Armin Laschet has won the backing of Germany’s governing Christian Democratic Union in his bid to succeed Angela Merkel as chancellor, after a campaign that exposed deep rifts in the party five months before national elections. Thirty-one of 46 members of the CDU’s executive committee backed Laschet in a secret vote, with his rival, Markus Söder, prime minister of Bavaria, receiving just nine, according to the party. There were six abstentions. The result means Laschet is all but certain to be the centre-right’s candidate for chancellor in September’s Bundestag election, when Merkel will bow out after 16 years as Germany’s leader. When the head of Uefa heard on Saturday that many of the world’s most famous football clubs were on the verge of announcing a radical plan to join a breakaway “Super League” that would upend the sport, he knew who to ask. Aleksander Ceferin, president of European football’s governing body Uefa, turned to Andrea Agnelli, a scion of the Italian billionaire dynasty that owns Turin-based Juventus, Italy’s most dominant football club. “[Agnelli] said these are only rumours and then he said I’ll call you in one hour,” Ceferin told a press conference on Monday. “He turned off his phone. The next day, we get the announcement.” That announcement late on Sunday — with Agnelli named as a vice-chair of the Super League — has rocked global football, shaken fans and prompted outrage from heads of government from the UK to France. Twelve of the wealthiest clubs including England’s Manchester United and Liverpool, Spain’s Real Madrid and FC Barcelona, and Italy’s Juventus and AC Milan declared they would join a new continental contest, one they alone would control as shareholders and in which they are guaranteed a place each season. Morgan Stanley recorded a $911m hit from the blow-up last month of Archegos, Bill Hwang’s family office, which caused billions of dollars of losses across global investment banks. The setback was a blemish on the Wall Street bank’s record set of first-quarter earnings, which were driven by a surge in dealmaking, trading and income from wealth management. The results statement referred to a $644m credit loss and $267m of trading losses relating to “a single prime brokerage client”, which chief executive James Gorman later confirmed was Archegos. US president Joe Biden has imposed sweeping sanctions against Russia including long-feared measures targeting its government debt in a sharp escalation of Washington’s confrontation with Moscow. The first anti-Russian measures from the Biden administration also included the expulsion of 10 Russian diplomats and sanctions against 38 entities, individuals and companies accused of taking part in efforts to interfere in US elections and conducting cyber attacks. On Wednesday, the US for the first time formally blamed SVR, Russia’s foreign intelligence service, for the SolarWinds hack, which affected at least nine federal agencies and 100 companies. One senior administration official told reporters the hack gave Russia “the ability to spy on or potentially disrupt more than 16,000 computer systems worldwide”. News of the measures sparked a sell-off in Russian assets and a warning from the Kremlin that the sanctions would harm efforts to reduce tensions between the two countries. The sanctions banned US financial institutions from trading in newly issued Russian state debt, known as OFZs, and bonds issued by the Russian central bank and National Wealth Fund. The ban affects debt issued after June 14. Joe Biden said US troops would start their final withdrawal from Afghanistan on May 1, declaring it “time to end America’s longest war”. “I am now the fourth American president to preside over an American troop presence in Afghanistan,” he said in a White House speech on Wednesday. “Two Republicans. Two Democrats. I will not pass this responsibility to a fifth.” US presidents have promised to withdraw troops from Afghanistan since George W Bush first deployed them in the wake of the September 11 2001 attacks to take down the Taliban government that harboured Osama bin Laden and his al-Qaeda Islamists. In the two decades of war against Afghan and foreign militants, 2,488 Americans have died and 20,722 have been wounded, Biden said, taking out a card from his suit jacket he said he had kept with him for 12 years to record war casualties. The US withdrawal will start May 1, a deadline set under the Trump administration as part of an agreement that Biden said was “perhaps not what I would have negotiated myself”. The withdrawal is expected to be complete before the 20th anniversary of the September 11 attacks. Madoff, who died this week aged 82 in a North Carolina prison, was so hated that he wore a bulletproof vest in court. His saga has sparked at least five on-screen depictions, including portrayals by Robert De Niro and Richard Dreyfuss. “Underneath that facade, there truly is a beast. He has fed upon us,” Sheryl Weinstein, one of his victims, testified at his sentencing. Stock market investors valued Coinbase at $75.9bn in its debut on Nasdaq on Wednesday, the first listing of a major cryptocurrency exchange and a moment of validation for the digital asset class some 12 years after the creation of bitcoin. Shares drifted lower through the trading day — from an opening price of $381 to $328 — but even at the close Coinbase had a market capitalisation of $65.4bn, rivalling that of the New York Stock Exchange’s parent company, ICE, which is worth $67bn. Coinbase