Dubai Chambers has established the Dubai Centre for Family Businesses to provide assistance to family businesses in the emirate on leadership transition, planning and growth, according to a statement. Family firms contribute about 60% of Dubai's gross domestic product and up to 80% of its workforce. Chairman Abdul Aziz Al Ghurair said the centre, a nod to the region's emphasis on family legacies, is crucial for ensuring not only the strength of Dubai's private sector, but the prosperity of the families that built and run those businesses. The chamber is also planning a family business dispute centre to resolve conflicts out of court.
Canada is making the same mistakes as Argentina and South Africa, said George Athanassakos, professor of finance and holder of the Ben Graham Chair in Value Investing at the Ivey Business School, University of Western Ontario. He added the government was discouraging entrepreneurship and wealth creation by favouring taxing corporations and adding regulatory impediments to corporate activity. Canada, he said, had a productivity problem that has gotten worse over the past decade and believes the government should channel its focus into industries such as robotics, cybersecurity and additive manufacturing.
An op-ed has criticized the Eurovision Song Contest for its lack of racial diversity. Suzanne Moore, writing for the Spectator, called out the lack of representation among acts at the contest, with just a few of the 26 performers featuring a visible ethnic minority. Despite this, Moore questioned why left-wing activists did not voice criticism of Eurovision, compared to how they respond to events in the UK. She speculated that such activists remain silent due to not wanting to acknowledge that the UK is not as racist as it is often accused of being. Moore went on to accuse the Conservative government of “selling out to hyper-liberal globalists”, and for failing to take steps toward cutting immigration rates. Moore also criticized universities that she claims “discriminate against our own young people”.
The Economist argues that while Western companies’ balance sheets look benign, a corporate-debt-fuelled cataclysm could be around the corner. Hard profits and fixed-rate debts mean it is unlikely that a disaster is imminent; the default rate for non-financial corporate debt in America and Europe remains at 3%; and many have locked in cheap debt. However, GDP growth in America and Europe continues to decline: first quarter GDP contracted 1.3% quarter-on-quarter in America, and analysts suggest that aggregate quarterly earnings for listed non-financial firms in both America and Europe declined in the first quarter of this year. Rising interest rates are also causing the most substantial strain for those at the flakiest end of the debt spectrum. Floating-rate debt predominately affects the most indebted companies, which are also backed by debt-hungry private equity firms. In addition, the economy may suffer most from the effect of higher interest rates on investment-grade debt, which non-financial firms often heavily rely on.
Greece, which was on the brink of economic disaster in 2015 and had its debt downgraded to “junk” status, is now one of the fastest-growing economies in the eurozone and is expected to regain its investment-grade credit rating this year. Kyriakos Mitsotakis, leader of the ruling New Democracy party, has worked to encourage foreign direct investment and exports, forge alliances, and bolster fiscal prudence through pro-business and relatively orthodox economic management. Despite impressive gains, Greece remains challenged by high debt, reliance on inflation, and public services that have come under scrutiny following a train crash and pushbacks of refugees at its borders. Greek politicians face off this Sunday and will need to build upon the improved foundation of the past decade by driving long-term capital investment growth and broader public service and justice reforms. They will also need to address crucial social issues that have yet to be mitigated by the economic revival.
The US government is at risk of running out of cash in a matter of weeks, with officials warning that it may default on its bonds if a political dispute in Washington over raising the debt ceiling is not settled. While some Republicans in Congress have explored the possibility of the Treasury prioritising bond payments if a default is close, this has been discouraged by treasury secretary, Janet Yellen, who has warned that delay in making other payments would constitute a “default by another name”. A short-lived default could result in a 0.6% decline in GDP and 500,000 lost jobs. The [US] credit score would be trashed, leading to higher borrowing costs for decades, according to experts. For those buying protection via credit default swaps, an enormous payout could await as US bonds have faced a steep rise in interest rates since early 2022, leading to the value of swaps rising to record highs.
Japan's GDP figures for the first quarter are set to be the highlight for Asian markets on Wednesday, with expectations of annualised growth of 0.7%, the fastest rate in three quarters, leading to Tokyo stocks opening up 0.2%. China's weaker than expected economic data for April has resulted in slumps across Chinese financial assets, with April house prices also due on Wednesday. Although offshore investors have a new scheme to link Hong Kong with the mainland in order to access interest rate derivatives to help hedge their Chinese bond exposure, concerns about debt demand have cast extra doubt over the yuan's ability to gain reserve currency status.
