Qatar’s bet on the World Cup

This is an audio transcript of the FT News Briefing podcast episode: ‘Qatar’s bet on the World Cup’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, November 23rd, and this is your FT News Briefing.

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British borrowers are seeing some signs of relief. US retailers though are bracing for a tricky holiday shopping season. And we’ll look at how things are going in Qatar as the tiny Gulf state hosts the world’s biggest sporting event. I’m Marc Filippino, and here’s the news you need to start your day.

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British home borrowers are enjoying a bit of a reprieve. Mortgage rates on five-year fixed deals dipped below 6 per cent for the first time in nearly two months. It’s a sign that the UK’s home loan market is stabilising after the disastrous rollout of the previous government’s “mini” Budget. The ensuing financial chaos sent mortgage rates spiking. Mortgage brokers told the FT they expect rates to continue falling as the housing market cools.

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In the US, this Friday is known as Black Friday. Huge sales and department store frenzies marked the informal start to the holiday shopping season. This is a critical season for retailers, and consumer demand has been holding up. The FT’s Andrew Edgecliffe-Johnson says retailers expect higher sales, but they’re also bracing for the first real-term drop since the 2008 financial crisis.

Andrew Edgecliffe-Johnson
They’re expecting anything from a sort of 4 to 5 per cent increase in headline sales to maybe an 8 to 9 per cent increase, depending on how the season goes. And I think the problem is that inflation is running at almost 8 per cent still in the US. And so the money they’ll actually make, even if they do pull in that headline sales increase, is not what they would have hoped.

Marc Filippino
Edge, how is it that consumer demand is still so high, even though everything seems to have gotten more expensive? Hasn’t inflation eaten into people’s budgets?

Andrew Edgecliffe-Johnson
I think there are several factors here. You have to remember, first of all, how distorted the last two seasons have been by, first of all, the health concerns associated with the pandemic. People certainly in 2020 were very scared of going shopping in-person, many of them. By 2021 we had another issue into the picture, which was supply chain shortages. You know, companies were really struggling to get the goods they wanted, particularly the most popular products for the holiday season. This year is probably going to be the first that we’ve seen since the outbreak of the pandemic. So since 2019, the holiday before the pandemic, that we haven’t had those distortions. So there’s plentiful supply. There is still a bit of money in people’s bank accounts, people’s back pockets from the stimulus spending from the US government during the pandemic. They haven’t completely depleted those savings and yet we are also seeing people start to put more money on the credit cards.

Marc Filippino
Now, I got to imagine that the Federal Reserve is watching all this very closely. What are they looking out for and how could it dictate the way they go about monetary policy?

Andrew Edgecliffe-Johnson
Well, obviously, as the Fed tries to tame inflation, they would rather see consumer demand slowing down rather faster than it is. At the same time, if we do see this picture play out, where the rise in retail sales is not enough to cover the increasing costs for retail businesses, then we are going to see retail margins, retail profit margins come down. And that is something that some officials at the Fed have expressed optimism about, that could meaningfully reduce inflationary pressures in some consumer goods. So there may be a silver lining here for Fed officials.

Marc Filippino
That’s the FT’s US business editor, Andrew Edgecliffe-Johnson.

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The controversies and criticisms swirling around the Fifa World Cup were interrupted yesterday by some news about the games. One of the lowest-ranked teams, Saudi Arabia, beat the powerhouse Argentina.

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One of the biggest upsets in World Cup history . . .

Marc Filippino
The excitement is no doubt a relief for officials in Qatar. They have a lot riding on these games. To talk more about this, I’m joined by our Gulf correspondent, Simeon Kerr. Hi, Simeon.

Simeon Kerr
Hi there.

Marc Filippino
So in the run-up to the tournament, which we should mention is the world’s biggest sporting event, I want to remind listeners that there was so much criticism from western countries, mostly. About worker’s rights, concern for LGBTQ athletes. Now that the games have started, how are things going so far?

Simeon Kerr
Well, it’s been a difficult beginning. I think in the run-up to the tournament there is, you know, been a lot of focus about how ready everything is and how fans are going to be treated, how much of a great experience really proved to be for them. But yesterday, with the shock victory of Saudi Arabia over Argentina, it might appear that it’s more likely that there will be more of a focus on on-the-pitch activities rather than the off-the-pitch controversies that have bedevilled the tournament so far.

Marc Filippino
So hosting a major global sporting event like this is clearly a huge deal for any country. It’s kind of like a badge of honour. How does Qatar see this benefiting them long term?

Simeon Kerr
Basically, as Qatar moves forward after this, it’s looking to diversify its economy away from oil and particularly gas. But at the same time, it’s massively ramping up its gas business and then, and gas export capacity. That is going to be the leading part of its economic future over the next few years. But they are also aware that they need to bring investors to invest in other sectors. This tournament is a big showcase for that because they are thinking about sports, they’re thinking about events. They’ve talked about even going for an Olympics. And so, therefore, their ability to deliver a successful and reliable experience is one that’s going to test what kind of sectors they can diversify into in the future.

Marc Filippino
And how do you think they’re doing so far?

Simeon Kerr
I think it’s up in the air. There have been several teething issues so far with accommodation, with some bottlenecks around stadiums. A lot of people coming into a tiny country that really on paper you’d think wouldn’t be set up for such a tournament. Now, they’ve invested $200bn to get the infrastructure ready, but will the system be able to deal with all the various issues? That’s going to be a major testing point for the country.

Marc Filippino
What about the criticisms we’ve seen in western media and also efforts by western athletes to protest the country’s social restrictions? Have they amounted to anything so far?

Simeon Kerr
They’ve certainly dominated the narrative to date. From the country’s perspective, they would say we are, you know, we’re a conservative Muslim society and you should respect our boundaries in that. Here in the region, they will say, you know, we listen to this when it comes to labour rights. We’re working on it. We’re responding. And we are doing our best because we want to become a global, modernised economy that can attract talent and can get the best people into these economies to work. There’s a slight difference when it comes to the culture war issues of LGBT rights, when they would say, you know, our society is one that is founded on Islamic values and therefore changing laws to as has been done in the West. I mean, many people here would argue that would take generations of change rather than just a quick fix.

Marc Filippino
Simeon Kerr, the FT’s Gulf correspondent. Thanks, Simeon.

Simeon Kerr
You’re welcome. Thanks for having me.

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Marc Filippino
Before we go, Warner Music shares jumped more than 15 per cent yesterday after the company posted huge quarterly earnings. Warner credited its revenue bump to big releases and royalty payments from social media. This is the next frontier for music companies. They’ve made deals with TikTok and Facebook and other social media sites. They earn royalties every time their songs are played on the platforms. For Warner, those fees now amount to $370mn a year.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.