Latest news with #KathleenBrooks
Business Recorder
13 hours ago
- Business
- Business Recorder
Sterling tiptoes lower; 40-year gilt auction, BoE speakers in focus
LONDON: The pound trod water on Tuesday, holding mostly steady against the dollar and the euro, ahead of a raft of Bank of England speakers and an auction of long-dated government bonds that may offer a gauge of investor confidence in Britain's finances. Sterling was last down 0.15% against the dollar at $1.352, near last month's more-than three-year highs. The euro was also stable against the pound at 84.45 pence. Investors are torn between having to navigate the turbulence across markets stemming from the U.S. administration's erratic tariff policies and growing concern about the long-term finances of developed economies. Long-dated bonds in the United States, Japan and the UK in particular have been punished hard, which has pushed yields up sharply. In the case of the UK, 30-year gilt yields are the highest among developed economies, at 5.36%. Their extra premium over 30-year U.S. Treasuries, which are yielding some 5%, is not the result of better growth expectations, but of more precarious financing, which has stirred up extra volatility for the pound. On Tuesday, British 30-year government bond yields fell to a four-week low of 5.341%, down 7 basis points on the day and slightly outperforming U.S. Treasuries ahead of the auction of 1.25 billion pounds ($1.69 billion) of 2063 gilts. Sterling set for fourth monthly rise against dollar Bank of England Monetary Policy Committee member Catherine Mann suggested late on Monday the central bank should reconsider the pace at which it sells gilts, as the rise in long-dated yields could not be adequately offset by cutting rates faster. Strategists at RBC said Tuesday's bond auction was small by historic standards, which should boost demand, although they were less attracted by the longer-term prospects for the bond due to the prospect of more supply in that maturity bracket. 'In the lead up to the UK's bond auction, UK gilts are outperforming across the curve and yields are falling. This suggests that bond vigilantes are out of sight for now, and that the bond market is not expecting any problem in today's auction,' XTB research director Kathleen Brooks said. In domestic news, Thames Water, Britain's biggest supplier, said on Tuesday that U.S. private equity firm KKR had pulled out of a multi-billion pound rescue plan, reigniting fears the company will need to be nationalised to avoid financial collapse. The government has said it is on standby in case Thames Water fails to recapitalise and needs to go into temporary nationalisation to keep services running. BoE Governor Andrew Bailey, Deputy Governor Sarah Breeden, Mann herself and external MPC member Swati Dhingra are due to appear before a parliament committee at 0915 GMT.
CNA
4 days ago
- Business
- CNA
Global stocks mixed after Trump accuses China of violating tariff deal
NEW YORK: Global stocks finished mixed on Friday (May 30) after President Donald Trump put US-China trade tensions back on the boil by claiming Beijing had "totally violated" an agreement with Washington. His social media post came hours after US Treasury Secretary Scott Bessent said trade talks with China aimed at putting to bed sky-high mutual tariffs, currently suspended, were "a bit stalled". The development risks renewed trade tensions between the world's two biggest economies. On Wall Street, the Dow Jones Industrial Average closed higher, while the S&P 500 index was flat, and the tech-focused Nasdaq Composite fell 0.3 per cent. "If it weren't for the trade war, the market would be feeling pretty good," said Tom Cahill of Ventura Wealth Management. "Inflation is definitely moving in the right direction," he added, referencing the Federal Reserve's favoured inflation gauge, which cooled more than expected last month, according to fresh data published Friday. In Europe, London and Germany's major indices ended higher, while France's CAC40 closed lower, following declines in Asian markets earlier in the day. "UNDIPLOMATIC APPROACH" "If President Trump does slap tariffs back on Chinese imports to the US ... we may see demand for US assets, and the dollar, severely impaired by a chaotic and undiplomatic approach to trade policy," said Kathleen Brooks, research director at XTB. Despite rumbling concerns about the US-China economic relationship, the markets were little changed by Trump's criticism on social media, with investors appearing to be largely inured to the US president's now-familiar cycle of making dramatic trade threats and then retreating. Investors, traders and analysts instead focused on the Commerce Department's personal consumption expenditures (PCE) price index data, which rose 2.1 per cent in the 12 months to April, cooling slightly more than expected. Despite the good news for the Fed, which is looking to bring inflation down to its long-term target of 2 per cent, analysts warned that the fuller inflationary effects of Trump's tariffs were yet to come, and could cause the Fed to maintain its watch-and-wait stance. "The true weight of these policies is likely to emerge more fully in the months ahead," said market analyst Fawad Razaqzada. Investors were also assessing the impact of a US court ruling that invalidated most of Trump's sweeping tariffs, although an appeals court suspended that order and the White House vowed that its tariffs goals would be pursued one way or another. The result leaves Trump's tariff plans in something of "a legal limbo" said Stephen Innes, of SPI Asset Management, adding that this sort of legal impasse was "the kind that keeps traders awake at night." In the eurozone, interest rates were in focus after official data showed inflation hovering around the European Central Bank's 2 per cent target. Consumer prices in top EU economy Germany showed a 2.1 per cent rise in May – the same as the previous month – while they fell to 1.9 per cent in Spain, and to 1.7 per cent in Italy. The ECB looks set to lower interest rates again on Thursday. The dollar gained against major currencies, while oil prices were down ahead of a Saturday meeting of eight key OPEC+ members to decide production quotas for July, with some analysts predicting that the cartel could make a larger-than-expected supply hike.
