Dollar under pressure as US fiscal anxiety rises
Investor attention has switched from tariff anxiety to US fiscal concerns in a week where Moody's downgraded the US credit rating and the Republican-controlled House of Representatives on Thursday passed a sweeping tax and spending bill.
Futures contracts tracking Wall Street's benchmark S&P 500 share index were steady in European trade on Friday morning as investors balanced the tax-cut boost to corporate earnings with longer-term concerns about the US economy.
"It's good for corporates initially, and clearly you're seeing the flip side of that in Treasury markets," Netwealth CIO Iain Barnes said.
But with long-dated debt yields' tendency to affect valuations of other assets, from global currencies to stocks, he said investors were nervous that any further volatility in 30-year Treasuries could start rippling across global markets.
With the US debt pile already at $US36 trillion, President Donald Trump's plans to slash taxes, cut federal budgets and boost military and border enforcement spending has sparked rollercoaster moves in the long-term debt yields that set the nation's borrowing costs.
The 30-year Treasury yield was four basis points lower but held just above five per cent after hitting a 19-month high in the previous session.
Yields on 30-year Japanese bonds, which hit record highs earlier in the week as selling driven by domestic fiscal and inflation concerns was exacerbated by moves in US debt, recovered slightly, declining by 5 bps to about 3.10 per cent.
Data on Friday showed Japan's core consumer price inflation climbed 3.5 per cent in April in its steepest annual increase for more than two years, raising pressure on the Bank of Japan to keep hiking interest rates.
In the euro area, German Bund yields dipped on but stayed on track for their fifth straight weekly rise, tracking US Treasuries.
The benchmark European debt has sold off despite money markets showing that traders anticipate the European Central Bank cutting its main deposit rate to about 1.75 per cent by year-end.
In currency markets, the euro firmed 0.5 per cent to $1.1335 .
An index tracking the US currency against a basket of peers including the euro and Japan's yen, was 0.2 per cent lower and down 1.3 per cent on the week in its first weekly drop since late April.
Despite the euro's gain, which tends to knock exporters' shares, Europe's Stoxx 600 share index gained 0.3 per cent in early dealings and Germany's Xetra Dax added 0.4 per cent, as traders stayed cautious towards US assets.
Japan's Nikkei also gained 0.5 per cent on Friday, with MSCI's broadest index of Asia-Pacific shares outside Japan rising by the same amount.
Bitcoin prices dipped from its record high but it was still set for a weekly gain of 6.4 per cent to $US110,796.
Oil prices dropped for a fourth consecutive session and were set for their first weekly decline in three weeks, weighed down by renewed supply pressure from another possible OPEC+ output hike in July.
Brent futures fell 0.85 per cent to $US63.89 a barrel and US West Texas Intermediate crude futures fell 0.9 per cent to $US60.65.
In precious metals, gold prices rose just more than one per cent to $US3,321 an ounce.
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Sydney Morning Herald
42 minutes ago
- Sydney Morning Herald
How a $155 billion ‘eco-paradise' fell short of its promise
At 9am, the beachfront was empty, except for a Malaysian couple and their grandson playing near a white concrete staircase jutting out over the sand. Dubbed the 'stairway to heaven', it's intended to be an Instagrammable spot, but it's difficult to pass over its metaphor as a boondoggle leading nowhere. While waiting to check in, I wandered the grounds for five hours, encountering maybe 20 visitors or residents. This paucity contrasted with the number of groundskeepers, maintenance workers and security staff roaming the facility, ensuring every fallen leaf was swept, hedge trimmed and pool sparkling to maintain the vision of a safe and immaculate paradise. At the centre of the estate, an entire building has been dedicated to selling this dream. A large-scale model of the project spans the length of a salesroom floor, capturing the grandeur of the four-island plan spanning 14 square kilometres that seems destined to remain a fantasy. A promotional video playing in the background claims the city is home to 15,000 residents and 'gradually growing'. By midmorning, a few Chinese buyers were flipping through brochures, outnumbered by staff ready to lock in a sale. From the outset, Country Garden gambled the success of its venture on the burgeoning Chinese middle class' seemingly insatiable appetite for real estate. It pitched Forest City as a way for Chinese investors to diversify their assets offshore, while dangling visa incentives and the prospect of residency in Malaysia. It has proved a bad bet. In 2020, Chinese President Xi Jinping began cracking down on the credit binge that the country's heavily leveraged developers had gorged on, setting in train a property-bubble bust that has wiped out wealth and confidence. Across China, cities are now littered with the abandoned ambitions of its developers, many of them falling into ruin. Country Garden has more than 3000 unfinished projects and nearly 1 million outstanding homes to complete, according to Japanese investment bank Nomura. It did not respond to a request for comment. Forest City has also suffered from lingering resentment in Malaysia at the idea of a massive project being built for Chinese buyers. This was fuelled by then-prime minister Mahathir Mohamad, who in 2018 said foreigners would not be granted visas to live there, further dampening demand. Visa controls have since been eased under current Prime Minister Anwar Ibrahim. Even with price decreases – a one-bedroom apartment starts at 500,000 Malaysian ringgit ($182,190) – Forest City is unaffordable for many locals and remains pitched at overseas buyers. Forest City may not be the total ghost town it's pegged as by the press, but it's far from the portrait of a vibrant, thriving community. At midday, many of the shops in the mall next to the hotel were still shuttered, some seemingly permanently. Those that were open had no customers, and bored shop assistants sat glued to their phones at vacant counters. At one coffee shop, the server was slumped across a table, asleep. A prime selling point for Forest City is its duty-free status. But a licensing issue meant none of the four duty-free shops in the mall were selling alcohol − one of the main drawcards for visitors, especially those from Singapore, where extortionate taxes make a tipple all but a luxury. One store was reduced to selling only chocolates, though upon entry its shelves were bare save for several boxes of wafer biscuits − a sales challenge that apparently required two shop assistants. One of them, a woman in her 40s, said she had lived in Forest City with her children for four years in an apartment tower behind the mall, having relocated from Kuala Lumpur. 