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Heralds the return of a new normal | financial times

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This article is an on-site version of The Week Ahead newsletter. Participation here Get our newsletter sent straight to your inbox every Sunday

Hello, and welcome to the first full work week of the new year.

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How are your events going in 2023? Amid the economic gloom and ongoing conflict in Ukraine, there are signs that things are returning to normal. The Golden Globe Awards are back this week at their Los Angeles home, after interruptions over a lack of diversity led to the event’s cancellation last year. Looking ahead, world leaders, business leaders and economic thinkers will begin arriving in the Swiss resort of Davos on Sunday for the following week’s World Economic Forum.

The next seven days also see the official start of the fourth quarter earnings season, starting with Wall Street banks and British retailers. This will of course remind us that we are far from returning to normal for the global economy – more details below.

For the UK, normal for now means a large-scale industrial move. Ambulance workers and driving instructors stage more strikes this week, while the strike closes ballots for teaching unions in England and Wales.

At least normal life has been restored in Congress. Focus can now focus on the economic challenges this year will bring – more on upcoming data announcements this week below.

Japanese Prime Minister Fumio Kishida will tour the capitals of the G7 countries this week, to consult with his counterparts to agree on topics for this year’s summit in May, something he has made a major item on his political agenda this year. Kishida personally convened the summit in his hometown of Hiroshima.

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Can things search? Yes, if you are in Cornwall. Monday promises to be a historic day for the uk boycott – at least according to the Virgin Orbit press release – with the launch of the first space satellite from mainland Britain. It is perhaps best described as a classic British eccentric as nine satellites will be launched into orbit using a rocket launched from a re-purposed Boeing 747, which is due to take off from Newquay airport on Monday night. He certainly shows a degree of creativity and should at least boost British morale.

Thanks to those who responded to the alternative guide last week for next year and for your comments about our regular newsletter. Send me an email to jonathan.moules@ft.com or by clicking reply if you received this via email (see subscription details here).

Economic data

Expect the Consumer Price Index (CPI) and other inflation data over the coming days from the US, China, Japan, Australia, Brazil and Mexico.

The British Retail Consortium updates its monthly survey of UK high street sales on Tuesday, while on Friday the Office for National Statistics publishes its monthly GDP estimate to give an idea of ​​where the country stands in terms of recession.

Monetary policy this week comes from the Bank of Korea, which is expected to raise its benchmark interest rate by another 25 basis points to 3.50 percent on Friday.

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Who likes high interest rates? Banks, that is. That will become evident this week when several of Wall Street’s largest lenders reported fourth-quarter numbers on Friday.

These companies profited from Fed tightening by raising loan rates more than deposits. Analysts estimate c. B. Morgan ChaseAnd American bankAnd Citigroup And Wells Fargo to report collective net interest income for the final three months of 2022 at nearly $60 billion, up 30 percent year-over-year, according to consensus data compiled by Bloomberg. The concern is that this revenue-raising party cannot continue and net interest margins have peaked.

The flip side of rising interest rates is the problem of high inflation, which brings me to the other topic on the corporate calendar this week: retailers.

Increased exit prices may seem like a good thing for retail traders. Not when inflation reaches double digits, it isn’t. We’ll find out exactly how bad it was over the Christmas period – or indeed whether stocking up to watch the World Cup provided any kind of boost – via trading updates from British street and online brands this week.

Consumer spending could of course be better than expected next one showed last week. Games Workshopwhich announces first-half results on Tuesday, is generating a lot of excitement (and not just Ben Dungeons & Dragons nerdy teens) about growth opportunities due to the sharp rise in role-playing games during the pandemic. Investors (as well as teens) expectations have been raised even more recently for a fantasy game product Amazon TV and Movie Deal.

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Major economic reports and company reports

Below is a complete list of what to expect in terms of company reports and economic data this week.

