Business

WASHINGTON — Global equity markets that have see-sawed in recent weeks but show signs of "overvaluation" are at risk of a sharp correction as major central banks raise interest rates, a top International Monetary Fund (IMF) official said on Tuesday.

"We are certainly living in very turbulent times," said Gita Gopinath, the newly-installed number two at the IMF, adding that "markets look overvalued in several spots and there is a high level of exuberance".

Wall Street put in an especially dramatic performance on Monday, with the broad-based S&P 500 sinking 3.5 per cent before staging a recovery late in the day and ending with a modest gain.

The index jumped 27 per cent in 2021, but investors have become wary amid rising inflation which has prompted the Federal Reserve (Fed) to signal that a rate hike is coming soon, likely in March.

The Fed's exit from highly stimulative monetary policy is "needed given the strength of the recovery in the US and the inflation pressures that we are seeing", Gopinath told reporters.

"One would expect that as interest rates go up, we will see corrections in markets. The hope is that this will stay orderly." 

There remains a lot of uncertainty about how many times the Fed will raise rates to contain the price increases, and that will weigh on markets, she said.

But as long as the Fed's moves are "well telegraphed" and officials explain the rationale, "That should certainly help with having a more orderly correction in markets."

BEIRUT — Lebanese officials began much-delayed talks with the International Monetary Fund (IMF) on Monday on support measures aimed at lifting the country out of its worst-ever economic crisis.

"We hope the negotiations will be concluded as soon as possible, but given the complexity of the issues it is possible that other rounds will be held," Deputy Prime Minister Saade Chami, who heads the Lebanese delegation, said in a statement.

The talks are taking place online due to COVID-19 restrictions.

Lebanon is hoping to obtain a financial rescue package to rekindle an economy that has been in free fall for two years.

The previous government held several rounds of talks with the multilateral lender, but was unable to secure a bailout, amid a failure by the two sides to agree on the scale of financial losses stemming from the meltdown.

The current government opened a preparatory dialogue with the IMF last year and has settled on a figure of around $69 billion as its estimate for the financial sector's losses, ahead of the talks that began on Monday.

The country defaulted on its sovereign debt in 2020, the currency has lost around 90 per cent of its value on the black market and four out of five Lebanese are now considered poor by the United Nations.

Despite the country's shocking social and economic decline, Lebanon's ruling class has continued to stall reforms demanded by foreign donors ahead of any assistance.

The Cabinet of Prime Minister Najib Mikati met on Monday for the first time since mid-October, after months of political horsetrading between its rival factions.

"In this first round of negotiations and over the next two weeks, we will discuss several topics, including the budget, the banking sector and the exchange rate," Chami said in the statement issued by Mikati's office.

TUNIS — Artificial intelligence (AI) firm InstaDeep, created on two laptops in Tunisia in 2014, has raised $100 million from investors, including Google and BioNTech, the company said on Tuesday.

InstaDeep will use the funding to develop its infrastructure, hire experts and speed up launching AI projects in "biotech, logistics, transportation and electronics manufacturing", it said in a statement.

AI is a branch of computing that builds machines capable of tasks that would normally need human-like intelligence, in everything from virology to transport.

InstaDeep said it had worked with German pharma firm BioNTech to create an immunotherapy lab making use of AI, as well as an AI-powered early warning system for detecting high-risk coronavirus variants.

The firm has also applied AI to complex train scheduling challenges for German railway firm Deutsche Bahn.

InstaDeep chief Karim Beguir said the firm saw "wide-ranging opportunities to deploy our AI products to tackle complex real-world problems".

According to US news channel CNBC, a survey of technology executives found that 81 per cent believed artificial intelligence would be very or critically important to their companies in 2022.

LONDON — Airlines must operate more flights in Britain this summer as demand recovers from the pandemic — or lose lucrative take-off and landing slots, the UK government warned on Monday.

Carriers operating in Britain are currently using about 50 per cent of their slots as the sector continues to recover from the long-running COVID crisis.

