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The United States is launching a new barrage in the chip war

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  • The US Federal Reserve announces decision on the interest rates at 2pm EST / 7pm London time today – check back FT.com For details and feedback. US stocks and bonds rose yesterday after new data showed consumer prices rose in the US 7.1 percent in Novemberdown from 7.7 percent in the previous month and the slowest rate in a year.

  • New data also showed today UK inflation slows, falling to 10.7 percent from a 41-year high in October of 11.1 percent. The news will be greeted by BoE policy makers who make their interest rate decision tomorrow.

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Good evening.

Today we’re reporting on US moves to place more semiconductor manufacturers in China Trade blacklist In the latest escalation of tensions around critical components for a wide range of industrial sectors, from electronics to… the cars.

It comes two months after the US reveal Strict export controls That made it difficult for China to obtain and produce the latest semiconductors, even from British companies such as an arm. Beijing responded this week before raise the dispute with the World Trade Organization.

The political tensions come on the heels of a prolonged semiconductor shortage during the pandemic, which has prompted an intensification of efforts by the United States and Europe To build their own production capacity.

The Joe Biden Chips and Science Act, passed this summer, provides $52 billion in subsidies to US chipmakers in an effort to counter China’s massive investment in its chip sector. Both Biden and Apple chief Tim Cook welcomed the latter Three times the investment in the Arizona facilities of Taiwanese TSMC, the world’s largest contract chip maker and sole manufacturer of chips used in iPhones.

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TSMC’s $40 billion is one of the largest foreign direct investments in US history and provides a boost to Apple, which had to shelve plans to use chips from China. Yangtze memory techniques Because of the Washington campaign.

Meanwhile, Chinese companies such as Alibaba, which also relies on TSMC, are having to tweak their chip designs. Reduce processing speeds to avoid US sanctions. They are doing this after spending years, and millions of dollars, creating blueprints for the nation’s next generation of supercomputers, artificial intelligence algorithms, and data centers.

Growing concerns about Chinese interference in Taiwan have further complicated matters. The US and Europe need more onshore production capacity while not economically weakening Taiwan, which, says the US-Taiwan Business Council president, will It offers China one of its primary goals.

Meanwhile, the new US controls will not only hurt China’s chipmakers, but also increase inflationary pressures on many products.

Latest program “Big Read” It puts the current conflict in context. “The stakes are high,” the book says. “Bullshit over chips is a proxy for a broader geopolitical confrontation between an old and a new superpower. But it may also reflect the conviction in the United States that China is catching up too quickly for comfort.”

The Chip War, an account of the decades-long struggle to control microchip technology, won the FT Business Book of the Year award. Could you Read our review here.

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Need to know: UK and European economy

The European Commission is pressing for relaxation in the European Union state aid rules For the beginning of 2023 in response to The US Inflation Reduction Act of $369 billion. Commission chairwoman Ursula von der Leyen said she planned to “adjust” state aid rules for “a few years” because the IRA risked “disqualifying the level playing field”.

industrial production in Euro-zone decreased by 2 percent in October compared to September amid higher energy prices and supply chain disruptions. Some energy-intensive manufacturers have had to cut or even stop production in Europe.

our Great read Multiplication details for Russian economy from Western sanctions. Supply chains have been broken leaving many companies scrambling to get products and parts through underground channels.

Need to know: The global economy

China will Stop counting asymptomatic Covid-19 cases But accelerating vaccinations after testing requirements were drastically reduced and testing facilities closed. Hong Kong I got rid of the Covid tracing app and Travelers are prohibited from visiting bars.

The dispute exists oil exports of the Black Sea ports of Russia Solved. Tankers were forced to disembark near the Bosphorus and Dardanelles after Turkey demanded a new proof of insurance in response to Western sanctions over Russian oil.

Ghana has agreed to a preliminary deal on A $3 billion loan from the International Monetary Fund To help stabilize its finances and bring it closer to an agreement with its creditors. The country’s economy has been hit by the effects of the war in Ukraine and its over-reliance on commodity products such as gold, cocoa, and oil.

Need to know: business

tuiEurope’s largest tourism company has agreed to pay another €730m in Covid-19 aid to the German government as its annual revenues return to levels close to pre-pandemic levels, after survived the “existential crisis”. In another sign of confidence in the future of air travel, United Airlines Apply for 100 Boeing widebody aircraft.

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inditex, The global fashion group and owner of the Zara chain, stated that 11 percent increase in quarterly sales But earnings growth is more limited as its costs rise. The company insisted that China remained a “core” market despite Covid restrictions that had seriously affected consumption.

checkout.com, Europe’s most valuable private technology company, It lowered its internal valuation to about $11 billionbecoming the latest high-flying startup forced to respond to technology trend and waning investor sentiment.

Banks, trading companies and brokers are preparing for the largest overhaul of Trade US stocks In nearly two decades with the publication of plans designed for Lower costs for small investors.

UK company fails it is expected that Past the post-financial crisis peak of 2009. In contrast to that time, companies also have to contend with rising interest rates, which makes it more difficult to survive.

world of work

UK private sector wage growth far The numbers outnumbered the public sector In October, it was up 6.9 percent compared to 2.7 percent for the public domain, one of the largest gaps ever. Delphine Strauss examines whether the government claims it You can not afford to increase the public sector actually pay a heap.

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Executive salaryHowever, the rally continues, with accusations that leaders can get distracted by employee and consumer concerns. our Moral money forum Discuss what can be done.

As in the United Kingdom, France Struggling to keep it Older workers in the labor market. President Emmanuel Macron is preparing a bill to raise the minimum retirement age to 65 from 62, a proposal very unpopular with unions.

Some good news

New treatment helps kill Bone marrow cancer Successful in 73 percent of patients in two clinical trials, the American Society of Hematology announce. The treatment, called Talquetamab, has been tested in patients with multiple myeloma since 2018 and has been successful in people whose cancer has resisted other approved therapies.

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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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