Business

HONG KONG — Stock markets were mixed on Tuesday as investors battled to maintain a global rally, with inflation still niggling over a pick-up in oil prices while a top Fed official pressed for a series of sharp rate hikes.

But optimism was boosted by data indicating an improvement in China's crucial manufacturing sector, helped by the easing of some strict COVID containment measures in major cities including Shanghai.

With Wall Street closed for a holiday, there were few catalysts to help extend the gains enjoyed in recent days, allowing inflation and borrowing costs to take centre stage.

Crude prices built on Monday's advance after the European Union reached a deal on a partial embargo of Russian imports as part of a punishment for its invasion of Ukraine.

Brent broke above $122 for the first time in two months and WTI sat around $117 as European chiefs said the latest sanctions would ban purchases of Russian oil delivered by sea, though there would be a temporary exemption for pipelines.

While widely expected, the agreement adds further upside to crude just as China begins to ease COVID restrictions in Shanghai and Beijing, raising the likelihood of a jump in demand from the world's number two economy.

The lift in oil prices will help fan already elevated inflation and pile further pressure on central banks to tighten monetary policy to prevent prices from running out of control.

In a sign of the struggle policymakers face, German prices are rising at their fastest pace ever while Spain's topped forecasts. 

In the United States, the chances of an extended period of rate hikes were increased after Federal Reserve (Fed) Governor Christopher Waller said he favoured half-point hikes "for several meetings" until inflation slows towards the bank's two per cent target. 

Waller added that his goal was in line with market expectations, which is about 2.75 per cent in December.

President Joe Biden was due to hold talks with Fed boss Jerome Powell on Tuesday to discuss the inflation situation.

Jobs data on Friday will provide an update on the state of the US economy in light of soaring prices and rising rates.

'A big if' 

The prospect of a period of rates rising higher for longer lifted the dollar against the euro, pound and yen as well as other currencies.

In Asia, there was some much-needed cheer from data showing China's manufacturing shrunk in May at a slower rate than expected.

The Purchasing Managers' Index — a key gauge of manufacturing activity — hit 49.6 last month, improving from April's 47.4, which was the worst reading since early 2020.

However, it remained below the 50-point mark separating growth from contraction and showed the Chinese economy was still struggling.

Jeffrey Halley at OANDA said: "A less worse than expected set of data has prompted a modest rally in China equities today, holding the promise of an accelerating recovery in June if the virus situation remains benign."

But he warned: "That's a big if."

Hong Kong and Shanghai rose more than 1 per cent, while Seoul, Singapore, Taipei, Jakarta, Bangkok and Wellington also advanced.

Tokyo, Sydney, Mumbai and Manila fell.

London edged up but Paris and Frankfurt dipped.

AXA Investment Managers' Chris Iggo warned that another 10-15 per cent retreat for stocks could still be a possibility.

"The mood is temporarily better in markets," he said, adding that "I think the worst is over for bond markets but picking the bottom in equities is trickier".

FRANKFURT — Germany and Spain on Monday reported another jump in inflation in May as the war in Ukraine continued to push up food and energy prices, heaping pressure on the European Central Bank to speed up interest rate rises.

In Europe's top economy Germany, the annual inflation rate quickened to 7.9 per cent to reach the highest level since reunification in 1990, according to preliminary data from federal statistics agency Destatis.

The last time inflation accelerated at a comparable pace was in West Germany in January 1952.

Spain's inflation rate hit 8.7 per cent year-on-year in May, after slightly cooling to 8.3 per cent in April, according to the INE National Statistics Institute.

As in other countries, the increase was driven by soaring costs for energy and commodities despite efforts from the Spanish government to ease the burden on households.

In Germany, Destatis said energy prices rose more than 38 per cent in May, while food prices were up 11 per cent.

"Energy prices, in particular, have increased considerably since the war started in Ukraine and have had a considerable impact on the high inflation rate," Destatis said.

"Another factor with an upward effect on prices is interruptions in supply chains caused by the COVID-19 pandemic," it added.

Analysts surveyed by FactSet had expected a lower inflation rate of 7.7 per cent for Germany.

July rate hike 

Monday's figures suggest the 19-nation currency club has yet to reach peak inflation, with many European nations highly reliant on Russian gas and oil imports. Heavy Western sanctions against Russia have also added further upheaval to already strained global supply chains.