The pandemic has created the wrong sort of decoupling for emerging markets, hurting their performance over the past three years, warns John Authers in Bloomberg Opinion. However, he added "none of this means that there won’t be a decoupling; but it’s not going to be the panacea that many have long wanted it to be". If China becomes the pole of what is effectively a different financial system, reshoring and deglobalisation will create opportunities in the emerging world, but it will also make them much harder to take advantage of, warns Authers. Nevertheless, these markets are experiencing some signs of recovery after a decade of underperformance, following the brief bull market which came to an end in the Global Financial Crisis in 2008.
Meanwhile, there is concern over the budget strategies of the US. Ted Decker, CEO of Home Depot, expects comparable sales to drop as much as 5% this fiscal year — the first annual decline in 14 years. Despite problems so far being driven by unusual conditions such as the price of lumber falling, according to Authers, if the recession risks loom larger over the US economy, and workforces normalize with new return-to-office policies, then support will fade for such firms that have been doing so well during the pandemic’s economic conditions. This would spell the end of the trends that Authers calls the home-building boom, e-commerce and working from home/home improvement.
Global public finances are being hit by an ageing population with ratings agencies warning that higher pension and health care costs are rising along with recent interest rate hikes. Moody’s, S&P and Fitch have all warned that ongoing issues with demographics are already impacting government credit ratings with little hope for change unless there are sweeping reforms. These downgrades could lead to a vicious circle of increased fiscal burdens and a rise in borrowing costs.
Unite, the UK’s largest trade union, is urging the Labour Party to consider nationalising the country’s energy sector amid accusations of “profiteering” and “greedflation” by companies. Earlier this year, Labour Leader Keir Starmer dropped plans to nationalise the energy, mail and water industries, instead opting to focus on state support for green energy. Unite General Secretary Sharon Graham will present Starmer a report supporting nationalisation, which is estimated to cost between £90bn ($120bn) and £196bn. The analysis suggests energy profits in 2022 stood at £45bn and energy bills under nationalisation could be reduced by up to £1,800 per household.
Following the release of China's economic data for April, which came in below expectations, and Germany's growth rate which has flatlined, concerns about the global economy are rising. If there is no resolution for the negotiations over the US debt ceiling, this could compound issues for the global economy and even a quota deal may result in the Federal Reserve Board throttling the growth rate in the world's largest economy due to its determination to stamp out US inflation and recent bank collapses that have impacted the availability of credit. All three of these issues could have an impact on China's contribution to global growth as well.
Standard Chartered and UBS economists have stuck with their forecast that China's GDP will rise by 5.8% this year despite weak economic data in April. Retail sales, industrial output and fixed investment grew more slowly than predicted in the country during the month. Meanwhile, JP Morgan Chase and Barclays lowered their forecasts due to a loss in economic momentum. JP Morgan put its full-year expected GDP growth at 5.9%, down from 6.4%, while Barclays set a target of 5.3%, down from 5.6%. It also cut its Q2 GDP estimate to 1%, from the previous three months, at an annualised rate. The Bank of China also withheld applying economic policy measures.
Gulf stock markets rose in early trading despite concerns around the US government's debt-ceiling negotiations. Saudi Arabia's benchmark index added 0.2%, and Dubai's main share index advanced 0.7%. Family-owned businesses contribute 60% to the United Arab Emirates Gross Domestic Product and 80% of its workforce. The Qatari benchmark climbed 1.3%, with most stocks on the index reporting positive returns.
Home Depot's Q1 earnings came in weaker than expected, with a 2.3% decline in sales growth for products not including lumber. Same-store sales fell 4.5%, with CEO Ted Decker acknowledging that speculation over whether customers are reverting to pre-pandemic spending patterns was a problem for retailers. Consumer patterns may not "end or how quickly it goes" and Home Depot may have to give back growth it picked up during the pandemic, he said. The government's most recent retail sales report also showed "volatile" numbers as many large, mature retailers weighed up uncertainty over spending and growth patterns in the coming year. Meanwhile, falling rates and a weaker dollar helped emerging-market bonds and Treasuries over high-yield bonds, with SocGen recommending the abandonment of high-yield bonds completely to shift to emerging market bonds and Treasuries. However, Andy Brenner, head of international fixed income at NatAlliance, is positive on high-yield bonds as they've transformed in composition over the last decade, including companies like Ford and Kraft-Heinz.