Business Recorder
6 days ago
- Business
- Business Recorder
Stocks sink as rally over eased trade tensions fades
LONDON: Stock markets sank Wednesday on evaporating cheer over eased tariff tensions, and oil prices climbed as Washington appeared closer to possibly putting fresh sanctions on Moscow over Ukraine. London, Paris and Frankfurt all closed lower, following Asia down. New York was trading in similar red territory. Much of the focus on Wall Street was on Nvidia, the US chipmaker, whose earnings report — to be released after New York's close — was being viewed as a bellwether for tech stocks generally. 'This is expected to be another quarter of monster revenue for Nvidia, however it may lead to the familiar question, can these results continue?' asked Kathleen Brooks, research director at XTB. She and others pointed to uncertainty over US restrictions on semiconductor exports, against a backdrop of effervescent chip demand as artificial intelligence development accelerates. Crude prices surged more than two percent, ahead of an OPEC meeting to discuss output and hiked tensions over Russia and Iran. President Donald Trump's rare rebuke Tuesday of Russian counterpart Vladimir Putin over stepped-up attacks on Ukraine — saying he was 'playing with fire' — raised the prospect of tougher US sanctions on Russian energy and banking sectors. US-Iran talks on curbing Tehran's nuclear programme have also yielded no breakthrough so far, additionally fuelling speculation of tightened sanctions. The US dollar picked up against major currencies, but analysts said that masked a fundamental weakness in the greenback, and in the US debt market, evident in recent weeks. 'It's the creeping realisation that US assets no longer provide the same refuge' they used to, said Stephen Innes of SPI Asset Management. 'Dollar strength is no longer reflexive — it's contested.' Europe and Asia were down after a rally over the previous two days triggered by Trump's announcement he was pausing threatened 50-percent tariffs on the European Union to give space to trade negotiations. 'The market no longer takes Trump at his word when he delivers swathing tariff hikes seemingly at random,' said Brooks. David Morrison, senior market analyst at Trade Nation, said: 'It looks as if investors are looking past tariffs, assuming that all will be for the best, in the best of all worlds. This Panglossian view could be severely tested, and a US-EU deal could prove hard to achieve.' In Europe, auto giant Stellantis, which makes Jeep, Peugeot, Chrysler and Fiat vehicles, named a new CEO — its North America chief Antonio Filosa — to succeed Carlos Tavares, who was sacked in December. 'To give him full authority and ensure an efficient transition, the Board has granted him CEO powers effective June 23,' the company said. Stellantis shares closed more than two percent down. A Financial Times report that European Central Bank President Christine Lagarde had discussed leaving her post early to take the helm of the World Economic Forum had little impact on the euro. 'It is trading in a relatively tight range, suggesting that reports Christine Lagarde may not fulfill her full term at the ECB is not having an impact on European markets,' said XTB's Brooks.
