Live updates: Son of drug kingpin 'El Chapo' taken to Mexico City ...

China is changing its tactics on the renminbi, according to analysts and traders, with a shift away from direct intervention and towards lower-profile, indirect tools to steer the market.

The currency dropped almost 8 per cent last year against the soaring dollar. But Beijing smoothed out that decline using tools such as so-called “invisible reserves” held by state banks, rather than its more typical heavy-handed intervention by the People’s Bank of China.

Beijing’s new approach to currency management poses a challenge to traders seeking to anticipate the renminbi’s next move, and to foreign officials, such as the US Treasury, who want to understand how tightly China’s currency is controlled.

“China’s overall foreign exchange management framework has changed,” said Becky Liu, head of China macro strategy at Standard Chartered.

China operates a managed float of its currency. Every day, the PBoC fixes a trading range against the dollar, but over the medium term the renminbi can fluctuate in line with market pressures, which in 2022 were dominated by a climb in the US currency. China also uses capital controls to restrict the movement of money in and out of the country.

Read more about China’s currency management.

Taiwan is courting investors to help establish a domestic satellite communications provider, inspired by the role Elon Musk’s Starlink has played in the war in Ukraine, as Taipei ramps up efforts to fortify itself against a potential assault from China.

Taiwan is in preliminary talks with several domestic and international investors to raise funds for the project, which the country’s space agency, known as TASA, wants to spin out of an existing satellite division, according to three people familiar with the situation.

Among the investors approached for funding was Draper Associates, the Silicon Valley venture capital firm.

“We are going to spin our low-Earth orbit satellite communications project off into a company,” said a senior official at TASA. People familiar with the talks said the government wanted to retain a significant minority stake in the venture.

The project is part of Taiwan’s broader efforts to build communications infrastructure that could survive an attack by China. “We look at the Russian invasion of Ukraine and how Starlink has been used very successfully,” said Audrey Tang, Taiwan’s digital minister.

Read more about Taiwan’s satellite strategy.

Samsung Electronics estimated on Friday that its fourth-quarter operating profit slid nearly 70 per cent to an eight-year low as the slowing global economy and high inflation sapped demand for computer chips and electronics.

The world’s largest producer of memory chips, smartphones and TVs said its operating profit dropped to Won4.3tn ($3.4bn) in the October-December quarter, down 69 per cent from Won13.87tn a year earlier and falling short of a Won5.9tn estimate by Refinitiv. Sales are likely to have declined 9 per cent to Won70tn.

The South Korean company said chip demand and price declines were greater than expected as customers cut inventories and added that “smartphone sales and revenue decreased due to weak demand resulting from prolonged macro issues”.

Samsung’s woes have been exacerbated by US sanctions on chip exports to China and Apple’s production delays at its Chinese plant due to Covid-19. Analysts expect the memory downturn to worsen before a recovery in the second half. 

Memory chipmakers including Micron Technology and SK Hynix have cut capital expenditure to cope with the slump but Samsung increased memory output by about 10 per cent in the fourth quarter, according to eBest Investment & Securities.

The deepening downturn has sparked speculation that Samsung may have to cut capex to ease oversupply. “We think Samsung is likely to modify its 2023 capex strategy to a more dovish stance,” Peter Lee, a Citigroup analyst, said in a report, noting that Nand flash memory chip prices were not matching the company’s production cost.

Mexico’s military has transported Ovidio Guzmán, son of convicted crime boss Joaquín ‘El Chapo’ Guzmán, to Mexico City after his arrest on Thursday morning triggered violence in the Pacific Coast state of Sinaloa.

Guzmán, known as ‘El Ratón’, was captured in a hamlet on the outskirts of Culiacán, the state capital, with a video on social media showing a helicopter opening fire on a residence.

He was previously arrested in October 2019, but soldiers were forced to surrender him after gunmen caused chaos in Culiacán. President Andrés Manuel López Obrador has repeatedly played down the botched raid, saying he ordered Guzmán released to save lives.

Cartel gunmen on Thursday once again burnt buses, blocked roads and closed the airport after Guzmán’s arrest. “Given the events that are taking place in Culiacán, I ask the citizens to remain calm and take shelter in their homes,” Sinaloa governor Rubén Rocha Moya wrote on Twitter.

Videos on social media showed gunmen bursting into the city’s airport and passengers on an Aeromexico flight cowering onboard. The airline said a bullet struck a plane, forcing the cancellation of a Mexico City flight.

The arrest comes ahead of US president Joe Biden’s first visit to Mexico as part of the North American leaders’ summit on January 9-10, where security will be among issues discussed.

Mexican foreign minister Marcelo Ebrard said US officials had requested Guzmán’s arrest since 2019. “There’s no connection between the police operation and the summit,” he told reporters. 

The elder Guzmán is serving a life sentence in a US prison after his 2019 conviction on drug-trafficking, weapons and other charges.

US stocks and Treasuries slipped on Thursday, while the dollar strengthened, after a stronger than expected jobs report underlined the labour market’s resilience in the face of the Federal Reserve’s aggressive campaign to tackle high inflation.

Wall Street’s benchmark S&P 500 lost 1.2 per cent, while the tech-heavy Nasdaq Composite fell 1.5 per cent, erasing small gains registered in the previous session. Meanwhile, Amazon’s shares shed 2.4 per cent a day after the ecommerce giant announced plans to fire 18,000 employees.

The declines came after US private sector employment rose by 235,000 in December, ahead of estimates, according to payroll processor ADP. Economists polled by Reuters had expected a gain of 150,000, suggesting the US labour market remains tight even as the economy shows signs of slowing. Initial unemployment claims for the last week of December, meanwhile, fell to 204,000 from a revised 223,000 the previous week.

ADP’s figures support the view — expressed in the minutes from the Federal Open Market Committee’s December meeting, which were released on Wednesday — that labour market conditions in the world’s biggest economy are exacerbating upward pressure on wages and prices.

“Despite the tightening implemented to date, the [FOMC] still sees the labour market as tight and inconsistent with price stability,” said Michael Gapen, US economist at Bank of America.

Read more about today’s market moves.

Germany and the US will send armoured fighting vehicles to Ukraine, the White House said, in a move that will deliver a big boost to Kyiv’s offensive capabilities.

The deliveries mark a huge shift for Germany’s chancellor Olaf Scholz, who has been highly reluctant to provide Ukraine with heavy weaponry amid fears it could drag Nato into the war.

Scholz spoke by phone with US president Joe Biden on Thursday to co-ordinate the two governments’ positions. The US agreed to send Bradley fighting vehicles, while Germany is providing Marder infantry fighting vehicles and will also join the US in sending a Patriot missile battery to Kyiv.

The leaders “expressed their common determination to continue to provide the necessary financial, humanitarian, military and diplomatic support to Ukraine for as long as needed”, according to a joint statement.

Pressure on Scholz to shift position has grown since Emmanuel Macron, president of France, agreed to supply AMX-10s ‘tank killers’ to the Ukrainian armed forces. “Scholz was forced to act after Macron pressed ahead,” said one person familiar with the discussions.

Read more about the military aid.