, flash figures from the European Union’s statistics office showed Tuesday.
The zone’s gross domestic product rose by 0.3% in the three months to the end of June compared to the previous quarter, the data showed. Economists polled by Reuters had expected a 0.2% increase on a quarterly basis.

First-quarter GDP was confirmed at 0.3%, unchanged from the initial reading announced earlier this year.
The euro zone entered a technical recession in the second half of 2023, as GDP contracted in both the third and fourth quarter of the year, according to revised figures released earlier this year.
Bert Colijn, senior euro zone economist at ING, said in a note on Tuesday that the data indicated that the regiona’s economy is somewhat recovering.
“After stagnation for all of 2023, this is a relief and shows that the economy has started to cautiously recover,” he said, adding that the economy was now in a better situation than a year prior.
“The question remains where the economy will head from here and recent data do not provide much confidence that the eurozone economy is further accelerating,” Colijn said.

Data released earlier in the day showed that the euro zone’s largest economy Germany unexpectedly shrank by 0.1% in the second quarter — coming in below the expectations of analysts polled by Reuters, who had anticipated the country’s GDP to grow by 0.1%.
Germany was one of just four countries whose GDP fell in the three months to the end of June, according to the European Union’s statistics office. Latvia, Sweden and Hungary were the other three countries that posted contractions.
Klaus Wohlrabe, head of surveys at ifo, said in a Wednesday note that the German economy was “stuck in crisis” and that it was also not expected to improve much in the third quarter.
Ireland meanwhile recorded the biggest growth at 1.2% in the second quarter, while the euro zone’s second-largest economy, France, logged GDP growth of 0.3% over the same period, its statistics office said Tuesday.
Inflation figures for the euro zone are set to be released on Wednesday. The fresh euro zone data out this week comes after the European Central Bank left interest rates unchanged at its meeting earlier this month, saying that the option for a cut in September was “wide open.” More

ADDIS ABABA (Reuters) – Ethiopia’s new $3.4 billion financing deal with the International Monetary Fund paves the way for completion of its long-delayed debt restructuring in the next three to six months, a senior finance ministry official said on Tuesday.The announcement of the four-year, $3.4 billion programme on Monday came hours after Ethiopia had undertaken one of the IMF’s key recommendations and floated its currency, the birr. “Debt restructuring should be finalised before the next IMF programme review,” State Minister of Finance Eyob Tekalign told Reuters, adding that would typically be between three and six months.The IMF deal is expected to be followed by further financing of up to $7.3 billion from the World Bank and other creditors, Ethiopian officials have said.The World Bank’s board was scheduled to meet later on Tuesday to approve its portion of the extra funds, Eyob said.News of the IMF deal lifted the $1 billion government bond at the centre of the restructuring plan to its highest level since October 2021 on Tuesday. A more than 2 cents jump left it trading at almost 78 cents on the dollar – or just over a 20% discount of its original face value.In the foreign exchange market, leading commercial banks quoted the Ethiopian birr at 74.74 against the dollar. That was unchanged from where it had settled after Monday’s float announcement prompted it to drop 30% against the dollar. Ethiopia’s development partners have welcomed the move to a market-based foreign exchange rate, but some analysts have said it could drive up inflation and the cost of living, especially for the poorest.Ethiopia also faces other challenges including the impact of climate change and the need to reconstruct its northern Tigray region, which was ravaged by a two-year civil war that ended in late 2022. More