Yahoo
6 days ago
- Business
- Yahoo
Shein turns to Hong Kong for flotation as London attempt stalls, reports say
Shein is reportedly aiming to list on the Hong Kong stock exchange as the online fast-fashion retailer struggles to gain the go-ahead from Chinese regulators for a flotation in London. The company, which was founded in China where the majority of its suppliers are based but now has its headquarters in Singapore, is aiming to file a draft prospectus with Hong Kong's stock exchange in the coming weeks, according to Reuters. It said Shein planned to go public in the Asian financial hub this year, which would scotch hopes of what would have been one of the biggest listings to hit the London Stock Exchange. Fears about a change of heart have been rising since it emerged earlier this month that Shein had dropped Brunswick and FGS, two communications companies that were aiding its push for a London listing. Shein, which was valued at $66bn (£48.9bn) in a 2023 fundraising round, filed papers with Britain's markets regulator, the Financial Conduct Authority, almost a year ago and gained the go-ahead last month. However, it also requires approval from the China Securities Regulatory Commission from which it has faced unexpected delays, according to Reuters. Shein's decision to move its planned listing from London to Hong Kong could be 'a blessing in disguise', according to Kathleen Brooks, a research director at the brokerage XTB. 'The difficult relationship between Beijing and Washington, and the UK's desire to stand shoulder to shoulder with the US could have made a Shein listing more trouble than it was worth,' Brooks said. The reported change in venue comes amid wider concerns about Shein's planned market listing after the US government closed a loophole that allowed overseas sellers to import parcels of goods worth less than $800 direct to shoppers without paying tax. The company had initially been expected to list with a value of as much as £50bn in the UK but estimates have fallen to as little as half of that amount amid changes to US import rules and planned government action in the EU and UK. Official Chinese data showed its total e-commerce shipping to the US dropped 65% by volume in the first three months of the year but rose by 28% in Europe, as companies such as Shein and Temu were hit by the change and additional US tariffs on Chinese-made goods. On Tuesday, Temu's owner PDD Holdings reported a 47% drop in net profits for the first quarter of 2025, blamed on high domestic competition and the impact of global trade uncertainty on its international business. While Shein has indicated it may shift production to different countries to help ease the effect on its prices, its low-tax model is facing challenges around the world. The EU also said in February it would join the US in phasing out its exemption on customs duties for low-value parcels. The UK chancellor, Rachel Reeves, is also reviewing the tax regime for imports of low-value goods in an effort to prevent Chinese companies undercutting British retailers by dumping cheap items on online marketplaces. Meanwhile, in the UK, Shein has faced questions about its links to forced Uyghur labour in the Xinjiang region of China. In January, the company refused to reassure British MPs that its products do not include items produced in Xinjiang, prompting one MP to accuse its representative of 'wilful ignorance'. The advocacy group Stop Uyghur Genocide announced a legal challenge in June last year and sent the FCA a dossier in August alleging that Shein uses cotton from the region. In February, Shein told MPs it had found two cases of child labour at its suppliers, and insisted it took a 'strict zero-tolerance approach' to the issue.
NZ Herald
21-05-2025
- Business
- NZ Herald
‘Worse than Greece': The debt crisis threatening to blow up the global economy
Shigeru Ishiba, Japan's Prime Minister, warned the country's Parliament on Monday that his debt-strapped government's position was 'worse than Greece', signalling just how vulnerable the world's third-largest economy could be to a meltdown if markets lost confidence. The wider fear is that Japan is a canary in the coal mine. In a world of Donald Trump-induced volatility and uncertainty, bond market investors could quickly lose faith in any one of the debt-dependent governments of the West. 'The pressure on both Japanese and US bonds this week is a sign bond traders are willing to punish high-debt nations with large deficits,' says Kathleen Brooks, an analyst at XTB. 'This is an issue that has hurt the UK in the past, it is weighing on the US right now, and Japan is also coming under the spotlight.' Jittery investors are demanding more reward for the growing risk of holding long-term government debt by marking down the price of bonds and driving up their yields. If the yields rise consistently, governments in countries such as Britain will have to spend even more taxpayer money on interest payments. Since the post-pandemic inflation crisis sent interest rates surging around the world, the door has been slammed on a decade of cheap money that encouraged governments to rack up borrowing rather than cut spending or raise taxes. It has also left finance ministers such as Rachel Reeves in a painful political bind. A shaky economy The Tokyo tremor began on Tuesday, when the government tried to sell 1 trillion yen ($12 billion) of March 2045 bonds and encountered lacklustre demand. The average bid-to-cover ratio, which measures investor appetite, dropped to 2.5 – the lowest since 2012. The 1.14-point gap between the average and lowest-accepted prices, known as the 'tail', was the longest since 1987. Investors responded by pushing the Japanese government 20-year yield to the highest this century, and the 30-year yield to a record. The benchmark 10-year yield also surged. The ever-increasing cost of borrowing will make life difficult for Ishiba, whose minority Government faces an upper house election in July – and with it, the temptation to promise tax cuts or spending largesse. He tried to temper those expectations on Monday, reminding MPs that Japan's long era of anti-deflationary zero interest rates was over. 