AFP

Brazil’s president-elect Luiz Inacio Lula da Silva on Friday named former Sao Paulo mayor Fernando Haddad, viewed unfavorably by many in the business community, as his finance minister.

Lula da Silva, who narrowly defeated incumbent Jair Bolsonaro in October elections, unveiled ministers in the key posts of foreign affairs, justice, defense, and chief of staff.

However, all eyes were on his pick for finance minister, with markets nervous over the incoming government’s commitment to fiscal discipline and the inflation-hit economy in fragile recovery.

“(I chose) comrade Fernando Haddad as Minister of Finance,” Lula said during a press conference in the capital Brasilia.

Haddad, 59, who served as education minister from 2005 to 2012, succeeds powerful liberal economy minister Paulo Guedes, an ally of far-right President Jair Bolsonaro.

After Lula’s new government takes office following his January 1 inauguration, the economy ministry will be dissolved and transformed into finance, industry and planning agencies.

When Haddad’s name started circulating for the role, markets reacted with unease, viewing him as too much on the left and fearing he would jeopardize the budgetary balance.

“He represents the heterodox economic policy” that Lula’s Workers’ Party (PT) defends, said Antonio Madeira of the MCM consultancy firm.

Madeira said that with Haddad in the finance ministry, he expects “an increase in spending” and “a more assertive state giving a significant role to public companies.”

Despite some of the reluctance towards Haddad, the Sao Paulo Stock Exchange’s Ibovespa index was up Friday by 0.5% after the names of the future ministers were announced.

Lula also tapped Mauro Vieira as foreign minister. 

Vieira is a 71-year-old career diplomat who has already served as foreign minister as well as ambassador to Argentina, the United States and the United Nations.

He is currently serving as ambassador to Croatia, which on Friday knocked Brazil out of the World Cup.

For the justice ministry, Lula appointed Flavio Dino, a former governor of the northeastern state of Maranhao.

Rui Costa, governor of the province of Bahia, was named to a ministry that falls between the roles of prime minister and chief of staff.

Jose Mucio Monteiro, a civilian, was named defense minister.

After appointing five white men to the key ministries, Lula promised that “in time, you will see more women than men here … as well as a number of Afro-Brazilians.”

“We will try and form a government in the image of Brazilian society.”

Lula, a former unionist who already served two terms as president between 2003 and 2010, said that he would announce the names of more ministers next week and he has “not yet decided the total number of ministers” he would have in his government.

One of the most highly anticipated posts is that of the environmental minister, who will play a crucial role as Brazil seeks to tackle deforestation in the Amazon.

Britain on Friday launched a post-Brexit plan to relax curbs on its powerhouse City sector introduced after the 2008 financial crisis, denying the reforms will bring about new instability.

Prime Minister Rishi Sunak insisted the government was not being reckless in scrapping “ringfencing” of assets held by the biggest banks, to separate their retail arms from riskier investment operations.

“No, the UK has always had and always will have an incredibly respected and robust system of regulation for the financial services sector,” Sunak told reporters.

“But it’s also important to make sure the industry is competitive -– there are a million people employed in financial services and they’re not just in London, in the City.”

The ringfencing policy was introduced after the 2008 global financial crisis, to help banks survive another meltdown.

The so-called “Edinburgh reforms”, announced in the Scottish capital by finance minister Jeremy Hunt, also eased capital requirements for smaller lenders.

The government has already said it plans to lift a cap on bankers’ bonuses, and to require UK regulators to prioritise growth and competitiveness, alongside market stability.

It says the reforms have been enabled by Britain’s exit from the European Union.

Brexit is allowing the government to “reshape our regulatory regime and unleash the full potential” of the finance industry, said Hunt, who voted in 2016 to stay in the EU.

He stressed that “we have learned the lessons of that (2008) crash, we put in place some very important guardrails, which will remain”.

“But the banks have become much healthier financially since 2008,” the chancellor said, adding the reforms would help the City better compete with US and Asian markets.

Since Brexit, the City has slipped behind Paris and Amsterdam by some measures. At Brussels’ insistence, UK finance was not covered by Britain’s EU trade treaty.

