FRIDAY 4 AUGUST 2023 EUROPE

A debt downgrade to make Uncle Sam weep The science of forecasting extreme weather
GILLIAN TETT, PAGE 17 BIG READ, PAGE 15

India protests Briefing

Modi pressed i US set to dismiss KPMG
wire fraud convictions
over violence Two people found guilty amid a
KPMG corruption scandal will
have their convictions dropped
Security personnel stand guard as dem- after US prosecutors said they
onstrators protest yesterday in Imphal, had misinterpreted laws.— PAGE 5
capital of Manipur state, India, against
the mass burial of Kuki people killed in i Turkey inflation soars
ethnic violence that has wracked the The inflation rate neared 50 per
north-eastern region in recent months. cent in July, halting eight months
More than 130 people have been of slowing price growth as the
killed and 60,000 displaced since the weak lira and higher taxes put
violence began in early May, sparking consumers under strain.— PAGE 2
nationwide protests by opposition
groups who accuse prime minister i Nintendo profit rises 82%
Narendra Modi of not doing enough to The Kyoto-based group broke its
quell the violence. His Bharatiya Janata first-quarter profit record, on the
party also rules Manipur. box office success of The Super
The India National Developmental Mario Bros. Movie and of its latest
Inclusive Alliance, an opposition group, Zelda game.— PAGE 6; LEX, PAGE 18
says the violence is a threat to national
security as it steps up attacks on Modi i New turn in malaria fight
ahead of a general election next year. A promising new weapon in the
Opposition parties yesterday placed a battle against malaria, which kills
parliamentary no-confidence motion 600,000 people per year, is being
against the government on the issue. trialled — bacteria found in the
Push for action page 3 guts of mosquitoes.— PAGE 4
AFP via Getty Images

i Birmingham City boosted

Ex-NFL player Tom Brady has
joined the list of US celebrities

Apollo warns borrowing costs will force investing in British football after
he bought a stake in second-tier
team Birmingham City.— PAGE 9

i SocGen outperforms

shift for $4tn private equity industry The French lender beat quarterly
profit predictions, helped by
falling charges on bad loans and
cost-cutting, although revenue in
its home market slowed .— PAGE 9

3 Buyout chief calls end to lucrative era 3 View chimes with other bosses 3 Quarterly profit up 60% Datawatch
ANTOINE GARA — NEW YORK industry’s cost of borrowing to take Kaye, chief executive of Warburg Pin- that a predecessor buyout fund raised in tioned it to be a beneficiary of the higher Science friction
groups private. Buyout firms enjoyed an cus, told the Financial Times last year 2018. interest rate environment, Rowan said. Contribution to high-quality scientific
publications in 2023 (’000 adjusted
A lucrative age for private equity buy- extraordinary run of profitability in the that an era of geopolitical calm that had Apollo earned an adjusted profit of Quarterly earnings it generated from count*) US China
outs has ended, prompting an abrupt past decade as low financing costs and provided a tailwind to asset prices was $1.1bn during the quarter, slightly beat- base management fees on the assets it
shift in the $4tn industry, which can no buoyant financial markets made it easy reversing, complicating the outlook. ing consensus estimates and nearly 60 manages and the spread it earns from All
sciences
longer rely on cheap debt and rising to sell investments for a gain. Jeffrey Jaensubhakij, chief invest- per cent higher than the same quarter a investing insurance policies rose 55 per
asset prices, the chief executive of Private equity firms will be forced “to ment officer of Singaporean sovereign year before. Its finances were buoyed by cent to $1.2bn from this time a year ago. 0 5 10 15 20
Apollo Global Management has warned. go back to investing in the old-fashioned wealth fund GIC, said last month: $35bn of new investor cash and the Apollo continues to expand its debt Physical
sciences
“In the [private] equity business, this way. They’ll actually have to be very “Many of the things that were tailwinds impact of higher interest rates, which origination businesses after it bought Earth and
year has really marked the end of an good investors,” Rowan said. for the private equity industry have increased yields in its $450bn portfolio the securitised products business of environmental
era,” said Marc Rowan, whose Apollo Similar warnings have come from come to an end . . . and I don’t think of debt investments. Credit Suisse, a large originator of asset- sciences
0 2 4 6
group is one of the world’s biggest pri- other executives in private capital. Chip they are coming back any time soon,” Growth at Apollo has mostly come backed securities worldwide. *Units reflect
vate equity firms with $617bn in assets. referring to the impact of rising interest from its credit investing operations, “We are in the beginning of a secular Source: Nature international collaboration
A decade of “money printing”, fiscal rates on corporate valuations. which include ownership of the insurer shift in how credit is provided to busi- China has surpassed the US’s output of
stimulus and low interest rates that had Firms will be forced ‘to Rowan made his comments as Apollo Athene and more than a dozen plat- nesses and a shift that I believe will con- high-quality academic articles in physical
pulled forward economic demand “is in reported second-quarter results. He forms Apollo has built or acquired over tinue to gather speed,” Rowan said. sciences and in earth and environmental
retreat”, he added.
go back to investing in said the New York-based group has the past decade to originate loans. He characterised the lending as sciences. However, it produces fewer
His warning came an investors face a the old-fashioned way’ closed its newest flagship corporate These non-buyout businesses now “highly complementary” to the banking exceptional scientific studies than the US
overall, the 2023 Nature Index reports.
period of lower growth and higher inter- buyout fund with about $20bn in com- constitute more than two-thirds of system because it is coming from
Marc Rowan, Apollo CEO
est rates, which have raised the buyout mitments, short of the more than $24bn Apollo’s overall assets and have posi- sources of long-term capital.

Bank of England takes interest rates to

15-year high despite slowing inflation
DELPHINE STRAUSS, GEORGE PARKER stay at high levels, saying “we are going below 5 per cent in the fourth quarter.
AND MARY MCDOUGALL — LONDON
to have to keep this stance of policy” to Jeremy Hunt, finance minister, was also
The Bank of England has raised inter- return inflation to target. cheered by the BoE forecast that a reces-
est rates by 0.25 percentage points to Prices in the UK are still rising at a sion would be averted and that inflation
5.25 per cent and warned that UK bor- faster pace than in other advanced could be much lower by the next elec-
Goldman suffers as spate rowing costs are likely to remain ele- economies such as the US, Japan and the tion, expected in late 2024, standing at
of top-level exits persists vated despite slowing inflation. eurozone as the country grapples with about 3 per cent by next August.
stubborn labour shortages and high “The plan is working,” Hunt said.
Top talent exodus i PAGE 8 The central bank’s Monetary Policy energy costs. “But we have to make sure we stick to
Committee voted by six to three yester- Persistently high rates increase the the plan and we don’t veer around like a
day to take interest rates to a 15-year prospect of more pain for homeowners shopping trolley.”
Austria €4.50 Morocco Dh50 high, with two members preferring a in the run-up to the next general elec- Sterling slipped and UK government
Bahrain Din1.8 Netherlands €4.50 larger 0.5 percentage point move and tion, with Rachel Reeves, shadow chan- bond yields fell after the BoE move
Belgium €4.50 Norway NKr45
Croatia Kn33.91/€4.50 Oman OR1.60
one voting to pause. cellor for the opposition Labour party, before ending the day little changed.
Cyprus €4.20 Pakistan Rupee350 Most economists had forecast a claiming that a “Tory mortgage bomb- The bank’s updated forecasts suggest
Czech Rep Kc125 Poland Zl 25 quarter-point rise after inflation fell to a shell is hitting families hard”. that whether rates remain at 5.25 per
Denmark DKr46 Portugal €4.20
Egypt E£80 Russia €5.00
15-month low of 7.9 per cent in June. But But the BoE forecasts contained some cent or rise further, it will still take until
France €4.50 Serbia NewD530 the MPC cautioned that “it was too early brighter news for Rishi Sunak, Conserv- mid-2025 for inflation to fall to the BoE’s
Germany €4.50 Slovenia €4.20 to conclude that the economy was at, or ative prime minister, who has promised 2 per cent target.
Greece €4.20 Spain €4.20
Hungary Ft1450 Switzerland SFr6.70
very close to a significant turning point”. to halve inflation to 5.4 per cent by the ECB eyes stable rates page 2
India Rup220 Tunisia Din7.50 BoE governor Andrew Bailey empha- end of the year. The day in markets page 10
Italy €4.20 Turkey TL110 sised that interest rates would need to The BoE said that the rate could dip FT View page 16
Luxembourg €4.50 UAE Dh24
Malta €4.20

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2 ★ FINANCIAL TIMES Friday 4 August 2023

INTERNATIONAL

Eurozone Price rises

Turkey cost of
ECB dove eyes stable rates to tame inflation living soars
Extended period at current ther while avoiding “unnecessary costs
to the economy”.
time high of 4 per cent is likely to tackle
persistent rises in services prices.
deliver medium-term price stability, the
risk of a de-anchoring of inflation ex-
Panetta, however, said “the process of
disinflation has been set in motion”. He
after lira is
levels will avoid damaging
economy, says Panetta
However, he did not rule out the pos-
sibility of more policy tightening, say-
Last week, the central bank opened
the door to a pause in its monetary tight-
pectations is low, inflation risks are bal-
anced and economic activity is weak.”
cited six consecutive months of falling
eurozone producer prices, which
allowed to
MARTIN ARNOLD — FRANKFURT
ing: “Should the inflation outlook mate-
rially deteriorate, a further rate adjust-
ment would be warranted.”
ening after raising rates by a quarter-
percentage point to 3.75 per cent while
ditching language indicating it expected
The eurozone economy grew 0.3 per
cent in June from the last quarter, an
improvement from a mild contraction
dropped 0.4 per cent in June, a recent
lowering of inflation expectations and a
deteriorating economic outlook.
plummet
A senior European Central Bank policy- The comments by Panetta, one of the more rises. over the previous six months but still “Demand conditions in the euro area
maker has said it can achieve its objec- ECB’s most “dovish” board members, Speaking in Milan, Panetta said “rely- weaker than the US, where gross domes- are likely to remain weak as the impact ADAM SAMSON — ANKARA
tive of bringing down inflation by com- underline how the debate is intensifying ing solely on an aggressive approach to tic product grew 0.6 per cent. of monetary policy strengthens, govern-
Turkey’s inflation rate jumped to
mitting to keep interest rates stable for over whether it should raise rates for a rate hikes might amplify the risk associ- Eurozone inflation has fallen from a ments unwind the fiscal policy meas-
almost 50 per cent in July, halting an
longer, rather than raising them and 10th consecutive time next month with ated with overtightening, which could record 10.6 per cent last year to 5.3 per ures they adopted in the energy crisis
eight-month streak of slowing price
risk crashing the economy. price pressures cooling and the euro- . . . require rates to be cut hastily in a cent in July. But that remains well above and the consumption impulse from
growth as the weak lira, an overheating
Fabio Panetta, an ECB executive zone heading for a downturn. deteriorating economic environment”. the ECB’s 2 per cent target and some pol- excess savings fades,” he added.
economy and higher taxes put consum-
board member, said persistence in Investors are leaning towards a pause Instead, he said: “Emphasising per- icymakers worry rising profit margins, Panetta is due to leave the ECB board
ers under strain.
keeping rates at current levels “for an by the ECB in its rate rises in September, sistence may be particularly valuable in increasing wages and resilient demand in November but will remain on its gov-
extended period” could achieve a simi- even though several economists think a the current situation, where the policy are raising services prices, which rose at erning council by becoming governor of Consumer prices rose 47.8 per cent in
lar effect to raising borrowing costs fur- final increase of its deposit rate to an all- rate is around the level necessary to a record rate of 5.6 per cent in July. Italy’s central bank. July compared with the same month in
2022, a pick-up from the annual pace of
38.2 per cent recorded in June, the
Turkish Statistical Institute said yester-
Interview. Leo Varadkar day. Economists polled by FactSet had
forecast a slightly lower 45.8 per cent.
The stronger than expected increase

Irish leader alert to Russia’s maritime threat underscores how Turkey remains in the
throes of a cost of living crisis, even as a
new economic team President Recep
Tayyip Erdoğan appointed in June con-
tinues to unwind unconventional poli-
cies that were in place for years.
PM rejects claims Dublin is Under the direction of new finance
freeloading over defence amid minister Mehmet Şimşek, Turkey has
abandoned its costly defence of the lira
military neutrality debate and allowed the currency to plummet
by a quarter against the euro since the
end of May.
JUDE WEBBER — DUBLIN
The weak lira makes imports more
Leo Varadkar has acknowledged that expensive, an increase that typically
Ireland must better defend its waters
from potential Russian sabotage, but
denied suggestions its longstanding mil-
‘The main objective of our
itary neutrality meant it was freeload- policies is to permanently
ing off its strategic partners.
Russian ships were spotted close to
reduce inflation to single
Ireland’s north-west and south-west digits in the medium term’
coastline earlier this year, sparking fears
they could be mapping and monitoring gets passed on to consumers and busi-
international data transmission cables nesses through higher prices.
and gas pipelines. At the same time, the stimulus pro-
Ireland’s prime minister told the gramme that Erdoğan launched before
Financial Times that while no indica- May’s election win is still filtering
tions were evident of an imminent through Turkey’s $900bn economy. Big
threat, his officials “have to do more” to increases in the minimum wage and
monitor the situation. public sector salaries were expected to
“There’s two areas that we’re working push inflation higher for much of this
on with our [EU, UK and US] partners,” year, central bank chief Hafize Gaye
he said. “One is to make sure that Erkan said last week.
[cables and pipelines] are more secure Şimşek has also boosted taxes on a
and harder to sabotage. And then, that broad range of goods and services,
we could respond to a threat if it did including a 200 per cent increase in pet-
emerge.” rol taxes. These measures, which are
Varadkar’s remarks come amid a aimed both at cooling demand and
public debate on whether Ireland’s posi- refilling government coffers after the
tion of neutrality — a stance it has held Supporting role: is never going to be a huge asset to Nato, have an international development ‘No country “realistic” prospect of returning to pre-election spending binge, are
since before the second world war — Leo Varadkar, at if we ever were to join it”. budget that’s as big as our defence power. Combined, the three parties out- expected to be inflationary.
remains fit for purpose following Rus- his Dublin office Ireland spends just a fifth of a percent- budget,” Varadkar said. “I think that’s in western poll Sinn Féin, support for which has “We are in a transition period where
sia’s full-scale invasion of Ukraine in this week, says age point of its gross domestic product actually a positive thing.” Europe, on fallen recently to 29-31 per cent. disinflation and price stability are tar-
February last year. Ireland held consul- Ireland is ‘never on defence, against a Nato target of 2 per Sinn Féin, the pro-Irish unity party, “It’s a significant risk to put . . . a pop- geted,” Şimşek said yesterday, adding
tations on the issue in June, with contri- going to be a cent — though most members miss this echoed Varadkar’s stance during a par- a per capita ulist party in office,” Varadkar said of that “the main objective of our policies
butions from international experts, aca- significant amount too. liamentary debate in June. But that’s basis, has Sinn Féin. “Historically, they’ve got all is to permanently reduce inflation to
demics and services personnel. military power’ The prime minister hit back sharply where Varadkar’s alignment ends with the big calls wrong, and will do so single digits in the medium term”.
Some people protested at what they Robert Stothard/FT against suggestions that the country was his rival, which is channelling voter accepted again . . . Up until very recently, they Cafes, restaurants and hotels posted
see as an attempt to push Ireland into freeloading. That was “definitely not” anger at an acute housing crisis and is as many were a Eurosceptic party.” the biggest annual price rises in July, the
Nato, but strong defences were also the case, he said. “I’ve read that com- topping opinion polls ahead of a general Sinn Féin would “tax talent hard”, had peak of the summer tourism season,
made of Ireland’s neutrality. President mentary . . . It’s certainly not the kind election to be held by spring 2025. [Ukrainian] opposed free trade deals and was out of with an 82.6 per cent increase. The cost
Michael D Higgins waded into the of thing that gets said to me [by EU Varadkar said the government was refugees as touch with small businesses. of basic necessities has also continued
debate in a newspaper interview in peers].” delivering “real signs of progress” in The government, meanwhile, plans to climbing rapidly: food costs jumped
which he warned Ireland that it was Ireland’s relative distance from conti- homebuilding, but admitted: “It’s too we have’ stash the corporate tax bonanza in 60.7 per cent while clothing and housing
“playing with fire”. nental Europe and history as a colony of soon to say we’ve turned the corner.” sovereign wealth and infrastructure costs climbed about 20 per cent.
Varadkar maintains that Ireland will Britain lie behind its neutrality. Voters appear weary, however. Varad- funds to face the challenges presented The central bank has more than dou-
stay out of the western military alliance Varadkar said EU partners appreci- kar’s Fine Gael has been in government by its fast-growing population, includ- bled interest rates since June, with fur-
despite the decision of Finland and Swe- ated the security contributions that Ire- since 2011. Varadkar has called the ing growing pressures on housing, infra- ther increases expected in the coming
den to join. He also defended Ireland’s land had made away from the battle- period “austerity to prosperity”, span- structure and pension costs ahead. months in an attempt to tame inflation.
role supplying only non-lethal equip- field. “No country in western Europe, on ning economic bust to a boom driven by Varadkar said Ireland would seek to Erkan forecast last week that inflation
ment and humanitarian aid to Kyiv. a per capita basis, has accepted as many a huge tax windfall from global technol- cash in on robotics, artificial intelligence would reach 58 per cent by the end of
Estonia, Latvia and Lithuania, the [Ukrainian] refugees as we have.” ogy and pharmaceutical companies, but and other digital investment opportuni- the year before falling to 33 per cent by
Baltic states, with a combined popula- Ireland is already involved in UN his party’s support has sunk to 18 per ties despite job cuts in its tech sector, the end of 2024 and 15 per cent the fol-
tion not much above Ireland’s 5.1mn, peacekeeping, the EU’s Permanent cent in one poll. including nearly 900 at IT consulting lowing year. But many economists
have been Nato members for two dec- Structured Co-operation initiative for Still, Varadkar maintains that the eco- group Accenture announced this week. worry that Erdoğan, a long-term oppo-
ades. Finland joined the alliance in closer military links and Nato’s Partner- nomic record of his party, which has “Trump was change, Brexit was nent of high borrowing costs, will not
April. Varadkar said Ireland was “never ship for Peace. “There probably aren’t governed with allies Fianna Fáil and the change,” Varadkar said. “Change isn’t allow the central bank to raise rates to a
going to be a significant military power, that many countries in the world that Greens since 2020, gives the coalition a always for the better, in my view.” sufficient level to cool inflation.

ECB

Central bank needs more ‘critical mindset’ in oversight role

MAKE A WISE MARTIN ARNOLD — FRANKFURT criticised the ECB for being too lax in “The problem in Germany is that banks low rates for long periods in their large
INVESTMENT One of the leading candidates to
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Friday 4 August 2023 ★ FINANCIAL TIMES 3

INTERNATIONAL

Modi pressed
to take more
action over India
security crisis
PM accused of ‘indifference’ as violence
in north-east threatens to spread
JOHN REED — NEW DELHI around state capital Imphal, and the
hill-dwelling, mostly Christian Kukis.
Narendra Modi’s political opponents are Tensions escalated after the state’s BJP-
seizing on a grisly, three-month conflict led government floated a plan to extend
in India’s north-eastern state of tribal status to the Meiteis, which would
Manipur to challenge the prime minis- give them the same affirmative privi-
ter on a security crisis of national signifi- leges enjoyed by the Kukis, including
cance they say his government has the right to buy land in the hills.
failed to contain. Analysts said the conflict could
Opposition parties, who are sharpen- spread beyond Manipur, which has a
ing their lines of attack ahead of next population of about 3mn. The Kukis are
year’s general election, say the violence ethnically related to the Mizos in the
is a threat to national security, a view Indian state of Mizoram to the south
shared by some analysts who warn it and to the Chin in Myanmar. Some in
threatens to spill over to neighbouring the group also live in Bangladesh, mean- On the march: a protest takes place in Kolkata on Wednesday over sexual violence against women and ethnic clashes in Manipur — Piyal Adhikary/EPA/Shutterstock
states in a volatile region. ing ties of kinship and sympathy with
Members of the newly formed India the Kukis extend across India’s state and
National Developmental Inclusive Alli- international borders.
ance, an opposition umbrella group, Some Meiteis have left Mizoram in
accused Modi at the weekend of “brazen recent weeks, fearing for their safety.
indifference” to the violence, which has The Nagas, Manipur’s second-largest
killed more than 180 and displaced ethnic group, have voiced concern
some 60,000 since May. about being dragged into the conflict as
Opposition parties have succeeded in they live alongside the warring commu-
placing a no-confidence motion against nities and in some cases have faced har-
Modi’s government on parliament’s assment or other repercussions.
agenda, putting the premier on the spot “There are all the signs that it might
spread” to other parts of the north-east,
said Praveen Donthi, senior analyst for
‘The genie is out of the India with the International Crisis
bottle and they are Group. “The genie is out of the bottle
and they are trying to put it back.”
trying to put it back’ Tensions have escalated elsewhere in
International Crisis Group India amid what opponents say is Modi’s
weakening of democratic institutions
in a legislature where his Bharatiya and promotion of Hindu majority inter-
Janata party enjoys a solid majority and ests. At least six died this week in
calls the shots. A vote is expected next clashes between Hindus and Muslims in
week, before the end of parliament’s Haryana state near New Delhi.
session on August 11. Authorities in Manipur initially im-
Although the motion is certain to fail, posed an internet blackout, but its par-
it will compel Modi to address the crisis tial lifting allowed images of burnt
in BJP-governed Manipur. His only churches and violence, including the
remarks on it came last month when he sexual assault of two women, to be cir-
expressed “pain” and “anger” over a culated, adding pressure on Modi to act.
widely shared video showing two The government has deployed about
women from the state’s Kuki minority 50,000 soldiers, armed police and other
being paraded naked by a mob. security personnel to the state to
“The opposition has made Manipur a enforce buffer zones between the war-
prestige issue, a stick to beat Modi with,” ring communities.
said Neerja Chowdhury, a contributing Mobs have looted more than 4,000
editor at The Indian Express paper. weapons and half a million ammunition
However, she added, “this has to go rounds from police in Manipur, accord-
beyond the immediate politics that both ing to official estimates, only some of
sides want to play”. which have been recovered. “There is no
Manipur is one of the region’s states possibility that violence can calm down
known as the Seven Sisters, plagued by until these weapons come back,” said
conflicts since India’s independence in Sushant Singh, senior fellow at the Cen-
1947. It borders China and Myanmar’s tre for Policy Research in New Delhi.
Chin state, where residents have been in The BJP enjoys support from the
revolt since a military coup in 2021. Meiteis and Kukis, but some are
Unlike past conflicts there, in which demanding New Delhi dismiss Biren
armed insurgents fought the state, the Singh, the state’s chief minister, and
current strife has pitted two ethnic impose direct rule from India’s capi-
groups against each other, with violent tal. The Kukis have also called for a sep-
incidents including two women and a arate administration on their lands.
child being burnt in an ambulance and a “This has strategic implications,” said
man’s head being impaled on a stake. Singh from the Centre for Policy
Conflict broke out in May between the Research. “It weakens our defensive
mostly Hindu Meiteis, the state’s domi- posture against China,” amid border
nant ethnic group who live in lowlands tensions.