'The government is not in a position to comment on interest rates, but the reality is we are facing a world with them. Our country's fiscal situation is undoubtedly extremely poor, worse than Greece's,' he said. International Monetary Fund data puts Japan's debt-to-GDP ratio at 235%, well above the 142% rate in Greece, the epicentre of the 2009 eurozone crisis. Katsunobu Kato, Japan's Finance Minister, was even more stark, warning of the damage that could flow from the market ructions. 'A loss of market trust in our finances could lead to sharp rises in interest rates, a weak yen and excessive inflation that would have a severe impact on the economy,' he said. Japan's economy already looks shaky, having contracted 0.2% in the first three months of this year from the previous quarter, as timid consumers kept their wallets shut. Inflation is running at 3.6%, pushing the Bank of Japan (BoJ) to last year impose a positive interest rate for the first time since 2008. Bonds struggle for buyers For decades Japan's bond market has seemed relatively relaxed about the country's economy and public finances. But this was because the BoJ was buying up bonds to help boost the economy, owning about half the outstanding stock of bonds and creating a balance sheet bigger than Japan's GDP. Now the BoJ is trying to unwind this untenable position: it is spending ¥400 billion less on bonds per quarter as part of its fight against inflation. But the bonds are struggling to find alternative buyers, even among other traditional stalwarts like the big Japanese life insurers and managed funds. The BoJ will next month decide whether to stay the course on this sell-down from next year, which would still leave it buying ¥2.9 trillion every month. On Tuesday the bank released a summary of the views it has collected from economists and traders, which varied from one extreme to the other: some urged the central bank to keep buying anything from ¥1 trillion to ¥3 trillion a month; others said it was time to stop buying altogether. Some market participants hope the BoJ's gradual withdrawal will help the Japanese bond market function more normally, even if the process of resetting prices is painful. 'Japan is not alone' But even if this normalisation process is necessary or desirable, it is being side-swiped by the broader ructions in the global economy. Trump's tariff tirade has clouded every crystal ball, putting markets on a hair trigger. Behind that, there are mounting worries about the sustainability of the American and other Western governments' fiscal positions. With few exceptions, these are mired deep in deficit and debt. The US Government is heavily funded by the BoJ, owner of more than US$1 trillion ($1700b) of US Treasury bonds, adding to the uncertainty. Fred Neumann, the chief Asia economist at HSBC in Hong Kong, said: 'Rising debt levels in developed markets have become a growing concern in recent years, and the seeming lack of urgency about fiscal consolidation is leaving government bond investors increasingly jittery. 'After years of generous spending and tax cuts, fiscal constraints are starting to bite. Japan is not alone in facing the need for budget consolidation, but volatility in other developed economies' bond markets adds an extra layer of urgency to put the fiscal house in order.' British and Japanese bond yields are related because the two are substitutes for each other, according to Paul Dales, chief UK economist at Capital Economics. But he says the big risk to the UK comes from the US. He said 'uncertainty and tighter monetary policy in the US can be imported into the UK'. The US, which suffered a downgrade from credit agency Moody's last week, has a government debt-to-GDP ratio of 123% and is rated by BNP Paribas as the most fiscally vulnerable developed economy. An American 'Liz Truss moment' is 'a non-trivial possibility in current conditions', the bank said on Tuesday. BNP Paribas expects Congress to tap the brake on the US deficit, but 'perception can be reality in markets'. Avoiding the tripwires The ray of hope in Japan is that the markets will calm down and volatility will ease, even if yields never return to the level of previous decades. Some investors, such as Vanguard and RBC BlueBay Asset Management, are doing some contrarian buying of 30-year Japanese bonds according to Bloomberg. But that might not be enough to ease the squeeze, unless big Japanese money also starts to crowd in. The next test of the Japanese litmus paper is barely a week away, when the Government will hold an auction of 40-year bonds. Investors are already nervous: the 40-year yield was up more than 10 basis points on Tuesday. Will Japan blow up the world economy, including Britain's public finances? There are so many tripwires: the risk appetite of Japanese investment managers; the deliberations of the Bank of Japan; the election promises of Japanese political parties; and the continuing emanations on tariffs and tax cuts from the White House and Capitol Hill. And those are only the biggest threads. It's a hard knot to unpick. Reeves will just have to soak up BNP Paribas' pithy observation: 'In the short term, concerns about debt sustainability provide just one more reason to predict unpredictability.'