– No Brexit dividend? –

And there is mounting concern about the everyday effects on people and businesses of increased costs and border delays.

Brexit has not helped tame red-hot inflation or cut soaring food bills, according to recent research from the London School of Economics.

“I think this whole idea that there is a massive dividend from Brexit (for finance) is flawed,” economics professor Steve Schifferes at City, University of London, told AFP.

The ringfencing reform “is the most controversial bit (and) the most unwise” aspect of the proposals, he added.

Fran Boait, executive director of the pro-consumer campaign group Positive Money, said the end to ringfencing was “extremely concerning”.

“Behind the spin, today’s announcements amount to wide-ranging deregulation that threatens to destabilise an increasingly fragile financial sector, with huge risks to the public and little benefit,” she said.

– ‘Race to the bottom’ –

The opposition Labour party, which is tipped in opinion polls to form the next government, also expressed unease.

But Miles Celic, chief executive of business lobby group TheCityUK, welcomed the “comprehensive” package.

“Boosting the industry’s competitiveness and securing the UK’s position as a world-leading international financial centre is an investment in the nation’s success and in communities across the country,” he said.

Under the reforms, the Treasury said it would axe “hundreds of pages of burdensome” EU-era rules that are deemed detrimental to economic growth and company investment.

“This will establish a smarter regulatory framework for the UK that, is agile, less costly and more responsive to emerging trends,” it said.

However, the government’s push to deregulate after Brexit has run into criticism that it intends a “race to the bottom”, depriving Britons of important protections enacted by the EU.

Global stocks diverged on Friday after hotter-than-expected US wholesale prices renewed concerns that the Federal Reserve will stick to aggressive policies against inflation.

Investors have been poring over economic data as they try to guess whether the US central bank will shift to a softer approach to interest rate hikes or maintain its hawkish stance at a regular meeting next week.

China’s easing of its zero-Covid restrictions, which have hammed the world’s second biggest economy, have been welcomed by the markets this week.

Investors also tracked news that China’s consumer inflation slowed further in November, falling below two percent and providing authorities room to unveil fresh stimulus measures.

Hong Kong shares closed sharply higher Friday, building on big gains for the week while Chinese mainland markets were also higher.

European markets were up in afternoon trading.

But Wall Street opened lower as US government data showed the producer price index (PPI) — a gauge of inflation — rose by 0.3 percent in November, slightly higher than forecast by analysts.

“The numbers themselves weren’t mean so to speak. They were simply less friendly than what market participants had hoped they would be,” said Briefing.com analyst Patrick O’Hare.

The reading will raise concerns that key consumer price data due next week may not be “as friendly as expected either, which in turn will keep the market on edge about the Fed’s monetary policy path,” he said.

The Fed has raised rates by 0.75 percentage points in four straight meetings in efforts to tame four-decade high inflation.

The central bank is widely expected to slow the pace to 0.50 percentage points at its final meeting of the year next week.

But investors are concerned that a strong jobs market and other data might convince the Fed to keep tightening monetary policy longer than had been hoped.

The European Central Bank and the Bank of England also have rate decisions due next week after also hiking their rates sharply this year.

“The hotter-than-expected PPI print called into question the ‘peak inflation’ narrative, although traders know that it is too late for the Fed to change its mind about a 50 (basis points) hike next week,” said Fawad Razaqzada, market analyst at Forex.com and City Index.

Elsewhere, oil prices jumped by more than one percent as Russian President Vladimir Putin threatened to cut production after Western nations imposed a $60 price cap on Russian crude.