Japan has entered a period of recovery following Covid, creating an exit from its technical recession. While the recovery has caused stocks in the country to skyrocket, it is primarily driven by tourism and consumers spending. However, economists warn that exports and manufacturing in Japan are still weak, not to mention the global economy's substantial risks in a post-Covid world. Despite a modest recovery, there is still a cautious optimism that Japan has reached an inflection point whereby wages and higher spending could loom on the horizon, which has driven the foreign investment that fueled the country's post-Covid recovery.
From January to March, Gross Domestic Product (GDP) in Japan grew at an annualized rate of 1.6%, well above economists’ forecast of 0.7%. Q1 data indicates that household spending has increased, which accounts for over half of Japan’s GDP, boosted by domestic tourism after the Japanese government repositioned Covid similarly to seasonal flu. Business investment has also increased, rising to a bigger than expected 0.9%. However, goods and services’ export fell 4.2%, the first drop in six quarters influenced by the global underproduction of semiconductors.
The expectation is for a modest recovery for Japan, with economists and investors closely watching the impact of a global economic slowdown or any future Covid-related measures that may present themselves. Yet, solid performance in consumer spending and tourism validates that there are still bullish signs of life in the Japanese market, which is the largest in Asia.
Nomura NRSCF has cut its forecast for China’s GDP growth in 2023 to 5.5% from 5.9%, following a post-COVID recovery slowdown. April data revealed that China's factory output and retail sales growth fell below expectations, placing pressure on policy-makers to support activity. Nomura expects China’s central bank to cut its benchmark lending rate by 10 basis points in mid-June and warned that "unlike previous cycles, we see no easy fix this time around as, in our view, the real barrier to sustaining the growth recovery is a lack of confidence." Barclays has also cut its forecast on 2023 GDP growth to 5.3% from 5.6%.
As India prepares to overtake Germany and Japan as the world's third-largest economy, the country's potential for growth is considered by different economists from opposing perspectives. Narendra Modi's pro-business government has invested in initiatives such as digitisation, whilst critics claim the country suffers from the underinvestment in human capital first outlined by Nehru, resulting in an economy that fails to produce enough jobs or skilled workers. Meanwhile, Whole Numbers and Half Truths by Rukmini S provides an empirical look at India's complex society, covering all aspects from consumption to employment and identifies underemployment as behind India's relatively low official jobless rate.
The UK risks becoming a society that accepts higher taxes as inevitable unless income tax thresholds are raised in line with inflation, according to Conservative MP and former Treasury minister Simon Clarke. As “fiscal drag” pushes 20% of taxpayers into the higher tax bracket by 2027-28, Clarke warns that the stealth tax raid underway - which will generate an estimated £29.3bn in 2027-28 - could represent just the beginning of even more painful tax hikes. The report reveals new analysis by the Institute for Fiscal Studies highlighting that in four years’ time, 1 in 8 nurses and 1 in 4 teachers will have become higher-rate taxpayers. This is a more widespread issue than initially believed, infecting large numbers of electricians, fitters and other tradespeople. Clarke advocates combining the need for further tax increases with measures that grow the economy, including tackling bureaucracy, scholarship for new technologies and asking more fundamental questions over public spending priorities and trade unions.
China is to host an in-person summit of central Asian leaders this week, a bid to firm up its links with smaller former Soviet states, widely seen as Russia's backyard. China's president, Xi Jinping, is expected to discuss deepening economic and security links with the leaders of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, a region which analysts say has been seeking alternative investment as Moscow concentrates on the Ukraine. The inaugural, virtual China-Central Asia leaders' summit was held in 2020, and China's trade with the five central Asia states has multiplied a hundred-fold since the establishment of diplomatic ties three decades ago.
Russia's economy shrank 1.9% YoY in Q1 2015, following growth of 3% in the same period last year. The economy defied expectations of a double-digit collapse in 2014, but still contracted 2.1% after the West imposed sanctions in response to Moscow despatching troops to Ukraine in February. Blunting the impact of sanctions are rising military production and huge state spending, allowing Moscow to plough on with what it calls its "special military operation" in Ukraine. The International Monetary Fund is among those that are forecasting growth in 2016, although it expects global isolation and lower energy revenues to dampen Russia's economic growth prospects for years to come.
