Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Yet another surge in the dollar and U.S. bond yields on Monday suggests the momentum in these assets – which set the tone for markets around the world – is not about to slow down just because the final quarter of the year is underway.If anything, it is accelerating. Asian markets could be in for a rocky ride on Tuesday after the 10-year U.S. Treasury yield leapt above 4.70% to its highest level since 2007 and the dollar spiked to its highest in almost a year.Investors in Asia are also awaiting the Reserve Bank of Australia’s latest policy decision and guidance on Tuesday. But it is the relentless rise in U.S. Treasury yields and the dollar that will set the tone across the region.From an Asian FX perspective, these moves can quickly snowball. Higher U.S. yields boost the dollar, which pushes Asian currencies lower, raising speculation that countries with particularly weak exchange rates might intervene by selling FX reserves, thereby pushing up U.S. yields. Repeat to fade.Japan is in or around this kind of territory. The dollar is a whisker from 150.00 yen – the yen is at its weakest in over 50 years on a real effective exchange rate basis – and Tokyo could intervene at any moment, potentially selling some of its huge stash of U.S. Treasuries.But the Bank of Japan is also fighting on the domestic bond market front, announcing on Monday that it will conduct extra bond buying operations as the 10-year yield reached its highest in a decade at 0.78%.A closely-watched BOJ survey on Monday showed that Japan’s business sentiment improved in the third quarter, with big non-manufacturers’ mood brightening to levels not seen since 1991. This would strengthen the view that the BOJ is closer to ditching 30 years of ultra-loose monetary policy, hence the rise in domestic yields.But the yen continues to slide, suggesting it is still being driven by U.S. yields and the dollar side of the equation. Something has to give.Australia’s central bank is expected to keep its key interest rate steady at 4.10% on Tuesday, according to a Reuters poll, but hike it to a peak of 4.35% by the end of this year as inflation remains above target.All but two of 32 economists in a Sept. 27-28 poll expected the RBA to hold its official cash rate steady. The two outliers forecast a 25 basis-point hike.Like nearly every currency in the world on Monday, the Aussie dollar got crushed under the wave of U.S. dollar-buying, falling more than 1% to $0.6363. It was its steepest one-day fall in a month.Here are key developments that could provide more direction to markets on Tuesday:- Reserve Bank of Australia rate decision- Australia, Japan services PMIs (September)- South Korea manufacturing PMI (September) (By Jamie McGeever; Editing by Deepa Babington) More

The head of the IMF has backed reforms that could eventually give Beijing more voting power within the fund, warning of “devastation” if her institution remains without adequate financial resources to aid struggling countries. In an interview with the Financial Times, Kristalina Georgieva called for the IMF to better represent changes in the global economy over the past decade, which include the rise of China.“There is a need to constantly change to reflect how the world economy is changing,” she said, in an implicit reference to the disparity between China’s 6 per cent share of voting power in the IMF and its heft in the world economy, which is roughly three times as much.Noting that she was encouraged by “how the fund has been able to mobilise and overcome differences in views so many times since [Covid-19] hit,” Georgieva said of the changes in voting power: “I am optimistic that we will go there.”Traditionally each IMF member country has a so-called quota, based on its position in the world economy, which determines its contributions to the fund as well as its voting weight within the institution and access to emergency financing.At present, China’s quota is less than Japan’s, despite its larger share of global gross domestic product. As the IMF’s largest shareholder, the US holds roughly 17 per cent, giving it veto power over quota decisions, which require 85 per cent support. The IMF’s board of governors conducts quota reviews at least every five years. The last time it agreed changes was in 2010, since when China’s economy has grown considerably. Those changes took effect in 2016.Speaking ahead of IMF and World Bank meetings in Marrakech this month, Georgieva acknowledged changes to voting weights were not on the agenda for a current quota review, due to wind up in December.Georgieva’s call for a longer-term rethink of IMF representation comes amid a US effort to shore up Washington-based multilateral institutions to increase western influence with emerging and developing countries.It also comes as she seeks to step up her institution’s resources to deal with economic problems across the globe.