– Key figures around 1450 GMT –

New York – Dow: DOWN 0.3 percent at 33,693.79 points

London – FTSE 100: UP 0.2 percent at 7,484.25

Frankfurt – DAX: UP 0.5 percent at 14,333.84

Paris – CAC 40: UP 0.3 percent at 6,664.75

EURO STOXX 50: UP 0.3 percent at 3,933.79

Tokyo – Nikkei 225: UP 1.2 percent at 27,901.01 (close)

Hong Kong – Hang Seng Index: UP 2.3 percent at 19,900.87 (close)

Shanghai – Composite: UP 0.3 percent at 3,206.95 (close)

Euro/dollar: DOWN at $1.0534 from $1.0560 on Thursday

Dollar/yen: DOWN at 136.44 yen from 136.61 yen

Pound/dollar: UP at $1.2262 from $1.2239

Euro/pound: DOWN at 85.89 pence from 86.24 pence

Brent North Sea crude: UP 1.2 percent at $77.08 per barrel

West Texas Intermediate: UP 1.4 percent at $72.44 per barrel

Chinese President Xi Jinping on Friday touted close security and energy ties with Gulf nations during summit meetings in Saudi Arabia that have highlighted tensions with Washington.

On the third and final day of his visit, Xi attended summits of the six-member Gulf Cooperation Council and a broader China-Arab leaders’ meeting.

This is only Xi’s third journey outside China since the coronavirus pandemic began.

The discussions came one day after bilateral sit-downs with Saudi royals yielded a joint statement stressing “the importance of stability” in oil markets — a point of friction with the United States. Washington has urged the Saudis to raise production.

“China will continue to firmly support the GCC countries in maintaining their own security… and build a collective security framework for the Gulf,” Xi said at the start of the China-GCC summit.

“China will continue to import large quantities of crude oil from GCC countries on an ongoing basis,” he said, also vowing to expand other areas of energy cooperation including liquefied natural gas imports.

Oil from Saudi Arabia alone accounted for 17 percent of China’s imports last year, and last month Qatar announced a 27-year natural gas deal with China.

Earlier on Friday, a joint Chinese-Saudi statement spoke of “focusing on emissions rather than sources” in tackling climate change, the approach championed by the resource-rich Gulf monarchies. 

Forty-six bilateral agreements and memorandums of understanding were announced on everything from housing to Chinese language teaching. Both sides are seeking economic and strategic benefits by deepening cooperation. 

However, few details were released despite a Saudi state media report on Thursday that about $30 billion in deals would be signed during Xi’s visit. 

Riyadh and Beijing stressed “deepening relations within the framework of the comprehensive strategic partnership between the two countries, and reaching new and promising horizons”, the statement said. 

Xi’s visit comes during tensions between Saudi Arabia and the United States, its long-time partner and security guarantor, over oil production, human rights issues and regional security. 

It follows US President Joe Biden’s trip to Jeddah in July, before midterm elections, when he failed to persuade the Saudis to pump more oil to calm prices.

– ‘Prestige’ trade deals –

Crown Prince Mohammed bin Salman, Saudi Arabia’s 37-year-old de facto ruler, addressed both summits on Friday, promising “continuing Arab-Chinese cooperation to serve our common goals and aspirations of our peoples”.

The Gulf countries, strategic partners of Washington, are bolstering ties with China as part of an eastward turn that involves diversifying their fossil fuel-reliant economies. 

At the same time China, hit hard by its Covid lockdowns, is trying to revive its economy and widen its sphere of influence, notably through its Belt and Road Initiative which provides funding for infrastructure projects around the world. 

Officials provided few details about the agenda for Friday’s talks, but one potential area of focus was a China-GCC free trade agreement under discussion for nearly two decades. 

Drawing those negotiations to a close would be “a matter of prestige for Beijing,” said Robert Mogielnicki of the Arab Gulf States Institute in Washington.

“It’s not as simple for the GCC states, which seem to be more invested in advancing bilateral ties and are engaged in varying degrees of regional economic competition with their neighbouring member states.”  

A breakthrough on the trade pact could help Saudi Arabia, the Middle East’s biggest economy, diversify its economy in line with the Vision 2030 reform agenda championed by Prince Mohammed. 

Beijing’s foreign ministry has described Xi’s trip as the “largest-scale diplomatic activity between China and the Arab world” since the People’s Republic of China was founded. 

The visit earned a rebuke from the White House, which warned of “the influence that China is trying to grow around the world”. 

Washington called Beijing’s objectives “not conducive to preserving the international rules-based order”.