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Europe offers a glimmer of optimism amid the global gloom




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The most important news of the day

  • Salesforce has become the latest tech company to cut costs as demand slows, announcing plans to scale back 10 percent of its workers.

  • British Prime Minister Rishi Sunak made it clear in his first major political address since taking office Five promises Who wants to be judged by the public in general elections. One of these big issues is the state of the health service: here’s our explanation of why the NHS exists Worst crisis ever.

  • To be imposed by the European Union Covid tests before departure For travelers coming from China, in light of the new wave of infections in the country, which is still being reported propaganda efforts in Beijing. The World Health Organization called for More transparency.

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Good evening.

“We expect a third of the global economy to be in recession,” was the International Monetary Fund’s cheery New Year’s message as it hinted at other possibilities. cut in his expectations for 2023, likely during its annual meeting in Davos later this month.

But even though the US, Europe and China will all experience some kind of slowdown over the next 12 months, new data this week has highlighted some key differences.

In continental Europe at least, optimism is growing that inflation has peaked. Better than expected The German CPI fell to 9.6 percent From 11.3 per cent lifted European stocks and government bonds to one of the best starts of the year ever. German companies reported an improvement in supply chain disruption And the number of jobs in high after reunification.

inflation in Spain And the France It also fell more than expected, suggesting that the eurozone-wide figure due on Friday could fall 9.7 percent less than expected. Outside the European Union, Turkey has also reported A big drop In inflation, albeit from as high as 85 percent, to 64 percent, thanks to lower food and fuel costs.


However, comfort crumbs are hard to find across the channel.

Industry data showed today UK food inflation was 13.3 per cent, which puts more pressure on distressed families. Other data this week showed industrial production contracted in one of the Fastest prices since 2009; Closing stores hits them highest totals in five years; Mortgage approvals are their responsibility lowest levels in more than two yearshighlighting the turmoil in the housing market sparked by the disastrous September ‘mini’ budget of then Prime Minister Liz Truss.

Not surprisingly, the Financial Times’ annual survey of economists concludes that the UK is facing The worst and longest recession in the Group of Seven.

The Chinese economy, which until recently was under severe pressure from crippling epidemic restrictions, is now struggling with A new wave of infection After the sudden reopening in the country, it negatively affected the factory activity in the process. For the first time in 40 years, China is likely to be a major drag on the global economy in 2023 rather than a driving force, according to the International Monetary Fund.

The United States, which the International Monetary Fund believes will likely survive the worst of the downturn, thanks in part to its strong labor market, will publish monthly figures on Friday, but new data on… Jobs Today was better than expected.


However, the country’s manufacturing sector continues to struggle, contracting in December for the second month in a row, according to closely watched. ism scan, today too. As for the fight against inflation, minutes from the latest Federal Reserve meeting later (2pm ET / 7pm London) will give more clues about policymakers’ next steps.

Need to know: UK and European economy

In better news for the beleaguered Brits, recent warm weather across Europe means home energy bills Likely to be Less than previously expectedwhich is lower than the price guarantee provided by the government in the second half of the year.

Meanwhile, the European Union plans to reform the bloc electricity market give priority to The cheapest renewable energy. Right now, the most expensive fuel—currently gas—determines the price of all power generated. Our Big Read explores whether the consumer is moving to reduce consumption It will have a lasting effect.

Need to know: The global economy

Dhananjayan Sriskandarajah, President of Oxfam Great Britain, argues in the Financial Times for the urgency Financial architecture reform to global aid With less of an emphasis on charity and more about responsibility – and enlightened self-interest.

Pakistan Turns to China to fund its overhaul The rail system is creakingEven though it already owes $100 billion in foreign debt and is at risk of default after its foreign exchange reserves plummet.


We can remember 2023 as a new year global energy system It is shaping up as the oil market slowly “dollars back,” says a columnist Rana Forouhar.

And if you can’t get enough of those Predictions for 2023take a look at this Compendium of kicks by Financial Times writers On everything from the war in Ukraine to the prospect of cutting federal interest rates and the future of cryptocurrency.

