High US inflation continues to cause concern

Good evening,

US government bonds and Wall Street stocks sustained renewed selling today after fresh data showed US inflation defied expectations of a bigger drop. Meanwhile, European shares went up after a turbulent week.

US consumer prices rose at an annual pace of 8.3 per cent in April, staying at a 40-year high and underscoring the urgency of the Federal Reserve’s push to tackle inflation.

Although the consumer price index moderated for the first time in eight months — it was a step down from the 8.5 per cent increase recorded in March — it was slightly above economists’ expectations of an 8.1 per cent rise. The core CPI, which excludes food and energy prices, increased at a faster pace than the previous month at 0.6 per cent compared with 0.3 per cent. (Take a look at how your country compares on rising prices using our global inflation tracker.)

Increases in the cost of new vehicles, food, airline fares and housing were the biggest drivers of the rise, according to the report by the Bureau of Labor Statistics. The data may represent the beginning of a peak in the pandemic-era inflation surge.

Will the US be able to curb rising prices without leading to an economic downturn? “It is, alas, quite likely that a recession will now be needed to keep inflationary expectations under control,” writes chief economics commentator Martin Wolf.

Food protectionism is also adding to the global inflation crisis. Indonesia’s decision to ban overseas sales of palm oil has been a further blow to consumers struggling with a rise in cooking prices. Meanwhile, Malaysia is boosting its palm oil exports. The second-largest producer of the commodity, which is under pressure to support its finances during a simmering political crisis, has set itself apart from other exporters as it seeks to capitalise on rising prices.

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Need to know: the economy

European Central Bank president Christine Lagarde has signalled she would support raising the ECB’s main interest rate in July, leading economists to declare that the first increase for more than a decade is almost certain to go ahead.

The head of automaker Stellantis has warned that carmakers will struggle to get hold of enough batteries in the next three to four years as they race to roll out electric vehicles. Carlos Tavares said the battery supply challenges would feed into the bigger problem of keeping cars affordable in the switch to electric models.

US households added $266bn to their debt balances in the first quarter, led by mortgage loans, in the largest single-quarter increase since 2006, according to the Federal Reserve Bank of New York.

Latest for the UK and Europe

In yesterday’s Queen’s Speech, the UK government included 38 headline bills to be introduced over the next year, pledging to regenerate the economy and drive strong growth in the face of rising global economic headwinds.

France, the EU’s biggest wheat exporter, is facing challenges because of low rainfall this year. It has brought the threat of drought, triggering warnings of a hit to output and exports as well as adding to fears of a further squeeze to global supplies.

Global latest

We are likely to experience global warming of 1.5C within the next five years because of record greenhouse gas levels, according to a new report. Global banks are facing increasing regulatory pressure over their climate change vulnerabilities, ranging from the risks posed to the future value of assets to the difficulty dealing with heavily polluting clients. Read more in of our special report on Risk Management: Financial Institutions.

The head of the World Health Organization warned that China’s zero-Covid strategy was unsustainable, as new modelling showed the country risked unleashing a “tsunami” of coronavirus infections. China dismissed the criticism from the WHO, saying the agency was “irresponsible” to question the sustainability of the country’s reliance on lockdowns.

The US Pharma and Biotech Summit returns to New York on May 11 2022. Join us in-person or online to hear views from industry leaders and FT journalists on regional and global trends in areas such as drug discovery, clinical development and market access.

Need to know: business

Toyota has warned of a 20 per cent drop in annual operating profit, blaming a doubling in raw material prices linked to the pandemic, as well as higher energy costs.

Pfizer has agreed to buy US biotech Biohaven Pharmaceuticals for $11.6bn, striking its biggest deal in more than five years as the pharma company bolsters its pipeline of drugs. With the record revenues linked to the success of its Covid-19 vaccine and antiviral pill forecast to fade, Pfizer had been hunting for acquisitions to sustain its growth.

Peloton shares hit new lows yesterday after reporting far higher quarterly losses than expected. As more people return to gyms and fitness studios, the company has struggled to maintain its equipment sales.

The Australian government has moved to re-establish a commercial shipping fleet in the country to ensure the flow of critical goods during times of geopolitical tension.

Elon Musk has said he would reverse Donald Trump’s ban from Twitter, accusing the social media company of having a leftwing bias that had aggravated political divisions in the US. Watch Musk’s interview with the FT’s Peter Campbell here.

The World of Work

Millions of people started a “side hustle” to make some extra cash during the pandemic, but how can you scale yours into a full-time business? On this week’s Money Clinic podcast, a fledgling fashion designer with more than 40,000 Instagram followers who wants to turn her passion for knitting into a main source of income gets advice from FT journalists and a chartered accountant.

With the lifting of Covid-19 restrictions, business travel is making a comeback. But with climate concerns growing and the ability to work remotely, can we justify flying abroad for a business conference in a windowless room? This week’s Working It podcast looks at business travel trends, away days in theme parks and why your employer may book your vacation.

People from a working-class background who attempt upward mobility can suffer in their careers because they are not familiar with the invisible rules of middle and upper-class professionals — and can feel alienated as a result. The book What’s Your Zip Code Story? offers tips for businesses on incorporating social class into their diversity, equity and inclusion initiatives. Plus, take a look at other titles in this month’s business books.

Get the latest worldwide picture with our vaccine tracker

And finally . . . 

Malaysian actress Michelle Yeoh broke the glass ceiling of Hong Kong action cinema to become one of its biggest stars. She has been at the vanguard of female action heroes for nearly 40 years. Yeoh talks to Sam Moore about her new role in surreal comedy and indie hit Everything Everywhere All at Once, which is in UK cinemas from May 13 and in US cinemas now.