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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Investors have been building up bets against the pound, as conviction grows that the Bank of England will start cutting interest rates by the summer, ahead of its US counterpart.Currency speculators’ wagers on a fall in sterling have reached a 16-month high, data from the US Commodity Futures Trading Commission shows. Meanwhile, asset managers have turned the most bearish on the UK currency since March last year, according to State Street, one of the world’s largest custodian banks.The shift in positioning, driven by falling UK inflation and weak economic data, has helped push the pound down 1.5 per cent against the dollar this year. Investors now expect the BoE, which announces its latest rate decision on Thursday, to cut earlier and faster than the Federal Reserve.“Everyone thought central banks would move together and now that assumption has been challenged,” said Michael Metcalfe, head of macro strategy at State Street. “Investors are going underweight sterling as the UK looks on track to ease ahead of the Fed.”As recently as March, when data still showed UK inflation running ahead of the US, investors had clung on to bets that the Fed would cut rates ahead of the BoE.But stronger than expected US economic data has left traders pricing in the probability of a Fed rate cut by late July at only one-third, compared with a near-50 per cent chance of a BoE cut by June. A drop in UK interest rates by August 1 is almost fully priced in by markets.The change in expectations has come as US headline inflation rose to a higher than expected 3.5 per cent in March from 3.1 per cent in January. Over the same period, UK inflation dipped from 4 per cent to 3.2 per cent, twice undershooting expectations this year.Traders are betting the BoE will deliver at least two quarter point rate cuts by the end of the year. That compares with just one or two cuts priced in for the Fed, even after weak US labour figures on Friday helped ease investors’ concerns about consumer price rises.“Inflation hasn’t met the Fed’s target and doesn’t look like it will any time soon, so the Fed is on hold,” said Roger Hallam, global head of rates at Vanguard, adding that, in spite of last week’s jobs figures, economic data “has not given the Fed the confidence they need to start easing rates”.In contrast, Imogen Bachra, head of non-dollar rates strategy at NatWest, which expects 1 percentage point of BoE cuts this year, said current market pricing for two BoE cuts this year still looks “far too low considering . . . the domestic data backdrop”.Hedge funds and other leveraged funds upped their net short positions — bets on falling prices — on sterling to almost 29,000 contracts for the week ended Tuesday April 30, the highest level since January last year, according to CFTC data.State Street, which is custodian to $44tn of assets, said asset managers’ sterling holdings had dipped to the lowest level since March last year, reversing a buying trend that had picked up in the first quarter of this year when the Fed was still expected to deliver multiple rate cuts in 2024. Data from Citi shows that bearish bets on sterling picked up across its asset management clients over the past month, with net selling in 15 of the past 20 trading days.Sam Hewson, the bank’s head of FX sales, said the net amount asset managers have sold to Citi was “roughly twice as large as the historical norm over any two-week period over the past 10 years”.The bets against sterling have come as falling US bond prices have weighed on gilts. Yields, which move inversely to prices, on benchmark 10-year Treasuries and gilts have both risen by about 0.6 percentage points since the start of the year.“You have had gilts trading like Treasuries for the last six weeks or so when they should be more like euro [European government] bonds,” said William Vaughan, associate portfolio manager at Brandywine Global, given that UK data has been more in line with the Eurozone than the US.Analysts expect dovish guidance from the BoE on Thursday, despite widespread expectations that rates will be left on hold at 5.25 per cent. When the bank published inflation forecasts in February, it predicted inflation would come back to target in two and a half years, while investors were pricing in about five cuts for 2024. “The MPC [the BoE’s Monetary Policy Committee] could easily judge that inflation at the 2-3 year horizon will be below target,” said Tomasz Wieladek, chief European economist at T Rowe Price. “This would be a green light for a cut in June and would lead investors to price in more cuts.” More

TOKYO (Reuters) – Japanese Finance Minister Shunichi Suzuki said on Wednesday authorities were ready to respond to excessively volatile moves in the exchange-rate market.”It’s desirable for currency rates to move stably reflecting fundamentals. Excessive volatility is undesirable,” Suzuki told parliament.”We will continue to monitor currency market developments carefully, and stand ready to respond with all means available,” he said.Suzuki also said authorities were not looking at specific yen levels in deciding whether to take action. He declined to comment on what he deemed as excessively volatile moves. More

TOKYO (Reuters) -Bank of Japan Governor Kazuo Ueda said on Wednesday the central bank may take monetary policy action if yen moves have a big impact on inflation, escalating his warning against the economic fallout from the currency’s recent sharp declines.A weak yen affects the economy in various ways including by pushing up import costs, and affecting demand for goods and services, Ueda said.While the BOJ won’t seek to directly control yen moves with monetary policy, it will scrutinise the potentially huge impact they could have on the economy and prices, Ueda said.”Companies’ wage- and price-setting behaviour is becoming somewhat more active. As such, we need to be mindful of the risk that the impact of currency volatility on inflation is becoming bigger than in the past,” Ueda said.”Exchange-rate moves could have a big impact on the economy and prices, so there’s a chance we may need to respond with monetary policy,” Ueda told parliament.The remarks compared with those Ueda made after the BOJ’s policy meeting last month, when he said the yen’s recent falls did not have an immediate impact on trend inflation.Ueda’s post-meeting comments have been cited by some traders as having accelerated the yen’s declines by heightening market expectations the BOJ will hold off on raising interest rates from current levels around zero for some time. More

