Apr 29 FT Biden's Plans, China/EU? HK another poor law, Sony reality check, China regional chance


29 Apr

MARKETs @ 2pm Hong Kong time
AUSTRALIA 
Opened higher testing 7,090 before easing back to 7,070 level ahead of Export/Import price data which was better than expected and the market worked higher to test 7,100 early afternoon but failed to break above despite a couple of tries. Consolidated to 7,080 level and traded sideways currently +19pts (+0.3%) @ 7,083
DATA
Export Prices Q1 +11.2% QoQ vs +5.5% Q4 (F/cast was +0.9%)
Import Prices Q1 +0.2% QoQ vs -1% Q4 (F/cast was +1.1%)
Tomorrow PPI and Private Sector Credit
JAPAN
Markets closed for Golden Week Reopen Thursday 6 May
S KOREA  
South Korea's terms of trade rose for the 12th consecutive month in March, as exports have shown signs of a strong recovery, central bank data showed Thursday.
Market sold down as Korea Fair Trade Commission said seven more major firms are required to disclose detailed information on their management and business activities; with Coupang, Korea Aerospace Industries Co. (KAI), and six others newly added to the list.
Rebound as Samsung Electronics announced 1Q21 net profit +46% yearly to KRW7.1 trillion; sales rose 18% to KRW65.4 trillion. F/cast notable growth in 2Q21 chip profit, driven by insatiable demands for servers and a better market landscape.
Some concerns also that bank loans to the Samsung family to pay the inheritance bill could impact other lending
Kospi opened higher after the Fed comments and tested 3,200 in the first 5 minutes but then sold down to 3,160 in the next 40 minutes before bouncing back and working back to test 3,200 again 2 hours later. Having failed a second time it then trended lower initial support around yesterday’s closing level then dipped briefly into the red and currently flat at 3,181
Kosdaq traded a similar pattern; tested 1,005, sold down to 985, worked back to 1,003 but now -6pt (-0.6%) @ 992Pre market tomorrow Industrial Production, Retail Sales, Manufacturing Production and Construction Output Monday short selling resumes
TAIWAN Opened higher at 17,650 and rose to 17,675, then sold down to 17,590 before working higher to test 17,700 but lacked momentum and trended lower for the rest of the session finding support at yesterday’s closing lever around midday and traded sideways to close flat @ 17,567
Tomorrow after market GDP Growth Rate
CHINA 
CSI300 opened higher and tested 5,160 a couple of times in the first 45 minutes before consolidating and testing yesterday’s close ahead of lunch. PM opened higher and worked higher but resistance at 5,150. Currently +31pts (+0.6%) @ 5,150
Tomorrow pre market Non & Manufacturing PMI’s, also last day of trading ahead of labour day holidays.
HONG KONG 
Pre market opened @ 29,268 +197pts vs +152pts ADR’s as futures settle; HSBC and Ecommerce names firm except Meituan (being probed)
Worked higher to test 29,400 mid morning but then trended lower 29,230 and then traded sideways into lunch. PM continued trading sideways currently +188pts (+0.7%) @ 29,262
At lunch Meituan, CCB,HKEX and BYD Electronic weak.
Std Chart reported 1Q21 Underlying PBT +18% YoY to US$1.446B, Beat. Also news that Tencent was facing a Rmb10bn fine over anti trust issues.
EUROPE 
Expect a higher open FTSE +10 points at 6,972, DAX +22 points at 15,319, CAC 40 +7 points at 6,316 and Italy’s FTSE MIB +54 points at 24,250, according to IG.
Earnings from Total and Airbus among the companies reporting earnings
Shell reported adjusted earnings of $3.2 billion for the three months through to the end of March. Beat estimates
Data due
EUROZONE Loans to Households, Loans to Companies, M3 Money Supply, Consumer Confidence, Sentiment (Economic, Industrial and Services), Consumer Inflation Expectations
GERMANY Import Prices, Unemployment Rate, Unemployment Change, Inflation Rate,
FRANCE 
No data due
UK Car Production
US Futures 
Opened mixed in Asian time Dow -3pts, S&P +0.2%, NDX +0.5% but rallied after Biden’s speech Dow +88pts ,S&P and NDX +VE. He said the US was ready to take off
Ahead of the busiest reporting day for the S&P 500 with 11% due to report and initial claims
AHEAD Initial Claims, 4 week Average Claims, Continuing Claims, GDP (Growth Rate and Price Index), Core PCE Prices, PCE Prices, Pending Home Sales,  EIA Natural Gas Report.
Earnings: 
Amazon, Caterpillar, McDonald’s, Twitter, Bristol-Myers Squibb, Comcast, Merck, Northrop Grumman, Airbus, Kraft Heinz, Intercontinental Exchange, Mastercard, Gilead Sciences, U.S. Steel, Cirrus Logic, Texas Roadhouse, Cabot Oil, PG&E, Royal Dutch Shell, Church & Dwight, Carlyle Group, Southern Co.