The latest eurozone inflation data will be released on Tuesday.

In April, eurozone inflation soared to an all-time high of 7.5 per cent — well beyond the European Central Bank (ECB) two-per cent goal.

The ECB has signalled it plans to hike interest rates in July for the first time in over a decade in a bid to tame inflation, following similar recent moves by other major central banks.

ECB chief Christine Lagarde has said that the bank aims to end negative interest rates by September.

The ECB currently has a bank deposit rate of minus 0.5 per cent, meaning lenders pay to park their excess cash at the central bank.

"The ECB has clearly passed the stage of discussing whether and even when policy rates should be increased," said ING bank economist Carsten Brzeski. 

"The only discussion seems to be on whether the ECB should start with a 25 basis point rate hike in July or 50 basis points."

LONDON — The BBC is to axe 1,000 jobs and scrap some broadcast channels in traditional form as it prioritises digital and copes with a funding freeze, the British public service broadcaster said on Thursday.

Aiming to "build a digital-first public service media organisation", the BBC said it would "change in step with the modern world, giving audiences the content they want... in the ways they want it".

The network will create a single 24-hour television news channel serving the UK and abroad, absorbing BBC World.

Channels including children's channel CBBC, BBC Four and Radio 4 Extra will stop traditional broadcasting, while "a number" of World Service language services will become digital only.

Director General Tim Davie made a speech to BBC staff on Thursday in which he hailed "a fresh, new, global digital media organisation which has never been seen before.

"We need to evolve faster and embrace the huge shifts in the market around us," he told them.

The first phase of the changes, including job cuts, will save £500 million (585 million euros, $630 million) a year, £200 million of which will help offset the £285 million funding gap caused by the government earlier this year freezing the television licence fee.

"The BBC will also reinvest £300 million to drive a digital-first approach, through changes to content and output and additional commercial income," a statement said.

Further details are to be announced in the coming months, said the BBC, which marks its centenary this year.

The broadcaster has faced increasing claims from right-wingers since the UK's divisive Brexit referendum in 2016 of political bias, and pushing a "woke", London-centric liberal agenda.

The BBC, founded by Royal Charter and operating independently of government, has faced similar accusations from the political left.

Critics accused Culture Secretary Nadine Dorries of "cultural vandalism" and wrecking a world-renowned British institution when she announced the licence-fee freeze.

The fee — payable by every household with a television set — funds BBC television, radio and online services, as well as programming, many of which are exported commercially worldwide.

Supporters maintain the fee — currently £159 for a colour TV — provides excellent value for money, and a range of services from news and current affairs to wildlife documentaries, children's output, drama and music.

But opponents, including rival commercial broadcasters, have long complained the guaranteed funding model, which criminalises non-payers, is unfair.

BRUSSELS — Ambassadors from the 27 European Union member states were scheduled on Sunday to examine a compromise that could enable them to break the deadlock on a sixth round of economic sanctions against Russia, including a landmark halt to Russian oil imports, according to EU sources.

The latest round of proposed sanctions has been blocked by landlocked Hungary, which has no access to seafaring oil cargo ships and is dependent for 65 per cent of its oil needs on Russian crude supplied via the Druzhba pipeline. 

Budapest has rejected as inadequate a proposal to allow it two years longer than other EU states to wean itself off Russian oil. 

It wants at least four years and at least 800 million euros ($860 million) in EU funds to adapt its refineries to process non-Russian crude and boost pipeline capacity to neighbouring Croatia.

The compromise solution put to national negotiators excludes the Druzhba pipeline from a future oil embargo. It would only impose sanctions on oil shipped to the EU by tanker vessel, the sources said.

The Druzhba pipeline accounts for a third of all EU oil supplies from Russia. Maritime cargos account for the remaining two thirds.

The compromise was tabled by France, which currently holds the rotating EU presidency, and by the European Council, which represents the governments of the EU nations. 

Its aim is to break a stalemate that has, since early May, prevented the EU from imposing a sixth round of sanctions on Moscow over its war in Ukraine.

It would end the purchases of Russian crude within six months and Russian petroleum products by the end of the year. It would also impose additional sanctions on Russian banks and expand the list of Russian individuals blacklisted by the bloc.

