Aurelia Butler

BUDAPEST (Reuters) – Hungary’s central bank warned on Thursday the 2024 budget gap could exceed the government’s recently raised target of 4.5% of gross domestic product, calling for credible fiscal planning to cut market risks for central Europe’s most indebted economy.Eastern European Union neighbours Hungary and Romania have struggled since the COVID-19 pandemic to control their budget deficits, with their shortfalls averaging about 7% of GDP over the past four years, well above EU average levels.Data for the first two months showed a rise in the deficit in both countries, leading Hungary to abandon plans to cut the shortfall below the EU’s ceiling of 3% of GDP and raising risks to EU fund flows for Romania, one of the bloc’s poorest members.”For the debt ratio to decline continuously in 2024 and Hungary’s risk perception to improve, it is also necessary to achieve the set deficit targets in a credible manner,” the National Bank of Hungary said.”The high inflationary environment over the past two years has led to a significant increase in government interest expenditure, which will continue to be a heavy burden on the budget this year as well.”It said the shortfall could exceed the EU’s 3% of GDP threshold even in 2026, when nationalist Prime Minister Viktor Orban will face a parliamentary election.Despite tax hikes at the start of the year, the European Commission has warned that Romania’s shortfall could rise back to 7% of economic output this year, while Hungary’s central bank sees the 2024 budget deficit between 4.5% and 5% of GDP.”We have highlighted delayed fiscal consolidation among top credit risks for CEE sovereigns for 2024,” Karen Vartapetov, a sovereign ratings analyst at S&P Global Ratings, told Reuters.”Fiscal consolidation plans will be challenging due to a heavy election calendar, high interest bills and ambitious defence spending commitments,” he said in an emailed response to questions.Any loss of EU funding due to a failure to meet fiscal rules could hurt economic growth, Vartapetov added.S&P has projected general government interest spending at nearly a tenth of revenue for Hungary and more than 6% for Romania this year after an inflation surge into the double digits triggered aggressive rate hikes across central Europe.Hungary’s central bank, which has slashed borrowing costs by 975 basis points since May to 8.25%, slowed the pace of rate cuts this week, while a rise in inflation at the start of 2024 and other risks have so far prevented rate cuts in Romania.”Hungarian ministers are openly talking about a new deficit target of 4.5% of GDP, which is likely to be officially amended in the spring parliamentary session,” ING economist Peter Virovacz said in a note.”However, based on our technical projections, we can already see a slippage of around 1.0 to 1.5 ppt even on the soon-to-be-updated deficit target.” More

LONDON (Reuters) – Zambia’s deal with bondholders this week suggests it will finally emerge from more than three years in default — and become the first successful restructuring under the debt-rework architecture designed by the G20.The deal is a much-needed win for the so-called Common Framework. The African nation’s President Hakainde Hichilema posted on X that “history has been made,” while International Monetary Fund (IMF) President Kristalina Georgieva lauded the “important achievement.”Global leaders hope that Ghana may soon reach its own deal with lenders, boosting the Framework before the IMF World Bank Spring Meetings in Washington, D.C. in mid-April.But the scars from Zambia’s drawn-out battles with creditors – and its years-long, stop-start progress – have left investors, observers and many policymakers themselves wary of the multilateral mechanism’s efficacy.It was designed to expedite talks between a myriad of lenders from Chinese state-owned institutions to London-based asset managers and New York banks.”I don’t think anyone is filled with a tremendous sense of confidence that the Common Framework is going to speed up the debt negotiation process,” said London-based Kevin Daly, head of emerging market debt at Abrdn, which held some of Zambia’s $3 billion worth of international bonds.Ricardo Klinger, Brazil’s Finance Ministry official in the G20 International Financial Architecture Working Group, said those involved in Zambia’s restructuring would discuss lessons learned. Brazil currently holds the G20 presidency.”The stages are being completed more quickly because it is a learning process,” Klinger said. He said they aim to publish a document in July incorporating feedback from all sides of Zambia’s restructuring to identify bottlenecks and potential improvements to gain time.”The document seeks to synthesize this learning in these recent cases to build a more refined process,” he said.FIRST TO FALLZambia was the first African country to default amid the economically punishing COVID-19 pandemic, doing so in late 2020.Foreseeing more collapses, the G20 launched the Common Framework to bring all creditors to low-income nations under one roof — particularly China, whose lending to developing countries exploded in the decade before the pandemic.For