This has helped to ensure that airlines have avoided carbon-intensive "ghost flights" — with none or few travellers during pandemic restrictions.

Carriers operating in Britain have traditionally been required to use 80 per cent of their slots, but the target was suspended owing to COVID.

From the end of March, carriers must use slots at least 70 per cent of the time in order to keep them, the Department for Transport (DfT) said in a statement on Monday.

But airlines will also "benefit from added flexibility over when they are justified not to use them", the DfT said.

During the pandemic, the rule had been eased "to provide financial stability to the sector and prevent environmentally damaging ghost flights", added Aviation Minister Robert Courts. 

"As demand for flights returns, it's right we gradually move back to the previous rules while making sure we continue to provide the sector with the support it needs."

Monday's news was welcomed by London airports.

The move "strikes the right balance between driving recovery and promoting competition", said a Heathrow spokeswoman.

The aviation sector was slammed by the COVID-19 health emergency that started in early 2020, grounding planes worldwide and decimating demand for air travel.

Recovery has been hampered by frequent changes to travel restrictions and testing requirements following the emergence of the Omicron variant late last year.

WASHINGTON — Blocks from the White House, an unassuming edifice in downtown Washington that once held offices used by the US Department of Justice is set to be converted into homes for hundreds of people.

The transformation of the vacant office space is among a surge of "adaptive reuse" projects that swept the US property market in 2021, where developers bought hotels and offices that were struggling to get business and announced plans to turn them into apartments.

"The market spoke, and it said the value was greater for a conversion than for it continuing as office space," said Michael Abrams, managing director of Foulger-Pratt, the property development firm that is turning the 14-storey building on New York Avenue into 255 apartments.

A survey by apartment listing service RentCafe found about 20,100 apartments were built out of converted properties in the United States last year, almost double the number converted in the year prior.

Such conversions could offer a way forward for US downtowns, which haven't been the same since office workers fled as COVID-19 broke out nearly two years ago, leaving landlords and local businesses struggling.

"The slow office market recovery is just going to make it that much more expensive to carry vacant office buildings," Abrams said.

Conversions may also play a role in easing a shortage of affordable housing, particularly in cities like Washington, where notoriously high rents are a feature of life.

"From the overall perspective, we just need increased supply. By having more supply, both the home price growth will come down and the rents will come down," said Lawrence Yun, chief economist of the National Association of Realtors.

Even more expensive 

Despite the downturn caused by COVID-19, the median price of existing homes climbed 15.8 per cent over the course of 2021, and by last month supply had hit an all-time low, according to NAR data, likely exacerbating a crisis of affordable housing that predated the pandemic.

As of 2017, 48 per cent of tenants were considered "rent burdened" by the US Government Accountability Office — meaning they paid more than 30 per cent of their income on rent — a figure that had risen 6 percentage points over the preceding 16 years.

The United States, meanwhile, has a glut of offices. With many of them dating to the 1980s, they are now too old to be attractive to companies, said Tracy Hadden Loh, a fellow at Brookings Metro.

With their designs centered around outdated needs like space for file cabinets, "Really just the entire building is obsolete", she said in an interview.

Corporate pullout 

Marc Ehrlich, chief investment officer at Rose Associates, which has converted New York City offices into housing, said such projects tend to be "well-located properties that need a higher and better use".

One of his firm's latest undertakings is the transformation of an office once used by telecommunications firm AT&T into a place people want to live.

Lacking amenities like covered parking, the building is unlikely to attract commercial tenants, Ehrlich said.

However, the new apartments will feature co-working spaces, since many tenants will likely want to continue working from home, he said. 

In Washington, developers are pouncing on properties formerly rented by the region's top employer, the federal government. 

This includes The Wray, an office building used by the State Department, but which has been totally renovated to house apartments.

The only signs of its former use are in the lobby, where the tiles are original, as is a directory listing the names of State Department offices once based there.

"The pool of tenants that goes back into these buildings is dramatically diminished, and that's what's putting the stress on that tier of property, that's what's creating the opportunity," said Abrams.

