Trump says US interest rates should be at least two to three points lower
"We should be at least two to three points lower. If things later change to the negative, increase the Rate," he said in a post on Truth Social. (Reporting by Angela Christy in Bengaluru; Editing by Tom Hogue)
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Khaleej Times
an hour ago
- Khaleej Times
S&P affirms 'AA+' credit rating for US, cites impact of tariff revenue
S&P Global on Monday affirmed its "AA+" credit rating on the US, saying the revenue from President Donald Trump's tariffs will offset the fiscal hit from his massive tax-cut and spending bill. Trump signed the "One Big Beautiful Bill Act" into law in July after it was passed by the Republican-controlled Congress. The bill, which delivered new tax breaks, also made Trump's 2017 tax cuts permanent. "Amid the rise in effective tariff rates, we expect meaningful tariff revenue to generally offset weaker fiscal outcomes that might otherwise be associated with the recent fiscal legislation, which contains both cuts and increases in tax and spending," S&P said in a statement. "At this time, it appears that meaningful tariff revenue has the potential to offset the deficit-raising aspects of the recent budget legislation." The U.S. reported a $21 billion jump in customs duty collections from Trump's tariffs in July, but the government budget deficit still grew nearly 20% in the same month to $291 billion. Interest on the public debt also continued to grow, hitting $1.013 trillion in the first 10 months of the fiscal year, an increase of 6%, or $57 billion, over the prior-year period due to slightly higher interest rates and increased debt levels. Since returning to power in January this year, Trump has launched a global trade war with a range of tariffs that have targeted individual products and countries. The Republican president has set a baseline tariff of 10% on all imports to the U.S., as well as additional duties on some items and trading partners. IMPACT OF TARIFFS S&P, which became the first ratings agency to cut the pristine U.S. government rating in 2011, said the outlook on the U.S. rating remains stable. The ratings agency said it expects the Federal Reserve, which Trump has criticized this year for not cutting interest rates, "to navigate the challenges of lowering domestic inflation and addressing financial market vulnerabilities." It projected the country's general government deficit to average 6.0% of GDP during the 2025-2028 period, down from 7.5% in 2024 and from an average 9.8% of GDP in 2020-2023. S&P said it could lower the rating over the next two to three years if already high deficits increase. "The ratings could also come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or independence of the Federal Reserve," it said. SP, however, said it could raise the U.S. rating in the event of sustained economic growth and adjustments to the U.S. fiscal profile that would diminish recent increases in the country's debt burden. There was no reaction in markets on Tuesday to SP's credit rating affirmation, which follows a U.S. sovereign credit downgrade by Moody's in May, when that ratings agency cut the triple-A U.S. rating by one notch, citing rising debt levels. The U.S. national debt load surged above a record $37 trillion last week. James Ragan, co-chief investment officer and director of investment management research at D.A. Davidson, said the SP rating affirmation was an acknowledgment of the meaningful tariff revenue generated so far. "That's all good revenue (coming) in, but that's also a drag on the economy, so I think we don't know the impact of that going forward," he said.
Zawya
3 hours ago
- Zawya
Mideast Stocks: Most Gulf shares muted on lower oil prices; Fed symposium in focus
Most stock markets in the Gulf were restrained on Tuesday as oil prices fell and investors awaited signals from the U.S. Federal Reserve's annual Jackson Hole conference later this week. Crude prices, a catalyst for the Gulf's financial markets, slid 1.1% ahead of possible three-way talks involving Moscow, Kyiv and Washington to end the war in Ukraine, which would likely lead to the lifting of sanctions on Russian crude. The Qatari benchmark index fell 0.4%, declining for a third straight session as investors booked profits after an earnings-driven rally. Telecom company Ooredoo dropped 2.9% and Commercial Bank lost 2%. The Abu Dhabi benchmark index fell marginally, extending its longest losing streak since February 2024, as declines in materials, financials and consumer discretionary stocks outweighed gains elsewhere. Abu Dhabi Islamic Bank fell 1.6% and E7 Group slid 1.3%, while Pure Health Holding and Abu Dhabi National Energy rose 1.4% and 0.6%, respectively. TAQA's unit Masdar and partners reached financial close on a roughly $1.1 billion solar project in Saudi Arabia. Saudi Arabia's benchmark stock index was little changed, with ACWA Power up 1.3%, while oil major Saudi Aramco eased 0.3%. Dubai's benchmark stock index was up for a fourth straight session and rose 0.4%, with most sectors higher. Emaar Properties gained 1% and Dubai Electricity and Water Authority added 1.1% after the state utility said it began trial operations and electricity export from the Hatta pumped-storage hydropower plant to Dubai. Investors are awaiting the Fed's symposium in Jackson Hole that starts on Friday; Chair Jerome Powell's remarks will be parsed for clues on the economic outlook and monetary policy. Monetary policy shifts in the U.S. have a significant impact on Gulf markets, where most currencies are pegged to the dollar. Outside the Gulf, Egypt's blue-chip index rose 0.8%, lifted by a 1.4% gain in Commercial International Bank and a 2.2% rise in Fawry for Banking. Arabian Cement jumped 4.4% to a record high of 45.73 Egyptian pounds after reporting that second-quarter group profit more than tripled. "Market was supported by healthy improvements in macroeconomic conditions and the potential for a further rate cut by (Egypt's) central bank, which meets next week", said Joseph Dahrieh, managing principal at Tickmill. SAUDI ARABIA ended flat at 10,882 KUWAIT up 0.1% to 9,326 QATAR fell 0.2% to 11,492 EGYPT rose 0.8% to 36,100 BAHRAIN lost 0.3% to 1,927 OMAN fell 0.3% to 4,918 ABU DHABI ended flat at 10,210 DUBAI added 0.4% to 6,151 (Reporting by Md Manzer Hussain; Editing by Sahal Muhammed)