FRONT PAGE
India’s oxygen crisis deepens
People have engaged in frantic hunts for oxygen cylinders or hospital beds for sick loved ones. The crisis has fuelled claims that the government failed to prepare for a second wave.
Inside India’s desperate oxygen need underscores severity of crisis 
Also read Beijing spots chance to gain influence in south Asia

Biden charts $1.8tn plan to spread social safety net with higher taxes
• Further expansion of spending • Focus on childcare and health • Battle ahead in Congress
Notes the taxes rises will be hefty but are targeted at a very small percentage of the population.
An important point to note is that it ‘reflects Biden’s ambition to remake the US economy with greater government support for struggling households far beyond immediate relief provided during the pandemic.’
That is good not only for the economy but for the American society which has seen many ‘flare ups’ recently.
Targets are '$225bn in funding for childcare expenses and a further $225bn for the creation of a national family and medical leave programme, measures designed to help middle-class households and boost female participation in the jobs market. The plan provides for $200bn in funding for universal access to prekindergarten schooling and $109bn for two free years of community college, as well as subsidies for buying health cover.’
Key changes to the tax law are 'an increase in the top income tax rate from 37 per cent to 39.6 per cent for Americans earning more than $400,000, eliminate the preferential tax treatment of capital gains and dividends for those earning more than $1m and scrap provisions allowing people to pass unrealised capital gains to their heirs free of tax.’
Those earning over $400k are in the top 1.8% of tax payers in the US also remember that it is the marginal rate of tax that is being increased; so the actual hikes on income over $400k will be small. $400k is nearly 6x the median income in the US; and higher than the US Presidents salary.
Listening to him speak, he was convincing, he mentioned that without good education other countries would outperform the US. He was clear that his plans were fair, looking to cut corporate tax loopholes. Pointed out that Trump’s tax cut only really benefited CEO’s and it did not pay for itself, it did not add jobs but it did add the to the budget deficit.
He mentioned that speaking to world leaders the comment he heard was 'America was back but for how long'; so he called on Congress to back America being back a world power for the long term with its allies; saying no country could resolve all the global issues on their own.
He mentioned he spoke to China saying that the US welcomed competition but did not want conflict but trade must be fair and the rules must be adhered to. Mentioned about keeping a strong military presence in the Indochina theatre, just as it does in Nato, not for conflict but to prevent conflict.
He also mentioned withdrawal from Afghanistan and covered the domestic US issues.
The full text of his speech is at https://www.cnbc.com/2021/04/28/biden-speech-congress-live-updates-stream.html

Johnson faces investigations over who paid for renovations at Downing Street
British prime minister Boris Johnson is facing two investigations into alleged donations for the refurbishment of his Downing Street residence, as the UK’s electoral watchdog said that it suspected an offence may have occurred.
Another issue for the PM to address; slight -VE

INSIDE
EU warned about insolvency ‘tsunami’
Withdrawal of support by states likely to ‘trigger a recessionary dynamic’
Key is that once Government support is withdrawn many companies may be left struggling with too much debt. Notes that 'The number of businesses filing for insolvency fell sharply in most European countries after the coronavirus pandemic hit the region last March and stayed abnormally low for the rest of the year.’
Due in part to over €1.5tn in public support; its removal could trigger a wave of insolvencies.
It suggests 'governments take a series of actions to mitigate the risk of a wave of corporate insolvencies, including developing more targeted policies to boost the solvency of otherwise viable companies and streamlining debt restructuring and insolvency procedures.’
They underline the need to avoid supporting ‘zoombie firms’ which could hamper the recovery; so the actions must be targeted on those companies that will be viable and windup those that are not.
'In total, the ESRB said companies had taken up €435bn of loans with state guarantees across Europe, of which €289bn were still in place in the third quarter of last year.
It said changes to the European Commission’s state aid temporary framework allowed governments to “convert public loans and guarantees into grants up to a certain ceiling to help companies weather the Covid-19 crisis” until the end of next year.
Another way to help over-indebted companies would be to make financial restructurings quicker and easier, the ESRB said.’
I think they make a good point. I suspect that a number of private businesses have been careful in taking loans; knowing they have to repay them.
But key will be ensuring that the administration of targeted loans is making the system easy to access for those who need it and bar those who just play the system.