(Reuters) -The target date for the next attempt to launch Boeing (NYSE:BA) Co’s Starliner space capsule on its first crewed test flight has been pushed back to no earlier than May 17, to replace a pressure valve on its booster rocket, NASA said on Tuesday.The CST-100 Starliner’s debut voyage carrying astronauts to the International Space Station (ISS) has been highly anticipated and much-delayed as Boeing scrambles to compete with Elon Musk’s SpaceX for a greater share of lucrative NASA business.The test flight was called off on Monday night with less than two hours left in the countdown after a pressure regulation valve malfunctioned on the upper-stage liquid oxygen tank of the Atlas (NYSE:ATCO) V rocket that was to launch the new capsule into orbit.The rocket, a separate component from the Starliner capsule, was furnished for the mission by United Launch Alliance (ULA), a Boeing-Lockheed Martin joint venture. After Monday night’s aborted launch attempt, NASA, Boeing and ULA announced that they would seek to try again as early as Friday, May 10.But in an update posted Tuesday evening, NASA said more time was needed after ULA “decided to remove and replace” the faulty pressure valve. That will require the rocket to be rolled back to its hangar on Wednesday for repairs, leak checks and other reviews ahead of a second launch attempt, NASA said.Those operations pushed the potential launch date back another week, NASA said. More

(Reuters) -Electric-pickup maker Rivian (NASDAQ:RIVN) on Tuesday stuck to a 2024 production forecast well below Wall Street targets and reported a wider-than-expected first-quarter loss as it ended a weeks-long manufacturing halt.Rivian shares fell 6% in after-hours trading as the muted forecast drew questions from some analysts about demand for its pricey R1S SUVs and R1T pickups. High inflation has soured consumer sentiment for electric vehicles, with hybrids gaining sales traction.Rivian shut down for the start of its second quarter and resumed production of its flagship vehicles late last month. The three-week shutdown allowed it to upgrade its assembly line to reduce costs in the long run. “We didn’t produce for the first month this quarter. We’ve moved from three shifts to two. That’s all balanced by the fact that the lines are running faster,” Rivian CEO RJ Scaringe told Reuters. “We are optimistic on the guidance we provided, but we’re not updating it.”Rivian said it will make 57,000 vehicles this year, while nine analysts polled by Visible Alpha expected 62,277.The factory retooling, however, added costs in the first quarter, and the supplier changes might limit the production ramp and rate in the near future, Rivian said. “We believe it is being cautious,” said Garrett Nelson, senior equity analyst at CFRA Research. “We also think there is some uncertainty regarding its sales looking out until later this year, so it is possible that sales can’t support a higher production total.”While a broader slowdown in EV demand has forced automakers to slash prices, Rivian has shied away from major discounting. It has instead introduced lower-priced variants with shorter range.As a result, the average selling price of its vehicles has fallen to $88,607 in the first quarter from $94,123 in the prior quarter.In March, Rivian revealed its smaller, more affordable R2 SUV aimed at the mass market. Production is due to start in the first half of 2026 at its existing Illinois factory instead of a previously proposed plant in Georgia. That will save the company more than $2 billion in expenses.On Tuesday, the company cut its annual capital expenditure forecast by $550 million to $1.2 billion. Analysts had expected capital spending of $1.59 billion.The Amazon (NASDAQ:AMZN).com-backed company has been trimming costs by renegotiating supplier contracts and building some parts, including its drive unit dubbed Enduro, in-house to reduce dependency on vendors.Revenue for the quarter ended March 31 totaled $1.2 billion, compared with analysts’ average estimate of $1.16 billion according to LSEG data.Rivian’s net loss widened to $1.45 billion from $1.35 billion the year-ago quarter, partly due to costs to retool the factory. It posted a loss of $1.24 per share, steeper than the $1.17 per share loss expected by Wall Street according to LSEG data.Rivian posted cash and cash equivalents of $5.98 billion, compared with $7.86 billion in the fourth quarter. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Some of Australia’s best-known exports come in the form of amber nectar, with the logos of Foster’s and Victoria Bitter among the most recognisable brands the country has produced. Less known is that the local brewing industry is in effect owned by two Japanese companies — Asahi and Kirin — which now own eight of the top 10 selling beer brands in Australia after consolidating the industry in recent years. Even Coopers, the one large brewery that has stayed independent, has joined the club by brewing Sapporo beers in Australia. It is a sign of Japan’s heavy investment in Australia, which has stretched far beyond the “stubby” beer bottle into renewable energy, finance, software and other consumer-focused areas such as insurance, cosmetics and vitamin pills. The depth of the Japanese-Australia partnership has been laid clear in a report from law firm Herbert Smith Freehills and the Australian National University. This states that Japanese finance “is one of the great untold stories of supporting Australian prosperity”. In 2023 alone, there were 44 takeovers of Australian companies by Japanese buyers and 38 partnerships struck. Japanese foreign direct investment, at $88bn (A$133.8bn) in 2023, now represents 12 per cent of the total and the country remains Australia’s second-largest trading partner and export destination. Meg O’Neill, chief executive of Woodside, highlighted the impact of Japanese investment on Australia’s largest oil and gas producer “since day one” with the Asian country’s banks, government and energy companies key players in the growth of the local energy industry. That has extended into 2024 as Japanese investors have spent around $2.3bn to acquire stakes in Woodside’s Scarborough offshore gas project — Australia’s largest energy project — to lock in supply of liquefied natural gas into the future.The enthusiasm for Australian investments was evident in the coastal city of Newcastle last month when Canberra-based start-up MCi Carbon launched a pilot facility called Myrtle to transform carbon dioxide into cement. The company has been backed by Japan’s Itochu, Mizuho Bank and Sumitomo Mitsui Trust Bank. Potential customers including Nippon Steel and Mitsubishi UBE Cement, were in the crowd.China remains Australia’s largest trading partner despite tariffs and sanctions being placed on Australian imports such as wine, beef and lobster in 2020 only just starting to unwind. Yet Chinese-led takeovers have dropped sharply. A report from KPMG and the University of Sydney Business School this month showed that 2023 was the joint lowest year for Chinese takeovers of Australian companies since 2006 with only 11 transactions completed. The value of takeovers dropped 36 per cent in Australian dollar terms in 2023 to $850mn from $1.4bn as Chinese development money was focused on other markets across south-east Asia. In contrast, there were 271 Chinese takeovers of Australian companies between 2017 and 2023 worth $23.5bn when mining was a key area of focus for buyers. So have Japanese buyers plugged a hole left by Chinese companies that are now looking elsewhere? Shiro Armstrong, director of the Australia-Japan Research Centre, doesn’t believe that there is a direct causal link between the rise in Japanese deals and the sharp fall in Chinese takeovers in Australia and sees politics instead playing a part in the trend.Armstrong said that there has been a tightening of national interest rules in Australia in sectors like critical minerals that has deterred Chinese buyers. He pointed to a 2020 decision by the Australian government to block a Chinese takeover of a milk and juice company on national interest grounds, even though the business was already owned by a Japanese company. Armstrong cited this as an example of “exaggerated concerns” surrounding foreign takeovers of companies perceived to have been bought for strategic reasons.For Armstrong, the irony is that Japanese buyers and investors met a similar attitude in the first wave of investment into Australia in the 1970s and 1980s. That is no longer the case with the Woodside deal and a $5.8bn takeover of a Tasmanian software tools company by Japanese chipmaker Renesas in February proving uncontroversial. Armstrong says Japanese companies were once treated with suspicion and investment was kept quiet. “Companies want to tell you their story and Australia is championing it,” he [email protected] More