The National
3 hours ago
- The National
Europe faces $1 trillion military bill to match US might on continent
President Donald Trump is offering security guarantees for Ukraine and the wider European region as part of a peace process, which prompts the question: what is the US military's role on the continent worth? Removing American might from the European equation raises queries over how much dozens of countries can invest to match the level of military readiness on offer today. The cost for Europe 's defence in the event of a US military withdrawal following a Ukraine peace deal would be $1 trillion, according to a think tank. That estimated total cost above $1 trillion would stem from the boosting of defence spending back to Cold War levels in terms of individual nations' GDP. The IISS estimate covers both one-off procurement outlays of almost $400 billion as well as support and associated costs over a 25-year assumed lifespan. The additional purchases would be triggered as a first step during a 'window of vulnerability' in which a dramatic increase in defence spending would be needed just to stand still. This means building 600 tanks and 10 nuclear submarines and adding 400 fighter jets, the International Institute for Strategic Studies (IISS) said. That would need to be done at speed to meet a resurgent Russian threat, with the likelihood that Moscow would have reconstituted its forces by 2027. Russia's economy is already on a war footing, so it has the ability to produce 2,700 attack drones a month, and has an army that is experienced in modern warfare. Europe's Nato states have promised to increase their defence budgets from 2 per cent to 3 per cent of GDP. The bill would suddenly go much higher if the US started to withdraw 128,000 service personnel and their kit to concentrate on the Indo-Pacific region. As US Vice President JD Vance has said, Europe must 'step up in a big way to provide for its own defence'. This will require the continent's powers to 'reduce dependencies on the US and, in extremis, to prepare for a Nato without any US role', the IISS report stated. Fighter jets The most expensive single item would be the purchase of 400 tactical combat aircraft, and training the pilots to fly them. But having many more squadrons of F-35 stealth fighters, Eurofighters and F-16s would give Europe a significant edge over Russia's depleted air force. This new air armada would cost up to $64 billion but Europe would also need other aircraft currently supplied by the US, including 15 P-8 Poseidon submarine hunters ($4.8 billion) and 200 attack helicopters, such as the Apache ($12 billion). It would at the very least need a further 50 Reaper combat drones ($3 billion), given the game-changing impact of drones in the Ukraine-Russia war. All its aircraft would need missiles, from Meteor air-to-air weapons to Storm Shadow cruise missiles, with a further 7,000 required at a high end cost of $16 billion. Tanks and missiles With drones making armoured warfare a much trickier undertaking, the 600 extra main battle tanks ($18 billion) required, such as the US-made Abrams or German Leopard 2, would also need to be more resilient. Infantry fighting vehicles, which have proven their worth in Ukraine by protecting troops and providing firepower, would be a priority. A further 2,400 of all types would be necessary, costing $25 billion. Given the importance of artillery, far more will be required, with at least 100 guns ($2.2 billion) and many more short or medium-range missiles such at the US-supplied Atacms, which have proven effective in Ukraine. A total of 400 Atacms would be needed, as well as 27 extra air-defence batteries, such as the Patriot ($35 billion), which have been vital in defending Ukraine's civilians and infrastructure. Essentially, on land the continent would need an additional three armoured divisions to cover the US absence. Warships and subs A war at sea will require significant European upgrades to combat Moscow's powerful Northern Fleet in the North Sea and Baltic Sea. An additional 10 nuclear submarines ($22 billion), such as the British-made Astute class, would be required, even though they take a decade to build, along with a destroyer force of 20 extra ships ($50 billion). A further four aircraft carriers would be necessary at a cost of $13.6 billion. These will all need more missiles, from cruise to air defence and torpedoes totalling $25 billion, according to the IISS estimate. Arms budgets Given that much of the above will take years to assemble, alongside willingness among European powers to finance it, the continent would face a 'considerable window of vulnerability' without US support, the report said. Therefore, it might not have 'much time to prepare for a Russian threat to allied territory' and would face 'a wide range of capability gaps'. Europe would face stark choices on how to fill them, especially with aircraft production at global aerospace factories already at high capacity. In the short term this would be 'very challenging', but given a few more years it 'would not be an impossible task', the authors suggested.