China ties prove double-edged sword for EU
Unfair competition and rights concerns cause rethink in boardrooms across bloc
Looks at the rise of China as a trading partner with Europe during the pandemic which has helped Europe’s recovery and cushioned the worst impact of the pandemic. 'China has become the EU’s largest trading partner for goods, the source of almost a quarter of wares imported into the bloc last year, while 10 per cent of the EU’s exported goods went the other way. Two-way trade has risen by 67 per cent in the past decade, against 19 per cent growth between the EU and other countries.’
It quotes 'Wolfgang Niedermark, executive board member of BDI, Germany’s main industry association, warned of problems. “It is time to treat China as a competitor as well as co-operate with it as a partner and to confront it when we disagree, such as over human rights.”’
He also said Beijing had become bolder in asserting its interests, meaning that “the tone from China is different, so we have to take a different approach”.
Looks at the case of cotton and clothes makers.
It highlights the dilemma for Germany who is a major beneficiary. It notes that 'Volkswagen in particular faces growing scrutiny, as one of the few western carmakers with a factory in Xinjiang. It is a sensitive issue for VW, given its use of forced labour during the second world war and because China is its biggest market. VW denied that any of its employees “work under duress”.’
On the flip side 'Janka Oertel, head of the Asia programme at the European Council on Foreign Relations, warned it was a “risky choice” to assume Beijing would continue to open up its economy after tit-for-tat sanctions left the EU-China trade deal agreed in December hanging in the balance.“This is bigger than individual companies,” she said. “It is a political problem and that needs to be addressed at a European level and not at an individual company or country level.”’
A good read not mentioned but over night EU legislators vow to kill China investment deal over Beijing’s sanctions. They want to reject the agreement ‘to show once and for all that the EU is not just a supermarket but rather has principles’, says a French member of the European Parliament.
How China will reacts will be interesting to watch; because now Europe is important to China’s recovery. President Xi is still trying to boost domestic consumption but its tough and the economy is seeing a divided recovery; so export markets are important. He cannot afford to burn too many bridges. But he also has the present a viable story to his domestic audience.

Beijing spots chance to gain influence in south Asia
China moves swiftly to help nations with vaccines previously supplied by India
'After a videoconference between Chinese and regional foreign ministers — excluding India — on Tuesday, Bangladesh said it had asked China to supply it with vaccines as soon as possible. Nepal said Beijing had offered medical equipment and materials.’
The meeting went further and the SCMP reports 'Chinese Foreign Minister Wang Yi and his counterparts from Afghanistan, Pakistan, Nepal, Sri Lanka, and Bangladesh agreed on Tuesday to set up an emergency supplies reserve and a cooperation centre on poverty alleviation, among other initiatives.’
'Analysts said the chaos in India had given China an advantage in a long-simmering competition for regional influence that has intensified during the pandemic.’
China obviously has two objectives; to try and prevent covid re-entering China from its neighbours but also looking to gain political capital from the exercise.

BioNTech chief confident jab will work against new variant
BioNTech’s chief executive has said he is confident the Covid-19 vaccine his company pioneered with Pfizer will work against a new variant circulating in India, where health officials are recording hundreds of thousands of new coronavirus cases a day.

HK immigration law change raises exit ban fears
Critics say amendment gives authorities power to prevent people leaving
Looks at the amendment that will empower immigration authorities to request airlines not to “allow individual persons to board the plane” to Hong Kong, and to provide them with passenger information before a flight departs. Government says it is to “reduce at source the number of non-ethnic Chinese illegal immigrants and overstayers” who might lodge asylum bids, but the current wording of the bill gives it much wider powers; 'lawyers warn could increase business risks by handing the government broad powers to prevent individuals leaving the Chinese territory.’
It is due to come into effect on 1 August.
It seems like a further clamp down by China and the broad terms used again suggest Beijing’s influence in the drafting of the amendment. China has previously used “exit bans” to stop foreign business people leaving the country.
It is another example of the administration not acting on the concerns of the people despite legal associations and concern groups urging the government to include specific clauses in the amendment to protect the rights of Hong Kong residents to enter and remain in the territory.
In response to the outcry the administration said it would 'introduce further legislative adjustments to make clear that the scope of the amendment would cover only inbound flights. However, Johannes Chan, a law professor at Hong Kong University, said: “While this clarification is welcome, this is not what the . . . law says as the bill now stands.”’
Interestingly the administration 'accused the law’s critics of “misleading” the public, said the original amendment was to address persistent non-refoulement claims by refugees and asylum seekers.’
One cannot getaway from the fact that the administration’s legal department are skilled and qualified lawyers so presenting a bill that gave such wide powers was not a mistake or oversight; it was deliberate. They were aware of the concerns and chose to ignore them. Treating the citizens of Hong Kong this way will only fan the flames of resentment.
Worth noting that almost seven in 10 Hong Kong residents disapprove of Carrie Lam being the chief executive, with nearly 40% giving her zero mark in the latest popularity poll. Only 18% of respondents said they have confidence in Lam, out of the 1,004 people that the Hong Kong Public Opinion Research Institute interviewed last week. That was two percentage points lower than the previous poll conducted in early April. Some 68 percent cast a vote of no-confidence in Lam, making her net popularity at negative 50 percentage points, three points lower than the previous survey.
To me that shows that while the street protests may have been stopped you can’t make people like the administration. This act will only increase the resentment.

