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Increasing interest rates helps slow job growth in the United States

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The most important news of the day

  • Consumer price inflation in the eurozone Fell more than expected To 9.2 percent in December, from 10.1 percent in the previous month. However, core inflation, which excludes volatile energy, food and fuel prices, rose unexpectedly to 5.2 percent. Here’s our explanation of why inflation is so low It is unlikely to stop interest rates from rising.

  • UK ministers have announced new anti-strike legislation that will be implemented Minimum levels of service across eight sectors, including the NHS – already stretched by ‘twindemic’ Covid and influenza cases – in response to an industrial strike wave. Prime Minister Rishi Sunak Union leaders invited for talks on Monday.

  • Taiwan She is looking for investors to help set up her own company Satellite communications provider, inspired by Elon Musk’s use of Starlink in the war in Ukraine. The move is part of Taipei’s efforts to harden itself against a possible attack from China.

For the latest news, visit live blog


Good evening.

US job growth slowed down more As higher interest rates take their toll on the world’s largest economy, the Fed is unlikely to deviate from its rate-raising program.

About 223,000 jobs were added in December, more than expected but down from November’s 256,000 and well below last February’s peak of 714,000. The unemployment rate also fell more than expected to 3.5 percent.

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Federal Reserve policymakers have acknowledged that reining in inflation will require job losses and thus higher unemployment, which economists predict may eventually happen. 5.5 percent higher While the economy is heading towards recession.

A number of US companies have announced layoffs in recent weeks. Amazon yesterday became the latest tech company to rein in costs, announcing plans to do so cut 18,000 jobs, to reach the company’s warehouse unit – which includes its core business in e-commerce – and its human resources department. Software group Salesforce said Wednesday that it’s on the cusp 10 percent of its employees.

Separate survey data showed today American Service Contracting For the first time since May 2020.

Hourly earnings in December rose 0.3 percent, but that was less than expected and slower than last month.

In minutes from its latest policy meeting published on Wednesday, the Fed said it wanted to “More evidenceThat inflation was declining before he reconsidered his policy tightening, which saw interest rates rise from near zero to just under 4.5 per cent.

Gita Gopinath, the number two man at the International Monetary Fund, this week urged the Federal Reserve to “Stay on courseIn its battle against inflation, confirming concerns about a tight labor market. Separate data on Unemployment claims Yesterday showed new applications remain at historically low levels.

Investors gave Wide welcome To the news of slowing job growth and wages, which led to a rise in US stocks in morning trading in New York.

Need to know: UK and European economy

UK companies They reduce investment as interest rates rise, according to A Bank of England survey.

British taxpayers face losses of around £1 billion Fraud and error in grants to help companies to deal with the epidemic.

energy suppliers Activists in the United Kingdom called for a “social tariff” To help people deal with higher bills as analysts warn that wholesale gas prices may not return to “normal” before 2030. Chairman Where is the Italianone of the largest oil and gas companies in Europe, called for closer cooperation among themselves Europe and Africa The European Union seeks to replace Russian imports.

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German industrial orders He fell More than expected In November.

Spain Enjoy an increase in tax revenue after the previously clandestine business forced out of the shadows from the epidemic.

Need to know: The global economy

China Hong Kong confirmed its plans to reopen their shared borders Sunday after coronavirus restrictions were lifted, albeit with daily restrictions on crossings. The easing coincides with Beijing removing entry restrictions for foreign travelers, including the cancellation of PCR tests on arrival.

global regulators on stepping up scrutinyNon-banking financial institutionsSuch as hedge funds, clearing houses and retirement assets after a series of crises.

From peak dollar to not-so-big tech and the return of political orthodoxy, contributing editor Ruchir Sharma presents his work Investors Guide 2023 In the Weekend article at FT.

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And lest you despair so much of the grim warnings that the Disrupt Times trading stock presents, economics editor Chris Giles has some good news: the outlook for 2023 is Better than you think.

Need to know: business

shell Will pay UK taxes for The first time in five years Thanks to $2.4 billion in unexpected taxes from the European Union and the United Kingdom. In recent years, the oil and gas giant has received tax refunds on investments in the North Sea and decommissioning activities, which were higher than any taxes owed.

Technology investors She remains cautious about China’s pledge to support the biggest tech companies after the bruises organizational repression.

earnings in Samsungthe world’s largest memory chip maker, decreased by 69 percent In the fourth quarter, demand declined in conjunction with the slowdown in the global economy.

Some mixed news about prospects air travel. Europe’s Director of Air Traffic warned:Big “ This year the sky is crowded, in part because of the war in Ukraine. Ryanair Review its earnings forecast after a Bumper festive periodwhich sent its shares up 10 percent, however Southwest Airlines In the US said operational collapse in December Its cost reaches 825 million dollars.

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UK retailers next one And BM It reported strong sales in December, overriding concerns that hard-pressed Brits might shop less this Christmas. Both companies raised their expectations. In the US, however, the household goods chain bed bath behind It could become one of the largest retail bankruptcies in the country since the start of the pandemic.

Chinese electric vehicle Makers are worried about The end of government subsidies and semiconductor shortages, even after enjoying the bumper of 2022. BYDthe country’s largest manufacturer of electric vehicles luxury models To counter its western rivals Mercedes and BMW. Tesla In the meantime price reduction of its electric cars in the country.

BYD sports car
BYD’s Yangwang U9 sports car can, according to the company, travel from zero to 62 mph in two seconds. © BYD

Scientific tour

increase in Corona virus infection In China, it raised fears that a dangerous new strain might emerge. Read our news Explanation of COVID-19 variables. Science commentator Anjana Ahuja says 2023 could be for Covid Lowest expected year to date.

The UK is preparing to embark on a series of research projects that will cement its position as a world leader Genomics. They include the world’s largest genetic medicine initiative and a project to read all 3 billion characters DNA of a newborn baby To detect childhood diseases.

Could this project and others help realize the UK’s dream of becoming the The science of superpowers Or will it remain a low-cost “tech store” for the world? our Great read Examines the essence behind the speech.

Chinese researchers say they have found a way to crack Online encryption using quantum computers. If this is true, then it means that governments can Break the secrets of other governments. “If this is true – it matters – it will be as secret as it is in the movies, and one of the biggest things ever in computer science,” said one expert.

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Finally, here’s a short video unveiling the FT Technology Champions of 2022: The companies our rulers have chosen to be The best technology users To meet today’s business challenges.

Some good news

Here is the latest example of those British ambitions: Ministers signed an agreement with Biotechnology to Advanced Cancer Trials It has 10,000 participants. Germany’s Covid-19 vaccine pioneer has been testing custom cancer vaccines since 2012, and now needs to scale it up to get the product ready for approval by 2030.

Something for the weekend

Interactive crossword puzzles will be published for FT Weekend here Its Saturday, but in the meantime why not try today Mysterious crosswords?

Interactive crosswords on the FT app

Subscribers can now solve FT’s Daily Cryptic, Polymath and FT Weekend crossword puzzles at iOS and Android apps

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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Thanks for reading Disrupt Times. If this newsletter has been sent to you, please register here to receive future issues. Please share your feedback with us at disrupttimes@ft.com. Thank you


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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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