many, though, Zambia has been a cautionary tale — throwing into sharp focus disagreements around equal burden sharing and transparency.The delays have hamstrung much-needed investments in the country, curtailed economic growth and weighed on local financial markets. A devastating drought has exacerbated the pain, hitting hydropower and food production.In November, an unexpected official creditor smackdown of Zambia’s initial bondholder deal shocked its leaders — and bondholders like Daly.Members of the Official Creditor Committee (OCC), co-chaired by China and France, said it did not offer Comparability of Treatment, meaning bondholders were not taking a comparable hit to the debt relief that official lenders offered. Zambia has promised that the new deal has official creditor sign-off, but Daly and others said communication and transparency issues loom for other restructurings.”There is a major flaw,” Daly said.Bondholders, for example, do not have access to the terms official creditors give countries, effectively leaving them working in the dark. Details are sometimes published later, but not always, potentially leaving the public in the dark as well.”Improvements could … be made to transparency and information sharing between official and private creditors, as well as clearly defined rules on Comparability of Treatment to ensure agreements under the Common Framework are timely and equitable,” said Christian Libralato, EM Portfolio Manager at BlueBay Asset Management.AIMING TO REVISEOthers agree with Klinger that Zambia’s pain could help forge a successful Framework.”Some of those lessons will be put to work in Ghana, and some will be put to work in Ethiopia,” said Giulia Pellegrini, portfolio manager for emerging markets debt at Allianz (ETR:ALVG) Global Investors. “There will be some transferable skills and lessons.””There’s definitely a lot of push to have more successful cases,” she added.Ghana is currently in formal talks with holders of more than $13 billion in international bonds and wants to speed up remaining negotiations. Ethiopia defaulted on its sole $1 billion Eurobond in December, but talks with bondholders have been slow.The IMF is also working on key fixes; it is in the middle of a years-long revision of its debt-sustainability analyses (DSA) and has promised to share them earlier with creditors. DSAs detail how sustainable a country’s debt burden is and form the basis for restructurings.It also launched the Global Sovereign Debt Roundtable, bringing together representatives from the countries, private lenders, the World Bank and the G20 to identify and solve key problems with the Framework. Such issues include how to calculate comparability of treatment, how to treat debt to state-owned enterprises, and cut-off dates for debt included in reworks.”They are aware of these issues, and they have begun a process to address these, but it won’t be an easy announcement in the Spring Meetings,” Pellegrini said.That may not be much comfort to other countries in a similar situation.”I am not sure that the three years it took to get Zambia done will commend the Common Framework to other countries that may be technically eligible to apply for Common Framework treatment,” lawyer and veteran sovereign debt expert Lee Buchheit told Reuters. More

NEW YORK (Reuters) – Owning a home can feel like risky business, from coming up with the mortgage payment every month to worrying about disasters like fires or floods or tornadoes.But here is something riskier still: Going without home insurance in the U.S. altogether.It is called “going bare,” and 12% of American homeowners report doing just that, according to a study from the Insurance Information Institute (III) and Munich Re. That is up from just 5% in 2015.In some areas, it is estimated to be even higher than that – between 15-20% of homeowners in Florida, the highest percentage in the country, according to the III.That means if disaster strikes, you are “self-insured” – a fancy way of saying you will have to find the funds to rebuild. Unless you happen to have hundreds of thousands of dollars just sitting around, that won’t be pleasant.“Thinking you can recover from a major catastrophe like a hurricane, tornado or wildfire without property insurance is unrealistic for 99% of U.S. homeowners,” says Mark Friedlander, III’s communications director. Going bare is still fairly uncommon: That is because if you take out a mortgage on the property, lenders typically require proof of home insurance.And yet, some homeowners are choosing to take on this risk. One reason for that is sky-rocketing costs: Average home insurance premiums are now $1,759 annually for $250,000 of dwelling coverage, according to financial information site Bankrate.com. That is a whopping 23% more than a year ago.Secondly, coverage may be hard to find, since some insurers are not writing new policies, or are pulling back altogether from high-risk areas. After all, they face their own rising costs, from severe weather events to increasingly expensive building materials.As a result, some homeowners are taking the biggest bet and going without any coverage at all – which is enough to make their financial planners tear their hair out.