Samsung family vows to pay $11bn in tax and donate artworks
The family noted that 'noted that the tax bill was “equivalent to three to four times the [South Korean] government’s total estate tax revenue last year”.’
Without giving details the family said the taxes will be paid in six instalments over a period of five years.
'According to local analysts and people familiar with the situation, the family planned to foot most of the bill initially through bank loans backed by their own shareholdings as well as cash from higher dividend payouts from Samsung group units. Lee Kun-hee’s estate includes shareholdings in Samsung Electronics as well as smaller businesses such as Samsung Life Insurance and Samsung C&T.’
It is possible that they have to sell some interests but my expectation would be that the group of companies will increase dividends to help pay the bill or the loans taken out to pay the bill.
It concludes 'The wealth and power of South Korea’s chaebol families remain divisive on the streets of Seoul. Chun Young-tae, a real estate agent, viewed the donations as “a ploy” to improve the family’s image. “The Lee family has transferred Samsung’s management control to the third generation in many illicit ways,” he said.’

Worth also noting that there was a petition to have Lee Jae-yong pardoned by other business leaders but local press reports that President Moon has maintained a prudent approach to issuing pardons, and no exception is expected for Samsung Electronics Vice Chairman Lee Jae-yong.
Worth noting also that of the 20 trillion-won worth of assets that the family is inheriting, shares in Samsung companies account for 19 trillion won.

Covid hit prompts Japan to rethink rules on gambling
Japan’s government has begun internal discussions to legalise gambling on football and baseball in a move that would create a combined sports betting market estimated to be worth more than $65bn a year.
It seems the loss of revenue from cancelled matches etc has prompted the move.
Currently 'Japan permits betting on only four sports: horseracing, cycling and motorboat and motorcycle racing. In 2019 combined betting revenues of all four stood at about ¥6tn ($55bn), with betting on horseracing increasing significantly as mobile apps came online.Japan’s biggest form of gambling is pachinko. Annual turnover from the vertical pinball game is falling but remains at about $200bn a year. Its business model exploits a legal loophole.’
Interestingly many Japanese already gamble illicitly using foreign issued credit cards so it would make sense for the government to legalise it and make some money by taxing it.

Legal challenges test consensus on primacy of European law
The EU’s legal order seems to be under assault. Poland’s constitutional tribunal is considering whether EU injunctions against its judicial reforms are compatible with the Polish constitution. It is the latest skirmish between the EU and Warsaw.

South Africa’s ANC allowed looting, president admits
South Africa’s ruling African National Congress allowed systematic looting over the past decade “under our watch”, President Cyril Ramaphosa told a judicial inquiry examining the biggest post-apartheid scandal.

Iran leak sheds light on who wields power
Foreign minister suggests Revolutionary Guard has wide-ranging influence

Riyadh wants ‘positive relationship’ with Tehran
Crown Prince Mohammed bin Salman has said Saudi Arabia wants to resolve its differences with rival Iran, a marked shift in tone in the wake of the election of US president Joe Biden.

Democrats in rich districts pose threat to Biden fiscal proposals
Looks at the opposition to Biden’s tax proposals. The key as he made clear in his speech is that this will only impact 1.8% of American tax payers. I think his making this clear and appealing to the American people will make it hard for opponents to scuttle the proposal. His speech was eloquent and I think will resonant with a large number of American’s who stand to benefit from the proposals and that is the key. The 1.8% who make more than $400k pa which is nearly 6x the median income in the US are being asked to pay their fair share. He said he wasn’t out to burden anyone but that people should pay their fair share.