West Africa

US orders partial evacuation

of Niger embassy after coup
FELICIA SCHWARTZ — WASHINGTON military coups in neighbouring Mali and
Burkina Faso in recent years.
The US is partially evacuating its
Over the weekend, a group of west
embassy in Niger after a military junta
African leaders led by Nigerian presi-
seized power in the west African nation
dent Bola Tinubu threatened to take
last week and neighbouring countries
military action against the new junta in
warned that they may use force unless
Niger if it did not restore the toppled
constitutional order is restored.
democratic government within seven
The state department on Wednesday days. The US, France, EU and Britain
ordered the departure of non-emer- condemned the coup and suspended aid
gency personnel and family members, a to the country.
move that may signal a deterioration of Defence chiefs from the Economic
the security situation. It highlights the Community of West African States
challenges facing Washington as it began a two-day meeting in the Nige-
responds to the military takeover in a rian capital Abuja on Wednesday as a
country that has been an important delegation from the regional bloc trav-
regional partner for the US. elled to Niamey, Niger’s capital, as part
Matthew Miller, state department of efforts to find a solution to the crisis.
spokesman, said the embassy remained Nigeria also moved to increase the pres-
open for limited emergency services for sure on the Niger junta by cutting off
US citizens. Kathleen FitzGibbon, the electricity to a country where it supplies
US ambassador to Niger, was recently more than 70 per cent of the power.
confirmed and is due to arrive in the Washington has yet to declare the
country soon. events in Niger a coup, as doing so would
France has already begun efforts to end US security assistance to a country
voluntarily evacuate French and Euro- that Washington sees as important for
pean citizens who wish to leave Niger. fighting terrorism and pushing back
Mohamed Bazoum, regarded as the against Russia’s influence in Africa.
west’s staunchest ally in the Sahel There are about 1,100 US troops in
region, was overthrown as president on Niger and the Pentagon is not planning
Wednesday last week, bringing further to remove them. The US has suspended
instability to the troubled region after security co-operation since the coup.
4 ★ FINANCIAL TIMES Friday 4 August 2023

INTERNATIONAL

Trump indictment puts spotlight Public health

Mosquito gut
bacteria help
on inner circle of ‘co-conspirators’ boost fight to
curb malaria
Unnamed but easily identifiable accomplices of ex-president accused of helping to undermine election process
JOE MILLER — NEW YORK fraud” was accomplished through a vot- CLIVE COOKSON AND SHERI SCOTT
LONDON
ing machine company’s election soft-
Donald Trump did not act alone: that ware and hardware. A case matching Scientists are developing a new weapon
was one takeaway from special counsel this description was brought by Powell, in the fight against malaria in the form
Jack Smith’s indictment charging the only to be dismissed a few weeks later. of bacteria found in the guts of mosqui-
former US president with attempting to She has since faced sanctions for filing toes, which limit growth of the micro-
frustrate the peaceful transition of frivolous lawsuits. A lawyer for Powell scopic parasites that cause the disease.
power after his election defeat in 2020. declined to comment.
Six alleged accomplices were identi- The TC1 strain of Delftia tsuruhatensis, a
fied as “co-conspirators” by the US Jeffrey Clark naturally occurring bacterium, was dis-
Department of Justice, including four of A little-known DoJ official until late covered accidentally at the Spanish lab-
Trump’s attorneys. None has been 2020, Jeffrey Clark was introduced to oratories of GSK, the pharmaceutical
charged. Trump in December of that year and and biotechnology company, in the
They are variously accused of assist- was briefly proposed as an acting attor- course of its work looking into a disease
ing Trump with everything from intimi- ney-general after allegedly telling the that kills more than 600,000 a year.
dating state legislators and election offi- president that if appointed he would tell Thomas Breuer, chief global health
cials to cooking up “sham” investiga- state officials that the agency had evi- officer at GSK, hailed an “entirely novel
tions into supposed electoral fraud, and dence of election fraud, according to the approach for malaria control”. He con-
exploiting the anger of the crowd that January 6 committee’s final report. tinued: “TC1 has potential to further
stormed the Capitol on January 6 2021. His involvement in the attempts to reduce the huge burden of malaria in
While prosecutors did not name them overturn the election, as detailed in the endemic countries and is more evidence
— as is standard practice for individuals report, match the description of co-con- that through deploying a range of pre-
mentioned in an indictment but not spirator 4, who prosecutors say was “a vention approaches, we may be able to
charged — they painted a vivid picture justice department official who worked finally eradicate this terrible disease.”
of their alleged involvement. on civil matters and who, with the Nearly half the world’s population is
Details in the indictment all but defendant, attempted to use the justice at risk from malaria. The Anopheles
directly identify some of the more famil- department to open sham election mosquito, which spreads the Plasmo-
iar characters in Trump’s orbit based on crime investigations and influence state dium parasite responsible for malaria, is
public information. legislatures with knowingly false claims tackled with insecticidal nets, indoor
of election fraud”. sprays and antimalarial drugs. But the
Rudy Giuliani He is alleged to have “tried to coerce”
Former New York mayor turned Trump then acting attorney-general, Jeffrey ‘Through deploying a range
lawyer Rudy Giuliani has identified Rosen, to send a draft letter containing
himself as being “personally involved” such claims to state officials just two of prevention approaches,
in the litigation. days before January 6, saying he would we may be able to finally
His previously reported actions match take Rosen’s job unless he and his dep-
those attributed to co-conspirator 1, while he did not think anyone lied in the the House committee examining Janu- Accused: John uty agreed to the proposal. eradicate this terrible disease’
described in the indictment as “an attor- aftermath of the 2020 election, “you
Giuliani said ary 6 to explain his involvement in the Eastman, left, A lawyer for Clark did not respond to
ney who was willing to spread knowingly have the right to lie under the First he did not events leading up to the riot. and Rudy request for comment. effectiveness of these methods is declin-
false claims and pursue strategies that Amendment”. think anyone A former Supreme Court clerk who Giuliani ing as mosquitoes and parasites become
the defendant’s 2020 re-election cam- A lawyer for Giuliani, Robert Costello, joined the Trump camp after the Below: Sidney Kenneth Chesebro resistant to chemical treatments.
paign attorneys would not”. did not respond to a request for com- lied after the November election, Eastman was once Powell, top, and The author of the notorious “Wisconsin Field tests in Burkina Faso’s Institut
As the alleged leader of the Trump ment. In a statement to The New York election described by Pence’s counsel as “a ser- Jeffrey Clark memo” — as co-conspirator 5 is referred de Recherche en Sciences de la Santé
White House’s campaign to meddle with Times, Costello acknowledged that it pent in the ear of the president of the Jim Bourg/Reuters to in the indictment — appears to be and research with Johns Hopkins Uni-
the election results, he is accused of “appears that Mayor Giuliani is alleged but added: United States”, according to an email Kenneth Chesebro, a legal adviser to the versity in the US and other partners sug-
repeatedly lobbying lawmakers in Ari- to be co-conspirator number 1”. ‘You have released by the January 6 committee. Trump campaign identified by the Janu- gested that TC1 could be developed into
zona and Georgia, presenting them with Co-conspirator 2 is alleged to have ary 6 committee’s report as the person a safe, effective way to control malaria,
unsubstantiated claims of hordes of John Eastman the right to compiled a memo claiming votes were who drafted “a series of legal memo- said results in the journal Science.
dead people having voted, while also Described as “an attorney who devised lie under miscounted in seven states — a docu- randa” that laid the groundwork for a Janneth Rodrigues, project leader at
attempting to mislead elected officials and attempted to implement a strategy ment mentioned in the January 6 report so-called fake electors plan. GSK’s Tres Cantos lab, said experiments
in Pennsylvania and Michigan. to leverage [vice-president Mike the First and attributed to Eastman. On the This matches the definition of co-con- showed that mosquitoes infected with
Giuliani, 79, took to Twitter soon after Pence’s] ceremonial role overseeing the Amendment’ morning of January 6, co-conspirator 2 is spirator 5 provided by prosecutors in the bacteria were no longer carrying the
the indictment was released, posting a certification proceeding to obstruct the further accused of addressing the crowd the indictment as “an attorney who parasite at any stages of their life cycle.
185-minute live video in which he reiter- certification of the presidential election”, with a speech that matches one given by assisted in devising and attempting to When the scientists introduced TC1
ated claims of voting irregularities in co-conspirator 2 appears to refer to law- Eastman, telling Trump supporters that implement a plan to submit fraudulent into mosquito colonies in controlled set-
“crooked Democrat cities”, adding that, yer John Eastman. He was hauled before Eastman Pence needed to act to stop Congress slates of presidential electors to tings, the insects were not harmed by
from certifying Joe Biden’s victory. obstruct the certification proceeding”. the infection. The study showed the bac-
was once Lawyers for Eastman said the indict- According to the committee, Chesebro terium was not transmitted to humans
described ment “relies on a misleading presenta- suggested in November 2020 that the when the mosquito fed on their blood.
Legal Notices tion of the record to contrive criminal president “could gain a few extra weeks Delftia tsuruhatensis bacteria are rou-
as ‘a serpent charges against . . . Trump and to cast for litigation to challenge Wisconsin’s tinely found in nature. Although the
in the ominous aspersions on his close advis- election results, so long as a Wisconsin species has been shown to cause rare
ers”. They added that their client would slate of Republican nominees to the elec- cases of disease in the immunocompro-
ear of the fight any charges if brought. toral college met on December 14 to cast mised, researchers do not expect this to
president of place holder electoral college votes on a be a serious safety concern. They found
Sidney Powell contingent basis”. that TC1 produced a molecule called
the United Co-conspirator 3 is another attorney, A lawyer for Chesebro did not respond harmane that inhibited parasitic devel-
States’ described as someone “whose to a request for comment. opment. Harmane is a neurotoxin in
unfounded claims of election fraud” high doses but is considered safe in the
Trump privately referred to as “crazy”, Co-conspirator 6 tiny quantities produced by the bacte-
but whose theories he nonetheless The identity of co-conspirator 6, rium in mosquitoes.
“embraced and publicly amplified”. The described as a “political consultant who “Harmane can be found in most
few details provided by prosecutors helped implement a plan to submit foods, coffee and barbecued meats and
appear to match Sidney Powell, a fraudulent slates of presidential electors is naturally produced within the human
former federal prosecutor who joined to obstruct the certification proceed- body,” said Rodrigues.
the fight to overturn the election result ing”, is not obvious. Few details are Further confidence comes from the
after expressing concerns about its legit- given in the indictment, beyond refer- safety record of Delftia-based products
imacy on the podcast of Steve Bannon, a ences to the individual sourcing phone already marketed as plant growth pro-
former political adviser to Trump. numbers for senators, identifying help- moters in agriculture. Modelling at
Co-conspirator 3 is alleged to have ful attorneys and participating in a con- Imperial College London forecast that
filed a lawsuit against the governor of ference call with Pennsylvania electors. use of TC1 over three years would lower
Georgia, claiming “massive election See Opinion clinical cases of malaria by 15 per cent.

Netanyahu coalition

Israeli tech sector voices growing alarm at judiciary reforms

JAMES SHOTTER — JERUSALEM markets. As the crisis progressed, the Nexar co-founder Shir said it was wor- they also said such an exodus was the
shekel has lost about 8 per cent against rying that the government had been biggest threat facing the economy.
Eran Shir has helped create about 120
the dollar and the blue-chip index has prepared to go ahead with the overhaul “[The Israeli economy] is almost like
jobs in Israel since he co-founded
barely risen. Morgan Stanley warned despite opposition at home and abroad. an energy dependent economy that gets
Nexar, an automotive start-up, in 2015.
last week the turmoil could feed into Others in Israel’s tech sector — it all of its sales from taking minerals out
But this year, as Benjamin Netanyahu
higher borrowing costs. The central accounts for more than a sixth of eco- of the ground. The minerals in this case
has embarked on a drive to weaken the
bank said in April it could knock an nomic output and more than half of are entrepreneurs,” said Adam Fisher,
judiciary, he has decided to boost activ-
average of up to 2.8 per cent annually off exports — have similar concerns. A sur- managing partner at Bessemer Venture
ities abroad instead.
output over the next three years. vey last month by the Start-Up Nation Partners, which has invested $1.5bn in
“We’re investing more in our locations The overhaul includes a law passed Central think-tank found 68 per cent of Israeli start-ups. “The only problem . . .
outside Israel and generating intellec- last week that limits the top court’s abil- start-ups had taken legal or financial is that while minerals can’t be taken out
tual property outside Israel . . . and ity to strike down decisions of the gov- steps, such as moving activities or cash of the ground and moved elsewhere,
we’re actively looking at opening in ernment, which would have greater outside Israel, since the judicial battle entrepreneurs and employees can
other locations,” said Shir. “We haven’t control over the appointment of judges. began. Investment in the sector was 67 move. And that’s why high tech is
done any incremental hiring in Israel The government has played down per cent lower in the first half of the year screaming at the top of our lungs.”
this year, but we hired five people in Por- concerns about the economic impact. than in the same period a year earlier.
tugal,” he said. After Moody’s and Standard & Poor’s, Some are betting this reaction is over-
Shir’s decisions reflect alarm among the rating agencies, warned last week done. Michael Fertik, founder of Heroic
Israeli tech entrepreneurs and business about the economic repercussions of the Ventures, a venture capital firm, said he Legal Notices
leaders about the economic implica- overhaul, Netanyahu and finance min- had put more money into Israel this
tions of the overhaul being pushed by ister Bezalel Smotrich drew attention to year than last, and that the fundamental
the prime minister’s hardline coalition. big investments in Israel planned by reasons for investing in the country’s
The changes have sparked seven Intel and Nvidia, the chipmakers. tech sector remained. Others are less
months of protests, drawn US criticism But many economists, executives and bullish. Nadav Zafrir from Team8,
and prompted thousands of reservists investors see the changes as a recipe for which runs a start-up platform as well as
to threaten to stop volunteering. erratic policymaking that could erode a venture capital arm, said fundraising
For now, the fundamentals of Israel’s Israel’s business-friendly environment. had “definitely” become more difficult.
$500bn economy are solid. Growth is “Israel until now had good institu- The longer-term question is whether
forecast at around 3 per cent this year, tions, an array of checks and balances, the small steps towards relocating busi-
unemployment stands at 3.3 per cent separation of power and an efficient ness activities made so far by Israeli
and inflation 4.2 per cent. bureaucracy. But all that is being tar- companies, particularly in the highly
Economic disruption from the battle geted by the government,” said Itzchak mobile tech sector, become something
has been limited but the political gyra- Raz, an economist at the Hebrew Uni- bigger. Executives and investors said
tions have affected Israel’s financial versity of Jerusalem. that, so far, this was not the case. But
Friday 4 August 2023 ★ FINANCIAL TIMES 5

Continental drift Investors gloomy on European economic outlook but see the US as heading for a soft landing y MARKETS

DoJ seeks to Running total Adidas vows to give €110mn of

Yeezy sales to charity as it unwinds West ties
LSEG and
Microsoft
annul KPMG to develop
bespoke AI
audit scandal NIKOU ASGARI — LONDON

The London Stock Exchange Group is

working with Microsoft and several

convictions banks to create bespoke generative

artificial intelligence models in a move
that shows how the financial services
sector is trying to harness the technol-
ogy without exposing proprietary data.

3 Wire fraud charges to be dismissed The launch of OpenAI’s ChatGPT last

year spurred a wave of interest in gener-

3 Prosecutors misinterpreted the law ative AI and, while many financial serv-
ices companies are interested in its
potential benefits, they are wary of
inputting confidential information in
STEPHEN FOLEY — NEW YORK Commission, which oversees the the models, which continually learn
PCAOB, including charges related to the from the data they are given.
Two people found guilty in a corruption scandal. As part of the settlement it David Schwimmer, chief executive of
scandal involving KPMG and the US admitted using the advance notice to LSEG, said the company was working
audit regulator are set to have their con- alter completed audits before inspec- with Microsoft to create “bespoke large
victions dropped, after prosecutors con- tors arrived. language models”.
ceded they had misinterpreted the law. The DoJ secured criminal convictions “We’re having conversations with cus-
David Middendorf, a former KPMG of six people in all, three of whom tomers about the opportunity for them
managing partner for audit quality, and admitted additional charges of conspir- to use the vast amount of data we have
Jeffrey Wada, who worked at the Public acy to defraud the SEC by interfering available, to commingle that with their
Company Accounting Oversight Board, with the inspection process, as well as data in a secure proprietary [manner],”
were convicted of fraud over claims that the wire fraud charges that have now he said, as the exchange and data group
Wada passed confidential information been called into question. reported first-half results yesterday.
to KPMG to help the firm prepare for The applicability of the wire fraud Microsoft took a 4 per cent stake in
PCAOB audit inspections, in the hope of statutes turned on whether defendants LSEG in December last year and secured
being given a job at the Big Four firm. were trying to steal “property” from the a board seat as part of a 10-year strategic
The Department of Justice conceded PCAOB or just affect the outcome of its partnership, marking the latest incur-
this week in a court filing that its reading inspections. sion by Big Tech into the operation of
of wire fraud statutes was incorrect, in Recent judgments in unrelated cases, Taking stock: Adidas still retains unsold Yeezy sneakers with a book value of €400mn — Seth Wenig/AP global capital markets. It also invested
including a 2020 Supreme Court ruling, $10bn in OpenAI in January.
Kelly vs US, had clarified that wire fraud Schwimmer said generative AI was
The deported partner could not be brought against Midden- OLAF STORBECK — FRANKFURT Adidas yesterday gave a slightly In the second quarter, sales in China useful “if you are a big bank that has a lot
aims to be ‘reunited with dorf and Wada, the DoJ said in a submis-
Adidas has pledged to donate
more optimistic outlook for 2023 were up 16 per cent while they fell by of proprietary data that you want to use
sion earlier this week to an appeals after overall sales in the second quar- the same rate in North America, and get access to . . . for your own trad-
his three college-age US court considering appeals from Mid-
€110mn to charity after a successful
ter, excluding currency swings, were excluding Yeezy. In Europe, they ing strategies, risk management”.
first sale of its remaining stock of
children and wife’ dendorf and Wada. The department
Yeezy trainers, as the sportswear
flat year on year at €5.3bn. The poten- declined by 1 per cent. Operating Banks were interested in creating
asked for their case to be sent back to a tial full-year loss will also be smaller profit more than halved in the second their own generative AI models because
group unwinds its ill-fated partner-
light of subsequent legal judgments in lower court, where it said it would dis- than previously guided, with chief quarter to €176mn, excluding Yeezy. they “want to make sure that none of
ship with Kanye West.
unrelated cases. It said it would ask for miss the charges. financial officer Harm Ohlmeyer say- The Financial Times reported last [their] data is being used to inform any
the jury verdict to be set aside and the Attorneys for Middendorf and Wada The German company terminated its ing that, excluding the Yeezy sales, week that demand for the trainers in other large language models out there”,
charges dismissed. declined to comment. highly profitable agreement with rap- Adidas was a “break-even company”. the first sale in late May and early he added. Schwimmer did not name the
Another KPMG audit quality partner, Britt pleaded guilty in 2019 to a single per West — now known as Ye — in Gulden said the core business had June exceeded the company’s most companies that LSEG was working with.
David Britt, who was deported to Aus- count of conspiracy to commit wire October last year after he made done “slightly better than expected” optimistic expectations. Gulden The London exchange operator,
tralia after pleading guilty to a similar fraud, admitting to obtaining confiden- antisemitic remarks. in the second quarter. He also acknowledged yesterday that selling which is suffering from a dearth of list-
charge, is now planning to ask the court tial information on upcoming inspec- In its second-quarter results yester- believed the allure of the Adidas the Yeezy stock “is of course also help- ings, regards AI-related products as a
to allow him to reverse his plea. tions and using it to improve results. He day, Adidas said the first sale of its brand would increase once “larger ing both our cash flow and general potential new business line.
Middendorf and Britt were among six had been in the US for three decades, but outstanding Yeezy shoes generated volumes of our hot sellers”, such as financial strength”. LSEG shares dropped as much as 6 per
partners and employees, including the had never become a US citizen and was €400mn in revenue and €150mn in Samba and Gazelle shoes, were availa- He added that the company sold cent yesterday before recovering to
head of the audit practice, who were deported as a result of the conviction. operating profit. The company had ble in stores. 20-25 per cent of its remaining Yeezy trade 1.2 per cent lower after the com-
fired by KPMG in 2017 after revelations Rob Stern, a lawyer for Britt, said he previously promised to donate a “sig- Shares in Adidas were up 0.5 per inventory in late May and early June. pany reported mixed first-half earnings.
that it had hired people from the PCAOB would try to have the guilty plea with- nificant amount” of the proceeds to cent yesterday. The stock is up about A second batch will go on sale this Its operating profit edged up 0.7 per
and used its contacts there to receive drawn. “We fully expect now to go back, charity. It has made an initial dona- 40 per cent so far this year over inves- month. cent to £1.4bn, but growth in the com-
advance notice of which audits would be as I told the judge we would in these cir- tion of €10mn already with a provi- tors’ hopes that Gulden will be able to Adidas still sits on unsold Yeezy pany’s data subscriptions slowed. Reve-
subject to inspection. The firm had been cumstances, to have the record sion for another €100mn. restructure the company, which in sneakers with a book value of nues at LSEG’s equities business, which
wrestling with persistently low audit expunged so that he can be reunited Chief executive Bjørn Gulden said 2022 was hit hard by the sudden end €400mn and a retail value of at least includes stock market listings, declined
quality scores from the process. with the three college-age US children the donations would be made to of its highly profitable Yeezy brand, twice that much. Should Adidas be 11 per cent to £116mn compared with
KPMG later paid $50mn in a settle- and wife who are still in the country,” organisations fighting racism and an exit from Russia and lockdowns unable to sell this, it would have to the first six months of last year.
ment with the Securities and Exchange Stern said. antisemitism. and anti-western sentiment in China. write it off. See Lex

