FirstFT: Biden to warn Beijing against South China Sea aggression

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Good morning. We have an exclusive preview today of what Joe Biden is likely to say at summits with Japanese Prime Minister Fumio Kishida and Philippine President Ferdinand Marcos Jr this week.

Two senior US officials said the president would warn China about its increasingly aggressive activity in the South China Sea, especially around the Second Thomas Shoal, a submerged reef in the Spratly Islands where the Chinese coastguard has used water cannons to prevent the Philippines from resupplying marines on the Sierra Madre, a rusting ship that has been lodged on the reef for 25 years.

Biden will stress that the US-Philippines Mutual Defense Treaty applies to the Sierra Madre, said the officials, adding that he expressed “deep concern” when he spoke to President Xi Jinping.

“China is underestimating the potential for escalation,” one official told the Financial Times. “China needs to examine its tactics or risk some serious blowback.” Demetri Sevastopulo has more on the potential US-China flashpoint.

• Yellen in China: The US Treasury secretary has warned of “significant consequences” if Chinese companies provide support for Russia’s war against Ukraine in one of the sharpest messages Washington has delivered to Beijing.

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

• Aukus: The US, UK and Australia are considering bringing new members into the security pact, as the countries’ defence ministers are set to announce the launch of talks related to Pillar II, which involves collaboration on technologies such as undersea capabilities and hypersonic weapons.

• UK defence: The export potential of equipment will become crucial in assessing bids for new weapons and kit as part of a series of reforms that come into effect from today.

• Bank of England: Deputy governor Sarah Breeden speaks at an event on the future of the monetary system hosted by the Swiss National Bank in Zurich.

• Stormont: The Northern Ireland assembly returns from Easter recess.

Five more top stories

1. Exclusive: Former Wirecard shareholders are suing EY Germany over alleged asset stripping as they fear a complex organisational revamp at the Big Four firm will make it harder if not impossible to enforce damage claims over its allegedly flawed audits of the defunct payments group. People familiar with the matter said the firm had ringfenced its lucrative non-audit operations. Here’s more on the multi-stage process.

2. Vitol, the world’s largest independent commodity trader, made $13bn in net profit last year, dwarfing rivals. The privately owned group earned less than in the year before but still more than three times higher than in 2021, according to people with knowledge of the company’s results, illustrating how much Vitol has benefited from disruption to energy markets. Tom Wilson has more details from London.

3. Israel says it has withdrawn its troops from Khan Younis in order to prepare for operations in Rafah, Hamas’s last stronghold, despite US warnings that a big ground offensive on the town would be a mistake. The move to pull out of the southern city came as both sides sent teams to Egypt for talks on a potential ceasefire in the six-month war. Read the full story.

• UK-Israel ties: Britain will not offer “carte blanche” approval to Israel, but it is prosecuting a legitimate war, said the deputy prime minister, adding that government advice on arms exports to the Jewish state had not changed.

4. US regulators will investigate a new mishap involving a Boeing aircraft after a piece of engine housing fell off a Southwest Airlines plane yesterday. Footage posted on social media appears to show the 737-800 aircraft rolling down the runway at Denver International Airport as the right engine covering begins to disintegrate. Here’s what the Federal Aviation Administration said.

5. Brazil’s attorney-general has demanded “urgent regulation” of social media sites after Elon Musk threatened to disobey a court order banning certain profiles on his X platform and after he called for a Supreme Court justice to “resign or be impeached”. The profiles are likely linked to far-right movements, which have found fertile ground on X. Here’s more on the clash between the billionaire and Brazil.

• More from Latin America: Ecuador is facing a tide of condemnation over a late-night raid on the Mexican embassy in its capital Quito that saw the capture of the Andean nation’s former vice-president.

Military briefing

The Russian air force is stepping up its use of Soviet-era weapons that have been retrofitted for 21st-century warfare and are pounding Ukrainian forces, pulverising towns and giving Moscow an advantage on the battlefield. These “glide bombs” can be launched by Russian bombers deep behind the front line and out of reach of Ukraine’s air-defence systems. Reporting from Donetsk, Christopher Miller explains how the former “dumb bombs” have been modernised into a “very scary, very lethal” weapon.

We’re also reading . . . 

• Post Office scandal: As the next phase of the public inquiry resumes this week, sub-postmasters tell the FT they want the “truth” about one of Britain’s biggest miscarriages of justice.

• Japanese economy: Prices are rising, workers are demanding higher pay and the stock market is booming. Today’s Big Read asks: is Japan finally becoming a “normal” economy?

• Turkish politics: President Recep Tayyip Erdoğan should fear for his political future if he “does not get the message” from recent local elections, Istanbul’s newly re-elected mayor Ekrem İmamoğlu told the FT.

• War in Ukraine: Russia has changed tactics in targeting Ukraine’s energy infrastructure, using precision missiles to destroy power stations in areas less protected than Kyiv.

Chart of the day

Food inflation across rich nations has dropped to its lowest level since before Russia’s full-scale invasion of Ukraine, with a slowdown in price growth easing pressure on millions of households hit by the two-year surge in food costs.

Take a break from the news

FT Magazine has a new advice column, and its agony aunt/uncle is none other than Robert Shrimsley. In a self-referential first instalment, he discusses the popular Reddit staple — “Am I the asshole?” — and offers a definitive answer to the question (spoiler: yes, you are).

Additional contributions from Benjamin Wilhelm