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Good morning. We have an exclusive interview with the head of Britain’s top financial regulator today.
The Financial Conduct Authority’s chief executive, Nikhil Rathi, has said he is “not convinced” that private equity groups pose a systemic risk, taking a stance at odds with the Bank of England, which last week said lenders should stress test their exposure to the $8tn industry because of risks to the wider economy.
“What I do think is important is that the [private equity] industry doesn’t nickel-and-dime us on data,” he told the Financial Times, “because we need to understand the evidence here and take a view on what is happening.”
Rathi also sits on the BoE’s financial policy committee, which maps risks to the wider economy. In its most recent report, the committee escalated warnings about private equity’s leverage, transparency and valuations.
“There are risks in private markets, there is work to be done, but I don’t think we should go into overkill regulatory mode where we put leverage limits on all of this activity, if actually, we haven’t got the evidence for it,” Rathi said. Here’s more from his remarks to Ortenca Aliaj in London.
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UK banks: Interest earned by the largest high street lenders on their BoE reserves surged 135 per cent to more than £9bn last year, according to data released yesterday.
Here’s what else I’m keeping tabs on today:
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Economic data: The OECD publishes its economic outlook, while S&P Global has manufacturing purchasing managers’ indices for the EU, France, Germany, Italy, Poland, Russia and Spain. The US reports monthly factory orders.
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Meetings: French President Emmanuel Macron will meet his Japanese counterpart Fumio Kishida in Paris, where Japan is chairing the OECD ministerial council meeting. The Asian Development Bank’s annual meeting begins in Tbilisi, Georgia.
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UK local elections: Prime Minister Rishi Sunak’s political fate depends on contests for more than 2,600 council seats and 11 mayoralties taking place across England and Wales today. Our Inside Politics newsletter and Political Fix podcast will be holding a special event next Wednesday to discuss the results. Sign up here.
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Results: Apple, ArcelorMittal, ConocoPhillips, ING, Shell, Smiths News, Standard Chartered and Universal Music report.
Five more top stories
1. The US military has nearly completed a $320mn floating pier off Gaza, a complex project to allow seaborne humanitarian aid to the besieged enclave where land routes have been disrupted by politics and war. Hundreds of American troops have spent weeks building the structure promised by President Joe Biden in early March. But here’s why a senior UN official has called it “a wasteful distraction”.
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Ceasefire talks: US secretary of state Antony Blinken has told Israel and Hamas that “the time is now” for a deal that would free hostages and halt more than six months of fighting.
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US campus turmoil: Republicans are attacking Biden for failing to quell protests over the war, while rightwing congresswoman Marjorie Taylor Greene has called for House Speaker Mike Johnson to be ousted for his role in a sweeping aid bill for Ukraine and Israel.
2. Big shareholders in Shell have urged other investors to back their resolution seeking greater climate action to send a “strong signal” to the oil and gas industry. Amundi and Axa Investment Managers are among the 27 shareholders, who collectively own about 2.5 per cent of the fossil fuel group, that have called on the company to align its “medium-term” emissions target with the Paris Agreement. Here are more details on the resolution.
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ExxonMobil: US regulators are poised to approve its $60bn acquisition of Pioneer Natural Resources on the condition that the smaller oil company’s former chief executive, Scott Sheffield, does not join the supermajor’s board.
3. Uber is facing a multimillion-pound lawsuit from London’s black-cab drivers, reviving a long-simmering battle between the San Francisco-based ride-hailing app and the UK capital’s taxi trade. The action, which will be filed in London’s High Court today on behalf of more than 10,500 cab drivers, alleges that Uber improperly obtained a licence from Transport for London in 2012. Here’s what this means for the US company.
4. Embraer is exploring options for a new passenger aircraft to rival Airbus and Boeing, people familiar with the situation said. The Brazilian aerospace and defence group is studying plans for a narrow-body aircraft or a long-range business jet, with a business case ready for the company’s board by the end of next year. Here’s more on the project, which is still in its early stages.
5. The strong US economy is posing a dilemma for Joe Biden and the Federal Reserve, with the high borrowing costs that American voters complain about set to linger at least until November’s election. The central bank’s chair, Jay Powell, dashed the president’s hopes yesterday when he said high rates would “need more time to do their job”.
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Opinion: The Fed plays an important role in keeping inflation tame, but we need to be realistic about the limits of monetary policy, writes Tej Parikh.
Want more insight into how rate-setters are fighting inflation? Sign up for our Central Banks newsletter by Chris Giles if you’re a premium subscriber, or upgrade your subscription here.
Visual story
Stalled western aid and Russia’s success in a primarily land-based war have made for a tough start to the year for Ukraine. But in the Black Sea, Kyiv continues to make progress. Despite having no real navy, Ukraine has disabled or destroyed a third of Russia’s Black Sea fleet over the past two years. Our latest visual story explores Ukraine’s striking naval success and its strategic and economic importance for a country dependent on seaborne trade.
We’re also reading . . .
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Berkshire after Buffett: The second part of our series on the company’s future looks at Ajit Jain, the risk “genius” running Berkshire Hathaway’s insurance operations.
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UK consumption: An FT analysis of official data shows British households are cutting back on beer, meat and domestic appliances, highlighting the impact of the cost of living crisis.
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Italian politics: Deputy premier Matteo Salvini is facing a revolt within his far-right League party after he picked a homophobic, pro-Russia candidate for EU elections.
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Puig: The Spanish group behind Jean Paul Gaultier is aiming for a €14bn valuation when it lists this week, as chair Marc Puig scales back his family’s influence over the 110-year-old company.
Chart of the day
New lending to UK commercial real estate fell to a historic low in 2023 as lenders and investors struggled with falling property values, higher debt costs and pressure to deal with troubled loans. Total loan origination during the year was £33bn, the lowest in a decade, according to a closely followed report by Bayes Business School.
Take a break from the news
Once described by the FT as “the perfect 15-minute city”, Frankfurt is a byword for urban liveability — and that extends to its offerings on the arts, sports and festivals fronts, as our latest Globetrotter guide reveals.
Additional contributions by Benjamin Wilhelm and Gordon Smith