Adaptive reuse projects tend to demand high rents, Loh said, since they often require expensive renovations such as the construction of new bathrooms in buildings where they were once communal.

While expanding inventory has been shown to relieve price pressures elsewhere in the housing market, "This isn't a solution to the housing crisis," she added.

"This is a solution to revitalise areas like downtowns that are super dominated by places like office spaces."

COLOMBO — Sri Lanka consumer prices shot up a record 14 per cent in December, surpassing a previous high of 11.1 from a month earlier, official figures showed on Saturday as food and fuel shortages worsen.

Senior ministers warned parliament last week of a growing food crisis with rice harvests due in March expected to be drastically lower after an agrochemical import ban last year saw farmers abandoning more than 30 per cent of agricultural land.

The country’s tourism-dependent economy has been hammered by the pandemic with the government imposing broad import restrictions to avert a foreign exchange crisis, triggering a shortage of essential goods.

The Census and Statistics Department said year-on-year inflation in December was the highest since the National Consumer Price Index (NCPI) was established in 2015.

It said food inflation also hit a record 21.5 per cent, up from 16.9 per cent in November and 7.5 per cent a year ago.

The use of substandard organic fertiliser and pesticides has sharply reduced vegetable and fruit crop yields. 

After intense farmer protests, the government lifted its agrochemical import ban in October, but banks are still short of dollars to finance imports.

Supermarkets have been rationing milk powder, sugar, lentils and other essentials for months with a top official warning last month of more restrictions to feed those most in need.

But agriculture ministry secretary Udith Jayasinghe was sacked hours after calling for a formal rationing scheme to ensure that mothers, the elderly and the sick could be fed in the months ahead.

Sri Lanka's foreign reserves have tanked since President Gotabaya Rajapaksa took office in 2019, going from $7.5 billion to $3.1 billion at the end of December. The current figure is enough to finance less than two months of imports.

International rating agencies have downgraded Sri Lanka over fears of default on its $35 billion foreign debt. The government has insisted it can meet the obligations.

TOKYO — Tokyo stocks closed higher on Thursday, bouncing back from sharp losses in the previous session as China's central bank cut key lending rates, brightening market sentiment.

The benchmark Nikkei 225 index added 1.11 percent, or 305.70 points, to 27,772.93, while the broader Topix index gained 0.98 percent, or 18.81 points, to 1,938.53.

The dollar fetched 114.48 yen in Asian trade, against 114.33 yen in New York late Wednesday. 

Gains in Tokyo shares were "a reaction to yesterday's losses", Makoto Sengoku, senior equity market analyst at Tokai Tokyo Securities, said

Aside from the rebound, there were some positive factors at play, he said: "China cut key rates, and investors are reacting positively to that."

On Wednesday, the Nikkei fell more than three per cent as market heavyweight Sony plummeted on news of Microsoft's plans to buy US gaming giant Activision Blizzard.

The ongoing semiconductor shortage, worries over US inflation and rising virus cases in Japan also weighed on the market during Wednesday's session.

"I think yesterday's fall was excessive. But the market did face many negative factors," Sengoku said.

On Thursday, Sony Group shares rebounded 5.84 per cent to 13,135 yen after plunging nearly 13 per cent in the previous session. 

Toyota, which had previously fallen on news that it no longer expects to meet its annual production target, rose 1.71 per cent to 2,342.5 yen, while Panasonic edged up 0.03 per cent to 1,293.5 yen.

WASHINGTON — After Microsoft announced it would spend tens of billions of dollars to buy a video game company, World Bank President David Malpass on Wednesday drew a contrast between the deal and the amount of money rich nations have pledged to help poor countries facing higher debt loads. 

"I was struck this morning by the Microsoft investment -- $75 billion in a video gaming company" compared to just $24 billion over three years in aid for the poorest countries, Malpass said, referring to donations allocated in December by 48 high- and middle-income governments.