“I live in Florida, and there is no good solution here,” laments Dennis Hunt, a planner in Melbourne, Florida. “I have a couple of different client families that have chosen to drop their home insurance coverage due to the skyrocketing premiums. I obviously advised against this.”To avoid taking such a huge gamble, here are a few pointers.SHOP AROUND AND HUNT FOR DISCOUNTSBefore you give up, put the work in and see what kind of rates you can get. That means diligent comparison shopping – according to Bankrate research, the insurers Erie, Auto-Owners and USAA offer some of the lowest rates available.It also means loading up on any potential discounts, which you may not even realize you qualify for. These include bundling with another policy such as auto insurance (generates an average 10%-25% discount on both policies), being claims-free, loyalty discounts (being a long-time customer of your insurer), installing a security system, adding smart home devices or being a retiree or senior citizen, says Friedlander.CONSIDER PERSONAL CIRCUMSTANCEThere is no one-size-fits-all solution here – and some planners say that in limited, rare cases, self-insuring could be a legitimate option.“What if the land is worth more than the house?” asks Kevin Dunleavy, a financial planner in Orlando. “What if it’s a rental that it is really a teardown? What if the client has enough investable assets to consider self-insuring? I think there are cases when forgoing dwelling coverage for much less expensive liability-only coverage makes sense.”TWEAK THE POLICYIf the punishing premiums are scaring you off, there are ways to mitigate the costs. One common method is to increase the deductible. That means you will have to cover more modest claims out-of-pocket, but at least you will still be covered in the event of catastrophic loss.In addition, you could “change your policy type from an HO-3 to an HO-2,” suggests Bankrate insurance analyst Shannon Martin. An HO-2 policy is more basic coverage, where particular perils have to be named. “Both changes may offer significant savings,” Martin says.If you do decide to ‘go bare,’ just realize that the bill may eventually come, and it could be a very high one indeed.Just ask financial planner Paul Monax of Littleton, Colorado, whose town was ravaged by major hailstorms last summer, damaging roofs up and down his street.“I have a neighbor that decided to self-insure,” Monax remembers. “They are replacing their roof out-of-pocket – for about a decade’s worth of premiums.” More

(Reuters) – The owner, operator and charterer of the container ship that struck Baltimore’s Francis Scott Key Bridge on Tuesday are likely to face lawsuits over its collapse and the people killed or injured, but legal experts say U.S. maritime law could limit the companies’ liability.U.S. laws pertaining to open-water navigation and shipping, which are created through court decisions and by acts of Congress, could restrict the kinds of lawsuits filed against the registered owner of the Singapore-flagged ship, Grace Ocean Pte Ltd, its manager Synergy Marine Group and its charterer Maersk, and could limit the damages they would have to pay, three legal experts told Reuters.Representatives for Synergy and Maersk declined to comment on the potential for litigation. Efforts to reach a spokesperson for Grace Ocean were not successful.The economic damages suffered by the city of Baltimore from the closure of the port, the busiest port for car shipments in the U.S., or by businesses that rely on it and the now-collapsed bridge would not be recoverable through lawsuits, said Martin Davies, director of the Maritime Law Center at Tulane University School of Law.That’s because U.S. courts have interpreted a 1927 U.S. Supreme Court ruling to mean that any purely economic damages from maritime incidents can’t be recovered from the ship’s owners and operators, Davies and other experts said. Instead, lawsuits would be limited to injuries, death and property damage or losses, such as claims from the people harmed by the collapse or claims over the damage to the bridge itself, likely brought by government entities.The lawsuits are likely to be filed in federal court, the experts said. The plaintiffs may also ask a federal judge to “arrest” the ship, and prevent it from leaving the jurisdiction while the litigation plays out, they said.Those with economic damages might be able to get compensation from insurance policies. Insurers could face billions of dollars in claims, analysts said, with one putting the cost at as much as $4 billion, which would make the tragedy a record shipping insurance loss. Traffic was stopped on Tuesday before the ship, named the Dali, struck the pylon that led to the bridge’s collapse, likely saving lives. But eight people fell into the river, where water temperatures were 47 degrees Fahrenheit (8 degrees Celsius). The remains of two of the six missing workers were recovered on Wednesday with the remaining four presumed dead. Two workers were rescued, one unharmed and one injured. The ship’s owner, its operator, charterer and even the ship itself could face claims for those injuries or