(Reuters) -Reddit said it could post an adjusted profit in the second quarter thanks to its booming advertising business and content-licensing deals with AI companies, impressing investors who sent its shares soaring 16% in extended trading on Tuesday.The earnings report – the first since Reddit went public in March – also included a revenue forecast for the current quarter that was above Wall Street estimates, as more people flock to the social media platform behind 2021’s meme-stock frenzy. “It was a strong start to the year and a milestone quarter for Reddit,” CEO and co-founder Steve Huffman said.The company’s daily active unique visitors jumped 37%, to 82.7 million in the first quarter ended March 31, while its average revenue per user increased by 8%.That helped it post a 48% jump in revenue to $243 million, which was far above Wall Street expectations of $212.8 million, according to LSEG data. Its loss of $8.19 per share was also smaller than expectations for a loss of $8.71 per share.The results follow strong earnings from rivals including Snap and fan optimism that marketers are ramping up spending this year, after an ad market slump in 2023 caused by sticky inflation and an uncertain economic outlook.Reddit is also trying to diversify revenue by licensing its user-generated content for the training of data-hungry AI models. It signed a deal with Google (NASDAQ:GOOGL) earlier this year that is worth about $60 million annually. “Reddit has cultivated a diverse and loyal audience that advertisers covet. But the real money printer here is Reddit’s AI data licensing deals,” said eMarketer senior director of briefings Jeremy Goldman.Company executives signaled on a post-earnings call that Reddit was in talks for more such deals and has seen an increase in interest in its data.Reddit said it expects second-quarter revenue to be between $240 million and $255 million, compared with an estimate of $223.8 million. It expects adjusted earnings before interest, taxes, depreciation, and amortization to be between break-even and $15 million in the second quarter, compared with estimates for a loss of $18.2 million. With Reddit’s shares at $57.67 in extended trading, the stock has surged about 70% from the price in its March IPO. More