"You have to wonder, is this the best allocation of capital?" he said of the Microsoft deal in a discussion at the Peterson Institute for International Economics.

"There has to be more money and growth flowing into the developing countries."

Microsoft on Tuesday announced the purchase of US gaming giant Activision Blizzard, the firm behind hits like "Call of Duty."

Malpass has called on the richest nations in the Group of 20 to provide more debt relief to the world's least-developed countries that qualify for interest-free loans.

A G-20 debt service suspension initiative expired at the end of 2021, and this year alone, those countries must pay $35 billion in debt service.

"The debt payments are staggering," and it has become a "compounding" problem, Malpass said.

PARIS — The oil market could face another volatile year but demand is surging higher as the sector has weathered the impact of the Omicron coronavirus variant, the International Energy Agency (IEA) said on Wednesday.

The IEA revised its demand estimates, saying it increased by 5.5 million barrels per day in 2021 and would grow by 3.3 million bpd in 2022 — 200,000 bpd higher than its previous estimate.

This will take total demand above pre-Covid levels in 2022, at 99.7 million barrels per day.

While Covid cases have soared, "measures taken by governments to contain the virus are less severe than during earlier waves and their impact on economic activity and oil demand remain relatively subdued", the IEA said.

But the agency, which advises governments on energy policy, said supply growth expectations were being tempered by "disruptions and production shortfalls" by some members of the OPEC+ group of top oil producers.

"If demand continues to grow strongly or supply disappoints, the low level of stocks and shrinking spare capacity mean that oil markets could be in for another volatile year in 2022," the IEA said.

Oil prices tanked as the pandemic emerged in 2020, but have recovered since then, reaching their highest levels in more than seven years on Tuesday.

NEW YORK — Microsoft announced on Tuesday a landmark $69 billion deal to purchase US gaming giant Activision Blizzard, grabbing the sex harassment scandal-hit firm as the tech colossus seeks to boost its power in video games.

Merging with troubled Activision will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony, it said, a major shift in the booming world of games.

"This acquisition will accelerate the growth in Microsoft's gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse," Microsoft said in a statement.

Activision, the California-based maker of "Candy Crush" has been hit by employee protests, departures, and a state lawsuit alleging it enabled toxic workplace conditions and sexual harassment against women.

Over the past seven months the company has received about 700 reports of employee concerns over sexual assault or harassment or other misconduct, in some cases separate reports about the same incident, The Wall Street Journal has reported.

Nearly 20 per cent of Activision Blizzard's 9,500 employees have signed a petition calling for CEO Bobby Kotick to resign.

"Acquiring Activision will help jump start Microsoft's broader gaming endeavors and ultimately its move into the metaverse with gaming the first monetisation piece of the metaverse in our opinion," Wedbush analysts said after the news broke.

Troubled Activision 

"With Activision's stock under heavy pressure [CEO related issues/overhang] over the last few months, Microsoft viewed this as the window of opportunity to acquire a unique asset that can propel its consumer strategy forward," Wedbush added.

Microsoft has just marked 20 years of the "Halo" video game franchise that turned its Xbox console into a hit.

Microsoft launched a host of initiatives to mark two decades of both Halo and the Xbox, including a virtual museum exploring key moments in the console's history.

Xbox remains a key player in a video game industry now thought to be larger than the movie sector, with market research firm Mordor Intelligence valuing it at $173.7 billion in 2020.

Troubles, meanwhile, have stacked up for Activision over its sex harassment and discrimination scandal.

In July, California state regulators accused the company of condoning a culture of harassment, a toxic work environment, and inequality.

In September the Securities and Exchange Commission launched a probe into the company over "disclosures regarding employment matters and related issues".

And two months later the Journal reported that Kotick, accused of mishandling the harassment complaints, had signalled he would consider stepping down if he failed to quicky fix the company culture. He has led the company for more than three decades.

Late last year chief operating officer Daniel Alegre pledged a 50 per cent increase in female and non-binary staff over the next five years so that they will account for more than a third of Activision's workers.