Good morning. Today we’re covering:But first, protests erupted in Venezuela yesterday against authoritarian President Nicolás Maduro’s re-election, after the opposition claimed it had evidence that the vote count was fraudulent.Edmundo González, the opposition candidate, had been leading Maduro in independent polls by at least 20 points before polling day. The government-controlled election authority yesterday proclaimed Maduro the winner without yet having counted all of the votes.Russia, China, Iran and Cuba hailed his victory while the US, the EU and the UK have demanded to see a detailed breakdown of the count. Despondent Venezuelans have taken to the streets across the country, having tear gas and live ammunition from pistols fired at them by the police in some cases. The oil-rich nation faced a 75 per cent contraction in GDP between 2013 (when Maduro was elected) and 2021. Hyperinflation, regular power outages, a chronic food and medicine shortage and a mass population exodus have blighted the country. “How long is this going to go on for?” asked one of the marchers. “Maduro isn’t our president any more,” they told the FT’s reporters on the ground.Here’s what else I’m keeping tabs on today:Economic data: Mexico publishes preliminary second-quarter GDP figures.Federal Reserve: The US central bank’s monetary policy-setting committee begins its two-day meeting.Results: Merck & Co, Pfizer, Airbus, BP, Diageo, PayPal, Procter & Gamble, Standard Chartered, Western Union, L’Oréal, Microsoft and Nomura report. Five more top stories1. Governor Roy Cooper of North Carolina has withdrawn his name from consideration to be Kamala Harris’s running mate, winnowing the field of prominent Democrats vying to be her pick for vice-president.The Fed’s Trump dilemma: The US central bank will not want to look as if it is prejudging policies as inflationary during election season, writes Krishna Guha, formerly of the New York Fed.For more, sign up for the US Election Countdown newsletter, the FT’s essential guide to the twists and turns of the 2024 presidential election.2. Donald Trump has promised to make the US “the bitcoin superpower of the world”, as he seeks to court an industry frustrated with the fierce oversight leveraged against it by the Biden administration. 3. McDonald’s has suffered its first global drop in sales since 2020 as higher prices deter consumers around the world, fuelling concerns that post-Covid consumer strength has peaked.4. Mid-sized US accounting firms are rethinking their global operations to meet the needs of increasingly multinational clients, while better leveraging their global networks to spread the cost of technology and staff. 5. BHP, the world’s biggest miner, and Canada’s Lundin have agreed to acquire South American copper miner Filo in a $3bn deal, giving them full control of the Filo del Sol prospect, which straddles the Argentine and Chilean border near the copper-rich Atacama Desert. The Big Read© FT montage/BloombergThe Biden administration has depended heavily on Mexico’s President Andrés Manuel López Obrador to stem migration across the border. López Obrador has used this as a bargaining chip to push through leftwing nationalist reforms, which critics say have weakened the economy and democracy in Mexico — and Washington has turned a blind eye. We’re also reading . . . ‘Super shoes’: To understand what makes certain shoes so fast, the FT worked with experts to dissect the technology behind record-breaking footwear.AI battle lines: The global chip war could turn into a cloud computing war, as governments see AI-capable data centres as a strategic resource, writes economic historian Chris Miller.Paris Olympics: Star Olympian Simone Biles has billed her performance at the Games as a “redemption tour”, three years after her shock withdrawal from most of her events in Tokyo.Chart of the dayStarbucks’ chief executive Laxman Narasimhan has been facing criticism from many sides: the chain’s former boss, a barista union and aggressive activist investor Elliott Management. Inflation, mass boycotts over its perceived position on the war in Gaza and flagging performance in China have stalled sales. Is there a way back for the coffee house chain?Take a break from the news Alex Robertson-Texter found himself on the inaugural flight between Nuuk, Greenland and Nunavut, Canada, uniting two remote locations that share an Inuit identity. Not only is the route commercially viable for the first time, it is challenging former colonial ligatures and “feels like family coming home”, in the words of Nunavut’s premier. Read his dispatch here.Greenland social media star Qupanuk Olsen prepares to board the new flight Additional contributions from Benjamin Wilhelm and Camille De GuzmanRecommended newsletters for youOne Must-Read — Remarkable journalism you won’t want to miss. Sign up hereSort Your Financial Life Out — Learn how to make smarter money decisions and supercharge your personal finances with Claer Barrett. Sign up here More

BEIJING (Reuters) -Chinese leaders signalled on Tuesday that the stimulus measures needed to reach this year’s economic growth target will be directed at consumers, deviating from their usual playbook of pouring funds into infrastructure projects.The world’s second-largest economy missed growth forecasts in the second quarter and faces deflationary pressures, with retail sales and imports significantly underperforming industrial output and exports.The Politburo, a top decision-making body of the ruling Communist Party, pledged at the end of its July meeting to make “countercyclical adjustments” during the rest of 2024 to meet an economic growth goal of roughly 5% for the year.”The meeting stressed that it is necessary to focus on boosting consumption to expand domestic demand,” the official news agency Xinhua said.The Politburo said policies should increase residents’ income “through multiple channels” and enhance the “ability and willingness” of low- and middle-income groups to spend. It called for measures to improve welfare for the elderly and children, and “weave a dense and solid social security net”.As expected, no specific steps were announced, but the leadership pledged to “timely launch a batch of incremental policy measures”.In referencing incomes and social welfare, it nodded to measures advocated by some economists who have long argued that China’s economic model relies too heavily on investment and has produced much more debt than growth in the past 15 years.They propose Beijing transfers resources from the government sector to households to address this imbalance, which they say could lead China towards a decades-long period of low growth and periodic deflation as seen in Japan.Analysts said the latest Politburo readout contained more references to household consumption than previous ones, but this did not necessarily point to a new top-level agenda for a structural shift to rebalance the economy.The meeting’s summary still gave prominent space to pursuing “new productive forces”, a term coined by President Xi Jinping last year that envisions scientific research and technological upgrades for the world’s largest industrial complex.This suggest Beijing is holding onto its supply-side priorities, analysts said.”The meeting did call for policymaking to focus more on household welfare,” Julian Evans-Pritchard, head of China economics at Capital Economics. “This sounds promising on paper.””But the lack of any specifics means it is unclear what it will entail in practice. And overall, the communique suggests the primary focus of policy remains on economic security and nurturing new productive forces in high-end sectors.”Beijing uses the July politburo meeting to recalibrate economic policies for the rest of the year, not as a forum that discusses longer-term goals. A different Party meeting on July 15-18, which takes place roughly twice a decade, pointed to policy continuity, rather than structural shifts. The yuan, and Chinese stocks and bonds were little changed following the announcement. WEAK DEMANDAfter unshackling the economy from three years of COVID-19 restrictions, Chinese officials had hoped that stimulating the industrial sector would stabilise the job market and lead to higher wages and consumption.What happened instead was that greater industrial capacity led to price wars and a cost-cutting race that kept wages depressed, fuelling job uncertainty and adding to the pain among consumers caused by the property sector downturn.”The government recognises that domestic demand is weak,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.Authorities have already signalled in recent weeks a shift to a more supportive policy stance.China’s central bank surprised markets by cutting major interest rates last week, while the state planner said some funds raised through this year’s ultra-long bond issuance would be shifted towards supporting a consumer goods trade-in scheme.On the crisis-hit property sector, the Politburo reiterated existing policy goals, saying China will continue to support the delivery of unfinished projects and turn unsold apartments into affordable housing. It also reaffirmed plans for a “proactive” fiscal policy, and “prudent” monetary framework. More