'There are many people who live in my tower,' she says, explaining that most of them were Malaysian renters who commuted into Singapore daily for work. 'I like it here. It's very quiet.' By sundown, foot traffic has picked up. A modest number of people have filtered onto the beach and a volleyball game is under way. The hotel seems reasonably buzzy, due partly to the fact that a tech school, led by US cryptocurrency investor Balaji Srinivasan, has set up shop in the lobby. There are signs of life in towers, too, as lights begin flickering on in some of the apartments, though many remain dark. Country Garden isn't the only stakeholder banking on Forest City's future. Malaysian company Esplanade Danga 88, backed by the state's Sultan Ibrahim Iskandar, has a 40 per cent stake. Recently, the Malaysian government has ramped up its incentives to lure wealthy investors to the project, including offering a 0 per cent tax rate for those who set up family offices in Forest City. For now, it's quite something to climb the 'staircase to heaven' and peer back at the shore and marvel at the sheer scale of Forest City − its unbridled ambition, unfulfilled promise and uncertain future.
The Age
42 minutes ago
- The Age
How a $155 billion ‘eco-paradise' fell short of its promise
At 9am, the beachfront was empty, except for a Malaysian couple and their grandson playing near a white concrete staircase jutting out over the sand. Dubbed the 'stairway to heaven', it's intended to be an Instagrammable spot, but it's difficult to pass over its metaphor as a boondoggle leading nowhere. While waiting to check in, I wandered the grounds for five hours, encountering maybe 20 visitors or residents. This paucity contrasted with the number of groundskeepers, maintenance workers and security staff roaming the facility, ensuring every fallen leaf was swept, hedge trimmed and pool sparkling to maintain the vision of a safe and immaculate paradise. At the centre of the estate, an entire building has been dedicated to selling this dream. A large-scale model of the project spans the length of a salesroom floor, capturing the grandeur of the four-island plan spanning 14 square kilometres that seems destined to remain a fantasy. A promotional video playing in the background claims the city is home to 15,000 residents and 'gradually growing'. By midmorning, a few Chinese buyers were flipping through brochures, outnumbered by staff ready to lock in a sale. From the outset, Country Garden gambled the success of its venture on the burgeoning Chinese middle class' seemingly insatiable appetite for real estate. It pitched Forest City as a way for Chinese investors to diversify their assets offshore, while dangling visa incentives and the prospect of residency in Malaysia. It has proved a bad bet. In 2020, Chinese President Xi Jinping began cracking down on the credit binge that the country's heavily leveraged developers had gorged on, setting in train a property-bubble bust that has wiped out wealth and confidence. Across China, cities are now littered with the abandoned ambitions of its developers, many of them falling into ruin. Country Garden has more than 3000 unfinished projects and nearly 1 million outstanding homes to complete, according to Japanese investment bank Nomura. It did not respond to a request for comment. Forest City has also suffered from lingering resentment in Malaysia at the idea of a massive project being built for Chinese buyers. This was fuelled by then-prime minister Mahathir Mohamad, who in 2018 said foreigners would not be granted visas to live there, further dampening demand. Visa controls have since been eased under current Prime Minister Anwar Ibrahim. Even with price decreases – a one-bedroom apartment starts at 500,000 Malaysian ringgit ($182,190) – Forest City is unaffordable for many locals and remains pitched at overseas buyers. Forest City may not be the total ghost town it's pegged as by the press, but it's far from the portrait of a vibrant, thriving community. At midday, many of the shops in the mall next to the hotel were still shuttered, some seemingly permanently. Those that were open had no customers, and bored shop assistants sat glued to their phones at vacant counters. At one coffee shop, the server was slumped across a table, asleep. A prime selling point for Forest City is its duty-free status. But a licensing issue meant none of the four duty-free shops in the mall were selling alcohol − one of the main drawcards for visitors, especially those from Singapore, where extortionate taxes make a tipple all but a luxury. One store was reduced to selling only chocolates, though upon entry its shelves were bare save for several boxes of wafer biscuits − a sales challenge that apparently required two shop assistants. One of them, a woman in her 40s, said she had lived in Forest City with her children for four years in an apartment tower behind the mall, having relocated from Kuala Lumpur. 'There are many people who live in my tower,' she says, explaining that most of them were Malaysian renters who commuted into Singapore daily for work. 'I like it here. It's very quiet.' By sundown, foot traffic has picked up. A modest number of people have filtered onto the beach and a volleyball game is under way. The hotel seems reasonably buzzy, due partly to the fact that a tech school, led by US cryptocurrency investor Balaji Srinivasan, has set up shop in the lobby. There are signs of life in towers, too, as lights begin flickering on in some of the apartments, though many remain dark. Country Garden isn't the only stakeholder banking on Forest City's future. Malaysian company Esplanade Danga 88, backed by the state's Sultan Ibrahim Iskandar, has a 40 per cent stake. Recently, the Malaysian government has ramped up its incentives to lure wealthy investors to the project, including offering a 0 per cent tax rate for those who set up family offices in Forest City. For now, it's quite something to climb the 'staircase to heaven' and peer back at the shore and marvel at the sheer scale of Forest City − its unbridled ambition, unfulfilled promise and uncertain future.