Legal Notices
Uber’s profit marks a shift after Silicon Valley’s ugly decade
like to talk about how their companies sive and competition has waned, the
INSIDE BUSINESS will be financially sustainable and subsidised rides and deliveries that
socially responsible. drove Uber’s growth have largely ended.
TECHNOLOGY These look like necessary stylistic Pushing less well capitalised rivals to the
adaptations to the times. But the incen- sidelines before raising prices was
tive structure of the venture capital always at the heart of the plan champi-
Richard world hasn’t changed: outsized rewards oned by Uber’s early backers — though
still go to the biggest winners in new they probably didn’t think it would take
Waters markets. Nor have cycles in the capital 14 years to get to this point.
markets been banished. Despite the higher prices, bookings

I
Uber’s early years were an extreme have continued to rise steadily. That is a
version of the expansionism that took good sign that riders and eaters see
f you were looking for a sign that the hold during the period of ultra-low value in the convenience of ordering
tech start-up world has shaken off interest rates following the 2008-09 through Uber’s app and were not only
the growth-at-all-costs mindset financial crisis. So much money was drawn by uneconomically low charges.
that typified the last decade, Uber being tossed about that we ended up Uber is also starting to flex its muscles
reporting a profit this week for the with disasters such as WeWork and as a platform, as it looks for ways to
first time might fit the bill. Theranos. encourage the 137mn people who use its
The US ride-hailing company was Uber embodied an extreme version of services at least once a month to become
emblematic of Silicon Valley’s ugly side a prevalent business model and culture. more regular customers. It has a sub-
during the boom years of the 2010s. It Other internet companies might have scription service, Uber One, and cross-
gave a whole new meaning to the phrase been prepared to promotes its different services. Adver-
“cash burn”, reporting more than $30bn bend regulations in Uber’s early years were an tising is starting to become an impor-
of operating losses as it took advantage the race for global tant source of revenue.
of a ready supply of cheap capital to sub- growth but few extreme version of the The unresolved question is whether
sidise a global growth spree. were as willing to expansionism that took this will be enough both to make Uber
The chronic losses left doubts about openly flout them. sustainably profitable and to support
whether the economics of ride-hailing With Uber, the hold during the period of the kind of margins that would justify
— as well as the food delivery business q u e s t i o n w a s ultra-low interest rates the huge upfront investments it took to
Uber also moved into — would ever always: what build the company. But if it really has
make sense, or whether companies would happen when the cheap money turned a corner then, ironically, it will
would be able to build competitive ran out and regulators finally caught up have partly validated the aggressive tac-
moats in these markets. with the company? Did it provide tics that set the company on its way.
It wasn’t only a case of financial enough real value to riders and drivers It would be comforting to think that
transgression. For Uber, trampling on — and, more recently, users of its deliv- regulators had learnt the lessons from
regulations and antagonising the taxi ery services — to justify the unprece- the last decade of tech growth. But as
drivers it wanted to replace was a fea- dented accumulated losses it was another tech race heats up, this time in
ture, not a bug. amassing? artificial intelligence, they are once
It is nearly two years since the stock By squeezing out the company’s first again struggling to adapt quickly
market turned sour on high-growth operating profit this quarter, Dara enough. The leading artificial intelli-
tech companies, a reversal that quickly Khosrowshahi, the former Expedia boss gence companies have promised to
fed through into private markets and who took over six years ago, and Nelson apply this powerful technology respon-
stemmed the flow of capital. But how Chai, who came in as chief financial sibly. The huge rewards at stake — and
much has really changed? officer to steer the company’s initial the capital flooding into lossmaking AI
These days, company founders speak public offering and its aftermath, have start-ups — will put that to the test.
a different language and consciously provided at least a partial answer.
adopt a less abrasive demeanour. They As capital has become more expen- [email protected]
6 ★ FINANCIAL TIMES Friday 4 August 2023

COMPANIES & MARKETS

Support services Financial services. Succession

US attorney-client privilege in peril Race is on for the

top job at EY after
Leading law firms attack
break-up fiasco
cies to test client confidences”, said Ger- any next steps in consultation with our judge’s decision would prompt regula-
ard Stegmaier, a partner at law firm affected clients”. tors to go on “fishing expeditions” with
court ruling in favour of Reed Smith who regularly litigates The US Chamber of Commerce, which broad requests.
SEC after cyber atttack attorney-client privilege challenges. filed an amicus brief in support of Cov- “More than 300 federal agencies have
“It fundamentally risks interfering ington on behalf of its members, said the this same subpoena power and, if
with attorney-client relationships and “unprecedented” ruling would “chill cli- upheld, the court’s decision threatens to needs to be held accountable for push-
JOE MILLER — NEW YORK
the ability of clients to believe . . . that ents and their lawyers from having expand the use of administrative sub- Favourite Baldwin’s role in ing so hard and listening so little.”
Global law firms and corporate counsel their confidences will be protected by open, candid conversations”. poenas,” said Susanna McDonald, vice- Project Everest raises doubts Another said: “We need to reinstitute
are warning of a “massive” challenge to the law firm that they work with and the “I can’t think of any prior analogous president of the Association of Corpo- the ban on senior management retire-
the centuries-old concept of attorney- courts that they interact with,” he situations where the SEC has gone after rate Counsel, which lobbies on behalf of he will be able to unite factions ment extensions that clog up the pipe-
client privilege, as the US securities reg- added. lawyers in an attempt to investigate cli- its 45,000 members. line and hinder the development of
ulator seeks the power to examine inter- The SEC first filed an application to Companies “rely on the trust and con- future leaders.”
STEPHEN FOLEY — NEW YORK
nal records from companies that fall vic- force Covington to comply with a sub- fidence of the attorney-client relation- EY is structured as a network of
tim to cyber attacks. poena in January, telling a federal court
‘[The ruling] could have ship with their own lawyers and their
MICHAEL O’DWYER — LONDON
locally owned partnerships, giving
A federal judge in New York last week that it sought to “assess and identify massive implications for outside lawyers”, she added. EY boss Carmine Di Sibio’s right-hand country leaders considerable influence,
ordered law firm Covington & Burling to potential illegal trading based on infor- The order in the Covington case man has emerged as a frontrunner to particularly in the US, which accounts
reveal to the Securities and Exchange mation gathered during the attack”,
whether and how people comes amid challenges to the concept of take over as global head of the firm in a for 40 per cent of global revenues. Julie
Commission the details of seven clients thought to be carried out by Chinese seek the advice of counsel’ attorney-client privilege, which has leadership race triggered by the collapse Boland, US managing partner, dealt the
whose information was allegedly operatives. roots in ancient Rome and was adopted of its attempted break-up this year. final blow to Project Everest in April,
accessed in a hack of the firm’s compu- More than 80 leading US law firms — ents,” said Jonathan Urick, associate in the English legal system before enter- Briton Andy Baldwin, an architect of having decided it would weaken EY’s
ter systems in 2020. some of which have been the target of chief counsel at the Chamber Litigation ing US common law. The US Supreme the abortive plan to spin off EY’s con- audit business. She is not thought to
The SEC’s demand — even after Cov- their own cyber attacks — wrote to the Center. Court in January declined to overturn sulting operations, was running to be want the top global job for herself but is
ington said it notified all those whose judge in support of Covington’s efforts to “Covington did a very thorough, good an order compelling a law firm to hand the first non-US executive to become likely to play an important role in
information may have been compro- avoid disclosing the information, “to faith, internal review of all the material over tax-related communications as global chair and chief executive, accord- whether Baldwin’s campaign succeeds.
mised — marked a new front in the bat- emphasise the danger of enforcing a that was compromised in the cyber part of a criminal investigation. ing to people inside or close to the firm. Boland did not respond to an email
tle over the limits of attorney-client subpoena like the one at issue”. attack,” he added, and the SEC’s attempt The SEC has also passed a rule that Baldwin had argued, along with Di seeking comment. EY declined to com-
privilege, industry representatives said. The SEC declined to comment on the to nonetheless go after “highly confi- mandates the near-immediate report- Sibio, that EY needed to rethink its ment or to make any of the possible can-
The ruling “could have massive impli- recent ruling. dential and sensitive” client informa- ing of cyber security breaches at pub- structure radically but some of the peo- didates available for interview.
cations for when, whether and how peo- In a statement, Covington said it “had tion was an “invasive step, crossing a licly listed groups. It would compel com- ple said his involvement in the failed At a meeting of more than 100 senior
ple seek the advice of counsel, especially a duty to protect [its] clients’ confiden- huge Rubicon”. panies in the US to report “material” talks over how to divide the business partners in Lisbon in June, Shimaly was
if it emboldens the SEC and other agen- tial information” and would “consider Advocacy groups also warned that the breaches within four business days. had raised doubts on whether he could considered on the sidelines as a dark
unite EY’s warring factions. horse who could unite EY’s factions, one
Another contender was Jad Shimaly, person in attendance said. The natural-
head of EY’s business in Canada, insid- ised Canadian, brought up in Lebanon,
ers said, and at least four other execu- is six years Baldwin’s junior, giving him
tives have put their names forward or time to serve two full terms.
have considered doing so. Shimaly had a “Canadian ‘do no
“Andy is the favourite by a large mar- harm’ approach, and it could be helpful
gin but things can get weird in a hurry,” to have a North American perspective
said one person familiar with the candi- without necessarily being a US partner”,
dates. “Like a UK Conservative party said a person familiar with some part-
leadership contest.” ners’ thinking.
Nominations to lead the business will Marie-Laure Delarue, a French part-
close on August 13, according to an ner who oversees EY’s audit practice
internal email this week described to globally, was mentioned as a contender
the Financial Times. A nominations
committee will take soundings from
hundreds of the most senior partners,
‘Andy needs to wear this
and thousands more will be surveyed on debacle . . . to be held
the qualities they wanted in a leader and
on EY’s strategy, the email said.
accountable for pushing so
The final candidate will be picked not hard and listening so little’
by popular vote but by the global execu-
tive committee chaired by Di Sibio and after the Lisbon gathering. She would be
ratified by a group of prominent part- the first woman to lead EY at the global
ners. The firm has previously signalled level and, like Baldwin and Di Sibio, has
that it expects the decision to be settled a background serving clients in the
around November, with the winner tak- financial services industry.
ing over in June next year. Other mooted candidates include the
In 25 years on the consulting side of Americans Janet Truncale, who runs
the firm, Baldwin has been credited EY’s financial services in the Americas,
with pushing the use of new technology and Ryan Burke, who heads the firm’s
internally. He drove greater integration practice serving private businesses.
of EY’s separate national firms during a Truncale was seen as an ally of the glo-
three-year spell as head of European bal executive committee in its long-sim-
operations before he became one of Di mering tensions with other members of
Sibio’s two deputies in 2019. the US leadership, making it unclear if
The break-up plan, Project Everest, she could win Boland’s support, said
was designed to liberate EY from con- several people familiar with the matter.
flict-of-interest rules that restrict the Another executive said by several
consulting arm from working for audit insiders to be considering whether to
clients. “The strategic rationale of what stand was US-born Julie Teigland, who
we’re doing, our partners understand,” oversees EY’s businesses in Europe, the

Winning edge Nintendo has broken its record for

first-quarter profits as The Super Mario
Bros. Movie dominated the box office
several upgrades and redesigns during
its lifetime, has sold nearly 130mn
units, based chiefly on a relentless flow
beyond, The Super Mario Bros. Movie
was released in April, and has since
taken more than $1.3bn at the box
Baldwin said last year. Their question
“is not, ‘Should we do something?’ I
think that train’s left the station.”
Middle East, India and Africa. She was
previously in charge of EY Germany
when the firm was auditing Wirecard,
Nintendo and the company’s latest Legend of
Zelda game sold 18.5mn copies since its
of hit games that have included Mario
Kart, Super Mario Galaxy and the
office.
Nintendo said yesterday that sales
The plan pitted global bosses against
the leadership of EY’s US arm and con-
which was later revealed to have fabri-
cated half of its revenue and €1.9bn in
on a high as launch in May.
Operating profit in the April to June
quarter hit ¥185.4bn ($1.29bn), a rise
previous iteration of Zelda.
The first quarter also marked the
culmination of a four-year project by
related to IP had trebled from a year
earlier to ¥31.8bn in the first
quarter, driven by the success of the
sultants against their more sceptical col-
leagues in the audit business.
Some partners and former partners
corporate cash. Baldwin was in charge
of the European region at the same time.
EY has been banned from taking on new
sales soar of 82 per cent on the same period a
year earlier and testament to the
Nintendo to better leverage the might
of its intellectual property. Mario,
film.
While the film’s success was a
said a period of “healing” could be bet-
ter than another restructuring attempt,
audits in Germany for two years.
“Many of the candidates are going to
demand for new games from the large Luigi, Link and other Nintendo milestone, said Jefferies analyst Atul even a slimmed-down version of the be problematic, either because they are
base of Switch console owners. characters are described by analysts as Goyal, investors should not be split that would involve selling off only too closely associated with championing
Sales of The Legend of Zelda: Tears of the most valuable entertainment IP distracted by it. parts of the consultancy. Everest or with undermining it . . . or
the Kingdom, ranked by critics as properties that are not owned by “The story here is that console Several pointed to Baldwin’s age. Hav- because they are carrying with them
among the best games of all time, also Disney. gaming for Nintendo is still the main ing just turned 57, he would be able to baggage associated with previous scan-
helped shift 3.9mn units of the Switch Despite that, Kyoto-based Nintendo thing,” said Goyal. serve just three years before hitting dals,” said Laura Empson, a Bayes Busi-
during the April to June period. has historically avoided extensive use “The movies and theme parks are mandatory retirement age unless he ness School professor.
That pace, said analysts, was highly of its IP outside the games themselves. great, but peripheral. What we saw was given an extension to serve the That did not mean the firm would be
The company’s latest ‘Legend of unusual given that the Switch was now That strategy began to change in 2018 with the sales of Zelda is something usual four-year term. unable to coalesce around a new leader.
Zelda: Tears of the Kingdom’ seven years old and rumours were when Shuntaro Furukawa became else. From an investor’s point of “The global executive [committee] “They are all united in their desire to
game sold 18.5mn copies and already swirling about when the chief executive. view, you shouldn’t take your eye off has put the firm through the wringer make a great deal of money, and they
helped shift 3.9mn units of the company would launch a successor. As well as lending its IP to Mario- the core gaming side.” Leo Lewis and we need significant, maybe even know that the way to do that is not to
Switch in the April to June period The Switch, which has undergone based theme parks in Japan and See Lex wholesale, change,” said one person. fight but to get the firm on the safest
“Andy needs to wear this debacle. He possible footing as quickly as possible.”

Industrials Food & beverage

Adani buys India cement maker for $600mn Bud Light woes mar upbeat AB InBev quarter
CHLOE CORNISH — MUMBAI return to acquisitions after a seven- Adani became India’s second-biggest MADELEINE SPEED resilient quarter for the brewer, which in line with expectations. The company
month pause following a report by New cement maker virtually overnight after reported that revenues climbed 7.2 per maintained its guidance for the year.
Gautam Adani has made his first major Anheuser-Busch InBev has reported a
York-based short seller Hindenburg the deal for Ambuja and its subsidiary cent to $15.1bn as it managed to pass on The company’s share price has fallen
acquisition since a short seller report steep drop in sales of its Bud Light
Research in January. It accused Adani of ACC. It lags behind UltraTech Cement, price increases to customers. more than 10 per cent since March.
rocked his infrastructure empire ear- brand after a collaboration with a
financial misconduct and knocked part of the Mumbai-based Aditya Birla AB InBev, which also makes Bud- “Given Bud Light’s travails, this is an
lier this year, buying cement company transgender TikTok personality spark-
some $150bn off the group’s total stock conglomerate, which has a manufactur- weiser, Stella Artois and Corona, said impressive demonstration of AB InBev’s
Sanghi Industries in a $600mn deal. ed a backlash in the US.
market value. ing capacity of 132.5mn tonnes of grey yesterday that earnings before interest, resilience and diversification . . . We
Adani’s Ambuja Cements, which his Adani strongly denies the claims and cement per year. The biggest brewer said yesterday that tax, depreciation and amortisation inc- believe that the share price has over-
group bought last year from Switzer- its shares have gradually recovered Adani said it aimed to increase US revenues had dropped 10.5 per cent reased 5 per cent in the second quarter reacted to the Bud Light situation,”
land-headquartered Holcim for much of their losses. Sanghi’s production to 15mn tonnes per in the second quarter. to $4.9bn, far ahead of analysts’ esti- wrote analysts at RBC Capital Markets.
$10.5bn, is acquiring 57 per cent of the “We are optimistic about the acquisi- year. Its current assets produce 67.5mn The weakness in the key market was mates of 0.4 per cent growth. The Belgium-based brewer insisted
shares in Gujarat-based Sanghi from its tion by Ambuja Cements, recognising it tonnes a year, with a target of 140mn “primarily due to the volume decline of Drinks volumes declined 1.4 per cent, yesterday that, despite the backlash, it
family owners, with the company val- as a mutually beneficial opportunity for tonnes by 2028. Bud Light”. had surveyed 170,000 consumers and
ued at Rs50bn ($600mn) after taking both of the shareholders,” said Ravi “With this acquisition, we are very Sales of Bud Light, which had long found that 80 per cent had a “favourable
into account debt and liquid assets. Sanghi, Sanghi Industries’ chair and confident that we will achieve this been the top-selling beer in the US, or neutral” view towards Bud Light.
An open offer is being launched for a managing director. ahead of time,” said Karan Adani, Gau- tumbled for several weeks after a mar- Rivals have capitalised on the boycott,
further 26 per cent stake at 114.22 Sanghi boasts India’s largest plant for tam Adani’s son and chief executive of keting collaboration in April with Dylan with Modelo Especial dethroning Bud
rupees per share, which represents a 14 cement and clinker and produces 6.1mn the logistics and transport business Mulvaney led to calls for a boycott and Light as the best-selling beer in the US
per cent premium to Sanghi’s closing tonnes of cement per year at the facility Adani Ports and Special Economic Zone. hit sales. in June.
price on Wednesday. in western India. Ambuja this week reported that its The controversy caused AB InBev to Molson Coors, AB InBev’s biggest
Adani said it was funding the deal The deal strengthens Adani in its bat- standalone quarterly profits fell 39 per end the partnership and place two exec- competitor in the US, soaked up some of
entirely through its own cash, signalling tle for share in India’s cement market, cent year on year to Rs6.4bn from utives on leave. North America makes Bud Light’s market share with its Coors
a break from its previously debt-fuelled which is expected to benefit from Rs10.5bn for the three months to June up about a sixth of the brewer’s volumes Light and Miller Lite brands, reporting
acquisition spree. Narendra Modi’s drive to improve infra- last year, as sales were up nearly a fifth sold in 2022. Sales took a tumble after the brand record quarterly sales and upgrading its
The move marks the conglomerate’s structure. but expenses such as finance costs rose. Its US struggles marred an otherwise collaborated with a trans personality full-year outlook earlier this week.
Friday 4 August 2023 ★ FINANCIAL TIMES 7
8 ★ FINANCIAL TIMES Friday 4 August 2023