Need to know: business

US technology stocks It was a bumpy start to the year, led by big declines for electric car company Tesla and an Apple, which was affected by fears of declining demand. Markets fall globally More than 30 trillion dollars Last year thanks to inflation, high interest rates and the impact of the war in Ukraine. Premium subscribers can check out commentator Robert Armstrong Stocks to watch in 2023.

For more positive tech news, try Technology heroes Report of winners and shortlists for The smartest use of technology. Here’s how readers of sister publication Sifted see next year European technology.

Hollywood heads anticipation “year of unrestWhere the economic downturn coincides with a slowdown in the flow of growth, a faltering film industry and a potential writers’ strike. The boom is in TV content Spending is too It is expected to slow down. cinemaworldThe movie theater operator is in bankruptcy protection in the US, looking for buyers trying to avoid it Partially cut.


price for re Insurance rose up to 200 percent Its crucial January renewals, thanks to the war in Ukraine and severe weather. Reinsurers share losses with primary insurers, and so they have a vital role in what can be insured and at what rate.

Strong and long lasting Cold and flu season As people mix more indoors after two years of pandemic restrictions, this is good news for at least one sector: consumer health. Sales of cold and flu medicines in the UK jumped 28 per cent in value terms to £288.5m in the year to November 27.

world of work

The economic downturn will be paid to Post-Covid Work Attitudes? The FT team discusses what 2023 holds in the new edition Working on a podcast.

Get ready for what could be a tough year with our new series: Make work better. Read about how to communicate more efficiently, ask for a raise, and if all else fails, leave on better terms.

Another way to improve life is through work Mental health treatments. Companies are beginning to realize that basic wellness programs are failing to make a dent in burnout and Stress-related absence among executives.


And in case you missed it, here are some of them FT search On how to adapt to the city of London Hybrid work It is increasingly adopting a Tuesday-Thursday work week.

Covid cases and vaccinations

Total global cases: 649 million

Total doses administered: 13.1 billion

Get the latest worldwide image through our website Vaccine tracker


Some good news

There may be problems in the future but it is important to acknowledge the progress as well. Here are reasons to be a delight list 183 ways to improve the world in 2022.

Monarch butterfly

Monarch butterfly arrives in Mexico after migrating from Canada. The number of endangered species found in Mexican forests increased by 35% last year © AP

work on it Discover the big ideas shaping today’s workplaces with a weekly newsletter from Work & Careers Editor Isabel Berwick. Participation here

Climate chart: an explanation – Learn about the most important weather data for the week. Participation here

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Suez Canal Traffic Normal After Dealing With Ship Breakdowns – Securities and Commodities Authority via Reuters





© Reuters. An aerial view of the Gulf of Suez and the Suez Canal through the window of an airplane on a flight between Cairo and Doha, Egypt, November 27, 2021. REUTERS/Amr Abdullah Dalash

CAIRO (Reuters) – Freight traffic in the Suez Canal was operating normally on Monday after tugboats towed a cargo ship that had broken down while passing through the waterway, the Canal Authority said.

Shipping agent Leith said the collapse was expected to cause only minor delays, with convoys of ships resuming regular transit by 11:00 local time (09:00 GMT).

The Suez Canal Authority (SCA) said in a statement that the M/V Glory, which was sailing to China, suffered a technical malfunction when it was 38 kilometers from its passage south through the canal, before it was towed by four tugboats to a repair area. .

The Suez Canal is one of the busiest waterways in the world and the shortest shipping route between Europe and Asia.


In 2021, a massive container ship, the Ever Given, got caught in high winds across the southern part of the canal, blocking traffic for six days before it could be dislodged.

M/V Glory is a Marshall Islands-branded bulk carrier, according to data from trackers VesselFinder and MarineTraffic.

It left the Ukrainian port of Chornomorsk on Dec. 25 bound for China with 65,970 metric tons of corn, according to the Istanbul-based Joint Coordination Center (JCC) that oversees Ukraine’s grain exports.