Another option under consideration would be to postpone the entire package of new sanctions until a solution can be found to provide Hungary with alternative oil supplies, the sources said.

The search for a compromise has accelerated in recent days to avoid divisions over Russia clouding the summit of EU heads of state and government due to take place in Brussels on Monday and Tuesday.

Ukrainian President Volodymyr Zelensky is to address the summit by video link when it begins on Monday afternoon.

If EU ambassadors succeed in reaching a compromise on an oil embargo, it will still need to be approved by their governments before it can be put to the summit.

WASHINGTON — Fast-food employees in Manhattan demonstrating for a wage of $20 an hour: a demand unthinkable before the COVID-19 pandemic has become unexceptional, as short-handed companies offer big wage increases without, however, doing much to narrow a yawning income gap.

The upward wage pressure has come from several sources, including an unusually tight labour market and child-care challenges linked to the pandemic, as well as chronically underpaid workers unwilling to return to pre-pandemic conditions.

Employers have not only had to raise wages but in some cases have offered improved health care insurance and bonuses.

"The country's major employers have understood that they need to bring wages up to scratch if they want to attract reliable workers who can help them navigate this period of major uncertainty," said Gregory Daco, chief economist at Ernst & Young Parthenon.

Apple, after announcing it was raising its hourly minimum wage to $22, said in a statement, "Supporting and retaining the best team members in the world enables us to deliver the best, most innovative products and services for our customers."

The tech giant said that in addition to sector-leading wages, it was providing "a robust range of benefits" for full- and part-time employees.

Higher wages may also help Apple in its efforts, like Amazon, to discourage unionisation efforts. 

Apple's $22 hourly minimum represents a 45 per cent increase from the company's minimum in 2018, the group said.

In the summer of 2021, facing serious labour shortages, several major companies including Amazon, Target and Chipotle pushed their base hourly wage past $15, more than double the federal minimum of $7.25, a figure unchanged since 2009. 

Bank of America said this week that it was lifting its hourly minimum to $22, a figure set to rise to $25 by 2025.

Across the US, some of the biggest wage increases have gone to some of the lowest-paid workers — people unafraid in the COVID era to make their demands known. 

While there have been wage increases at all salary levels, only the lowest-paid workers saw rises big enough to compensate for today's high inflation rates, according to Mahir Rasheed, an economist with Oxford Economics.

Put another way, he said, "Even with stronger incomes, most consumers are actually seeing wages down in real terms."

Deceptive wage hikes 

So even if the increases might appear significant — particularly for restaurant and hotel employees — workers in that sector are still earning less than the national median salary.

"The increases look huge, with some workers going from $7 to $10, from $10 to $12, from $12 to $15 or even from $15 to $20," said Daco.

And yet, he added, "$15 an hour is $30,000 a year, considerably less than the (US) median salary of $50,000 to $60,000".

What's more, the increases might be a one-time affair.

"It's unlikely that these wage gains will continue to increase at a persistent clip over the next year," said Rasheed, even if some companies make occasional raises in a bid to attract qualified workers.

The increases are bound to slow, he added, as more and more people return to work.

As the labour market opens up, workers' negotiating power will erode, Daco said.

"Unfortunately, I don't expect those gains to be durable in the long term, because we haven't seen increases in the federal minimum wage," said Elise Gould, an economist with the Economic Policy Institute, an American think tank. 

She predicted "a decided slowdown in wage gains."

In a study published last month, she noted that average wages rose by 4.4 per cent in the first year of the pandemic in the US, but declined by 1.7 per cent in the second year.

Despite the recent increases, "wage levels remain vastly unequal across the US labour market, with disparities among workers by wage level, gender and race/ethnicity remaining stark", Gould wrote.

BEIJING — Chinese e-commerce company Alibaba said on Thursday its profit fell 59 per cent in the last fiscal year, joining other tech firms that reported lacklustre results while grappling with COVID-19 restrictions and a sector crackdown.

China's economy has been battered by the fallout from strict COVID curbs including lockdowns and transport restrictions that have kept consumers home, pushed up unemployment, and tangled supply chains.

Alibaba has also had to contend with heightened competition and a wide-ranging regulatory crackdown on alleged anti-competitive practices by China's tech giants, driven by fears that massive Internet companies control too much data and expanded too quickly.