deaths.Under maritime law, a victim can sue the ship itself, in contrast to laws pertaining to car crashes, and have it sold to satisfy their judgment, said Robert Anderson, a professor at the University of Arkansas School of Law.But an 1851 law limits the shipowners’ liability to the present value of the ship, which could be in tens of millions of dollars, said Anderson and Baltimore maritime plaintiffs’ attorney Charles Simmons Jr. Davies and Simmons said they expect the shipowners to petition a federal court for that limitation of liability, and Anderson said the shipowners will likely rely on liability insurance to pay any damages. But if evidence shows that the shipowners were somehow at fault for the crash, they could lose the ability to limit their liability, the experts said.Questions have arisen about the Dali’s condition when it hit the pylon and problems identified during previous inspections, which could come into play as a court evaluates whether to limit the damages, said Simmons.“If there was any indication that the ship had pre-existing issues, these guys are not going to get out on a limitation of liability,” he said.An unusual feature of these claims is that any lawsuits filed on behalf of people injured or killed in the collapse will not be subjected to a Maryland law that caps non-economic damages in wrongful death cases to about $1.4 million, because it isn’t recognized by maritime law, Simmons said. More

U.S. stock futures traded largely unchanged Thursday, on course for a second consecutive winning quarter and fifth straight winning month ahead of the release of more widely-watched economic data.By 05:15 ET (09:15 GMT), the Dow futures contract traded largely flat, S&P 500 futures dropped 2 points, or 0.1%, and Nasdaq 100 futures fell by 25 points, or 0.1%.The major indices closed higher Wednesday, with the broad-based S&P 500 index gaining 0.9% to close at a record high, the Dow Jones Industrial Average gaining 1.2%, its best day this year, and the tech-heavy Nasdaq Composite rising 0.5%.On a quarterly basis, the S&P 500 is up 10%, on pace for its best first-quarter gain since 2019. The DJIA is up 5.5%, on track for its strongest first-quarter performance since 2021, while the Nasdaq is up just over 9%.Economic data due for release Thursday includes weekly jobless claims, fourth-quarter gross domestic product data and Michigan consumer sentiment.The main focus, however, will be on Friday’s release of the Fed’s favorite inflation gauge, the core personal consumption expenditures price index, when the market is shut for Good Friday.In corporate news, RH (NYSE:RH) stock soared over 9% premarket after the home furnishing company reported “exceptional” demand for its new catalog of products, even after its fourth-quarter results missed expectations, as adverse weather and shipping delays weighed. Take-Two Interactive Software (NASDAQ:TTWO) took a step late Wednesday towards enhancing its video games offerings by agreeing to buy U.S. game developer Gearbox Entertainment for $460 million.Take-Two is seeking to buy Gearbox from Sweden’s Embracer Group (ST:EMBRACb), and will thus obtain its popular “Borderlands” series.Borderlands is by far Gearbox’s most successful franchise, selling nearly 80 million copies, with Take-Two adding that it and Gearbox were in “active development” over the next installment in the Borderlands series. The main focus for Take-Two, however, will be on the upcoming release of the sixth iteration of its very popular “Grand Theft Auto” franchise, which is slated for 2025. The game is a long-awaited follow-up to GTA 5, which is among the best-selling video games of all time.The acquisition is expected to close in the first quarter of Take-Two’s fiscal year 2025. It’s just over a year after UBS (SIX:UBSG) agreed to buy rival Credit Suisse, and it has seemingly greatly benefited from the move as its share price is now over 50% higher.CEO Sergio Ermotti has been rewarded for this, picking up 14.4 million Swiss francs ($1 = CHF0.9059) in 2023 after taking over the Swiss bank’s helm for a second bout following the takeover.However, the Swiss banking giant said Thursday, in its annual report, that it is still reviewing potential misstatements in Credit Suisse’s financial reports, adding that there is a risk that “a material error” may not be detected.A “material weakness” is how Credit Suisse reported its numbers could signal a significant misstatement in the financial statements, eventually leading to the demise of the lender.  