would be valued at $85.8bn including options and other kinds of stock-based awards. The company holds assets for 56m retail customers and operates the largest digital coin exchange in the US — a business that has rocketed in recent months along with the price of bitcoin and other cryptocurrencies. The strength of the recent rally in cheap stocks could trigger a rare shift in equity market dynamics that some investors expect will fuel the gains of financial and energy companies. For much of the past decade, so-called momentum stocks have been on fire, layering gains upon gains. Meanwhile, unloved “value” stocks have limped behind, frustrating a generation of fund managers who made their reputation eking out equity market bargains. Since November’s coronavirus vaccine breakthroughs, however, value stocks have benefited from their high sensitivity to economic cycles. Now, they are climbing fast and consistently enough to start classifying as momentum stocks as well. It is an uncommon union of two normally conflicting market “factors” that could send billions of dollars that typically chase trends towards once-shunned value shares. Grab, south-east Asia’s most valuable start-up, has agreed to the largest-ever merger with a special purpose acquisition company, raising $4.5bn in cash to go public in a US deal that will value its shares at close to $40bn. SoftBank-backed Grab was founded in 2012 as the region’s answer to Uber and morphed into a “super app” that provided everything from food delivery to digital payments. It will combine with a New York-listed Spac launched by Altimeter, a Silicon Valley group known for its backing of late-stage technology companies. The deal, which marks a significant moment for south-east Asian start-ups as well as the booming market for Spacs, shatters the record for the largest merger by a blank-cheque vehicle as hundreds of competing entities search for private targets. Jay Powell said the US economy is at an “inflection point” with growth and hiring set to accelerate, but he warned that new surges of Covid-19 could impede the recovery. Speaking on CBS’s 60 Minutes programme, the chair of the Federal Reserve delivered an upbeat message about the economic outlook and underscored the critical importance of the ongoing vaccinations campaign and the massive stimulus measures enacted to date to maintain its momentum. “We feel like we're at a place where the economy's about to start growing much more quickly and job creation coming in much more quickly,” he said in the interview, which was conducted on Wednesday and aired on Sunday. “What we're seeing now is really an economy that seems to be at an inflection point, and that's because of widespread vaccination and strong fiscal support, strong monetary policy support,” Powell added, saying the economy would have been “so much worse” without the aid. Chinese regulators have fined Alibaba a record Rmb18.2bn after finding that the ecommerce group had abused its market dominance. The $2.8bn penalty, which was set at 4 per cent of Alibaba’s 2019 revenues, concludes an antitrust investigation into the company founded by Jack Ma. It comes as Chinese authorities have stepped up scrutiny on dealmaking and anti-competitive practices in its once lightly regulated technology sector. The market regulator said that since 2015 Alibaba had forced merchants to sell exclusively on its Tmall and Taobao online shopping platforms. Alibaba used its “market position, platform rules and data, and algorithmic methods” to put in place rewards and punishments for its “choose one of two” policy, the regulator said on Saturday. While the penalty marks the end of the government’s antitrust scrutiny of Alibaba, Ma’s other interests remain under pressure. In November, Chinese authorities suspended the $37bn initial public offering of Ma’s Ant Group and have yet to announce formally a deal for the payment group’s restructuring. Last week authorities also suspended new enrolment at Ma’s elite business school. The Biden administration is calling for the world’s biggest multinational companies to pay levies to national governments based on their sales in each country, as part of an ambitious proposal for a global minimum tax. The plan would apply to the global profits of the very largest companies, including big US technology groups, regardless of their physical presence in a given country. The US Treasury laid out its proposal in documents obtained by the Financial Times, which had been sent to the 135 countries negotiating international taxation at the OECD in Paris. The plan faces an uphill battle through the US Congress. But an agreement at the OECD would allow Joe Biden, US president, to increase corporate taxes on US companies without being undercut by other countries because it would include a global minimum tax rate. The US move during the week of the IMF and World Bank spring meetings comes as the White House has also called for raising US corporate taxes by about $2.5tn over the next 15 years to pay for more than $2tn in investments in infrastructure, clean energy and manufacturing. Joe Biden said he is open to compromise on his $2tn infrastructure plan amid a backlash from businesses over a proposed $2.5tn increase in corporate taxes to fund it. Biden’s latest economic package seeks to plough huge sums of government investment into the US economy, paid for largely by the tax rises on America’s biggest businesses. “It is the single largest investment in American jobs since World War