The Joint Coordinating Committee, which includes representatives from the United Nations, Turkey, Ukraine and Russia, said the ship was cleared to continue its journey from Istanbul after an inspection on January 3.

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Wage inflation is not dead yet





This article is an in-site version of the unprotected newsletter. Participation here To have our newsletter sent straight to your inbox every day of the week

good morning. The scenes in Brasilia over the weekend brought back painful memories from two years ago in Washington. Trump may be retreating into the rearview mirror, but anti-democratic populism is not. Send me some good news, please:

The news of wage growth has not been so good, everyone please calm down

Markets experienced last Friday morning Jobs report – and in particular his data on slowing wage growth – as further evidence that inflation will continue to decline rapidly, and the Fed will be able to start cutting interest rates before the end of this year. The S&P rose 2.3 percent on the day, and the two-year Treasury yield fell 19 basis points, almost a full rate hike that fell short of investors’ expectations. Futures market prices now a 95 percent chance The Fed’s interest rate will be lower than what the central bank says targeting 5.1 percent at the end of 2023.

Regular readers wouldn’t be surprised that Unhedged didn’t think the news was quite as good as all of that, both because of our inherent bad temper and because we’ve argued in the past that the final rounds of anti-inflation will be the toughest.

Economic data remains vague, opaque, and confusing. Yes, the downturn in wage growth to 4.6 percent in December, and a revision to growth rates in previous months, leaves us on a trend of steady slowdown in wage growth going back to May – even if the current rate of growth is uncomfortably high:

Line chart of US average hourly wages, % annual growth showing Yay?

New jobs added have fallen off each month since August, too. But adding more than 200,000 jobs a month, with ample job openings and a high turnover rate, isn’t a downturn, even with the sudden weakness in activity surveys reporting recent weakness. Barclays’ Christian Keeler thinks markets should ditch the champagne so the data will be easier to read:

A combination of rising hiring and slowing wage growth would certainly be good news on a macro level, which could make the Fed less hawkish. But we warn about that [the average hourly earnings data] It is notoriously noisy and subject to distortions from ongoing shifts in the composition of payroll employment and back to lower-wage service-sector jobs, as strong labor demand pulls in lower-skilled workers. . . The Atlanta Fed’s wages tracker next week and the Employment Cost Index for the fourth quarter (Jan. 31) both control for compositional effects, which should shed more light.

Don Resmiller of Strategas also emphasized the compositional issues:

Average wages can be affected by mixed shifts: the economy adds more part-time jobs versus full-time jobs. But it seems that workers choose to work part-time (that is, they are not part-time mainly for economic reasons). There is still a mismatch in labor supply versus labor demand. The tight employment situation will continue to threaten future wage pressures. . . Price inflation has peaked, but wage inflation appears to be holding.

Chances are good that the recession is killing wage inflation, Rissmiller thinks.

Matt Kline, in The Overhoot, makes something else important pointThe marked slowdown in wage growth can only be deflationary if it is accompanied by a lesser contraction in the labor market. If inflation is under control, demand must be lower than supply. When someone loses their job, their contribution to demand falls as their spending tightens, but their contribution to supply falls to zero – they’re out of work! So job losses alone are not deflationary. Employees should be afraid to accept the jobs and wages they now receive, and control their budgets:

Forcing people out of work does not in itself reduce pressure on prices. Scaring people away leads to spending less compared to the value they generate. Thus, from the Fed’s point of view, the ideal scenario is for workers to lose leverage to demand larger bonuses without anyone actually being fired. But this (relatively) benign outcome will only happen if the labor market returns to normal. Unfortunately, the latest data suggests that this is still a long way off.

The number of job vacancies relative to the number of people actively looking for work is still about double what it was on the eve of the pandemic. . . More important, given the close relationship with wage growth, is the number of people leaving their jobs for better prospects elsewhere. While the number is down slightly compared to the peak at the end of 2021, there has been no real change since June.