COMPANIES & MARKETS

Goldman hit by exodus of top talent

Financials

Citi’s head of
investment
as lower pay and slowdown take toll bank Ybarra
to step down
Surge of high-profile exits has left insiders fearing loss of knowledge could take years to replace
STEPHEN GANDEL — NEW YORK
JOSHUA FRANKLIN, STEPHEN GANDEL
AND MADISON DARBYSHIRE — NEW YORK Paco Ybarra, Citigroup’s investment
banking head and leader of the bank’s
When a memo landed in Goldman Sachs
biggest business unit, is to leave the
inboxes earlier this year announcing
company in the most significant man-
that Mike Koester was leaving the firm,
agement departure since Jane Fraser
there were audible gasps at the bank’s
became chief executive more than two
headquarters in lower Manhattan.
years ago.
The departure of the 25-year Gold-
man veteran, co-president of the Ybarra, a 36-year veteran of Citi, joined
group’s alternative investments busi- the bank as a junior manager in Madrid
ness, stunned staff, with one employee before climbing the ladder to become
describing Koester as a “beloved” figure head of debt trading.
inside the bank. “If you don’t have aspi- In 2019, Citi’s then chief executive
rational mentors, it becomes difficult to Michael Corbat named him head of
stay,” the person added. Citi’s large institutional client group,
It is one of several recent high-profile which also includes the bank’s transac-
exits from Goldman, which have added tion services business.
to chief executive David Solomon’s Ybarra, 61, said the decision to leave
struggles in the past 12 months as he was his own and followed a period of dis-
pares back an expensive foray into con- cussion with Fraser. They had recently
sumer banking at a time when the firm’s come to the conclusion that it was the
financial performance is still lagging right time for him to move on.
behind that of rivals. “This is my retirement from Citi but I
Some current and former Goldman don’t plan to disappear,” Ybarra said. “I
employees say the turnover is in part don’t think I am just going to play golf,
due to lower pay at the bank in 2022, but I don’t know what is next.”
when it had to cover losses at its con- Insiders say Ybarra has played an out-
sumer lending business. Others blame a sized role at Citi as head of the invest-
reorganisation late last year, Solomon’s ment bank.
second such overhaul since he took The unit he oversees generated more
charge less than five years ago. And than half of Citi’s $40.9bn first-half reve-
many fear that 2023 will be another dis- nue in 2023, and includes the transac-
appointing year for pay given the slow- tion services business that is growing
down in Goldman’s core investment quickly and is one of the bank’s new
banking and trading businesses. focal points. Of Citi’s five main business
“Goldman people, senior people, are heads in the current structure, three
more receptive than ever to take a call reported up through Ybarra.
from me,” said one Wall Street head- For the past few years, Ybarra has also
hunter. been one of Citi’s top-paid employees.
Besides Koester, who left in April and Return on equity Stock He was awarded $22.6mn in cash and
plans to start his own venture in the pri- Per cent Price-to-book value stock grants last year, only $2mn shy of
vate markets, other notable departures Fraser’s $24.5mn package.
have included Julian Salisbury, chief JPMorgan Goldman Morgan Stanley BofA Citi This year, though, Citi said it would
1.8
investment officer for asset and wealth 20 Morgan Stanley withhold some of his 2022’s pay after
management, Dina Powell, head of 1.6 the bank, along with rivals, agreed to
Goldman’s business covering sovereign pay hundreds of millions of dollars to
wealth funds, and Joe Montesano, head 15 settle allegations employees were using
of equity trading for the Americas. 1.4 WhatsApp and other unauthorised
This week, three more partners con- 10 messaging services.
firmed they were leaving Goldman. On 1.2 Ybarra’s exit comes shortly after Citi
Monday, two of the bank’s senior law- announced a number of management
yers decamped for Citadel. David 5 1.0 changes, and as Fraser seeks to restruc-
Thomas is becoming head of legal for Goldman ture the bank to find a mix of businesses
global markets at Citadel’s hedge fund 0 0.8 that will produce consistent returns.
unit, while David Rusoff is joining Cita- Citi’s profits fell in the second quarter
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 2013 14 15 16 17 18 19 20 21 22 23
del’s market-making arm as chief legal and, with Goldman Sachs, it was one of
Sources: company statements; Bloomberg; Morningstar
officer. the few big US banks that reported a fall
Then, on Tuesday, Goldman told in year-on-year profits for the period.
employees that Lisa Opoku, a partner Trading places: matter who leaves, gaps are filled senior asset management executive ‘For years recent years — and in particular the Citi has not named a replacement for
since 2012, was heading for the exit. She the departures quickly and there are enough hungry, departs, and that the attrition rate quality of people leaving — are notable Ybarra, and has not said if it will. The
had been running the bank’s wealth have added to smart go-getters to ensure the bank among its investment professionals is people compared with the historical norm. move could allow Fraser to streamline
management business that caters to the struggles of does not miss a beat. the lowest it has been in years. weren’t One senior Goldman executive said upper management, something she has
current and retired partners. chief executive “The joke at Goldman is there’s no Part of Goldman’s success is often this week that the recent departures had signalled she would like to do, poten-
“It’s hard to watch, really,” said one David Solomon, place that can regenerate itself faster attributed to its large and influential ready to for the first time made them consider tially removing a layer between her and
former Goldman banker. “It used to be a below, as the than Goldman Sachs,” said one banker alumni network. Employees often leave. Now being more receptive to incoming calls a number of Citi’s key business units.
place that really specialised in training firm’s financial who left last year. become clients when they leave to run from prospective employers. Ybarra will stay with the bank to help
people, and training them to be leaders. performance is After consumer banking, Solomon is companies, work at hedge funds or join senior The early years of Solomon’s tenure with the transition and plans to leave at
It’s just not the same place any more.” still lagging doubling down on asset and wealth private equity firms. people take were also marked by several high-pro- some point in the first half of next year.
Goldman has pointed to longer tenure behind rivals management. The bank is hoping that One of Solomon’s priorities has been file departures, including co-head of “I think we have done a very good job
for current partners across the firm and Michael Nagle/Bloomberg;
Takaaki Iwabu/Bloomberg
growth in those businesses, which inves- to cultivate that network in a more co- our calls investment banking Gregg Lemkau, in executing on our strategy to simplify
argued that the bank has intermittently tors view as more stable, can comple- ordinated way, including offering and are who joined Michael Dell’s investment and focus the business on key areas,”
gone through periods of higher turnover ment its more volatile investment bank- former partners exclusive access to an firm, co-head of the securities division Ybarra said. “I am sticking around to be
before, including in 2011 following the ing and trading division. A similar strat- investment vehicle that will put money even Marty Chavez and chief financial officer part of those discussions about the
financial crisis and in 1998 when the egy has proved popular among investors into the firm’s private market funds. proactively Stephen Scherr, who later became chief future leadership of Citi’s institutional
firm delayed an initial public offering. in longtime rival Morgan Stanley. Goldman’s upper echelon of roughly executive of Hertz. business but I don’t know what the
“We have incredibly talented people Ahead of the announcement of Salis- 425 partners — historically one of the calling us’ Many departing employees are join- result of that will be.”
who are the best at what they do, and we bury’s departure, Goldman called inves- top titles on Wall Street — is selected ing the Goldman diaspora. Salisbury is Fraser announced the departure
are never surprised when, after 20 tors in its funds to play down the every two years and undergoes regular
Wall Street joining Chavez at Sixth Street, while internally yesterday in a memo to
headhunter
years, they go on to have big roles at impact for the asset management churn to make room for new talent. Powell will be working for Lemkau, employees, which was seen by the FT.
other companies,” said Goldman business, which has raised more than “We work to keep the partnership at whose venture has merged with BDT, a Fraser said in the memo that no decision
spokesman Tony Fratto. $200bn in gross third-party funds around the same size and so 80 partners merchant bank started by another had been made on what the new leader-
He added: “This is history repeating since 2020. leave about every two years,” Fratto Goldman alumnus, Byron Trott. Cita- ship of Citi’s large commercial client
itself, it’s a natural cycle — and it creates “They understand, but it’s not a good said. “Given the changes we have made del, whose co-chief investment officer business would be, or how it would be
a powerful ecosystem where former col- look for asset management,” to set the business up for long-term suc- Pablo Salame joined from Goldman, has structured. “I expect that we’ll complete
leagues become loyal clients.” said one person familiar cess, some turnover is expected but not also recruited heavily from the bank. our assessment and be in a position to
But others at Goldman fear the with the discussions. anything that hasn’t occurred in prior “For years people weren’t ready to share decisions with you in the coming
loss of knowledge could take years Goldman said such cycles.” leave,” said the Wall Street headhunter. months,” Fraser wrote.
to replace. It is putting to the test calls are standard Still, some current and former Gold- “Now senior people take our calls and Additional reporting by Joshua Franklin
a refrain inside the firm that no practice whenever a man employees think the departures in are even proactively calling us.” and Arash Massoudi.

Pharmaceuticals Sport

Novo and Lilly face weight-loss drug claims NFL star Brady buys Birmingham City stake
JAMIE SMYTH — BELFAST drugs have proved popular in the US, Novo said GLP-1 drugs had been on JOSH NOBLE AND OLIVER RALPH “Birmingham City is an iconic club new financial services firm, Consello, as
with analysts estimating they could gen- the market for years to treat diabetes, with so much history and passion and to a partner and was one of several famous
Novo Nordisk and Eli Lilly are facing Tom Brady has joined the growing
erate a $50bn market by 2030. and symptoms of delayed gastric emp- be part of the Blues is a real honour for faces who promoted the now-collapsed
the risk of a wave of personal injury ranks of US sports stars and celebrities
Paul Pennock, a lawyer at Morgan, tying, nausea and vomiting were listed me,” Brady said. “I’ve been part of some cryptocurrency exchange FTX.
lawsuits over claims they failed to warn investing in English football after tak-
said the drugs had caused debilitating as possible side-effects. “Patient safety amazing teams in my day, and I’m look- Birmingham City’s new club chair
patients that their blockbuster diabe- ing a minority stake in second-tier side
and disabling injuries to clients, who is of utmost importance to Novo Nord- ing forward to applying my perspective Tom Wagner called Brady’s investment
tes and weight-loss drugs can cause Birmingham City.
had not been adequately warned by isk. We recommend patients take these to create that same success here.” “a statement of intent”, with the star
stomach paralysis and vomiting.
Lilly and Novo about the dangers of gas- medications for their approved indica- Brady, who retired from playing this Birmingham City did not disclose the “both investing and committing his
Morgan & Morgan, a personal injury law troparesis. “Many people are experienc- tions and under the supervision of a year, is the most successful quarterback size of his stake or the amount he time and extensive expertise”.
firm, said it had filed a case on behalf of ing constant vomiting. I don’t mean healthcare professional.” in NFL history, having won the Super invested, but said Brady would chair a Shortly after the takeover, Wagner
a 44-year-old woman from Louisiana Lilly said: “Patient safety is Lilly’s top Bowl seven times with the New England new advisory board working with the hired sports industry veteran Garry
who suffered such severe vomiting after priority, and we actively engage in mon- Patriots and the Tampa Bay Buccaneers. club on health, nutrition, marketing Cook as Birmingham City’s new chief
taking Ozempic and Mounjaro that she
A law firm has signed up itoring and reporting safety information His involvement at Birmingham City and commercial opportunities. executive. Cook was previously chief
was hospitalised and lost teeth. 400 clients who say they for all our medicines.” comes three weeks after US hedge fund Lower-league UK football clubs have executive of Manchester City and held
The firm said it had signed up 400 cli- Court documents showed that the Knighthead Capital Management took attracted attention from US celebrities senior roles at Nike and Ultimate Fight-
ents who claim that after taking the
contracted gastroparesis claim had been filed by Morgan on day-to-day control, having bought a 46 and sports stars in recent years. Holly- ing Championship.
drugs they contracted gastroparesis, a after taking the medicines behalf of Jaclyn Bjorklund in a federal per cent share of the club and purchased wood actors Ryan Reynolds and Rob New York-based Knighthead Capital
disorder that slows or stops movements court in Louisiana. its 29,000-seater stadium. McElhenney bought Wrexham in 2021, is an investment firm that describes
of food from the stomach to the small once a week, I mean every day, all the Personal injury lawsuits are common Knighthead’s investment followed a NFL star JJ Watt bought a stake in itself as a specialist in “event driven, dis-
intestine and causes nausea, vomiting time. I mean, so bad that these people in the US. Some can turn into mass torts, prolonged period of upheaval during Burnley this year, while basketball tressed credit and special situation
and abdominal pain. are going to the emergency room for where many plaintiffs seek compensa- which the club was controlled by a player LeBron James is a minority inves- opportunities”.
Novo’s Ozempic and Lilly’s Mounjaro their vomiting.” tion for harms caused by third parties. changing roster of Hong Kong and Chi- tor in Liverpool. Knighthead is part of a wave of US
are prescribed for diabetes. They are Morgan said it had signed up clients Johnson & Johnson is fighting a battle nese businessmen, one of whom went to Like James and tennis star Serena investment into lower-league football.
part of a class of drugs called glucagon- from 45 US states and expected that the over tens of thousands of claims that its jail for money laundering, while its par- Williams, Brady is part of a generation Former Disney chief executive Michael
like peptide 1 (GLP-1) agonists, which litigation would eventually involve talcum powder caused cancer. ent company was listed on the Hong of top athletes looking to build their own Eisner owns third-tier team Port-
are also used to treat weight loss. The thousands of cases nationwide. See Lex Kong stock exchange. business empires. Last year he joined a smouth.
Friday 4 August 2023 ★ FINANCIAL TIMES 9

COMPANIES & MARKETS

Trading sentiment. Recession fears Banks

Investors turn gloomy over

SocGen beats
forecasts
Europe’s economic outlook despite state
rate rise cap
SARAH WHITE — LONDON

France’s Société Générale beat profit

expectations in the second quarter,
helped by falling charges on bad loans
and cost-cutting measures, even as
revenue slowed in the lender’s home
market.
SocGen yesterday reported net
income of €900mn, exceeding the
€732mn forecast by analysts in a Refini-
tiv poll. It had posted steep losses in the
same period a year ago owing to its Rus-
sia exit.
Group revenues fell 8.9 per cent to
€6.3bn, worse than expected in the poll,
but costs rose at a slow pace and loan-
loss charges of €166mn were far lower
than the €424mn expected in consen-
sus estimates cited by RBC Capital Mar-
kets analyst Anke Reingen.
“Cost control in the second quarter
was encouraging but is also a reflection
of weaker revenues,” Reingen said in a
note.
“Revenues contracted due to the
decline in the net interest margin in
France and in market activities’ reve-
nues against a backdrop of gradual nor-
malisation after some particularly
favourable years,” said chief executive
Slawomir Krupa, who took over the role
in May.
Krupa, a SocGen veteran and former
head of the investment bank, has faced a

Bitter harvest: since 2014 in April but has expanded as

While the US looks headed for US stocks power ahead Gap between US and European
a larger US economic data improved relative to
SocGen has been held
of Europe borrowing costs hits widest
a ‘soft landing’, the continent’s Rebased (%) level this year proportion of the eurozone, hitting 1.6 percentage back by a rule that caps
inflation in points on Wednesday.
prospects are less sanguine 20 Yield spread between 10-year US Europe is down Kevin Thozet, a member of the invest-
the pace at which banks
S&P 500 Treasuries and German Bunds (%)
to food and ment committee at Carmignac, said that can pass on rate rises
MARY MCDOUGALL — LONDON 15 1.6 energy prices dynamic had pushed him to offload
HARRIET CLARFELT AND KATE DUGUID Attila Kisbenedek/AFP via
some US Treasuries in favour of German constrained French market, as well as
NEW YORK Getty Images
10 1.4 government bonds, which would rally in falling earnings from trading bonds and
Investors are increasing bets that a full European recession. “When we equities.
Europe will sink into a painful economic 5 1.2 consider the two economic blocs, Ger- SocGen also said it had reached a set-
downturn in a growing contrast to the Europe Stoxx 600 many is the region where we see the tlement with US regulators over the way
conviction in financial markets that the 0 1.0
most economic weakening,” he said. it kept records on unauthorised elec-
US is headed for a “soft landing”. Figures from BNY Mellon show tronic messages. It did not give an
Jan 2023 Aug Jan 2023 Aug
The euro has fallen against the dollar non-US investors have made net sales of amount, but guided yesterday that any
in the past two weeks, while the surprise Source: Refinitiv about $50bn of US Treasuries since the fine was lower than a €95mn charge it
ascent of European shares this year has start of the year, while Bunds attracted had already recorded. Paris-based BNP
stalled and German government bonds tations it can soon call time on its rate- year drop in earnings per share in the close to $4bn of net inflows from non- Paribas last week reported a fine for the
— investors’ preferred retreat in times of raising cycle. Meanwhile, Europe has second quarter, more than double the eurozone investors in the same period. same issue.
stress — are gaining in price. been teetering on the brink of recession, fall of US rivals in its S&P 500. Investors have also been buying UK SocGen has been held back this year
The shifts show growing confidence while services inflation in the eurozone Accordingly, the share price gap with government bonds in recent weeks, by a local consumer protection rule that
among fund managers that economic hit a record of 5.6 per cent in July. Wall Street has widened. The S&P 500 is with 10-year gilt yields falling 0.25 per- caps the pace at which banks can pass on
indicators in the eurozone are weaken- Analysts said interest rate rises had up almost 20 per cent this year, helped centage points from a peak in early July, interest rate rises to households. French
ing in the face of higher borrowing costs, been less successful at bringing down by enthusiasm over artificial intelli- as investors bet aggressive Bank of Eng- lenders have lagged behind regional
while the US has demonstrated resil- inflation in Europe than in the US gence — dominated by US companies. land rate rises to deal with the UK’s out- rivals in reaping the benefits of a rapid
ience despite the most restrictive inter- because a larger proportion of inflation “If you look at the equity valuations, sized inflation problem would result in rise in rates in the eurozone.
est rate environment in 22 years. had been down to the damage inflicted they’ve been much higher in the US economic pain. “We are more positive In France, SocGen’s retail banking
“We’ve seen a lot of interest rate hikes in food and energy supplies by Russia’s than in Europe and the rest of the world on gilts than we have ever been,” said revenues were down 13.6 per cent to
in the US but demand and growth are invasion of Ukraine. for quite some time,” said Tim Murray, a Eren Osman, managing director at pri- €1.9bn. The bank and other French
strong,” said Ario Emami Nejad, portfo- In the first half of this year, European multi-asset capital markets strategist at vate bank Arbuthnot Latham. lenders, such as Crédit Agricole, have
lio manager at Fidelity International. equity markets were a surprise hit, con- T Rowe Price. “There was a little bit of The price of bonds issued by compa- warned they were not likely to catch up
“The European growth dynamic is founding analysts’ almost universal narrowing and now that’s widened back nies also show expectations of a rosier with European peers posting higher
weak; we think the [European Central expectation of declines. Instead, a mild out. In the US, the narrative is we’re outlook for the US over Europe. The retail bank sales until 2024. At BNP,
Bank] has made a policy mistake and winter and easing of the region’s energy going to get the soft landing and avoid ‘If you look premium paid by lowly rated US compa- which is more exposed to business lend-
they will recognise this late,” he added, crisis helped the continent avoid a deep recession, whereas I think in Europe, nies to issue bonds is at about its lowest ing than mortgages, the impact has been
referring to the idea that the ECB has shock and propel the Stoxx Europe 600 there’s still a lot of doubt about that.” at equity in 16 months, with the “spread” over less pronounced.
hoisted borrowing costs too high and index 8.5 per cent per cent higher in the The picture is similar in other parts of valuations, government debt standing at 3.82 per- French banks are also having to pay
will be forced to cut them. first six months of the year. the financial markets. The euro has centage points — down from 4.81 per- out a higher rate on a popular savings
Official figures last week showed the Those gains have gone into reverse fallen 2.6 per cent against the dollar they’ve centage points at the end of 2022. Our global bank account called the Livret A than in
US economy grew at an annualised rate midway through a disappointing sec- since mid-July and, in government been much Eurozone junk bond spreads remain team gives you recent years.
of 2.4 per cent in the second quarter, ond-quarter earnings season. Compa- bonds, the gap between US 10-year bor- much wider, having shrunk by a more market-moving SocGen’s earnings from trading bonds
well above what economists had fore- nies on the Stoxx 600 are on track to rowing costs and those of Germany — higher in modest 0.7 percentage points to 4.32 news and views, and equities also fell year on year, mir-
cast, while the US Federal Reserve’s pre- deliver their biggest decline in quarterly Europe’s biggest economy — has wid- the US than percentage points this year, according to 24 hours a day roring a trend at Wall Street rivals and
ferred gauge of inflation cooled more profits since the early stages of the pan- ened to its highest level this year. That the ICE BofA Euro high-yield index. ft.com/markets BNP Paribas. SocGen shares were up
than expected in June, bolstering expec- demic, reporting a 17 per cent year-on- so-called spread hit its narrowest point in Europe’ Additional reporting by George Steer nearly 3.5 per cent yesterday.