II, and it is a plan to put millions of Americans to work to fix what is broken in our country,” Biden said in a speech in Washington on Wednesday. “Debate is welcome. Compromise is inevitable. Changes are certain,” he added. Italian and French banks’ exposure to the sovereign debt of their own countries has hit record highs since the pandemic started, reviving fears about the sector’s links to increasingly indebted governments. Domestic government securities and loans held by eurozone banks rose more than €140bn to just over €2.1tn in the year to February, according to Financial Times calculations based on data from the European Central Bank. The exposure of Italian banks to domestic government debt hit a record €712bn last August, up more than 9 per cent from February and dipping only slightly since then. French banks had the sharpest post-pandemic rise in their exposure to their own government, which climbed to a record €431bn in September, a jump of more than 18 per cent since February. The strengthening of ties binding banks to their national governments has reawakened concerns over a faultline in Europe’s monetary union that was exposed during the region’s sovereign debt crisis a decade ago. Janet Yellen, the US Treasury secretary, has called on other countries to join Washington in setting a global minimum tax for companies as she vowed to reassert America’s leadership in international economic policy. “Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth and prosperity,” Yellen said in a speech to the Chicago Council on Global Affairs on Monday. Yellen’s appeal on the eve of the spring meetings of the IMF and the World Bank comes as the Biden administration puts a crackdown on tax avoidance and tax shelters at the heart of its economic agenda. The White House last week released a plan to invest more than $2tn to revamp decaying infrastructure and boost clean energy products. It hopes to pay for the proposal with a higher corporate tax rate, an increase in its own global minimum tax and other measures designed to stop profit-shifting across borders for tax reasons. The US economy added 916,000 jobs in March and the unemployment rate edged down to 6 per cent in a sign that the recovery was accelerating in the month that Joe Biden signed his $1.9tn stimulus into law. The non-farm payrolls data released on Friday exceeded economists’ expectations and marked a sharp improvement from the upwardly revised 468,000 jobs created in February and 233,000 positions created in January. The improvement in the labour market has occurred amid optimism over America’s fight against the pandemic, as a winter surge in infections has ebbed and the rate of vaccinations picked up sharply. In the past few weeks, Covid-19 cases have started to increase again but the pace of inoculation has continued to rise, raising hope of further improvement in coming months. The March job gains were not only larger than in previous months, but more broadly based. Hiring in the leisure and hospitality sector, which has been especially sensitive to the ups and downs of the pandemic but drove last month’s job gains, slowed from a pace of 384,000 to 280,000. Technology and energy shares propelled US stocks to a new record on Thursday while government bonds rallied, in the return of a popular pandemic trade predicated on continued social curbs and supportive monetary policy. The benchmark S&P 500 passed the 4,000 level for the first time, closing 1.2 per cent higher in New York. The tech-focused Nasdaq Composite, which is stacked with growth companies whose valuations are flattered by lower market interest rates, climbed 1.8 per cent. The yield on the benchmark 10-year Treasury note, which rose sharply in the first quarter as investors bet on a jolt in inflation when economies reopened, fell 0.07 percentage points to 1.67 per cent. The rally in Treasuries picked up slightly after a report showed new claims for unemployment benefits rose by 61,000 last week to 719,000, a higher reading than the 680,000 Wall Street economists had forecast. China’s currency is set for its worst month against the dollar in more than a year and a half, as investors fret that a clampdown on borrowing could slow the country’s swift economic recovery from Covid-19. The tightly regulated onshore-traded renminbi fell 1.4 per cent against the greenback in March to about Rmb6.57, marking its worst one-month drop since August 2019, when Washington labelled Beijing a currency manipulator. The recent drop also erased the Chinese currency’s gains against the dollar since the new year. The fall represented a partial reversal for China’s currency after a banner 2020, when demand for the renminbi drove gains of 6.7 per cent. Offshore investors, eager to capitalise on the country’s rapid economic rebound from the coronavirus pandemic, poured more than Rmb1tn into China’s bond and stock markets. It also reflected the fact that Beijing faces a dilemma regarding whether to withdraw stimulus now that the world’s second-biggest economy has recaptured its pre-pandemic growth rate, just as the recovery elsewhere in the world begins to pick up steam. Economists said that China’s vague recently announced GDP growth target of “over 6 per cent” for 2021 was weighing on the currency. That is because it may signal authorities could be willing to clamp down on financial risk so forcefully that growth for the year could come in well below the 8.5 per cent forecast by economists polled by Bloomberg. Deliveroo, the UK’s very own labour arbitrage business, has listed on the London Stock Exchange this morning. Its debut was framed as a triumphant moment for tech stocks in London by some, with retail investors encouraged by Deliveroo’s app to get in on the action before the inevitable IPO “pop”.