Perth Now
42 minutes ago
- Perth Now
Asia shares fall as US unleashes fresh tariffs
Asian shares fell on Friday after the US slapped dozens of trading partners with steep tariffs, while investors anxiously await US jobs data that could make or break the case for a Fed rate cut next month. Late on Thursday, President Donald Trump signed an executive order imposing tariffs ranging from 10 per cent to 41 per cent on US imports from dozens of countries and foreign locations. Rates were set at 25 per cent for India's US-bound exports, 20 per cent for Taiwan's, 19 per cent for Thailand's and 15 per cent for South Korea's. He also increased duties on Canadian goods to 35 per cent from 25 per cent for all products not covered by the US-Mexico-Canada trade agreement, but gave Mexico a 90-day reprieve from higher tariffs to negotiate a broader trade deal. "At this point, the reaction in markets has been modest, and I think part of the reason for that is the recent trade deals with the EU, Japan, and South Korea have certainly helped to cushion the impact," said Tony Sycamore, analyst at IG. "After being obviously caught on the wrong foot in April, the market now, I think, has probably taken the view that these trade tariff levels can be renegotiated, can be walked lower over the course of time." MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4 per cent, bringing the total loss this week to 1.5 per cent. South Korea's KOSPI tumbled 1.6 per cent while Japan's Nikkei dropped 0.6 per cent. EUROSTOXX 50 futures dropped 0.5 per cent. Nasdaq futures fell 0.5 per cent while S&P 500 futures slipped 0.3 per cent after earnings from Amazon failed to live up to lofty expectations, sending its shares tumbling 6.6 per cent after hours. Apple, meanwhile, forecast revenue well above Wall Street's estimates, following strong June-quarter results supported by customers buying iPhones early to avoid tariffs. Its shares were up 2.4 per cent after hours. Overnight, Wall Street failed to hold onto an earlier rally. Data showed inflation picked up in June, with new tariffs pushing prices higher and stoking expectations that price pressures could intensify, while weekly initial jobless claims signalled the labour market remained on a stable footing. Fed funds futures imply just a 39 per cent chance of a rate cut in September, compared with 65 per cent before the Federal Reserve held rates steady on Wednesday, according to the CME's FedWatch. Much now will depend on the US jobs data due later in the day and any upside surprise could lower the chance for a cut next month. Forecasts are centred on a rise of 110,000 in July, while the jobless rate likely ticked up to 4.2 per cent from 4.1 per cent. The greenback has found support from fading prospects of imminent US rate cuts, with the dollar index up 2.4 per cent this week against its peers to 100, the highest level in two months. That is its biggest weekly rise since late 2022. The Canadian dollar was little impacted by the tariff news, having already fallen about 1.0 per cent this week to a 10-week low. The yen was the biggest loser overnight, with the dollar up 0.8 per cent to 150.7 yen, the highest since late March. The Bank of Japan held interest rates steady on Thursday and revised up its near-term inflation expectation but Governor Kazuo Ueda sounded a little dovish. Treasuries were largely steady on Friday. Benchmark 10-year US Treasury yields ticked up one basis point to 4.374 per cent, after slipping two bps overnight. In commodity markets, oil prices were steady after falling 1.0 per cent overnight. US crude rose 0.1 per cent to $US69.36 ($A107.89) per barrel, while Brent was at $US71.84 ($A111.75) per barrel, up 0.2 per cent. Spot gold prices were steady at $US3,288 ($A5,115) an ounce.