Canada finance minister hails global tax plan ‘breakthrough’
Canada’s finance minister has called the US proposal for a global minimum corporate levy a “breakthrough moment” in deadlocked international tax talks, in the latest sign of the growing momentum behind a deal on taxation of large tech groups.So far countries that do not benefit from having low taxes have come out in support but those who currently benefit have remained silent. Dublin, HK, Singapore have been remarkably quiet.

COMPANIES & MARKETS
Sony PS5 ambitions undimmed by chip crunch
Announced results yesterday and gave a cautious outlook not least because of the high base effect from last year. Leading its hopes is the PlayStation 5 games console, it hope it will outpace those of its hugely popular predecessor system this year, despite warning that the global chip crunch is likely to persist for the next 12 months.
It also announced a share buyback of up to ¥200bn ($1.8bn) of its own shares, which are trading near a 20-year high.
Demand for the PS5 currently outstrips supply, the question is whether that we remain or switch to its competitors like Nintendo. That is important because of the growth in it's the software and PlayStation Plus (online subscription service) that is bolstering profits.
Interestingly Sony is saving on freight costs by using sea freight vs air.The cautious guidance is usual for Sony and so bodes well for the future, the key is likely to be the chip supply and whether that impacts competitors to the same degree as Sony.
Also LEX Sony: are you not entertained?Concludes. 'Coming years are unlikely to see a repeat of such extraordinary events. A global shortage of chips has been weighing on console supply and could dent PlayStation sales.  
Sony is also likely to be affected by slow changes in the auto sector. It has already started to shift focus from electronics to auto manufacturing and has developed sensors crucial for automated driving. But the transition of early technology to mass production will require years of investment. The image sensor segment was the only core division to book an operating income decline in the year to March.
For now, a ¥200bn share buyback has bolstered the shares. But expect a reality check on profits later this year.'

S Korea’s retail investor army declares war on short-sellers
Amateur traders gain political clout as they account for 60% of daily stock trading turnover
An interesting read about how the retail investors are working together to change the rules other than using on line forums to chase stocks; largely I would guess due to the strict stock manipulation rules.
Many of them still think short sellers take advantage of retail investors despite 'short-sales making up only 6.5 per cent of total trades on South Korea’s main board in the year before the ban was introduced,….. That compared with an estimated 35-40 per cent in markets such as the US, Japan and Europe.’
Institutions say 'short selling is needed to hedge their exposure to South Korean stocks and that it can help prevent shares from becoming too overvalued.’
Nice quote '“Short-sellers are like the Grim Reaper to many amateur traders, who often buy stocks on rumours with a short horizon, regardless of their fundamentals,” said Hwang Sei-woon, a KCMI researcher. “They just blame stock falls on short-selling without thinking about their risky investment patterns.”’
Interestingly the amateurs 'want other strict measures against professional investors, such as higher collateral requirements to borrow shares in order to sell them short.’'They have also asked the state-run National Pension Service to increase its domestic stock holdings, blaming a recent market correction on the fund’s heavy selling of South Korean shares.’
It looks a lot like they want the playing field tilted to their advantage, but it isn’t their full time occupation. In the investment world access to information is key and data is usually expensive; whilst there are only low barriers to entry, it is a case of being aware of the risks. If you can’t watch your stocks all day you should invest in stocks that don’t need to be watched all day.
It concludes '“It is a David vs Goliath fight,” said a prominent Kstreetbets member (Kstreetbets, is an online forum that targets short-sellers). “We know that our chances of winning the fight against short-sellers remain very slim but we will continue the fight against injustice. Then, our children may live in a fairer world.”
An interesting read. Short selling resumes Monday

BaFin cracks down on Binance’s stock tokens
Germany’s financial watchdog has warned investors that Binance, one of the world’s biggest cryptocurrency exchanges, has probably violated securities rules over its launch of trading in stock tokens, in a crackdown on the crypto industry’s foray into highly regulated markets.
Looks at the grey area of trading as regulators still try to come to grips with how crypto should be regulated.Article notes 'Booming prices of digital currencies and heavy interest from retail investors for share trading have encouraged cryptocurrency exchanges to explore new products that mimic those found in the traditional financial industry.’
It is rather surprising that today the world regulators have not called a forum and sat down to discuss and set a regulatory framework. The various different approaches are going to lead to grey areas and no doubt scandals. Like the SEC chasing Ripple and asking for foreign entities to provide info; some of whom refused.