Asset management Commodities

Brookfield and Sequoia Heritage hunt Saudi Arabia warns of deeper cuts to oil
for value at venture-backed businesses production, risking Washington’s anger
ANTOINE GARA — NEW YORK funding crunch for start-ups and their Start-ups in hard-hit sectors such as TOM WILSON AND DAVID SHEPPARD “The market thinks that current The Opec+ cuts have raised tensions
GEORGE HAMMOND — SAN FRANCISCO LONDON
venture capital owners, which have cryptocurrencies and fintech are trad- Saudi production levels were a hard in the past between Saudi Arabia and
Brookfield Asset Management and struggled to exit their investments amid ing at discounts of as much as 80 per Saudi Arabia warned it could deepen floor, but they’re indicating output the White House.
Sequoia Heritage, a $16bn fund that a dramatic slowdown in initial public cent, according to participants in the cuts to oil production as it extended its could go lower at least until inventories Advisers to Joe Biden have travelled to
manages the wealth of Silicon Valley, offerings. Investors in venture capital secondary market. voluntary supply curbs with Russia for come down and the market stabilises,” Riyadh to try to broker a formal rela-
are creating a vehicle to capitalise on funds have, meanwhile, found it harder Sequoia Heritage was founded in another month, despite a rally in crude said Christyan Malek, global head of tionship between Riyadh and Israel,
plunging valuations of venture capital- to redeem their money. 2010 with money from partners at threatening to revive tensions between energy strategy at JPMorgan. including Amos Hochstein, who also
backed companies. Pinegrove will buy up stakes in start- Sequoia Capital, including $150mn each Riyadh and Washington. Russia, which has agreed to cut supply advises the White House on energy.
ups from venture backers under pres- from Doug Leone and Michael Moritz. by 500,000 b/d in August, said it would Prince Abdulaziz has been at the fore-
The firms are investing $250mn each to sure to deliver returns to their own The firm has grown fast, and secured The Opec+ leaders have sought to prop make a slightly smaller cut next month. front of efforts by Opec+ members to
found a company called Pinegrove Capi- investors, as well as shares in venture investments from Stripe co-founder up oil prices with a series of production raise the oil price as the country
tal Partners led by Brian Laibow, funds from people looking to cash out. It John Collison and former Google boss cuts over the past year, frequently plac- attempts to transform its economy
according to two sources familiar with will also offer some types of lending. Eric Schmidt’s family foundation. ing Riyadh at odds with the White
‘They’re indicating output through an investment programme that
the matter. Sequoia Heritage invests separately House, which wants lower prices to sup- could go lower at least until requires high crude revenues to fund it.
Until recently, Laibow was co-head of from Sequoia Capital. Last month, port the economy ahead of next year’s Russia wants a higher price to fund its
the North American operations of Oak- Moritz stepped down from his role at election, while limiting revenues flow-
inventories come down war, having lost a large part of its gas
tree Capital Management’s flagship Sequoia Capital to focus on his Heritage ing to the Kremlin. and the market stabilises’ export revenues.
credit fund. investments full time. Saudi Arabia will prolong its 1mn- “Opec+ clearly wants higher prices.
Brookfield and Sequoia Heritage will In January 2022, Brookfield entered a barrels-a-day production cut — first The move by the Opec+ leaders, made Higher interest rates are going to
each own a 50 per cent stake in the com- “strategic partnership” to build logistics implemented in July and dubbed the outside a formal meeting of the group, increase the cost of borrowing for the
pany, which is also trying to attract out- support for Sequoia China’s invest- “Saudi lollipop” or sweetener for the oil comes despite oil prices rallying 14 per grand projects Saudi Arabia wants to
side capital from institutional investors. ments in ecommerce start-ups. Brook- market by energy minister Prince cent in July to nearly $85 a barrel. Brent develop,” said Keshav Lohiya, founder
The firm hopes to raise more than field also invested in Sequoia China, Abdulaziz bin Salman — until the end of crude rose almost 2 per cent after the of Oilytics.
$2bn for its first fund, which will invest which is in the process of being spun off September, while Russia will cut oil announcements to $84.75 per barrel The cut in Saudi output is in addition
in privately held companies that have from the US firm. exports next month by 300,000 b/d. yesterday afternoon. to a voluntary 500,000 b/d cut
seen their valuations tumble amid a Bruce Flatt, chief executive of Brook- The Saudi cut could also be extended When Riyadh announced its 1mn b/d announced in April, when its output was
repricing of venture-backed groups. field, and executives at Sequoia were or “deepened”, the state news agency cut for July, crude had fallen from highs about 10.5mn b/d. It means Saudi oil
Brookfield and Sequoia Heritage introduced by Bruce Karsh, co-founder said yesterday, citing the country’s of $130 per barrel in March 2022 to output will remain at 9mn b/d until at
declined to comment. Brookfield, led by Bruce Flatt, wants of Oaktree after Brookfield acquired a energy ministry, indicating that it could about $75 per barrel. At the start of July, least the end of September, 25 per cent
The vehicle will take advantage of a to capitalise on plunging valuations controlling interest in Oaktree in 2019. tighten supply even further. the Saudis extended the cut for August. lower than its maximum capacity.
10 ★ FINANCIAL TIMES Friday 4 August 2023

COMPANIES & MARKETS

The case for The day in the markets

more US equity What you need to know
exceptionalism 3 US Treasury yields hit nine-year high Ten-year Treasury yield climbs to nine-month high
after borrowing pledge
3 Stoxx Europe 600 index suffers its Per cent

Rebecca Patterson third successive session of losses

3 Sterling falls to its weakest level
against the dollar since late June
4.5

Markets Insight US Treasury yields climbed to a nine-

month high yesterday in the wake of a
4.0

A
government announcement that it would
increase its borrowing in coming months.
fter outperforming peers other markets, just as it did at the turn of in another way: the weight of technol- The 10-year Treasury yield climbed 0.11
for 12 out of the past 13 cal- this year as China reopened and Europe ogy in US equity benchmarks. Thanks percentage points to 4.19 per cent, 3.5
endar years, could US equi- was less damaged than expected. But, partly to large overhangs of government extending a rise that began on
ties dominate for another over the next decade, there is good rea- debt, deteriorating demographic back- Wednesday after the US government
decade? son why Markowitz’s principle may at drops (more retirees and fewer work- lifted its issuance target for the coming
At first glance, another 10 years with least be geographically challenged. ers) and more fragmented economies, quarter in the wake of Fitch's unexpected 3.0
the US on top seem unlikely. History First, over multiyear periods, domes- we may well see a trend of moderating downgrade of Washington's credit rating.
shows relative equity performance tic growth has been found to dominate global economic growth. The IMF, in its Piling further pressure on Treasuries,
alternating between US and non-US local equity returns. A 2011 study by April World Economic Outlook, noted hedge fund manager Bill Ackman said he
equities. High valuations, margins and Clifford Asness, Roni Israelov and John that its five-year-ahead global GDP was shorting US 30-year debt, citing
ownership eventually all sow the seeds Liew suggests that 39 per cent of 15-year growth forecast had fallen from 4.6 per “large deficits as far as the eye can see”. 2.5
of a handoff, especially when there is a returns could be explained by domestic cent in 2011 to only 3 per cent. The US Treasury announced on Aug 2022 2023 Aug
new growth catalyst. The popping of the economic performance. Growth is fun- Without significant cyclical momen- Wednesday that it would boost its
Source: Refinitiv
US technology bubble in the early 2000s damentally a function of labour and tum, companies with more structural, issuance of new long-term debt this
coupled with the growth emerging from productivity. Given that most of the organic sources of growth are likely to quarter, in order to fill the growing gap
China joining the World Trade Organi- developed world (and China) faces at capture an investor premium. US equity between tax revenue and government Germany's Dax gave up 0.8 per cent and meeting in September, as prices in the UK
zation illustrates the dynamic: after index benchmarks have notably smaller spending. Yields on 10 and 30-year London's FTSE 100 fell 0.4 per cent. continue to grow at a faster pace than in
years of US equity leadership in the weightings of companies that depend on Treasury bonds have jumped since then. In currency markets, sterling fell to other large economies.
1990s, the baton was passed in the The US is set to capture cyclical growth than peers. Data from After weakness in early trading, US $1.2623, its weakest level against the Earlier in Asia, Hong Kong's Hang Seng
2000s to more China-centric markets. a sizeable share of Morningstar Direct, for instance, shows stocks were virtually flat at midday. The dollar since late June, after the Bank of index fell 0.5 per cent, while South Korea's
But a second look suggests more non-US equity benchmarks have more S&P 500 yesterday recorded its biggest England raised its benchmark rate to Kospi lost 0.4 per cent and Japan's Topix
American equity exceptionalism is pos- productivity benefits from exposure to industrials and basic mate- one-day drop since April. Apple and 5.25 per cent, as was expected by the dropped 1.5 per cent.
sible, for at least two reasons. First, the technology such as AI rials, while the US has more than double Amazon are due to report second-quarter majority of investors. China's benchmark CSI 300 was the
US is set to capture a sizeable share of the weight on technology. earnings after the closing bell. Falling inflation in the UK allowed the only outlier in the region, adding 0.9 per
productivity benefits from technology This doesn’t rule out a near-term pull- Europe's region-wide Stoxx Europe central bank to slow the pace of its cent after fresh data showed that the
such as artificial intelligence. Second, a least directionally similar labour con- back by big US tech stocks, or relatively 600 index ended the day down 0.7 per tightening campaign after it surprised country's services activity expanded
moderating global economy could work straints, the US seems likely to be a rela- stronger near-term equity performance cent, its third successive session of losses. markets with a larger half-point increase faster than expected in July. The Caixin
against more cyclically biased equity tive growth winner thanks to prospects in another region. But in thinking about The index has declined almost 3 per cent at the previous policy meeting in June. services purchasing managers' index rose
markets overseas, favouring those for greater productivity gains. longer-term portfolios and why equity since the start of the month. Yet the BoE policymakers left the door to 54.1, well above the 52.4 forecast.
geared towards organic growth drivers. Specifically, the gradual diffusion of leadership has shifted over several dec- France's Cac 40 lost 0.7 per cent, open for further tightening at their next Kate Duguid and Daria Mosolova
Diversification remains, as Nobel technological advances through the ades, it comes back to growth and what’s
Prize winner Harry Markowitz said, economy, led by AI, could give a produc- driving it. For now, it is difficult to see
“the only free lunch in finance”. But for tivity boost to US growth. A recent what could lead to a macro environment Markets update
global investors, economic prospects report by Goldman Sachs estimated that reminiscent of 1980s Japan or 2000s
over the coming years suggest that meal widespread adoption of generative AI China and emerging markets.
might taste better with an abundant could raise overall US labour productiv- A US economy that is relatively
helping of US stocks. ity growth by 1.5 percentage points a stronger than its peers, thanks in large US Eurozone Japan UK China Brazil
This is not to write off diversification year, roughly doubling the recent pace part to an advantage in key technologies Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
across asset classes and geography. Any — that’s in line with the effect of the per- and growth driven less by cyclical forces Level 4505.08 1810.91 32159.28 7529.16 3280.46 121096.11
investor hoping to increase long-term sonal computer. The report estimates than structural ones, suggests US equi- % change on day -0.18 -0.63 -1.68 -0.43 0.58 0.20
wealth through compounding returns that this force, all else being equal, could ties are more likely to remain in the win- Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
will want to manage risk from idiosyn- lift US gross domestic product growth ner’s circle in the coming decade. Level 102.707 1.093 142.315 1.270 7.190 4.884
cratic events. It also is not to suggest that 1.1 percentage points for 10 years. % change on day 0.114 0.000 -0.743 0.079 0.125 1.408
over a shorter period — months or quar- US tech dominance could benefit Rebecca Patterson is a former chief invest- Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
ters — the US won’t at times lag behind respective equities over the next decade ment officer at Bridgewater Associates Yield 4.190 2.599 0.649 4.571 2.682 10.441
Basis point change on day 8.960 6.900 2.570 8.700 -1.300 -0.900
World index, Commods FTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 454.79 84.82 81.26 1944.20 24.41 3775.00
% change on day -0.29 1.95 2.23 -0.15 -0.43 -1.86
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.

Main equity markets

S&P 500 index Eurofirst 300 index FTSE 100 index
4640 1880 7840

7680
4480 1840
7520
4320 1800 7360

| | | | | | | | |
4160 | | | | | | | | | | | | | | | | | | | |
1760 | | | | | | | | | | | | | | | | | | | | 7200 | | | | | | | | | | |

Jun 2023 Aug Jun 2023 Aug Jun 2023 Aug

Biggest movers
% US Eurozone UK
Clorox 9.74 Ses 14.81 Rolls-royce Holdings 4.51
Westrock 8.01 Casino Guichard 3.96 Admiral 3.69
Ups

Apa 7.36 Societe Generale 3.85 Entain 2.30

Regeneron Pharmaceuticals 7.09 Merck 3.74 Barclays 1.84
Constellation Energy 6.76 Caixabank 3.35 Natwest 1.59
%
Dxc Technology -29.46 Infineon Tech -10.33 Mondi -6.74
Expedia -16.49 Solvay -5.29 Bt -4.20
Downs

Etsy -12.13 Lufthansa -5.20 Fresnillo -4.09

Paypal Holdings -11.48 Telecom Italia -3.92 St. James's Place -3.38
Qualcomm -9.93 Sanofi -3.25 Ocado -2.62
Prices taken at 17:00 GMT Based on the constituents of the FTSE Eurofirst 300 Eurozone
All data provided by Morningstar unless otherwise noted.

Wall Street Europe London

A chunky profit beat sent Clorox to the Luxembourg-based SES surged on the Heading the FTSE 100 index was Rolls-
top of the S&P 500 index, with the back of better than expected results, Royce, which posted a fivefold increase in
cleaning products maker reporting posting second-quarter revenue of underlying operating profit to £673mn for
quarterly earnings of $1.67 per share — €497mn — more than 3 per cent ahead of the half year.
more than 40 per cent above Wall Street analyst estimates. The standout division was civil
estimates. The satellite operator also launched a aerospace, which achieved an
Clorox issued guidance for its fiscal share buyback of up to €150mn after a operating margin of 12.4 per cent, up
2024 year that was “better than feared”, “strong performance” from its mobility, from 3.4 per cent a year earlier,
said UBS, “and will likely be viewed as government and fixed data sectors. reflecting “higher after-market
conservative in light of the company's A weak forecast weighed on Germany's profitability and increased large spare
recent track record of overdelivering”. Infineon, with the chipmaker forecasting engine sales”, it said.
At the bottom of the blue-chip revenue of €4bn for the current quarter, The engine maker's shares have risen
benchmark was DXC Technology, which 2 per cent below market estimates, noted more than 90 per cent so far in 2023 as it
posted revenue and margins that “fell Citi. Jochen Hanebeck, chief executive, undergoes a turnaround plan that “may
short of our expectations”, admitted chair said semiconductor trends presented a be happening at a faster rate than
Mike Salvino. “mixed picture with both light and shade”, previously expected”, said Shore Capital.
The IT services group said it had been adding that “demand for consumer At the tail-end of the blue-chip
“impacted by lower than anticipated applications, such as PCs and benchmark was packaging and paper
resale and project revenues”, leading it to smartphones”, remained low. group Mondi, which reported a 28 per
cut its full-year outlook. Digital music distributor Believe fell cent year-on-year drop in core profits for
Trading app Robinhood Markets fell after cutting its full-year guidance, the half year.
sharply despite posting net income of forecasting organic growth of about 14 This was the result of “softer demand,
$25mn in the second quarter against a per cent, down from an 18 per cent target. customer destocking and higher input
loss of $511mn three months earlier. A “less favourable currency environment” costs”, it said.
What spooked investors was a decline and a lack of recovery in ad-funded Leading the FTSE 250 mid-cap index
in monthly active users to 10.8mn — streaming were to blame, it said. was Helios Towers, which reported a
down by 1mn during the period — which New business buoyed Bavarian Nordic, 28 per cent year-on-year jump in core
contributed to a 7 per cent fall in which announced an order for smallpox profit to $173.8mn for the first six months
transaction-based revenue to $193mn. (and mpox) vaccines worth $120mn from of 2023.
An unexpected profit sent Wayfair the US Biomedical Advanced Research The telecoms infrastructure group,
soaring, with the online furniture store and Development Authority. which operates in Africa, flagged an 18
reporting quarterly earnings of 21 cents The biotech group raised its per cent increase in organic revenue due
per share — way better than the 74 cents 2023 revenue forecast by 15 per cent to to tenancy growth and inflation-linked
loss analysts had expected. Ray Douglas DKr6.9bn ($1.01bn). Ray Douglas contracts. Ray Douglas
Friday 4 August 2023 ★ FINANCIAL TIMES 11

MARKET DATA

WORLD MARKETS AT A GLANCE FT.COM/MARKETSDATA

Change during previous day’s trading (%)
S&P 500 Nasdaq Composite Dow Jones Ind FTSE 100 FTSE Eurofirst 300 Nikkei Hang Seng FTSE All World $ $ per € $ per £ ¥ per $ £ per € Oil Brent $ Sep Gold $

-0.18% -0.08% -0.43% -0.63% -1.68% -0.49% -0.29% -0.743% -0.15%

No change No change No change
0.079% 0.18%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Jul 04 - - Index All World Jul 04 - Aug 03 Index All World Jul 04 - Aug 03 Index All World Jul 04 - Aug 03 Index All World Jul 04 - Aug 03 Index All World Jul 04 - Aug 03 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul

4,505.08 7,529.16 33,422.52 2,605.39

4,446.82 20,103.89 20,124.81 7,442.10 15,937.58 15,851.44 2,579.00
32,159.28
Day -0.18% Month 1.11% Year 8.42% Day -0.49% Month -0.18% Year 2.93% Day -0.43% Month -0.10% Year 0.99% Day -0.79% Month -1.48% Year NaN% Day -1.68% Month -3.00% Year 16.66% Day -0.42% Month 1.60% Year 6.79%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore

13,973.27 19,420.87 3,304.06

13,791.65 1,816.09 1,810.91 9,486.30 19,110.38
54,039.66 9,307.10 3,185.38
53,203.80
Day 0.00% Month 1.14% Year 10.31% Day -0.06% Month -2.17% Year 13.25% Day -0.63% Month -1.01% Year 5.06% Day -0.23% Month -2.98% Year 14.95% Day -0.49% Month 2.66% Year -1.37% Day -0.63% Month 2.98% Year 1.93%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
35,253.93 122,350.39 28,702.74 3,280.46
34,288.64 119,549.21 7,310.81 7,260.53 28,220.18 3,222.95 65,446.04 65,240.68

Day -0.08% Month 2.43% Year 7.44% Day 0.20% Month 1.18% Year 16.68% Day -0.72% Month -1.89% Year 13.27% Day -0.94% Month 1.67% Year 28.42% Day 0.58% Month 2.45% Year 2.96% Day -0.82% Month 0.86% Year 12.28%

R WU H DWH W 3UHYLR R WU H DWH W 3UHYLR R WU H DWH W 3UHYLR R WU H DWH W 3UHYLR R WU H DWH W 3UHYLR R WU H DWH W 3UHYLR
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14 ★ FINANCIAL TIMES Friday 4 August 2023

