FirstFT: Western banks cut jobs in China

Good morning.

Western financial institutions in China have cut their investment banking workforce by the most in years after a market slowdown hit profits and halted years of expansion in the country.

The cuts in 2023 came as five of the seven Chinese securities units that are part of Wall Street and European banks either made a loss or reported tumbling profits, according to recently released annual reports. The seven units employed 1,781 people last year, a fall of 13 per cent from 2022.

China’s capital markets activity has slowed in a weaker economy dominated by a prolonged property slowdown and the fallout from rising geopolitical tension between Washington and Beijing.

“Western investment banks are caught in a vicious cycle,” said Han Lin, China country director at consultancy The Asia Group. “Weak deal flow means less investment in onshore capability, which limits further deal flow.”

Some banks “are running out of patience when the opportunities in India, south-east Asia and the US are looking more promising”, he said. Find out which banks are cutting down on their presence.

Here’s what else I’m keeping tabs on today:

• Orbán in Ukraine: Hungary’s prime minister will meet President Volodymyr Zelenskyy in Kyiv in his first wartime trip to the country.

• French elections: Centrist and left-wing parties must decide whether to pull candidates out of hundreds of run-off races in an attempt to boost the vote against the far-right Rassemblement National.

• Economic data: EU publishes flash inflation data for June. Economists polled by Reuters forecast overall Eurozone inflation will drop slightly, from 2.6 per cent in May to 2.5 per cent for the month. Italy releases May unemployment figures.

• Results: Polestar publishes first-quarter earnings, while J Sainsbury issues its first-quarter trading statement.

Five more top stories

1. The US Supreme Court’s blockbuster ruling granting Donald Trump broad immunity from criminal prosecution for his actions as president was a major legal victory for the former president — but it was also a significant political win, all but eliminating the chance that the Republican candidate in this year’s White House race will face another criminal trial before polling day in November. Read the full report.

2. Iran would use “all means” to back Hizbollah if Israel launches a full-blown war, an adviser to Iran’s supreme leader has warned. The Islamic republic is “not interested” in a regional war and has urged the US to put pressure on Israel to prevent further escalation, but it would support Hizbollah militarily in the event of a full-blown conflict, said Kamal Kharrazi, foreign affairs adviser to Ayatollah Ali Khamenei, in an interview with the Financial Times.

3. More German businesses are moving into military equipment and services as they break a widespread taboo to supply the arms industry in the wake of Russia’s invasion of Ukraine. Since February 2022, some key players in the country’s engineering supply chain have reconsidered or ended their ban on defence contracts. Here’s what’s driving the change in attitudes among Mittelstand companies.

• Siemens Energy: A unit of the German group plans to hire more than 10,000 new employees as it earmarks €1.2bn to boost its electricity grid business, the division’s chief has told the FT.

4. An eclectic government that includes the far right takes office in the Netherlands today, led by a former spy chief and including a reality TV show star heading the agriculture ministry. The Freedom party of anti-Islam campaigner Geert Wilders secured five out of 15 ministerial posts in the new government, including migration and trade. Andy Bounds has the rest of the cabinet line-up.

• Panic mode: Liberals are in for a long struggle as nationalist populism surges in the US and Europe, writes Gideon Rachman.

5. Nigel Farage’s Reform UK benefited from almost £1mn from a campaign group intended to be a cross-party effort to support Brexit. The donation, made in early 2020, is the single largest that the party received in the wake of the 2019 general election, according to filings, and is being criticised as inconsistent with the the spirit of the organisation of Leave Means Leave.

FT Investigation

London-based Gemcorp has become one of Europe’s most daring emerging markets funds, having made $6bn of bets on frontier economies. But the origins of its success show how money from businessmen who are now alleged to be connected to the Kremlin was used to establish a foothold in Britain’s financial sector. The FT takes a look at the activities of an investment fund with a complex history in Russia and Tories on the payroll.

We’re also reading and listening to . . . 

• EY’s new chief: Janet Truncale’s alternative strategy for growth is already being criticised for lacking detail.

• Isolated Macron: The French president’s miscalculation has led to the very upheaval he wanted to avoid and put his ability to complete his term in question, writes Sylvie Kauffmann.

• UK’s multicultural model: Britons should be proud of the country’s record on race and politics — but they must not be complacent, writes Stephen Bush.

• The Economics Show🎧: Soumaya Keynes talks to John Burn-Murdoch, the FT’s chief data reporter, on the changing landscape of US and UK politics. 

Chart of the day

Labour is deploying activists to shore up its vote in 24 seats with sizeable Muslim populations as it seeks to stave off challenges from pro-Palestine candidates in Thursday’s UK election. Green, independent and Workers party candidates are hoping to capture enough votes to apply pressure on Sir Keir Starmer to shift the party’s position on the Middle East.

Take a break from the news

Padel and pickleball are reshaping traditional lawn tennis clubs as courts are transformed to accommodate surging demand for the new racket sports. Clubs in the UK have been racing to keep up in a bid to strengthen their post-pandemic financial positions and attract, and retain, members of all ages.

Additional contributions from Benjamin Wilhelm and Harvey Nriapia