Zomato hopes listing will raise $1.1bn as lockdowns bolster delivery sector
Food delivery group Zomato plans to raise up to $1.1bn in an initial public offering, setting the stage for what would be India’s biggest listing so far this year.
Opportune timing with the pandemic driving demand for delivery ; it says the funds to be used to 'to scale, for instance by delivering goods as well as food’
But like the other delivery companies it is not making money. It faces competition from local Swiggy and also Amazon. It has had some success; Uber sold its operation in India to Zomato last year in exchange for a 9.99% stake.It's being heralded as a tech company but as we have seen with Deliveroo and DoorDash in the news yesterday the model is less about tech and more about cheap labour. Even Grab is still not profitable and fighting competition.
'India’s retail investors are “tech-starved”, said Amit Anand, founding partner of Singapore-based Jungle Ventures. “Zomato is a household name in India and should reap the benefits of a growing appetite for the technology sector [among] domestic market investors,” he said.Zomato was founded in 2008 by Deepinder Goyal and has a presence in 24 countries, though the majority of the cities that it serves are located in India.’
I for one would stay away at this stage and wait for a clear winner to emerge.

Hong Kong’s stock exchange posts record profits after tech IPO boom
Hong Kong’s stock exchange operator has reported its best quarterly profit as a flood of trading and initial public offerings boosted the bourse ahead of a new chief executive taking the helm.
Key drivers were increased turnover and listing fees (especially from Chinese companies looking for an alternative listing to New York).
Much of the turnover has come from Mainland China where the growth in wealth management has driven demand for product which Hong Kong is able to offer in depth. The use of the connect programme has been key to that business and additionally in allowing some offshore investors, that can accept the custody arrangements, access to China without having to have a A share ID.
The outlook is maybe not so rosy with China’s crackdown on the large tech stocks just as the exchange tries to turn itself into a tech hub.
With regard to its overseas tie ups and running of indices they got little mention.
The increase in mainland money could be a concern; Beijing is saying effectively that it is supporting Hong Kong but I would worry that if the winds change that more could be turned off.
Equally the imposition of more ’National Security’ rules and the undermining of Hong Kong’s legal system and independence could erode its attractiveness.
I also worry that the increase in Mainland money is masking local money being moved offshore.

US runaway inflation fears are misplaced. By Tiffany Wilding is North American economist at Pimco; Allison Boxer of Pimco contributed to this article
A good read she feels 'as the economy further normalises over the second half of 2021, we expect sequential growth in real economic activity and prices to slow, moderating the year-on-year pace of inflation. Price pressures are likely to level off as vaccination rates increase, shipping and supply pathways clear and durable goods purchases ease.’
Notes that there is likely to be a lag between Core CPI and the Feds preferred core PCE that period might be enough for markets to moderate their expectations on inflation.
Also that a number of factors that contribute to inflation have already occurred and impacted (factory output disruptions and shipping issues) and so wonders how much more inflation should be expected? 'we are sceptical that the situation will worsen enough to drive core inflation 0.5 percentage points higher than we now expect over the coming months.’'Yet we do not expect persistent inflation. Consumers substituted services for durable goods in 2020. In 2021, demand for durable goods will probably cool as more people are vaccinated and resume consuming services. This could mitigate the ability of retailers of those goods to pass on higher costs. In turn, this could offset inflationary pressures in other categories, such as airfare and lodging.’
But airfare and lodging account for less than 1% of CPI so not enough to drive inflation. But with housing being 33% of CPI it has a bigger influence, which is impacted by the labour market.
She concludes 'Worries about inflation have helped propel US bond yields higher in the past six months. In the near term, each new economic data point may seem to hint further at accelerating growth.Recovering demand should help prices normalise this year. But while government stimulus measures will probably close the gap between actual and potential GDP, do not expect a large and persistent overshoot of that shift to contribute to runaway inflation.’
An interesting read but key is her comment what more can happen? The growth in house prices is a key factor, even allowing for the fact as she points out 'US statistical agencies consider buying a home an investment and, instead, use rental rates to measure changes in the cost of shelter — even for homes that are owner-occupied’ and rental inflation is less than house price inflation. But when wage discussion happen house prices are a key reference point. House prices are rising because of labour shortages and lumber shortages are driving up prices. The recovery in the service sector is valid but also then I think renewed growth in the Auto demand may also impact. Also as people become more relaxed that covid is under control the propensity to spend will gradually increase.
But most importantly is going to be expectations if the public think there is going to be inflation they will not be happy with a 2% pay rise but will want to be compensated for expected inflation in the forthcoming year; that can then spiral would you ask for 3% or 4% to compensate in case inflation rises faster? That is what the Fed says it can control but I doubt it.