Global equity markets are ending the first quarter of 2024 on a high note, as investors celebrate the likelihood of prospective rate cuts from major central banks and the associated pickup in economic activity.Wall Street’s S&P 500 index and Europe’s STOXX 600 index are near record levels.This optimism has resulted in a pickup in global mergers & acquisitions, after a gloomy 2023, with total M&A volumes globally climbing 30% to about $755.1 billion in the first quarter, according to data from Dealogic. The number of transactions worth more than $10 billion jumped to 14, compared with five during the same period last year.It’s the U.S. and Europe where the deals have been concentrated, as U.S. M&A volumes surged 59% to $431.8 billion and European deals jumped 64%, while Asia Pacific volumes slumped 40%. Credit card giant Capital One ‘s (NYSE:COF) $35.3 billion takeover of Discover Financial, the deal by software company Synopsys (NASDAQ:SNPS) to acquire design rival Ansys (NASDAQ:ANSS) for $35 billion, and Diamondback (NASDAQ:FANG) Energy’s $26 billion tie-up with Endeavor Energy were the quarter’s largest transactions.Oil prices rose Thursday, on course for a strong opening quarter, with traders betting on tighter supplies, especially amid lower Russian production.By 05:15 ET, the U.S. crude futures traded 0.4% higher at $81.66 a barrel, while the Brent contract climbed 0.3% to $85.64 per barrel.Both contracts were set for strong gains in the first quarter of 2024, trading up between 11% and 14% over the past three months.Prices were boosted chiefly by a tighter outlook for markets, as the Organization of Petroleum Exporting Countries and allies, including Russia, kept ongoing production curbs in place. Moscow had earlier in March said it will deepen its ongoing production cuts, while a series of attacks by Ukraine on Russian fuel refineries has also hit fuel supplies in the country.“Russia’s actions could push Brent oil price to $90 already in April, reach mid-$90 by May and close to $100 by September,” JPMorgan analysts wrote in a recent note.The main obstacle to this scenario is likely to come for the U.S., with high gasoline prices expected to become a contentious topic ahead of the 2024 Presidential elections. The Biden Administration had drawn the country’s Strategic Petroleum Reserve to near 40-year lows in 2022 at the onset of Russia’s invasion of Ukraine, and could tap this reserve again to combat rising oil prices.   More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Official statistics published on Thursday confirmed the UK economy slipped into a technical recession in the second half of last year.The Office for National Statistics said gross domestic product fell 0.3 per cent quarter on quarter in the last three months of 2023, following a 0.1 per cent fall in the previous period, confirming initial estimates.This means that the economy contracted for two consecutive quarters, the definition of a technical recession, reflecting the impact of the cost of living crisis and high borrowing costs. Liz McKeown of the ONS said: “Our updated set of GDP figures shows quarterly growth unrevised across 2023, with a little growth in the first quarter and small contractions in the latter half of the year.”The revised data offers little cheer to Prime Minister Rishi Sunak, casting a shadow over his pledge to “grow the economy”. The Conservative party trails Labour heavily in opinion polls ahead of the general election expected in the autumn. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Chancellor Jeremy Hunt said: “Last year was tough as interest rates had to rise to bring down inflation, but we can see our plan is working. Inflation has fallen decisively from over 11 per cent to 3.4 per cent, the economy grew in January and real wages have increased for eight months in a row.”Labour’s shadow chancellor Rachel Reeves said the prime minister should call an election: “Rishi Sunak has broken his promise to grow the economy and left Britain in recession with working people paying the price.”The ONS last month published GDP figures for January showing the economy returned to growth with 0.2 per cent month-on-month expansion. Other indicators, such as retail sales, business sentiment and mortgage approvals, all improved from last year. Philip Shaw, economist at investment bank Investec, calculated that even if output remained flat over February and March, the result would be a quarterly increase in GDP in the first quarter.The detailed figures published by the ONS on Thursday showed some positive news for consumers.Real household disposable income, the amount available to spend after taking inflation into account, grew 0.7 per cent in the final three months of 2023 after barely growing in the previous three months. The household saving ratio — the proportion of income that is saved — rose to 10.2 per cent in the final quarter, from 10.1 in the previous three months, and above the long-term average of 7 per cent. It was helped by pension savings and social benefits.Better household finances could help stimulate a recovery in both spending and overall growth. Economists expect the improvement to continue this year as inflation declines and wages rise. “We think real household disposable income will continue to rise this year due to lower inflation and the boost from further cuts to national insurance tax announced in the March Budget from April,” said Ashley Webb, economist at Capital EconomicsIn contrast, the current account deficit widened to 3.9 per cent of GDP in the final three months of 2023 from 3 per cent in the previous quarter because of a deteriorating trade picture. The deficit includes the UK trade balance and the net income from foreign investment and transfers, and is a measure of how much the economy relies on the inflow of foreign money. More