* Well, it hasn’t quite worked out that way. At pixel time, Deliveroo’s shares are trading at 302p -- 23 per cent below the 390p price it listed at just 27 minutes ago, according to Refinitiv data. It was down at one point almost a third. Ouch. Look on the bright side though, at least those customers who purchased shares will now know what it feels like to lose money from what seemed like a sure-fire money maker, just like its riders. A key measure of US long-term borrowing costs hit its highest level since the early days of the coronavirus crisis on Tuesday in the penultimate trading session of a brutal quarter for global government bonds. The 10-year Treasury yield rose as much as 0.06 percentage points from Monday’s closing level to touch 1.77 per cent, the highest point since January 2020, according to Bloomberg data, before rebounding to trade at 1.72 per cent. The fresh bout of volatility came as investors weighed optimism over the US’s vaccine rollout and another plan to boost fiscal stimulus. US bond markets have led a global retreat in government debt since January as investors fret that the Federal Reserve will allow the economy to run hot, with huge amounts of government spending combining with monetary stimulus to pump up inflation. Archegos Capital, a private investment firm, was behind billions of dollars worth of share sales that captivated Wall Street on Friday — a fire sale that has left traders scrambling to calculate how much more it has to offload, according to people with knowledge of the matter. The fund, which had large exposures to ViacomCBS and several Chinese technology stocks, was hit hard after shares of the US media group began to tumble on Tuesday and Wednesday. The declines prompted a margin call from one of Archegos’ prime brokers, triggering similar demands for cash from other banks, said people familiar with the matter. Traders buying the large blocks of stock were told the share sales had been prompted by a “forced deleveraging” by a fund. Archegos is a family office that manages the wealth of Bill Hwang, a “Tiger cub” alumnus of Julian Robertson’s legendary hedge fund Tiger Management. Frantic efforts are under way to unblock the Suez Canal after one of the world’s largest container ships ran aground, severing a vital trade artery and threatening to disrupt global shipments for days. The Ever Given container ship, which is almost as long as the Empire State Building is tall, is wedged across the southern end of the canal, with tug boats engaged struggling to free it. Every day, about 50 vessels sail through the 120-mile long Suez Canal. It is a key artery handling at least 10 per cent of global seaborne trade and a similar amount of oil shipments, leading to fears that a prolonged shutdown could disrupt supply chains worldwide. Taiwan-based Evergreen Marine, which operates the 220,000-tonne vessel, on Wednesday said the ship had entered the Suez Canal from the Red Sea on Tuesday and became stuck after being blown off course. Germany, France, Italy and Spain said they would resume using the Oxford/AstraZeneca coronavirus vaccine after the EU drugs regulator said there was a “clear scientific conclusion” that the jab was “safe and effective”. Emer Cooke, head of the European Medicines Agency, on Thursday said its investigation had concluded that the AstraZeneca vaccine was “not associated” with a potential risk of blood clots noted recently by some scientists, adding that the benefits of the shot outweighed possible risks. “If it were me, I would be vaccinated tomorrow,” said Cooke. EMA officials said they could not “definitively” rule out a link between the vaccine and a rarer, and more serious, type of blood clot associated with a low platelet count. “A causal link with the vaccine is not proven, but is possible and deserves further analysis,” the agency said. Cooke recommended an awareness campaign that aimed to “spot and mitigate any possible side effects” of the vaccine. Mario Draghi, prime minister of Italy, which was among the countries to suspend use of the AstraZeneca vaccine, said it would resume using the shot on Friday. Federal Reserve officials signalled that they expect to keep interest rates close to zero until at least 2024, even as they sharply upgraded their US growth forecasts because of a massive fiscal stimulus and an accelerating vaccine rollout. The Fed maintained its dovish stance at the end of a two-day meeting of its top policymakers, noting the improving outlook while cautioning that a full recovery remained distant, the path ahead was uncertain, and the economy still required ultra-easy monetary policy. “While we welcome these positive developments, no one should be complacent,” Jay Powell, the Fed chair, said during a post-meeting press conference. “At the Fed, we will continue to provide the economy the support that it needs for as long as it takes.” The upgrades to the forecasts from Fed officials were significant: whereas in December they predicted 4.2 per cent growth this year, that estimate was bumped up to 6.5 per cent, which would be the fastest economic expansion since 1984. |
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March 2021
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