Former Airbus subsidiary fined £28m for corruption
• Fraud probe into Saudi military deal
• Bribes paid for ‘lucrative contracts’
A former unit of Airbus was ordered to pay £28.1m yesterday after admitting to corruption in relation to a UK government contract to provide services to the Saudi military. Refers to events that happened back in 2008-10. The reality is that back then such things were common in such business deals; for the defendants the problem was that somebody blew the whistle on them.

Growth cycle Aramco in talks with Ambani conglomerate over deal for refining unit stake
Saudi Arabia has held talks with Mukesh Ambani’s Reliance Industries on a cash and share deal for a stake in the Indian company’s refining and petrochemicals arm, as the largest crude exporter seeks to deepen ties with the fastest-growing energy consumer.

Mishcon de Reya law firm seeks London market crown
Mishcon de Reya is set to become the most highly valued law firm on the London stock market after partners voted in favour of taking the 83-year-old firm public later this year.'The firm said it wanted funds to accelerate its expansion overseas and to invest in growth opportunities in the technology sector, as well as to recruit more lawyers around its hubs in the UK and Asia.’

Denmark’s green success points to challenges and rewards for EU'
There is regular gnashing and wailing in Europe over its inability to produce a rival to Apple, Google or Face-book. But in one area, the continent — and in particular a small country in its north — is way ahead: green technology.
Denmark is home to a former oil company that transformed itself into a renewable energy giant (Orsted), one of the world’s largest wind turbine manufacturers that came back from a brush with financial collapse to new highs (Vestas), and a leader in products helping with energy efficiency (Danfoss), among many others.’
'Denmark’s companies and politicians show Europe how green action can offer decent shareholder returns and economic growth, but also point to some of the challenges ahead.’
Concludes 'For companies, the green technology space is becoming more crowded as competition heats up. Orsted has complained about infrastructure investors and oil majors pushing up prices in offshore wind auctions, potentially making renewable energy less competitive. It is branching out into new areas such as Poland, the Baltics and onshore wind in search of more growth.Denmark’s public-private co-operation could help the country maintain its lead in green technology. But companies will need to be sharp to stay ahead.’
A good read and makes clear that good co-operation between government and the private sector can reap benefits for both but the sector has become crowded and that is pushing up costs and rewards down. Well worth a read.

Deutsche enjoys best quarter since 2014
Robust performance at investment banking and asset management units'Deutsche Bank recorded its highest quarterly profit since 2014, thanks to a boom in bond trading, strong results in asset management and a clean exit from its exposure to the implosion of family office Archegos Capital.’

Lagardère heir abandons veto powers in truce with activist fund
'Arnaud Lagardère has struck a truce with activist hedge fund Amber Capital and two of France’s richest men who have been battling for control of the French media and retail group his father founded.’

VW’s Seat unit looks to assemble big state aid package
Spain and Brussels urged to back €4bn battery cell factory by the summer.Interesting read.
I had not realised that 'Unlike traditional engines, which are often shipped across the world to car factories, batteries have to be produced near their final assembly lines because they are so heavy.’
Makes the good point 'Griffiths said: “Up to now, the electric cars or the zero-emissions cars have been coming down from luxury brands, or from Tesla. So if we want to make that real big impact [on cutting emissions], we have to democratise electric mobility. If there’s a market and a manufacturer that’s capable of doing that, that is us.”Otherwise, fast-moving companies in China and elsewhere could capitalise on the shift in technology to win share.’
Notes that the auto sector is being disrupted by EV’s 'This disruption is going to happen incredibly fast, and the industries and the economies that are able to adapt fast — and the Chinese are very fast — will certainly have an advantage.”
Worth a read.

GSK chief rejects criticism of drugs pipeline
Emma Walmsley, GlaxoSmithKline’s chief executive, has said she is “very focused” on leading the “supertanker” drugmaker through its spin-off and beyond after hedge fund Elliott Management took a stake to push for change.

UK cost cuts start to bear fruit for Santander
'Santander is overhauling the management of two of its most important European businesses, including starting the search for a chief executive in the UK, as it looks to boost profitability after reporting its strongest quarterly earnings in more than a decade.’

Gupta empire’s use of tiny auditor rings alarm
Firm with one listed chartered accountant signs off more than 60 GFG businesses with revenues totalling £2.5bnMore on the Greensill saga.

FT BIG READ. BANKING. Can Credit Suisse survive?
The Greensill and Archegos failures have thrust the Swiss bank back into the spotlight and raised questions for António Horta-Osório, its new chair, about whether it can continue in its current form.