Olivier Blanchard also focuses on openings. Back in November, that is chirp that the US will soon experience a “false dawn” of inflation as commodity prices begin to fall, but that wage growth remains consistent with inflation consistently above the Fed’s target. In an email yesterday, Blanchard wrote that despite the recent data, he hasn’t changed his mind. we wrote:


The problem is that once energy/food prices stabilize, can we keep inflation stable with an unemployment rate of 3.5 percent? I guess, based on my work with Summers on the Beveridge curve in particular [the relationship between unemployment and job vacancies] That we need a higher unemployment rate, maybe around 4.5 percent.

Recent wage numbers suggest I may be too pessimistic. I don’t think so, but we’ll see. If I’m right, the Fed has to slow the economy, or think the economy will slow, before it starts cutting rates, given the delays.

Everyone, including the unprotected, wants inflation to hit the target without stagnation. But this is not the most likely outcome.

Gold and central banks

In a bad investment landscape, gold has performed well over the past 12 months:

Gold price line chart, showing $Old Yeller

The strong performance since August is particularly impressive because it occurred while real interest rates were strongly positive — in the one-and-a-half percent range, as measured by the yield on the 10-year Treasury Inflation-Protected Securities. Gold usually moves inversely to real rates, which reflect the opportunity cost of owning an expensive, inert metal.

One of the main reasons for this rise, such as the Financial Times mentioned At the end of last month, the increase in demand from central banks:

Central banks are snapping up gold at the fastest pace since 1967, with analysts pinning China and Russia as big buyers in a sign that some countries are keen to diversify their reserves away from the dollar. ..

in the third quarter [of 2022] Central banks alone bought nearly 400 tons of gold, the largest three-month haul since quarterly records began in 2000.


Does the increase in central banks’ appetite indicate a permanent shift in the supply/demand balance? John Hartsell, CIO of Donald Smith & Co. This request is noted

. . . It’s been consistently positive around 500 tons per year since the Great Financial Crisis (against mine output of about 3,500 recently), but hit a record high of 400 tons in the third quarter alone, and it’s very likely to average between 750 and 1,000 tons each from now on given For the geopolitical background as the utility of gold as a neutral (non-US dollar) reserve asset for Russia, China and Middle Eastern countries becomes more evident in 2022.

James Steele, precious metals analyst at HSBC, takes a more cautious tone. He believes that the recent strength in the gold price has something to do with expectations of a Fed rate cut as well. While acknowledging that central bank demand is higher and likely to remain that way, he believes three points should be kept in mind:

  • Central banks are not preparing to avoid the dollar. It is best to think of gold purchases as a marginal diversification, in a way that does not require a commitment to other global currencies, all of which have their own problems.

  • About 50 or 60 percent of doctors’ gold production goes to jewelry in developing economies like China and India, where consumers are very price sensitive. With the gold price hovering above $1,800 or so, demand is ebbing fast.

  • Central banks are also price sensitive, and will adjust their purchases of gold as prices rise.

Non-hedging is a bit skeptical about gold as an investment, for standard reasons (no return, not a yielding hedge, over-inflation) but we’ll be watching closely for now.

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Swiss National Bank records record losses of $143 billion in 2022 by Reuters





© Reuters. FILE PHOTO: A man walks past the Swiss National Bank building in Zurich on October 31, 2013. The Swiss National Bank reported a nine-month loss of CHF6.4 billion, due to a loss in the valuation of its gold holdings. Photograph: Arend Wegmann/Reuters

ZURICH (Reuters) – The Swiss National Bank said on Monday the Swiss National Bank posted an annual loss of 132 billion Swiss francs ($142.67 billion) in 2022, the largest loss in its 115-year history.

The central bank fell into the red as falling stocks and fixed-income markets hit the value of its share and bond portfolio, while a rally in the Swiss franc also had a negative impact.

Monday’s figure, a reversal of a profit of 26 billion francs in 2021, was larger than the previously largest loss of 23 billion francs in 2015. It equates to slightly more than Morocco’s annual gross domestic product.

($1 = 0.9252 Swiss francs)


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