Monday

  • Germany, monthly industrial production data

  • Mexico, December Consumer Price Index Inflation (CPI) data

  • US monthly consumer credit numbers

  • results: Tata Advisory Services Q3

Tuesday

  • The World Bank releases the winter edition of its Global Economic Prospects, its biannual World Economic Outlook

  • France, Monthly Industrial Production Figures

  • United Kingdom, Office for National Statistics Publishing Interactive maps For data from the 2021 Census of England and Wales down to local authority and community level

  • UK consumer spending data, Barclaycard

  • UK Retail Controller, British Retail Consortium- KPMG

  • UK Jobs Report, Employment and Employment Consortium-KPMG

  • United States, ex-brother Coinbase Production Manager, Nikhil Wahidue to be sentenced today after guilt in September Insider trading fees

  • results: Games Workshop H1, Robert Walters Q4 Trading Update

Wednesday

  • Italy, Monthly Retail Sales Figures

  • Mexico, industrial production data for November

  • United kingdom, Heathrow Monthly traffic figures for December

  • results: bars circulation update, fireexpo Q4 production report, Grafton circulation update, Jaguar Land Rover sales update, JD Sports christmas trading statement, Page group Q4 Trading Update, Sainsbury’s trading statement Q3, Tops Tiles Trading Statement Q1

Thursday

  • China, data on China’s inflation rate, consumer price index and producer prices for December, in addition to trade balance data for December

  • France, December CPI and the Harmonized Index of Consumer Prices (HICP) inflation rate data

  • Germany, Unemployment Claims Numbers

  • India, CPI inflation data for December

  • Japan, trade balance data for November (AM local time)

  • US inflation data, consumer price index for December

  • results: Asus circulation update, Retail Express Q1, Hafords Q3 Trading Update, John Wood Fiscal year trading update, Marks and Spencer christmas trading update, n brown trading statement Q3, persimmon circulation update, Tesco Q3 and Christmas trading update, TSMC Q4, whitcool Q3 Trading Update

Friday

  • France, the final monthly inflation rate in the consumer price index and industrial production figures

  • Germany, Rapid Annual GDP Numbers

  • South Korea, monetary policy committee rate setting meeting

  • UK, November GDP estimates and Goods Trade Balance figures

  • results: American bank Q4, Bank of New York Mellon Q4, Black stone Q4, Citigroup Q4, Delta Airlines Q4, DFS Furniture h1 trading statement, c. B. Morgan Chase Q4, Taylor Wimby trading update, United Health Group Q4, Wells Fargo Q4

world events

Finally, here’s a rundown of other events and milestones this week.

Monday

  • Japan, a public holiday on Old Age Day, celebrates those who turn 20 in the 12 months to April 1 this year.

  • Mexico, President Andrés Manuel López Obrador hosts the North Summit with counterparts from the United States and Canada at the National Palace in Mexico City. The event will conclude on Wednesday with a bilateral meeting between López Obrador and Canadian Prime Minister Justin Trudeau.

  • The UK and members of the Public Services and Commercial Services Union of the Rural Payments Agency and the DVLA in Swansea will be locked in an ongoing dispute over salaries, pensions, job security and redundancy terms. Separately, the NASUWT teachers’ union is closing a voting strike among members working in schools and Year 6 colleges in England and Wales, recommending that they vote in favor of the pay strike.

  • United Kingdom The first orbital launch from mainland Britain is set to take place from Cornwall Airport in Newquay, where Virgin Orbit is using a repurposed Boeing 747 to launch a rocket carrying nine satellites into space.

Tuesday

  • Sweden, Bank of England Governor Andrew Bailey chairs a panel discussion on central bank independence and potential future risks at an event Hosted by the Swedish Riksbank.

  • United States, the 80th Golden Globe Awards returns after a year off. The Los Angeles ceremony in particular took place in 2022 amid a boycott by actors and media companies over the lack of diversity in the Hollywood Foreign Press Association membership.

Wednesday

Thursday

  • European Union President Ursula von der Leyen is leading the European Commission’s visit to Sweden to discuss the country’s priorities during the bloc’s presidency, which began this month.

  • The UK, NHS England publishes figures for November and December, along with quarterly waiting time data for A&E attendance and emergency admissions.

  • UK Other rail strikes over wages, this time by TSSA union members at Rail for London Infrastructure, operator of London’s new Elizabeth Line service.

Friday

  • Czech Republic, the first two-day elections to determine the country’s next president and head of state. Incumbent President Milos Zeman will not be able to run again after serving two five-year terms, but former Prime Minister Andrej Babić has confirmed his candidacy.

  • The UK and the National Education Union are closing a wage strike among some 300,000 teachers and support staff in England and Wales.

  • The United States, the Trump Organization is due to be sentenced after the ex-president’s real estate firm indicted in December on tax fraud charges.

  • US and Japanese Prime Minister Fumio Kishida meets with US President Joe Biden at the White House, wrapping up a week of visits to five G7 countries to build consensus on the economic group’s annual summit this year, which Japan will host in May.

Saturday

Sunday

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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

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International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

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The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

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However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Economic

Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

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Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

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David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

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BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

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Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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