The Hangzhou-based group warned it would not give forward-looking financial guidance due to COVID risks and uncertainty after full-year profit slumped to 62 billion yuan ($9.8 billion).

Citing "macro challenges that impacted supply chains and consumer sentiment", Alibaba also announced a loss of 16.2 billion yuan for the January-March quarter, as the value of its investments fell.

The tech company has seen its market value plummet since Beijing launched its sweeping crackdown in 2020 on some of China's largest home-grown companies.

The crackdown included a last-minute cancellation of a planned initial public offering by Alibaba's financial arm Ant Group — which would have been the world's largest public offering at the time.

The company was also hit with a record $2.75 billion fine for alleged unfair practices last year.

But Alibaba — seen as a gauge of consumer sentiment — said on Thursday its revenue grew nine per cent in the last quarter to 204.1 billion yuan.

This was better than expected in a Bloomberg forecast, after Chinese consumers took to online shopping during COVID lockdowns that kept millions at home.

The company's revenues — generated mainly by its core e-commerce operations — were up 19 per cent for the fiscal year ending March 31.

COVID 'uncertainties' 

In a sign of a patchy outlook however, the company warned that its domestic business has been "significantly affected by the COVID-19 resurgence in China, particularly in Shanghai". 

"Considering the risks and uncertainties arising from COVID-19... we believe it is prudent at this time not to give financial guidance as we typically do at the start of the fiscal year," it added.

Alibaba's earnings follow a series of sluggish results by prominent Chinese tech firms, with Internet giant Baidu on Thursday reporting a net loss of 885 million yuan ($140 million) in the first quarter.

Baidu's business has been "negatively impacted" by China's recent COVID-19 resurgence since mid-March, co-founder Robin Li said in a statement.

He added that virus-related challenges continue to pressure its near-term operations.

Last Wednesday, Tencent reported record low quarterly revenue growth at 135.5 billion yuan ($20.1 billion) in the first quarter, putting year-on-year expansion at nearly zero.

China is the last major economy to stick to a strict zero-COVID policy, which is now being tested by the infectious Omicron variant.

The country's economic slowdown now appears to have motivated a softer approach towards the vast, money-spinning tech sector.

In recent weeks, the government said it will roll out measures to support the virus-battered economy, and indicated that it will ease the crackdown.

Chinese tech shares surged in late April after officials pledged support for Internet firms at a Politburo meeting.

SAN FRANCISCO — Twitter agreed to pay $150 million to settle allegations the platform gave advertisers some user information that was supposed to be employed to strengthen account security, US authorities said on Wednesday.

The Federal Trade Commission and the Department of Justice accused Twitter of taking phone numbers or email addresses provided to tighten privacy and then letting advertisers use the details to make money.

"Twitter obtained data from users on the pretext of harnessing it for security purposes but then ended up also using the data to target users with ads," commission chair Lina Khan, said in a release.

The personal information that users hand over to tech companies, and how that data gets used, is a front of repeated conflict between regulators and powerful firms like Facebook parent Meta, Twitter and others.

Clashes over privacy have resulted in periodic suits or settlements but critics have long called for a comprehensive updating of US national rules for how people's data is handled online.

In a five-year period ending in 2019, more than 140 million Twitter users gave phone numbers or email addresses to the San Francisco-based service to help secure accounts with two-factor authentication, regulators said.

The security technique involves augmenting passwords with one-time codes sent by text or email messages.

Without telling users, Twitter let advertisers use the personal information to target ads, said the FTC, which worked with federal prosecutors to pursue a case against the tech firm.

"Consumers who share their private information have a right to know if that information is being used to help advertisers target customers," US Attorney Stephanie Hinds said in a release.

Along with agreeing to pay $150 million, Twitter will implement new measures including having its privacy program regular evaluated by an independent assessor, the settlement deal indicated.

"Keeping data secure and respecting privacy is something we take extremely seriously, and we have cooperated with the FTC every step of the way," Twitter chief privacy officer Damien Kieran said in a blog post.

"We have aligned with the agency on operational updates and program enhancements to ensure that people's personal data remains secure and their privacy protected", he added, noting the penalty has already been paid.

The settlement, which will need to be approved by a judge, also requires Twitter to inform all of the people who joined Twitter prior to late 2019 about the deal and options for protecting their privacy.