ARTS

Straight-talking trans sex-workers tell all

This week’s new film
releases reviewed by
Jonathan Romney

K
okomo City isn’t a place so
much as a state of mind — and
a state of body. In this
documentary about four
black trans sex-workers, the
reference is to a 1930s number by
Kokomo Arnold, “Sissy Man Blues”,
containing the line “Lord, if you can’t
send me no woman, please send me
some sissy man.”
As playful as it is incisive, Kokomo City
is full of such provocations, including
stylistic ones. At the start, Liyah Mitch-
ell from Georgia recalls tangling with an
armed client. Director D Smith cuts in
dramatised moments from the encoun-
ter, and a gun swivelling in mid-air, to a Beth’s mother. As an urbane, angst-
soundtrack of ’70s cop-movie funk. Just fuelled New York comedy, it undoubt-
as its subjects flout social and gender edly occupies familiar territory; it’s
protocol, Kokomo City breaks with the edited by Woody Allen’s long-term col-
proprieties of documentary style. laborator Alisa Lepselter. But
The film mixes dispassionate obser- Holofcener’s film is sharper than any-
vation with something of an insider per- thing Allen has done for decades, and
spective: D Smith was a successful with a wry voice that’s purely her own.
music producer, then transitioned and On Amazon Prime Video now
found herself marginalised within the
recording industry. The stories here Joy Ride is a boisterously goofy female
similarly involve struggles of exclusion, comedy from first-time director Adele
but countering this is a focus on self- Lim, the Malaysian co-writer of the
invention and hard-earned humour. 2018 hit Crazy Rich Asians. It’s a trave-
Kokomo City could be accused of glamor- Above: Daniella Carter in the documentary ‘Kokomo City’. Above right: Virginie Efira in ‘Paris Memories’ — D Smith logue farce about an Asian-American
ising its topic, except that here self- woman in search of her personal history
glamorising is presented as an essential Kokomo City tell their “how we met” story on the sofa. time director Smith also edited the film, The star is Julia Louis-Dreyfus, from and cultural identity — but also up for
survival tactic. D Smith The most magnetic of the four main very jazzily, and shot it in black and Seinfeld, Veep and Holofcener’s 2013 film raunchy adventures and “I-love-you-
A theme running throughout is the AAAAE subjects is Daniella Carter, who is speed- white, with just an impressionistic Enough Said, a romcom that cast her guys” bonding en route.
subjects’ relationships with men who ily articulate and has zero interest in splash of colour in one sequence. The counter-intuitively but brilliantly Ashley Park plays Audrey, who was
consider themselves straight, but sleep Paris Memories self-censorship. She has the most photography is dazzling, whether cap- against the late James Gandolfini. Here adopted as a child by a white American
with trans women and want to keep it Alice Winocour trenchant things to say about sex work turing the subjects with their defences she plays Beth, a writer struggling with couple; she grows up strait-laced, work-
secret (male genitals may be considered AAAEE — a girl may have to “tickle a prostate to down, or giving them a supermodel her novel, following an only vaguely focused and out of touch with her ori-
a bonus by some clients, as Koko Da Doll get her [electricity] bill paid” — and also sheen; it also exults in jokey in-your- successful memoir that none of her gins. Fortunately she has life-long friend
from Atlanta says). You Hurt My Feelings about trans identity and black culture. face sexuality (it’s big on up-close back- writing students have read. Her hus- Lolo (Sherry Cola), an irrepressibly sex-
These liaisons can be risky, often Nicole Holofcener When she tells her own story, it’s not just sides). As for realist atmospherics — band Don (Tobias Menzies) is a psycho- positive artist, to remind her how Asian
resulting in violence when men feel AAAAE poignant but underwritten by social daytime street life, night-time neon — therapist, going through a period of she still is, and to encourage her to let
their masculinity threatened. But other awareness: she lost her family, she says, there’s barely a shot that wouldn’t look weary self-doubt and contending with her hair down.
possibilities are shown by Miami couple Joy Ride because her mother saw her transition- magnificent in a photo exhibition. patients who include an obstreperous When Audrey takes a business trip to
Xotommy and Rich-Paris — male and Adele Lim ing as “losing another black man”. The end brings a bitter sting: the film couple (David Cross and Amber Tam- Beijing, Lolo comes along, together with
trans woman respectively — who sweet- AAAEE What could have been a sombre study is dedicated to Koko Da Doll, who was blyn, priceless together) addicted to unpredictable non-binary cousin Dead-
naturedly canoodle for the camera and is offset by sparkling execution. First- shot dead earlier this year. It adds a attritional carping. eye (Sabina Wu, doing their own riff on
bleak note to a film that is empathetic the studied weirdness that made a star
and revealing, caustically realist but — of Aubrey Plaza). Once there, they meet
against all odds — exuberant too.
There’s barely a shot in up with Kat (Stephanie Hsu), a rising
In cinemas now ‘Kokomo City’ that star in Chinese cinema who’s desperate
to conceal her liberated past — and espe-
The title Paris Memories has an unfor- wouldn’t look magnificent cially her crotch tattoo, the subject of a
tunate ring — shades of Amélie, or,
worse, Netflix’s Emily in Paris. In fact it’s
in a photo exhibition jaw-dropping sight gag.
Written by Cherry Chevapravatdum-
quite apt: Alice Winocour’s drama is rong and Teresa Hsiao, Joy Ride is canny
about recovering erased memories fol- Don has always been supportive, but when it comes to flipping expectations
lowing the trauma of the Paris attacks in when Beth overhears him confessing — for example, showing how people
and around the Bataclan concert hall in that he’s not mad about the novel, her from different parts of Asia might have
November 2015. world collapses. And, because anxiety is their own Asian stereotypes. Eyeing up
Although the venue isn’t named, that contagious, so do the worlds of her sister other travellers at Beijing airport, the
event is clearly in mind in this story of a Sarah (Michaela Watkins) and Sarah’s heroines decide the Taiwanese are
woman caught in a bistro when armed actor husband (Arian Moayed). A deli- “weird but cute” and that Korean pop
intruders open fire (Winocour’s own cious tangle of comic paradox, the film groups “all have the same faces”. Other-
brother Jérémie, to whom the film is explores the idea that in being enthusi- wise, the quartet show surprisingly little
dedicated, was one of those who sur- astically affirmative of your loved ones, interest in the people they meet —
vived the Bataclan siege.) you may unknowingly cause them hurt unless they’re available to help Audrey’s
Trying to piece together her jigsaw and damage. journey of self-discovery, or to provide
recollection of that night months later, It’s super-spare in execution, yet eve- knockabout sex.
Mia (Virginie Efira) returns to the res- rything is meticulously tuned. The act- But the leads are hugely personable,
taurant, where a group of survivors ing is superb, too: as Beth, tenderly ago- with a briskly affecting spiky-sisterly
meet regularly; among them is Thomas nised, smiling doggedly through the interplay between Park and Cola. The
(Benoît Magimel, bullishly affable), daily humiliations, Louis-Dreyfus cre- execution is functional, and somewhat
who remembers more about Mia’s expe- ates a lovely lived-in rapport with Men- cartoonish — especially in a dance rou-
rience then she does. Meanwhile, she zies, who proves a master of the con- tine to a K-pop cover of Cardi B’s sul-
drifts away from her partner (Grégoire tained, near-subliminal cringe, his lined phurous rap hit “WAP” — but Joy Ride is
Colin), who wasn’t with her then but face looking as if it’s about to slide very, an amiable number that will really
easily might have been. The film is acute very slowly off his head. And Jeannie come into its own on Tsingtao-fuelled
on the logic of chance, near-misses, Berlin, recently the family doyenne in long-haul hen party flights.
encounters that seem destined. The Fabelmans, is imperiously tetchy as In cinemas now
One such crossing of paths on the fate-
ful night was with Assane, an African Left: Ashley
cook at the restaurant, with whom Mia Park, left, and
remembers hiding. It’s here that the film Sherry Cola in
becomes political, as she goes on a soli- the goofy
tary quest into the invisible world of comedy ‘Joy
immigrant labour that — as a telling Ride’. Below:
comment from Assane informs us — Tobias Menzies
keeps Paris functioning. and Julia Louis-
Writer-director Winocour — who Dreyfus are
made the distinctive realist drama among the
Proxima, with Eva Green as an astronaut neurotic
in training — slightly strains to carry this Manhattanites
sombre topic. There are some question- in ‘You Hurt My
able touches: Mia’s hallucinations of Feelings’
the dead and the use of first-person
voiceovers. A twist involving another
survivor and Eva’s sense of guilt feels
awkwardly contrived.
But there’s also a nicely downplayed
register to the acting — at times, it’s
almost impassive — which defuses any
sense of spurious torn-from-the-head-
lines urgency. Virginie Efira has a calm
solidity that has made her French cin-
ema’s most approachable Everywoman.
This undemonstrative containment
makes her eminently suited to play a
stunned survivor who walks through
her changed world like a ghost.
In cinemas now

Writer-director Nicole Holofcener has

been a mainstay of the US independent
circuit since 1996’s Walking and Talking,
and a longtime specialist in sophisti-
cated female-centred comedies. Her lat-
est film You Hurt My Feelings is about
pampered, neurotic Manhattanites
whose personal traumas seem inconse-
quential given the griefs of the wider
world — but they know it, and that’s part
of the joke.
Friday 4 August 2023 ★ FINANCIAL TIMES 15

FT BIG READ. SCIENCE

The UK Met Office’s predictions have become much more accurate even as the climate has become
less stable. But the ability to track some of the world’s most dramatic events remains elusive.
By Henry Mance and David Sheppard

Forecasting ever more extreme weather

T
he world’s weather is pre- sighed a BBC radio commentator.
senting a paradox. In many Overall, the Met Office’s forecast was
regions, conditions are largely accurate, and England’s rain-
unprecedented, different affected match finished in a draw. But
to anything seen before. the episode highlights one of the short-
Yet they are also more predictable comings of current weather forecasts:
than ever. pinpointing exactly when and where rain
This summer’s extreme heat across will fall.
Europe and the US was foretold days The physics behind rainfall is an
in advance. Last year, four days before “extremely non-linear process,” says
Britain experienced 40C for the first Parker. Most rain starts as ice crystals
time, the UK’s national weather service, or snowflakes and turns to rain as it
the Met Office, issued a red warning — descends within a cloud. It is affected by
announcing an 80 per cent chance of multiple factors, including interaction
record-breaking temperatures. with other water in the clouds, the
“The actual forecasting, and deciding topography of the land below and the
how to message the forecast, was one level of aerosols in the atmosphere.
of the easier things we had to do,” says Given the difficulties in forecasting,
Will Lang, the meteorological service’s attention is being paid to “nowcasting”:
head of situational awareness. “It was tracking rain over the extremely short
almost scary how clear-cut it was.” term. In 2021, DeepMind, an artificial
Economists and political pollsters intelligence arm of Google, and the Met
regularly see their predictions upturned Office published a paper in the journal
by real-world outcomes. In contrast, Nature suggesting that machine learn-
weather forecasters have managed ing could outperform traditional, phys-
steady improvements in modelling a ics-based models at nowcasting rainfall
chaotic system. within the next 90 minutes.
The Met Office encapsulates this Machine learning has also been tri-
process. Remembered by many Brits alled over longer time horizons.
for failing to forecast a 1987 storm that Researchers at Nvidia said last year that
killed 18 people in the UK, it is today their model was able to pick up extreme
ranked as one of the world’s best- weather events such as hurricanes two
performing public weather services. to six weeks in advance. It required
Based in Exeter, south-west England, much less computing power than tradi-
and largely funded by the UK govern- tional forecasting, running 320 ensem-
ment, it says its four-day forecast is ble forecasts in just three minutes.
now as accurate as its one-day forecast “The interesting thing is how [AI-
was 30 years ago. based forecasts] opens up for the
Much of the credit goes to the expand- private sector to compete with national
ing network of satellites, which provide weather services, because you don’t
data on cloud cover, humidity, wind need the same infrastructure of scien-
and other variables, and increases in tists or computing experts to make that
computing power, which allow more work,” says Parker.
complex calculations. But models trained on historic data
Better forecasts are giving govern- may not be reliable in a changing
ments and companies more opportu- climate. “If we have an AI that’s a
nity to mitigate the costs of heatwaves statistical fit to the climate that we
and extreme weather, which are already know, and then we have a different
large enough to be seen in gross domes- climate, it’s not so clear that that
tic product figures. So far this year, the model will continue to be accurate.
US has experienced 12 weather-climate
events costing more than $1bn, includ-
ing 10 severe storms. £1.2bn $1bn+
But even “normal” weather causes Budgeted cost Estimated cost of
all manner of shortfalls and inconven- of the Met Office’s severe weather
iences, from failed crop harvests to supercomputer, events in the US
delayed flights. Increasingly accurate due online in 2024 so far this year
forecasting has the potential to improve
performance across a swath of sectors. The extreme heat that caused on Newtonian physics, that could calcu- able worst-case scenarios can be picked might be a day [at least for rainfall].” We’ve got no guarantees,” Parker adds.
Abundant data has created new wildfires on the Greek island of late how pressure, temperature and up earlier. “Introducing randomness The Met Office has meteorologists Improvements in medium-range
opportunities for specialised or “hyper Rhodes in July, below, was predicted. other variables interact. into this incredibly complex system embedded with customers, particularly forecasts, whether by AI or othermeth-
local” forecasts, mostly for business. But certain weather, such as rainfall, Being an intrinsically chaotic system, actually improves it,” says Roberts. airlines and airports, who want tailored ods, are a focus for meteorologists. Such
Since the weather holds huge sway still poses challenges, making the weather is highly sensitive to small The Met Office’s global ensemble fore- interpretation of forecasts. Demand for probabilities could help retailers
over things like heating oil and flooding like that seen in Llanrwst, changes in initial conditions: the prover- cast currently uses 12 different scenar- tailored services is likely to grow. As to decide what to stock, for example,
natural gas, when Citadel, the world’s Wales, in October 2020, bottom, bial butterfly can cause a hurricane. As ios. This involves vast amounts of com- the UK’s share of renewable energy and farmers to decide what to plant.
largest hedge fund, hired Sebastian harder to foresee a forecaster, “you’re pushing against puting power and electricity. By the end increases — from 11 per cent in 2012 to “We might not be able to make a really
Barrack to expand its commodities FT montage/PA/Dreamstime/ESA-JHuart/CC/Met Office/Open chaos”, says Paul Davies, the Met Office’s of 2025, the service will only use ensem- more than 30 per cent in 2022 — under- strong statement about what the
Government Licence
trading in 2017, one of his first moves chief meteorologist. It wasn’t until the ble forecasting, enabled by one of the standing how hard the wind will blow weather’s going to be like this summer
was to hire a 20-strong team of weather 1960s that better data and computing world’s largest supercomputers, ini- or the sun shine has become key to or this winter, but even if we just talk
forecasters. Citadel now credits that power allowed a step-change. tially budgeted at £1.2bn. (The super- ensuring the lights stay on. about a slight shift in the odds — a 10 per
forecasting team for much of its success Data quality is crucial. The UK has computer, based in Microsoft data cen- The UK’s National Grid Electricity cent increased chance of it being ahotter
in commodities trading, which a few hundred observation stations tres and intended to process 60 quadril- System Operator is investing in increas- summer — combined with a lotof other
accounted for about half of its $16bn in containing meteorological instruments, lion calculations per second, was due to ing the frequency and quality of the information that you’re getting, that
returns last year. often at airports. These are now comple- be ready last summer, but was held back forecasts it receives, including using might just be enough to tip the
Despite leaps in forecast accuracy, mented by sensors on aircraft, ships by Covid chip delays. The Met Office machine learning. It is also working on balance,” says the Met Office’s Lang.
blind spots remain. Forecasters struggle and buoys, as well as remote sensing by now expects it to be online in spring analysis of satellite imagery of clouds But mid-range forecasts would not
with certain weather phenomena: local- radar, satellite and weather balloons. 2024.) to see if its solar radiation forecasts can help individuals plan holidays or wed-
ised thunderstorms, which can trigger Everyday devices are now capable of Human forecasters retain a role. They become more accurate. dings. “You’re never going to be able to
flash flooding, are still at the outer limits feeding into forecasters’ models. “We’re compare the models’ outputs to real Whiffle, a specialist forecaster that forecast your barbecue a month in
of their abilities. Google, Nvidia and not at the stage yet of using the tempera- weather observations and adjust them grew out of a project at Delft University advance,” says Parker.
Huawei are among the technology com- ture from your car, but most cars are for biases. “For the time being, human of Technology in the Netherlands, has Conveying such nuanced information
panies developing AI-based forecasting, measuring temperature and it would be meteorologists provide so much added taken the grid concept and super- is a challenge. Already the public has
which aims to bridge some of the gaps. technically quite easy to share that value and insight above raw model charged it. Rather than focusing on access to an array of weather apps, often
Not to be outdone, the Met Office is data,” says Douglas Parker, a professor data,” says Roberts. 10km boxes, it says it can predict the with hourly forecasts and shiny maps
also investing in machine learning and of meteorology at the National Centre The models should perform robustly weather based on areas as small as 10 that foster an illusion of certainty. The
supercomputing power. Beyond being ‘We believe we’re solving for Atmospheric Science, University of even as the world warms. Extreme metres squared. This can give wind Met Office is studying how to give a
the UK’s national service and archive, it Leeds. farm operators advance notice of how sense of the probabilities involved.
provides its forecasts to other countries equations of physics that Weather forecasting also marks suc- much they are likely to generate from With extreme events, communica-
Paul Davies, the
and sells insights to private clients in
fields as wide-ranging as aviation, retail,
are fundamental. So if cessful international co-operation.
Through the UN World Meteorological
Met Office’s chief
individual turbines, aiding their trading
in power markets. It can also help with
tion can be counterintuitive. In 2017, a
small but intense storm hit the Cornish
meteorologist, says
construction, agriculture, mining and we move into a hotter Organization, established in 1950, coun- forecasting is like the optimal placing of wind turbines coastal village of Coverack, causing flash
insurance. world, the equations tries agree to share their weather data. ‘pushing against within a bloc. floods. On the radar, “you could hardly
The investment has already aided the In 1997, the Met Office worked with a chaos’ “The margins on these projects are see it — it was just a little point”, says
Met Office in its most important task: should still be valid’ grid of boxes 90km wide. That resol- not normally huge, generally in the Davies. As a result, people nearby were
forewarning. The 1987 storm, which the ution has gradually shrunk to 10km weather is not necessarily hard to pre- region of 6-10 per cent,” says Remco unaware and did not try to flee the area.
office forecast would largely hit France today for the global grid. For the UK, dict: July’s European heatwave involved Verzijlbergh, Whiffle’s co-founder. “So if “Had we produced the perfect warning,
and Spain rather than the UK, was diffi- the resolution is 1.5km. These boxes are a “loopy” jet stream, which allowed high the yield you get from the wind is lower we might have lost lots of lives,” he adds.
cult to predict because of a sting jet — a stacked vertically, into the troposphere pressure to settle for many days in five than you hoped for, the economics can People nearby “might have rushed to
burst of powerful winds lasting just a and the lower stratosphere. Meteorolo- regions of the northern hemisphere. quickly blow up.” The company works the car and been drowned”.
few hours. gists now debate whether there is an “We believe we’re solving equations of closely with General Electric and Shell, Since the Coverack storm, the UK has
Today, its forecasters would be able optimum resolution below which the physics that are fundamental. So if we among other customers. endured a number of unprecedented
to identify the storm hitting the UK as a accuracy of forecasts no longer move into a hotter world, the equations weather incidents. In 2020, a study by
low probability event, allowing a warn- improves significantly. “There might be should still be valid,” says Parker. Better days ahead the Met Office had concluded that while
ing to be issued. “We work on a mantra other ways that we can use our compu- Some places are easier to forecast Last month, exactly a year after accu- hot summers were rising, “the current
of ‘no surprises’,” says Lang. ter power to increase the accuracy,” says than others. Britain has comparatively rately predicting record-breaking tem- chance of seeing days above 40C is
Helen Roberts, a Met Office forecaster. unpredictable weather because it sits off peratures, the Met Office found itself extremely low”. Two years later, it hap-
A global endeavour One of those ways is so-called ensem- the edge of a continental landmass and under scrutiny — from England cricket pened. Now the service says 40C temper-
The science of weather forecasting dates ble forecasting. Traditional models next to a large ocean. fans. The fans wanted dry weather to atures “could be the norm” by the middle
back to the mid-19th century. In 1854, are “deterministic”: observations are But prediction is easier than in the enable England to try to beat Australia of the century, even if the world takes
Robert FitzRoy, formerly the captain of plugged into a model, which provides a tropics, where there are fewer observa- in an Ashes Test match in Manchester. some steps to limit carbon emissions.
HMS Beagle, on which Charles Darwin ‘We’re not at the stage yet single forecast. In ensemble forecasting, tion stations, where the effect of the The Met Office suggested that no play Experts emphasise that even accurate
sailed, founded the Met Office. Its initial the observations are tweaked in random Earth’s rotation, a stabilising force on would be possible on the third day of warnings are no substitute for long-
role was to improve safety for ships, by of using the temperature ways, and the model is run multiple the weather, is weaker, and where the Test, a Friday. A rival forecasting term adaptation and mitigation strate-
gathering a few scattered observations
and charting them.
from your car, but most times simultaneously on the different
data sets.
thunderstorms can be frequent.
“In a chaotic system, there is a time-
service, AccuWeather, offered a more
optimistic view, which was quickly
gies, which help society cope with
intense heat and rainfall. “Underneath
By the 1920s, there was an attempt at cars are measuring The random tweaks compensate for scale over which [things] are no longer adopted by fans. The England team itself is climate change. It affects everything,”
more sophisticated prediction. Lewis temperature and it would the limitations of the observations and predictable,” says Parker. “We think judged that an app called Home and Dry says Davies. “How do we communicate
Fry Richardson, a British mathemati- of the model. They give a probabilistic for our mid-latitude world it is some- was the most accurate guide. “It’s impos- that, but also present it in such a way
cian, honed a series of equations, based be technically quite easy’ account of different outcomes; reason- thing like two weeks. For the tropics, it sible to know with weather forecasts,” people don’t see us as nanny state?”
16 ★ FINANCIAL TIMES Friday 4 August 2023

The FT View
The Bank of England walks a tightrope
are particularly concerning when the The UK’s robust labour market has Modelling that much previous rate rises are squeezing
Mixed signals on monetary economy is already straining and the kept core inflation, which excludes showed the BoE the economy. Few central banks have
margin of error for causing a recession is energy and food prices, too high at 6.9 got to grips with that. The MPC itself, as
policy leave UK economy small. The MPC’s updated view that per- per cent. Some further tightening looks
reaching its 2%
governor Andrew Bailey admitted, is
on an uncertain path sistent inflationary pressures may be inevitable. But modelling that showed inflation target not leaning much on its own internal
crystallising indicates the need to keep the BoE reaching its 2 per cent inflation in 2025 under model. The planned review by former
Ahead of the Bank of England’s 14th its policy tight. But guidance that rates target in 2025 under different interest different Federal Reserve chair Ben Bernanke
consecutive rate rise since 2021 on would stay “sufficiently restrictive for rate paths created some confusion. interest rate is very welcome, and will hopefully
Thursday, Prime Minister Rishi Sunak sufficiently long” — alongside a split Some saw the August meeting as “hawk- scenarios go some way to improving the BoE’s
claimed “there is light at the end of the vote, with two members voting for a ish”, others underscored more “dovish” processes.
tunnel” on Britain’s inflation fight. After more forceful 50 bps rise — points to tones — highlighting the broader prob- created some For now, the BoE will need to tread
justifiable criticism of the bank for fall- uncertainty over how far and how fast lem the central bank has faced in com- confusion carefully and keep a very close eye on
ing behind the curve — with the UK’s the BoE thinks it ought to go. municating its plans. the data. It was playing catch-up before,
high inflation making it an outlier in the A 25 bps increase this month was Just how the BoE proceeds matters but now the economy is looking more
G7 — a downward trajectory for price sensible. Broader price pressures are greatly. Home buyers and those set to delicate and price pressures are easing.
growth is now visible. Since the BoE’s abating. Food price inflation has slowed remortgage already face thousands of A slow and steady approach from here
hefty 50 basis point rate rise in June, a to its lowest in a year. Producer price pounds more in annual payments, would be wise to gain a clearer picture of
product of being too complacent earlier inflation, a leading indicator of the which will increasingly pinch demand. where the economy is.
in the year, inflation data has cooled. prices shoppers face, has fallen rapidly. Business activity is falling sharply too. If Britain was the first major advanced
The Monetary Policy Committee Prior rate rises are also squeezing the BoE is too dovish there is a risk that economy to raise rates, but the last to
plumped for a less aggressive 25 basis demand. Last month, annual house inflationary persistence feeds into wage leave double-digit inflation. The BoE
point rise at its August meeting, taking prices fell by the most since 2009 amid resilience. But if it pushes rates too would surely not want it to be the last to
rates to 5.25 per cent. Yet it does higher mortgage rates. Bank lending far, for too long, it risks crushing the recover from a substantive interest rate-
not seem confident on what it needs to has eased. But the MPC’s nemesis has economy. induced recession as well. The light at
do next. been the jobs market, with wages still Part of the problem is that it is diffi- the end of the tunnel should not lead
ft.com/opinion The mixed signals from the meeting growing strongly. cult to get a clear handle on just how into a ditch.

