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FirstFT: Emerging markets hit by ‘toxic’ mix of rising rates and slowing growth

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Emerging market currencies have fallen the most since the early stages of the pandemic as a “toxic” mix of rising US interest rates and slowing Chinese growth cloud prospects for developing economies.

An MSCI gauge of emerging market currencies has fallen more than 4% since early April as the Federal Reserve embarked on aggressive monetary policy tightening in a bid to contain inflation, boost the U.S. dollar and beat stocks and bonds.

China’s coronavirus shutdowns have added pressure by threatening a critical source of demand for emerging economies. The renminbi fell to its weakest level against the dollar in more than 18 months yesterday after data showed the country’s exports in April grew at the slowest pace in two years, boosting sales in the currencies of the Emerging Markets.

The threat to emerging markets comes as Wall Street yesterday suffered its worst one-day drop since the early months of the pandemic in 2020, as investors worried about signs of a slowdown in major global economies.

“We’ve had this cooling in Chinese demand at a time when the Fed is raising interest rates and inflation continues to rise,” said Cristian Maggio, head of emerging markets portfolio strategy at TD Securities. . “As if that were not enough, we still have the risks associated with the war in Ukraine. It’s a very toxic combination.

  • Learn more about the economy: Richard Bernstein wonders if the current real fed funds rate will slow the economy, let alone dampen inflation.

Thank you for reading FirstFT Europe/Africa. Here’s the rest of the news from the day — George

The news of the war in Ukraine

  • Kyiv’s Trust: Ukraine has improved its war aims and is seeking to repel Russian forces, Foreign Minister Dmytro Kuleba told the Financial Times.

  • Food prices: Protectionism is exacerbating soaring prices in global food markets as governments crack down on exports of basic commodities including grains, cooking oil and pulses.

  • Victory Day: In his speech in Red Square, Vladimir Putin sought to justify his invasion by saying that Russia had to defend itself. Gideon Rachman writes that Moscow is mired in a bitter, inconclusive and increasingly humiliating war.

  • The FT view: The EU reacted admirably to the Russian invasion. But his actions should be just the start of a more ambitious collective effort to strengthen the bloc.

1. The UK is eliminating trade reforms from its agenda When Boris Johnson’s government unveils its legislative agenda for the year ahead today, there will be some striking omissions: laws to improve auditing and corporate governance, to give statutory powers to a dog technological custody and to create a new football authority have all been abandoned.

2. The oil majors are silent on the profit engine When Europe’s biggest energy companies announced record first-quarter profits, there was one constant: trading. But BP, Shell and Total declined to provide a breakdown of the financial performance of their various business units, or the contribution to overall group profits.

3. South Korea’s new leader launches nuclear debate Yoon Suk-yeol, inaugurated as South Korea’s president today, has vowed to ‘significantly strengthen’ defenses against North Korea, as debate mounts over whether Seoul should push for a return of American nuclear weapons or even to develop its own deterrent.

4. Crypto Market Value Drops $1.6 Billion Since November Cryptocurrencies have lost $1.6 billion in market value, falling 50% from their all-time high seven months ago, as rising interest rates scare investors away from the hardest corners. riskiest markets.

5. Grindr to go public in Spac deal The gay dating app plans to go public through a merger with a special-purpose acquisition company that would give it an implied valuation of $2.1 billion. Grindr will receive $384 million in proceeds from the deal with Tiga Acquisition, a Spac created by Ashish Gupta in 2020.

The latest news on the coronavirus

  • British Labor leader Mr Keir Starmer has pledged to step down if fined for breaching coronavirus restrictions during a meal while campaigning in Durham last year.

  • UK retail sales fell in April as shoppers tightened their belts in response to the cost of living crisiswhile imported goods faced delays due to supply chain disruptions and blockages in China.

  • German pharmaceutical company BioNTech beat profit and revenue expectations as the Omicron variant boosted demand for its Covid-19 jab developed with Pfizer.

The day ahead

Queen’s Speech British Prime Minister Boris Johnson will introduce legislation for the crucial third session of parliament covering 2022-2023 in the Queen’s Speech, which will announce around 20 pieces of legislation including economic crime, financial services and media bills.

Economic data Germany’s ZEW economic sentiment indicator is out, while Hungary’s April consumer price index.

Earnings Bayer, Coinbase, Mitsubishi, Nintendo, Pirelli, Sony and Sumitomo are among the companies reporting results today.

Central bankers speak European Central Bank Vice President Luis de Guindos speaks at a banking industry event hosted by IESE Business School. Michael Saunders, a member of the Bank of England’s Monetary Policy Committee, speaks at an event organized by the Resolution Foundation think tank.

FT Future of Car Summitwhich runs through Thursday, features Tesla founder Elon Musk, who will speak and answer questions, along with a host of other industry leaders. register here.

What else we read and watch

Bored Ape creator’s next bargain The startup behind Bored Ape Yacht Club, the non-fungible digital art token collection snapped up for millions by celebrities and crypto enthusiasts, has an ambitious new idea: sell plots of virtual terrain in its own metaverse, an alternative to platforms built by Silicon Valley companies such as Apple and Meta.

Durban in South Africa plagued by difficult waters Decaying infrastructure and lack of maintenance have propelled Durban, the ‘engine’ of South Africa’s economy, to the bottom of the world port rankings. Weeks after the worst flash flooding in decades and a year after the city was wracked by violent unrest, businesses are continuing to clean up the debris.

The remains of a house in KwaNdengezi township outside Durban

The remains of a house in KwaNdengezi township outside Durban © Phill Magakoe/AFP/Getty Images

Henry Kissinger: “We now live in a totally new era” The Cold War strategist discussed Russia, the war in Ukraine and China at the FT Weekend Festival in Washington last weekend. Find the full transcript of Kissinger’s interview with the FT’s Edward Luce and watch it here.

New Zealand’s jobs law will cause ripples beyond its shores Legislation pending in New Zealand’s parliament aims to improve bad jobs by setting a minimum floor for wages and conditions. Sarah O’Connor says the bill represents a huge shift in the labor market – and its success or failure will impact the whole world.

The Enduring Fascination of the “Power Spouse” Movies and books are often dedicated to telling the stories of the rich and powerful. But their spouses can be just as fascinating, writes Emma Jacobs. Otherwise, how to explain the newspaper soap opera reporting gossip about Meghan Markle and Carrie Johnson?

What to watch

Explore the best in TV and streaming this week, from hard-hitting French drama Oussekine for Our fathera nightmarish story of a doctor who played god, modern dating explored in Love life and more.

Sayyid El Alami as Malik Ossekine

Sayyid El Alami in the role of Malik Ossekine © Jean-Claude Lother

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