Editorial
A new deal for the young: funding higher education
Cost of expanding university and vocational courses needs to be sharedWorth a read and interestingly Biden mentioned Education in his American Family Plan speech; noting that a country that is better educated than its competitors will beat them when it comes to competition. Hence the need for Congress to fund more education… and he was talking from pre-school all the way up.

Biden’s difficult quest to fund a growing state
There are better ways to raise revenue than doubling capital gains taxI have to say I disagree with the editorial, I think Biden’s taxing of 1.8% of the tax payers in the US to benefit the whole of the population is the right way. The editorial suggests that it will deter investment but if your decision to invest or not invest is decided by your marginal rate of tax they you probably shouldn’t be investing. Finally as Biden says, these 1.8% of tax payers have made their money from the fabric of America society, all he is asking is that they pay their share and lets face it they have larger income to pay from than most. For me his proposal is simple and straightforward. He also mentioned on tightening up on tax loopholes I would imaging that has the 1.8% much more worried.

OPINION
Wall Street beware: the SEC’s Gensler carries a big stick. By Brooke Masters
The last time Gary Gensler ran an American financial regulator, he was charged with cleaning up the mess left by the 2008 crash. Now the new chair of the US Securities and Exchange Commission faces a rather different task: policing volatile and frothy markets that may be hiding all kinds of misbehaviour.
She concludes 'These problems may lead to tighter regulation. But crafting a measured response takes time. High profile, big-dollar enforcement cases are a quicker way to change behaviour. Look for Gensler to exploit that to the full.'
A good read and key is that he is likely to be looking for misbehaviour rather than waiting for it to show itself.
I do wish though that regulator would have an open door no names basis for discussions. So that the banks, when they find a new wheeze for making money could go to the regulator and discuss it. Currently its an matter of finding a grey area, maximising your profit from it and hope the fine is less than the amount you made. There has to be a better way.

Team Johnson needs some levelling up. By Robert Shrimsley

Europe should play a long game for semiconductor success By Pat Gelsinger chief executive of Intel
An interesting read.
Key 'the hard truth is that the semiconductor industry is a long-term game. Real solutions will take time and strategic thinking to implement.’
Highlights that having under invested for the past 20 years a reversal cannot happen overnight.
Notes 'Today, according to the Semiconductor Industry Association, it is mainland China that makes nearly a quarter of all semiconductors, Taiwan makes 21 per cent, South Korea makes 19 per cent and Japan makes 13 per cent. All in, a staggering 80 per cent of semiconductors are now made in Asia.’
Stresses the importance of R&D; something that TSMC is keenly aware of and it has built its success on focusing and paying for that.
The key is 'the EU is going to have to compete hard and to collaborate.’ That I think could be problem as member states vie with personal interests. 'It won’t be easy but it’s the only way the EU will win. The bloc has some semiconductor industry champions, but it faces fierce competition from other countries that view chip production as a national priority.’
Concludes 'As the global economy gears up for the biggest recovery in more than 70 years, EU leaders must make the necessary investments to ensure a vibrant semiconductor industry.We look forward to building upon and renewing the tremendous heritage of EU and US partnership, and we stand ready to play our part.’
A good read .

To vanquish Covid, the world must get better at sharing By Ellen ’t Hoen the director of Medicines Law & Policy. Christopher Garrison, a research affiliate, contributed
An interesting read and cites how penicillin was made available to the world without a patent. Calls for the same for covid vaccines.
It is a pipe dream.
The reality is that drug companies have invested heavily in their vaccines and the delivery systems but those processes are not unique to the covid vaccine and can be applied to other areas of medical research which is what makes them so commercially proprietary.
Worth reading
LEX Google/Microsoft: Bigger Tech.  'Can Big Tech’s financial results explain what has happened to the Spac boom? Reverse mergers into cash shells gave investors the chance to buy into companies with high growth metrics but little in the way of profits or even revenue. In recent weeks, the Spac market appears to have cooled.’'Google is facing challenges on how it runs its advertising business. Microsoft may face restrictions on speculative M&A after it announced a $19bn acquisition of voice AI pioneer Nuance Communications. Still, the benefits of scale are more evident than ever in software. Profits are accruing far faster than the pace of regulatory and legal efforts to constrain them.'
LEX Thematic indices: trend alert. 'Back to front as it sounds, MSCI is following the money. The global securities index publisher has launched a deck of indices allowing both domestic and international funds to track Chinese megatrends.’'By allying with Beijing’s strategic goals MSCI’s Chinese versions may at least avoid the fate of more fad-driven funds, which often struggle to sustain initial stellar outperformances. In their place comes political risk that could chafe with more ESG-focused investors, particularly in the US. Sino-US tension is, after all, another megatrend.’

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