Opinion Global affairs

Letters
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Include daytime telephone number and full address
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Courting autocrats won’t

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solve Europe refugee crisis Solar sites can support climate goals while protecting nature
FT montage/Getty Images I would like to expand on issues raised There is no denying that nature will biodiversity, including mandating a net meadows that are rich in wildlife.
by former US Treasury secretary be in decline at a catastrophic rate gain in biodiversity through the Solar energy is an essential
Henry Paulson regarding the need to unless urgent action is taken, and planning system. component of our journey towards net
address climate change while Paulson is right in that if not located Utility-scale, ground-mounted solar zero and it is vitally important to adopt
safeguarding biodiversity (Opinion, properly, renewable energy sites will in the UK supports multifunctional thoughtful strategies to ensure that
July 16). have an impact on ecosystems and land use, which is a solution that not renewable energy development aligns
While we can all agree with the habitats. only maximises the potential of solar with the Global Biodiversity
importance of conserving nature, I However, UK planning policy farms to deliver clean energy to Framework. By working
believe that a more balanced ensures that significant harm to address climate change, but also collaboratively and embracing
perspective is necessary when biodiversity resulting from significantly improves biodiversity. innovative approaches, we can
considering the climate and development is avoided. These Planning permission for a solar farm is overcome these challenges and also
biodiversity nexus and perhaps there safeguards extend to protected areas, time-limited, typically 25 to 40 years, learn from geographies where
can be some transferable lessons that important habitats and species. which leaves the land to lay fallow, deployment of solar already works in
the US could take from the UK, Furthermore, the Environment Act while many solar sites are also grazed harmony with nature.
particularly when it comes to site (2021) includes provisions to on by sheep, beneath and around the Ross Grier
selection and planning for solar strengthen and improve the duty on solar panels. This management regime Chief Operating Officer, NextEnergy
deployment. public bodies to conserve and enhance often results in biodiverse hay Capital, London W1K, UK

his country. Haftar, a warlord, is

Kim reported to have links to the smug-
glers. Then there is Egypt’s Abdel
Women’s emotional touch AI tools must be open to Seigniorage as described by Haldane,
originally designed to improve the
Ghattas Fattah al-Sisi, upon whom President
Emmanuel Macron bestowed the
is needed in tech sector
With the recent explosion of public
scrutiny and public debate
The FT report about advocates of open
liquidity of the banking system,
deserves a different coining to reflect
Légion d’honneur, France’s highest discourse around AI, largely as a science warning of scientific fraud the reality of its function now that

E
decoration, in 2020. result of ChatGPT, it is no surprise that (FT.com, August 1) raises some particular crisis has passed into history,
Sisi has spent billions on vanity even dating apps are now embracing well-founded questions about research namely subsidy.
urope is helping to entrench projects like a new capital city while the software, as written about by data sharing, but fails to take into The real value of CBDCs is that they
Arab autocrats by asking the economy takes a nosedive. Infla- Elaine Moore (“AI entering the dating account recent developments in lift the veil of myth, cultural memory
them to stem the flow of tion has reached an all-time high of pool is a bleak prospect”, Opinion, artificial intelligence, which are and emotion, which avoids having to
refugees across the Med- 35.7 per cent, the national currency August 1). redefining scientific discovery. confront the fact that modern money is
iterranean, with no regard has plummeted and Egyptians are There is indeed a possibility that To develop robust AI systems, we created out of thin air, and allow
for their governance or human rights facing power cuts in the sweltering such apps could lose their personal need high-quality training data, and proper debate on the value of the bits
record. They, in turn, are only too heat. In 2022, Egypt suddenly made it touch as they become dependent on large volumes of it. The life sciences and bytes we use to pay for stuff.
happy to pose as partners, claiming into the top five nationalities of illegal software to generate human sentiment, community has been sharing research Bruce Davis
they alone can protect Europe’s south- arrivals in Europe. however AI is here to stay and so data openly for decades. As such, it’s Associate, Cambridge Centre for
ern border from illegal migrants, in While Europe works to keep refu- wherever it is built and used, it needs uniquely placed to leverage new AI Alternative Finance, Cirencester,
exchange for more cash. gees and migrants out, it expects other to be representative. technologies to drive our Gloucestershire, UK
Perversely, it is often the rule of countries, such as Lebanon, Jordan AI requires humans to build it and, understanding of the living world, from
those repressive leaders that is driving and Turkey to host millions of refu- as we know, women still face barriers molecules to ecosystems. A recent What is the true cost of
thousands of people from across the gees forever. Refugees in Lebanon are when it comes to entering the world of example is the AlphaFold AI developed
Middle East and north Africa to leave estimated to represent 25 per cent tech. Part of this is that women are by Google DeepMind, which used the latest travel boom?
their homes and make the treacher- of the country’s overall population — exposed to the industry less due to publicly available data and clever “Travel boom as holidays come first”
ous trip in the first place. compared to just 1.5 per cent in societal bias or a lack of non-traditional Japanese market will not machine learning to shed light on the (Report, July 29) suggests there are
In its yearly threat assessment Europe. Syria is not safe for voluntary entry routes. In order for tech such as mystery of how proteins fold. plenty of “travellers determined to
released in February, the US intelli- returns and Lebanon was rightly AI to be understanding and tolerate yield curve control As more research becomes take to the skies despite soaring ticket
gence community singled out Tunisia chided by the European parliament empathetic, its creation and Your editorial’s (“The Bank of Japan’s AI-powered, scientists and engineers prices”. And it seems cruise lines are in
as a particular problem in the region: for forcing some Syrians to go home, implementation must be by as broad timely tweak”, FT View, August 1) should apply principles of the same happy economic bubble.
“President Kais Saied’s ongoing where many are then rounded up by and diverse a range of people as assessment that BoJ governor Kazuo transparency and openness to the AI So now is the perfect time to make
consolidation of governing authority the regime of Bashar al-Assad. possible, meaning we need more Ueda has passed his first big test sits tools they develop. AI systems are sure the full price includes the real
The impact of such large refugee women in the industry. oddly with the Japanese yen’s renewed complex, but there are many ways of true cost of covering each individual’s
populations on the stability and social So more must be done to ensure this slide and the rise in Japanese bond making them more open, so the carbon footprint. Capitalising on this
Repressive rule in the fabric of small countries like Lebanon
and Jordan cannot be ignored. But as
is the norm, rather than the exception,
and this includes placing greater value
yields to a seven-year high in the wake
of his yield-curve policy tweak
community can scrutinise and validate
their predictions. To develop trusted AI
opportunity to get those buoying up
global economies to take full
Middle East is driving long as Syrians are not heading in large on people returning to the workforce announcement. that is free of bias, we need open responsibility for their part in adding
thousands to make numbers to Europe as they did in who want to resume or embark on a The basic flaw with Ueda’s choice foundational data sets, open AI models, to our climate crisis couldn’t be
2014, Europeans seem content to new career in tech. of a gradual approach to eliminating and a society-wide debate that informs better timed.
treacherous journeys ignore the festering wound in Syria. Beckie Taylor yield control is that it signals that the regulation. No matter how much we pay, any
Meloni, who has in the past praised Chief Executive, Tech Returners, Bank of Japan is becoming concerned Edith Heard form of unnecessary travel that adds to
increases the risk for a serious break- Assad, may even think he can be an Manchester, UK about rising wage and price inflation Director-General, European Molecular the droughts, heat and flames
down in stability.” ally on the refugee issue. and that its policy tweak could be the Biology Laboratory, Heidelberg, devastating so much of our planet is
Since then, Saied has in effect dis- The long-term interests of Europe Graphene holds key to precursor to the BoJ eventually Germany clearly just getting us all to hell in a
mantled democracy in Tunisia. He and the west are best served by democ- allowing the markets free rein in Ewan Birney variety of handcarts.
whipped up racist sentiment, unleash- racy and good governance in the global better carbon capture setting bond yields. That risks putting Deputy Director-General, European Barbara Mullarney
ing violence against sub-Saharan south. Of course, policymakers have to The true potential of carbon capture, Japanese bond prices on a very Molecular Biology Laboratory, Acton, London W3, UK
migrants which sparked a further ref- deal with the world as it is, and not with utilisation and storage (CCUS) lies in different trajectory from those in the Hinxton, Cambridgeshire, UK
ugee crisis. Human rights groups have the leaders they wished they had. But the U. Many people started their week US, where the Federal Reserve appears BoE had its head in the
accused Tunisia of dumping migrants coddling dictators only cements their hearing, perhaps for the first time ever, to be towards the end of its interest CBDCs lift veil of myth sand on inflation
in the desert on its border with Libya, rule, creating a vicious cycle. about carbon capture — but it’s not all rate rising cycle.
where some have died of thirst. Skilled No one has yet cracked the code of about sequestering carbon under the If the odds favour a fall in Japanese over the money system In your article, “Bernanke to lead Bank
Tunisians are also leaving in droves. how to maintain short to medium term sea. Instead, we have homegrown bond prices at a time when they favour Andy Haldane’s response to the of England review into forecasting”
Yet last month the EU signed a strate- stability while helping to deliver technology right now that is being a rise in US bond prices, why will there backlash against the concept of CBDCs (FT.com, July 28), the subheading
gic partnership deal with Tunisia that democracy and good governance in the exported around the world, to help not be substantial selling pressure on illustrates two things (Opinion, August reads, “Appointment of former Fed
offers several hundred million euros long term. It requires vision and sus- industries decarbonise instantly by the Japanese government bond 1). Firstly, money is inherently chair follows criticism of UK’s central
worth of help for economic develop- tained, smart policies about thorny locking carbon from their emissions market? political, and in a democracy, it is the bank for failing to predict persistence
ment, but is mostly focused on cracking issues at a time of short public attention into graphene. If such selling pressure were to occur, people rather than bankers, of inflation”. Was it not more the case
down on illegal migration and curbing spans, dictated by-election cycles Instead of just pumping this carbon would that not imply a continued slide billionaires or cryptographers who that at the time of inflection (early
departures. Another €900mn is in the increasingly driven by populism. Sadly, under the sea, graphene is part of a in the yen that would exert unwanted should decide who benefits from the 2022) the BoE denied it had an
pipeline, if Saied agrees to reforms band-aid solutions are becoming the circular economy that both upward pressure on Japanese inflation, provision of money as a means of inflation problem, rather than it failed
demanded by the IMF. norm in an age of policy gridlock on decarbonises existing heavily polluting which is already above the payment. to predict persistent inflation?
Communities that host refugees various challenges, including climate materials, such as concrete and government’s 2 per cent target? Secondly, finance is an industry Semantics, maybe, but if you deny you
deserve international support and change, the effects of which will also cement, and transforms the In the end, it would seem that with a long history and short memory. have a problem, how can you possibly
financial aid can help create economic make the migration crisis worse. performance of future energy Ueda will eventually be forced by The Bank of England’s practice of fail to predict it will persist!
opportunities to keep migrants at In June, the EU said it will join infrastructure such as battery cells and the market to abandon yield curve paying interest on “reserves” was Martin Hewes
home. Having said little about his efforts to assess the viability of block- solar panels. control. enacted in 2009 when the banking Hewes & Associates,
power grab, the EU approach now ing out the sun to mitigate global This technology fits easily with From a credibility standpoint, he crisis was at its height. Prior to that Haslemere, Surrey, UK
rewards Saied for being a cruel auto- warming — instead of focusing on existing infrastructure and reduces might then regret not having heeded date, seigniorage referred instead to
crat and an incompetent steward of curbing emissions. “Solar radiation the CO₂ potential of natural gas by up Macbeth’s advice that if the deed were the “profit” which the state generated
his country’s economy. modification” carries its own risks to 40 per cent immediately. In our shift to be done, it were well that it would be when it minted coins in a metal that Correction
Italy’s rightwing prime minister and is described by some experts as to a cleaner future, CCUS has a rightful done quickly. was worth less than the face value,
Giorgia Meloni has also led the way in science fiction. So is the illusory stab- role in our arsenal. Desmond Lachman allowing the government to finance its c There are 465 global human rights and
courting the de facto ruler of eastern ility promised by dictators. John Hartley Senior Fellow, activities in effect at a discount (as long civil society groups in Meta’s Trusted
Libya, General Khalifa Haftar, seeking Chief Executive Officer, Levidian American Enterprise Institute, as “the people” believed in the value of Partner Program, not 645 as wrongly
his help to prevent departures from The writer is author of ‘Black Wave’ Technology Centre, Cambridge, UK Washington DC, US the currency). stated in an article on August 3.
Friday 4 August 2023 ★ FINANCIAL TIMES 17

Opinion
The Trump indictment is welcome news for America’s allies Frenzy over
superconductor
Donald
more than two months following elec-
tion day [he] spread lies that there
vice-president Mike Pence to fraudu-
lently alter the electoral vote count on
to subvert the democratic electoral sys-
tem on which America’s existence as a
in the case. And ultimately, the charges
against Trump must come to trial
seems too
Ayer had been outcome-determinative fraud
in the election and that he had actually
won” and went on to commit crimes
January 6.
And when all of these efforts fell
short, Trump, the indictment alleges,
nation is based.
It does so with charges that fit the
conduct like a glove. The first charge
and the government must deliver proof
of what it claims that satisfies a
jury beyond a reasonable doubt. The
super to be true

T
that would have made the false claim a used the violence of the mob that he had is of a conspiracy to defraud the US defendant can be counted on to do
reality. invited to Capitol Hill on January 6 as by subverting its interests in a free whatever he can to prevent that from
uesday’s indictment of Its allegations, if proved, show beyond one last tool to change Pence’s mind, or and fair election. The second and happening.
Donald Trump is a turning any doubt that Trump knew he had lost, to at least delay the proceeding. It will third are conspiracy to obstruct, and But the grand jury has had its say, and PHYSICS
point of enormous impor- and that, working together with six pre- be highly notable that Trump is at the obstruction of, the official proceeding at the story is a very powerful one. And the
tance for the US — and for cisely described but unnamed co-con- which the electoral votes were to be case is in the hands of an excellent judge Anjana
the global community of spirators, he spearheaded a series of sys- counted on January 6. And the fourth, — a former public defender who has
democracies. tematic efforts to change the outcome. This powerful pushback fittingly brought under the Ku Klux already handled an important case Ahuja
On January 6 2021, we witnessed the Those efforts are spelt out with great Klan statute enacted after the Civil War against Trump in which she rejected his
by our constitutional

I
appalling culmination of an organised specificity that foreshadows the evi- to protect against abuse of freed former efforts to block the investigation of the
effort to overturn the outcome of a free dence that the prosecutors are ready to rule of law system should slaves, alleges the no less appalling January 6 committee.
and fair election. Since then, it has been put before the jury. They include: exten- conspiracy to deny the civil rights of all For people and nations who worried f you haven’t yet heard of LK-99,
far from clear to many people in the US sive activities and intimidation aimed be profoundly reassuring Americans to have their votes counted that this day would never come, there where have you been? Over the past
and around the world that the American at convincing officials in seven states fairly. is reason for optimism that Trump week and more, this pebble-sized
system of government has what it takes to alter the legitimate vote counts centre of all these manoeuvres. It will The indictment is important not only may finally be made to answer for the dark rock lookalike — made of lead,
to effectively deal with the nefarious without any basis; the organisation also prove important that his persistent to Americans. Contemplating the spec- worst of what he has done. That is good phosphorus, copper and oxygen —
conduct of a wilful demagogue. and submission of fraudulent slates of efforts were resisted even by many of his tacle, the US’s allies were right to won- news for American democracy — and has pushed social media into meltdown,
However, the indictment delivered state electors that could be relied on to closest advisers, but went forward any- der if they could continue to count upon for America’s democratic allies the sent stock markets surging and put Sili-
this week is the greatest demonstration alter the outcome of the election; way on the strength of his will. it to play a global leadership role — world over. con Valley investors into a spin.
yet that our system is, after all, up to the repeated attempts to intimidate officials This indictment is so important including on democracy issues. This Scientists all over the world struggled
task. In its 45 pages it tells one story in a in the Department of Justice to convince because it officially calls the former week’s powerful pushback by our con- The writer was US deputy attorney-general to make sense of the hallowed lump.
very readable way — the story of how state officials to replace legitimate elec- president to account at the criminal bar stitutional rule of law system should be under George HW Bush. Norman Eisen, One enthusiast livestreamed his effort
Trump “[d]espite having lost, . . . was tors with electors supportive of Trump; for the most important wrongs that he is profoundly reassuring on that front. White House special counsel in the Obama to bake a replica, with 16,000 Twitch
determined to remain in power. So for and tireless efforts to intimidate the alleged to have committed — the efforts Of course there remains much to do administration, also contributed viewers tuning in to stare at a kiln.
According to scientists in South
Korea, LK-99 is a room-temperature
superconductor that can work at nor-
Efi Chalikopoulou
mal pressure. If true, it represents colos-
sal progress. Superconductors are mate-

Downgrading rials that can conduct an electrical cur-

rent with zero resistance, which means
zero energy loss. They generally operate
only at impractically low temperatures
or fantastically high pressures. MRI

US debt has
machines, for example, use a niobium-
titanium alloy cooled by liquid helium
to below minus 263C.
But a room-temperature, ambient-
pressure superconductor made from
cheap materials would pave the way for

a political logic perfectly efficient high-capacity power

grids, desktop quantum computing,
fusion reactors and even levitating
trains. Hence the race in Europe, the US,
Russia and Japan to find so-called high-
temperature superconductors. Any
breakthrough would be a Nobel Prize
To understand why, it pays to peruse shoo-in.
FINANCE the details of Fitch’s announcement. In But there’s a catch: proof remains elu-
decades past, rating agencies have sive. Superconductivity, first discovered
Gillian assessed the creditworthiness of Amer-
Tett ica primarily by analysing its economic
and financial fundamentals. For as any
student of finance knows, one differ-
Scientists all over the globe
struggled to make sense of

S
ence between emerging markets and
developed countries is that the former the hallowed lump from
ometimes the gods of finance have traditionally been deemed more
deliver choreography that prone to political risk, and developed South Korea
might make future historians countries less so.
chuckle. This week in America In Tuesday’s announcement, Fitch of those debt statistics have actually stand-off was resolved in June, the indictments are energising his base. At in 1911, is notoriously difficult to con-
provided one such moment. analysts did duly cite some statistics. improved recently: debt-to-GDP, say, is shouting — and threats about a govern- best, this will ensure that the 2024 race firm in the lab. Mistaken sightings are so
On Tuesday, the special counsel Jack “We expect the general government def- slated to be “only” 112 per cent in 2023, ment shutdown — may return this is bitterly polarised, making bipartisan common they are nicknamed USOs, or
Smith announced a blistering new icit to rise to 6.3 per cent of GDP in 2023, down from 122.3 per cent in 2020. No autumn when negotiations restart over initiatives impossible. At worst, if Unidentified Superconducting Objects.
indictment against former US president from 3.7 per cent in 2022, reflecting wonder that Janet Yellen, Treasury sec- the 2024 budget. Trump wins back the presidency An electrical current is a messy affair
Donald Trump for allegedly launching cyclically weaker federal revenues, new retary, dismissed the downgrade as The broader issue, however, is that (which cannot be discounted), this will — a bit like a dance floor of rowdy party-
“an unprecedented assault on the seat of spending initiatives and a higher inter- “arbitrary and based on outdated data”. the political ecosystem is so polarised unleash profound policy uncertainty. goers attempting a conga (the moving
American democracy”. est burden,” they noted, predicting “a But what many critics failed to realise that it is hard to imagine Congress tak- This is a populist, after all, who has electrons bumping into atoms cause lost
And on the very same day, the credit further widening to 6.9 per cent of GDP is that this downgrade has less to do with ing the sensible steps needed to tackle vowed to take revenge on his enemies by energy). But below a critical tempera-
rating agency Fitch stripped America of in 2025”. economics than with politics — or “gov- America’s fiscal problems. These gutting the civil service. The last time he ture, many materials become supercon-
its hallowed AAA tag, echoing a similar Meanwhile “the interest-to-revenue ernance”, to use the polite euphemism include hammering out a bipartisan bill was in office he threatened the inde- ducting: the electrons abruptly pair up
2011 move by Standard & Poor’s. This ratio is expected to reach 10 per cent by the rating agency repeatedly cites. For to overhaul social security, reviewing pendence of the Federal Reserve, deliv- and begin to move smoothly. It is as if
means two out of the three big rating 2025 (compared to 2.8 per cent for the even if Washington can theoretically spending and reforming the tax system. ered big unfunded tax cuts and failed to the partygoers disappear amid clouds of
agencies have now downgraded treasur- ‘AA’ median and 1 per cent for the ‘AAA’ pay its bills and cut its debt, that does There have not been any serious initia- trim spending. More recently, he has dry ice — and instantly reappear as pairs
ies — never mind that these supposedly median”) and the “debt-to-GDP ratio is not mean it actually will; or not with 100 tives along these lines since the 2010 pledged to block reforms of social secu- of ballroom dancers gliding effortlessly
define the “risk-free” benchmark for projected to [reach] 118.4 per cent by per cent probability. There is a new rip- Simpson-Bowles commission — and rity or Medicare, and pledged to extend in unison.
global finance. 2025 . . . two-and-a-half times higher ple of policy risk. that failed. expiring tax cuts. There are two giveaway signs of that
At first glance, these two announce- than the ‘AAA’ median of 39.3 per cent of One sign of this is that bitter Congres- That is why this week’s accidental So while it might seem fair to question transition: first, measured resistance
ments might not seem linked — and GDP.” In plain English: America’s debt sional battles keep exploding over the choreography matters. If Smith’s legal some of the economic logic — as well as drops to zero; and, thanks to a curious
they were certainly not co-ordinated. data is far worse than any other top- debt ceiling. And while the last such onslaught knocks Trump out of the the timing — of Fitch’s move, the rating phenomenon called the Meissner effect,
But the coincidence is symbolic. For rated country, and likely to deteriorate. 2024 election race in a way that enables agency’s fears about rising policy risk a superconductor will levitate above a
what they collectively signal is that Of course, as many economists centrist political forces to prevail, it is looks spot on. What the loss of that AAA magnet.
America’s political economy is heading
into uncharted waters, with an alarm-
angrily retorted, America is not exactly
a “normal” country. Since it enjoys the
What is hard to imagine is a possible to imagine a future scenario
where sensible bipartisan fiscal policies
tag really reveals is that America is
being judged less like a developed coun-
On July 22, a preprint — a draft scien-
tific paper that has not undergone peer
ingly wide range of potential outcomes. (in)famous “exorbitant privilege” of polarised Congress taking might emerge in Congress to tackle that try, and more as an emerging market. review — surfaced, claiming that LK-99
Investors should take note, regardless of printing dollars, it can always repay its the steps needed to tackle debt. Uncle Sam should weep. had met both tests. Scepticism was
their views on the wisdom behind the debts — if it chooses. But right now Trump is leading the immediate. The researchers, from the
move by Smith — or indeed Fitch. Moreover, Fitch itself noted that some the nation’s fiscal problems Republican field, by some way, and the [email protected] Korea Institute of Science and Technol-
ogy and the country’s Quantum Energy
Research Centre, were respectable but
not superstars. The method for making
this miracle material — bearing the ini-

You don’t become a world leader in science by ignoring the basics tials of two authors, Sukbae Lee and Ji-
Hoon Kim — seemed incredibly simple,
including use of a pestle and mortar,
but lacked detail. A linked video
appeared to show partial, rather than
productivity. Purist economists may report) while the City of London falls world could take new research ideas in That view has been echoed by a damn- full, levitation.
TECH NOLOGY hate the horticultural analogy, but gov- down on its core function of providing these areas and turn them into success- ing report this week from the think-tank Strangely, another paper by Lee and
ernments prepare the soil and compost, growth capital to new businesses. ful businesses, Cowen argued. With its Reform, which argues that for too long Kim quickly followed, this time with
John businesses give the seed and nutrients. The reasons for this malaise were world-class universities, rich human Britain has been papering over the four other authors. As Scientific Ameri-
The trouble with Britain’s economy is explored last month at a refreshingly capital and venture capital expertise, cracks of an outdated social and eco- can notes, critics pointed to graphs fea-
Thornhill that instead of cultivating beautiful non-partisan conference run by Civic “south-east England is one”, he said. nomic model. turing an oddly scaled axis, though a
flowers, the country is pushing up too Future, a non-profit organisation The cluster of brainpower in the Lon- To believe that the British govern- researcher at Lawrence Berkeley

M
many weeds. Rather than exhibiting founded last year to help train a new gen- don-Oxford-Cambridge triangle — ment and City investors share the stra- National Laboratory in California said
complementary capabilities, the public eration of leaders to improve public life. which includes the AI research com- tegic vision to build world-beating the Korean claim was theoretically plau-
oravec’s paradox, an and private sectors suffer from the same Ironically, one of the most optimistic pany Google DeepMind, the Francis advanced industries in the way that the sible. One team in China reported lim-
observation much loved maladies: short-termism, managerial takes on Britain was provided by the Crick biomedical research centre and Taiwanese, South Korean and Singapo- ited success at replication; another in
by technologists, suggests inertia, poor productivity and a reluc- four of the world’s top 10 universities — rean governments have helped to do is India reported failure.
that robots do well what tance to invest. For the past seven years, is impressive. And there have been a few to imagine an institutional capability The matter is not yet closed but the
humans do badly and
vice versa. So, for example, a computer
Brexit has imposed a massive additional
distraction tax on both sectors.
For too long Britain has great examples of the public and private
sectors working well together in Britain:
that does not exist. That will require a
more creative era of national renewal to
odds seem unfavourable. A hastily con-
vened verification committee set up in
can easily trounce the strongest human All that has fed the narrative of bro- been papering over the the expansion of the offshore wind tur- ensure true complementarity between South Korea issued a cautionary note on
players at chess. But that same machine ken Britain, the impression that nothing cracks of an outdated bine industry and the rapid develop- the public and private sectors. August 2, suggesting lack of concrete
could not move the pieces on the board, really works anymore. The healthcare ment of the Oxford Covid vaccine, to Still, it should not be beyond the wits evidence.
a trivial task for a five-year-old child. system fails to treat many patients social and economic model name but two. of a fag-end Conservative government Given superconductivity’s history of
A similar complementarity exists speedily (almost 7.5mn remained on the But what was striking at the Civic to deliver on some smaller, but useful, false dawns, our trusty pebble, now with
between the public and private sectors NHS waiting list in May), the justice sys- American economist Tyler Cowen, Future event was the seething frustra- ambitions to help fix broken Britain: to its own wikipedia page, is most likely to
in a flourishing economy. Governments tem does not deliver justice (consider author of a book called The Great Stagna- tion felt by many of the British partici- build more houses, extend the provision be an unremarkable rock with acciden-
set national priorities, mobilise the grotesque mistreatment of the tion that inspired the event. The UK, he pants at the inability of successive gov- of more affordable child care and tally interesting properties. But what a
resources, build infrastructure and help wrongfully convicted Post Office sub- suggested, was well placed to capitalise ernments to help realise this economic encourage greater business and public gripping spectacle — one that tells us
nurture a well-educated, healthy and postmasters). Meanwhile, private sec- on three transformations that may be potential. Rather than indulging in sector investment. Rather than doing less about physics and more about the
mobile population. Private companies tor water companies pump sewage into about to boost global productivity: the overblown rhetoric about turning Brit- the clever stuff poorly, it should at least collective human need, even among
provide entrepreneurial dynamism, our rivers (only 14 per cent of England’s biomedical revolution, the diffusion of ain into a science superpower, policy- strive to do the simple stuff well. scientists and investors, to dream.
investing in new market opportunities waterways have “good ecological status” artificial intelligence and the energy makers needed to focus on improving
and technologies to boost the economy’s according to a 2022 parliamentary transition. Only a few places in the the performance of the core economy. [email protected] The writer is a science commentator
18 ★ FINANCIAL TIMES Friday 4 August 2023

Nintendo: Mario goes to the movies

Popular characters have given the Japanese company’s Switch console impressive longevity. Nintendo’s
sales and profits remain bumpy. This year’s Mario movie is still well ahead in terms of box office receipts
than bigger critical successes, including ‘Barbie’ and ‘Oppenheimer’.

Device lift More ups and downs than Mario Brooklyn blockbuster
Twitter: @FTLex Quarterly unit sales (units mn) Nintendo sales and operating income Box office takings, 2023 ($mn)
Nintendo Switch – OLED Model (¥bn)
Nintendo Switch Lite Sales Operating profit
Nintendo Switch Software
Worldcoin: Altman securities. This will deter users.
Even if demand is high, Worldcoin’s
8 80 700 ICE/LSEG:
lowballs for eyeballs chance of worldwide success is slim. delta blues
Global governments have no intention 600 1,350
The goal of Worldcoin, a of allowing a private company to 6 60 Over the past two decades, the mantra
cryptocurrency co-founded by OpenAI challenge fiat currency. 500 for stock exchange operators has been
boss Sam Altman, sounds reasonable diversification at all costs. First came
enough. It is to create a global network 400 The Super Mario Bros. Movie an expansion into trading other asset
4 40
in which users feel able to trust
strangers on the internet. The method
Obesity drugs: 300
classes, such as derivatives. Then it was
a move into clearing and settlement.
— scanning eyeballs to create digital the weigh ahead Recently, these businesses have pushed
IDs — is misguided. 200 into data and risk management.
2 20
Channelling wider unease, the Celebrity endorsements for a new class 811 Diversification has made these
Kenyan government has ordered a halt of weight-loss drugs are mounting, 100 419 companies financial estuaries. Trading
to sign-ups. People had been queueing even if they do not work on Boris and listing fees ebb and flow with the
for iris scans in the east African Johnson, incorrigible it seems in 0 0 0 wider market. Cash channels never
country. Iris scanning could allow the lifestyle as in politics. But reports of Q1 2023 Q2 Q3 Q4 Q1 2024 2021 2022 2023 Barbie Oppenheimer drop too low thanks to steady sales of
FT graphic Sources: Nintendo; S&P Capital IQ; Box Office Mojo Nintendo Q1 2024 is Apr-Jun 2023
San Francisco and Berlin-based drastic side-effects are also emerging. data and analytics. These also swell
start-up the opportunity to amass a A personal-injury law firm in the US valuation multiples.
centralised biometric database. It has has filed a suit for a Louisiana woman In the world of gaming, new is good. royalties nearly tripled thanks to the to future profits, especially during Intercontinental Exchange and the
been dishing out tokens, ostensibly who allegedly suffered severe vomiting New console releases mean more movie. Many movie-goers have felt a the peak Christmas period. Shoppers London Stock Exchange Group, which
worth a few dollars each, in return. and lost teeth after taking the drugs hardware and software sales. sudden urge to play a Mario game. are more likely to buy newer models both reported results yesterday,
Participants clearly have no idea Ozempic and Mounjaro. Nintendo has the oldest console of its That meant going out and buying a from Sony and Microsoft. demonstrate differing impacts from
what their personal data is worth to The manufacturers say they take class. The Japanese video game group new Switch console. The platform has Nintendo shares are up 15 per cent tides and torrents. ICE owns the New
tech companies. They also have a patient safety very seriously but therefore surprised investors been on the market for seven years — this year, about half the increase York Stock Exchange and is one of the
worrying level of faith in the value of further personal injury claims may yesterday when earnings beat decades by gaming industry standards. registered by peer Sony. They trade largest bourse operators in the world.
the tokens. Tokens trade at $2.31 each, follow. They are unlikely to dispel records and market expectations. Another legend perpetuated its myth at a premium of just a tenth to Sony LSEG makes most of its money from
according to data site CoinGecko. That bullishness about obesity treatments. Operating profits were the highest profitably. After nearly 40 years since on a forward earnings basis, despite data services following acquisitions
means a market worth of just under These diabetes treatments are part of ever in the three months to June 30 at releasing the first Zelda game, the huge popularity of the Mario and culminating in Refinitiv.
$270mn for the tokens in supply. a drug class known as GLP-1 agonists. ¥185.4bn ($1.3bn). Sales rose 50 per Nintendo launched The Legend of Zelda: Zelda releases this year. US stock markets are booming again
But this is a small, highly illiquid Recently these have been used to treat cent to ¥461.3bn. Tears of the Kingdom. Sales have been Nintendo has made the best return and London is falling behind. The
market in which price moves may be weight loss, often off-label. The earnings surge followed the strong, especially in the UK. possible from its investment in the combined market value of LSE-listed
driven by bad data. And if tokens are Novo Nordisk of Denmark makes success of The Super Mario Bros. When an old console model remains current Switch model. Consoles and companies was $3.18tn at the end of
free, they lack the scarcity that Ozempic and Wegovy, approved by US Movie. This may have gone unnoticed popular, it saves on development costs. games still account for 92 per cent of June, a 0.7 per cent drop from two
propelled bitcoin’s price. Parent regulators in 2021 as an obesity to chin-stroking Oppenheimer Nintendo also skips the marketing group sales. For its shareholders, years ago, says the World Federation of
company Tools for Humanity has yet treatment. Eli Lilly of the US is audiences and pink-clad Barbie fans. costs of each new version launch. Ad returns will depend on Nintendo Exchanges. The equivalent figure for
to present a convincing business model responsible for Mounjaro. But the film, featuring the evergreen spending alone can exceed $15mn in producing a sequel to the Switch as the NYSE increased 3.4 per cent to
for Worldcoin. The European Medicines Agency is Brooklyn plumber, broke this year’s the month before a platform goes on compelling as regular reinventions of $24.8tn over the same period.
Fluctuating prices go against the separately reviewing data on the risk of global box office record. Licensing sale. An ageing console remains a risk its Zelda brand. Net revenue at ICE’s exchanges unit
start-up’s original plan, which was to suicidal thoughts linked to GLP-1 rose 9 per cent to $1.09bn from a year
provide tokens that could act as global agonists. Critics point to potential earlier. That helped it deliver a 44 per
currency for a universal basic income. misuse by people with eating disorders. cent increase in net income for the
Altman is riding high on the success The popularity of GLP-1 agonists has the human tendency to overeat. Legal Hollywood. The best tale the former pay-TV cord-cutting movement. Zaslav quarter, despite weakness in its
of OpenAI, the generative artificial caused supply issues. Prices are high. and regulatory actions are more likely mentee to GE’s “Neutron” Jack Welch will have to decide how many billions mortgage software business. By
intelligence start-up he co-created. Wegovy has a US list price of $1,349 for to drag on earnings than negate them. could drum up involved bean counting. to pay to keep NBA basketball rights. contrast, LSEG, which generates two-
Worldcoin’s iris scan is designed to 28 days’ supply. The company’s streaming service Like rival Disney, which is pondering thirds of its revenue from data and
verify humans, a countermeasure to Forecasts over the possible size of the Max hit adjusted ebitda break even in the future for its ESPN network, Zaslav analytics, reported an 18 per cent drop
the proliferation of AI of which OpenAI weight loss drugs market have Warner: the quarter after losing $550mn in the must judge whether news channel CNN in group pre-tax profits in the first half.
is a part. Altman is therefore trying to ballooned. Morgan Stanley recently same period of the previous year. is worth selling to a specialised owner. LSEG shares are up just 0.4 per cent
solve a problem he helped create. increased its estimate for the size of the script doctor needed WBD’s gross debt balance fell to $48bn The company says free cash flow over the past 12 months, compared
OpenAI has raised more than $11bn obesity drugs market from $54bn to after it paid back a couple of billion of could hit $5bn for the year. An with ICE’s 7.4 per cent gain. Even so,
in funding. Worldcoin has received far $77bn by the end of the decade. Shares David Zaslav, chief executive of Warner borrowings. It is on its way to shrinking extended work stoppage could provide LSEG still commands a premium over
less. Crypto start-ups fell out of favour in Novo and Lilly have flown in the past Bros. Discovery, said yesterday the US its leverage ratio from 4.6 times now to even more near-term upside. WBD’s ICE on a price to forward earnings
after the price of digital assets crashed 12 months and trade at premiums to media company is “in the business of less than three times over 18 months. stock price is down 50 per cent since basis. This reflects hopes that problems
last year. But Worldcoin investors are such rivals as Pfizer. storytelling”. In the current narrative, Annual savings from the merger of the merger closed 16 months ago and integrating Refinitiv are over. If so,
well regarded, including venture Novo is shortly due to release the Zaslav appears to be the ham-fisted Discovery and Warner Media are set to its enterprise value now sits at $76bn. expect riverine flow to buoy LSEG
capital firm Andreessen Horowitz. results of a study into whether Wegovy corporate villain. In recent months, rise from $4bn to $5bn. The group’s numbers are decent to higher, even as ICE bobs up and down
The same concerns that hobbled cuts the risk of cardiac trouble in university students have jeered him But the plot remains complicated. good, given diminished expectations. in stronger tides of trading.
Meta’s digital token project could people who have a history of heart and Steven Spielberg and Martin WBD had boosted near-term profits by But Wall Street has soured on big
stymie Worldcoin. Regulators have disease or obesity. If so, it will bolster Scorsese have wrangled with him amid licensing intellectual property to others entertainment companies. Their Lex on the web
already raised alarms. Tokens are shares further. The real prize for a strike by writers and actors. such as Netflix. But this controversial economics do not work either for For notes on today’s stories
unavailable in the US, where regulators investors further down the road is a big Yesterday, Zaslav did not have much practice can help competitors. WBD’s either the talent or the capital markets. go to www.ft.com/lex
are still deciding on definitions for class of affordable drugs that reduce good news on the big picture in cable networks are suffering from the That script will be hard to flip.

CROSSWORD
No 17,486 Set by LEONIDAS
        ACROSS

 1 Directly organise search with wife lost

(2,3,4,5)
  10 Hamlet maybe disastrous without lead
on reflection (5)
11 Scowl after brief prank with old Jack (9)
12 Best drug cut with end bits of talcum
  separately (7)
13 Capital one sunk into struggling casino
(7)
14 Yankee nerd with dope cycling back to
     pub (5)
16 Raw fish inside of fete for VIP treatment
(3,6)
19 Complicated vessel, one with a fixed
   course? (9)
20 Holy scroll I see to the right of Mount (5)
22 Exaggerate version of Fagin in Moody’s
clothes? (7)
     25 Fabric bird with 50% off (no returns) (7)
27 Reason allotment has beer (9)
28 What Ma plays from some contrary
collection (5)
  29 Abbess in car crossing the lady’s lovely
isle (6,8)

DOWN

2 Hot soldiers climbing trees excited
tourist (9)
3 Race male to see where females are (5)
4 Boat charts army abroad regularly with
navy (9)
JOTTER PAD 5 Hunter stringing up black French duck
(5)
6 Diagram of fine church among vulgar
Solution 17,485 drawings? (9)
7 Jeremy possibly working to block NY tax
3 ( $ & + ( 6 $ 1 ' & 5 ( $ 0 collectors (5)
$ 7 ( 2 ( $ / 2 8 Right vehicle in place to get help (7)
, 6 + 0 $ ( / : $ 5 5 $ 1 7 9 Copied English chapter on dictionary (6)
1 ( ' ( 6 2 6 2 15 A Christian touring island city (9)
7 5 , $ ' 6 , 0 8 / $ 7 2 5 17 Repackage third cape that’s going for a
7 6 5 ( , : snip (4,5)
+ 2 7 + ( $ ' ( ' & 2 & 2 $ 18 Case of alcohol and of grease both
( 6 < , / < upended (9)
7 ( 5 1 6 6 3 $ 5 ( 5 2 2 0 19 Drone beat pedestrian (7)
2 $ 3 $ 5 $ 21 German guy probably reversed second
: $ 1 ' ( 5 ( 5 6 1 $ , $ '
carriage (6)
23 Huge Tatar provides accommodation for
1 & / 3 & 6 1 1
nag (3,2)
5 ( + ( $ 7 6 ( 3 , 6 2 ' ( You can now solve our crosswords 24 Keep heading north to catch eastern
( ( 1 , 1 1 & 6 in the new FT crossword app at poet (5)
' , 6 $ ' 9 $ 1 7 $ * ( 2 8 6 ft.com/crosswordapp 26 Suffer in short treatment (5)*