“We are at the centre of the global financial safety net,” she said. “If the fund is unable to step forward and bring confidence for others, the devastation can be profound economically, socially, but also from a security standpoint.” As part of the current push for more resources, the US wants to increase member countries’ quotas without an immediate reallocation of voting powers — along with governance changes to give greater prominence to developing countries.Georgieva said such changes had the support of a “very healthy majority” of the fund’s membership and would allow it to be “strong for the future”. But she noted the issue of adjusting representation over time had come up in discussions among member countries.US officials have left the door open to supporting a reallocation of shares at a later stage, but have signalled they would veto any expansion of Beijing’s voting rights at the present time. Jay Shambaugh, Treasury under-secretary for international affairs, said such a move would require “all countries — especially those that would see an increase in share” to respect “the roles and norms of the IMF”. China, now the world’s biggest bilateral lender, has been criticised by western creditors for hampering debt relief deals for troubled countries. Georgieva said it had “not been at all easy” to work with Beijing on such issues. But she added China had “steadily engaged” with the IMF on restructurings and was generally “quite constructive”.She underlined the fund’s call for more resources from its shareholders at a time when the global economy was likely to be hamstrung by lacklustre growth.Kristalina Georgieva said: ‘In a world of more tensions, more social pressures, more rejections of the notion of detached elites, we have to aim to understand the priorities of people’ More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.Asia faces one of the worst economic outlooks for half a century thanks to a sluggish post-pandemic recovery, China’s property crisis, rising levels of debt and US protectionism.That’s today’s verdict from the World Bank which downgraded its growth forecast for China from 4.8 per cent to 4.4 per cent next year and for the broader set of developing economies in east Asia and around the Pacific from 4.8 per cent to 4.5 per cent.The region, one of the world’s main growth engines, is now likely to experience the slowest pace of improvement since the late 1960s, barring extraordinary periods around the pandemic, the 1970s oil shock and the Asian financial crisis.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.China is the main barrier to progress due to a number of factors including the precarious state of its property sector, which normally accounts for more than a quarter of activity in the world’s second-largest economy, prompting Beijing last month to unleash a huge stimulus programme to rekindle demand. Retail sales meanwhile have fallen to pre-pandemic levels, although economists believe there could be a boost in spending on restaurants and outings during China’s Golden Week, the longest holiday break of the year, which starts today. Foreign investors are concerned but there have been signs of life in the past few weeks. Factory activity expanded in September for the first time in six months according to government PMI data on Saturday, while S&P Global data yesterday also showed improvement. Consumer prices have edged back from deflation and the rate of decline in exports has eased. There has also been positive news on trade tensions after a new “mechanism” was agreed with the EU to discuss export controls, mirroring a similar effort between Beijing and Washington. As the FT’s chief economics commentator Martin Wolf recently concluded, it’s far too soon to write off China just yet. Elsewhere there are signs that weakening global demand is taking its toll.Goods exports are significantly down in Indonesia, Malaysia and Vietnam and the World Bank’s worsening forecasts reflect the potential damage from US industrial and trade policies encapsulated in the Inflation Reduction Act and the Chips and Science Act. Countries such as Vietnam are fighting back, unveiling billions of dollars in deals with the US on semiconductors and AI.The way forward for the region was through deeper service sector reforms, said World Bank economist Aaditya Mattoo. “In a region which has really thrived through trade and investment in manufacturing . . . the next big key to growth will come from reforming the services sectors to harness the digital revolution,” he said.Need to know: UK and Europe economyPrime minister Rishi Sunak’s weakening of UK climate policies has left exporters facing hefty EU carbon tax bills. The collapse of the country’s carbon market, which sets the price to be paid for every tonne of CO₂ released, means the UK will be hit by EU rules that penalise countries with substantially lower carbon costs. House prices fell across all UK regions for the first time since 2009 in the three months to September as high mortgage rates took effect, according to mortgage lender Nationwide. The construction industry is bearing the brunt of a cooling UK labour market.Anti-Ukraine former prime minister Robert Fico is set to try to form a coalition government after winning Slovakia’s elections, potentially joining Hungary in undermining western unity in helping Kyiv in its war against Russia.EU plans to enforce 30-day payment terms have dismayed retail groups, which say the proposals will inadvertently push up prices and encourage them to buy more from China. UK businesses meanwhile are bracing for the impact of new post-Brexit rules for Northern Ireland.Ireland is booming yet its creaking infrastructure, and housing in particular, is hampering businesses’ ability to recruit and retain staff. Our Big Read explains.€14.40 for a Maß of pilsener anyone? Despite the gloomy outlook for the German economy, record numbers of drinkers are flocking to Munich’s Oktoberfest.Need to know: Global economyThe United Arab Emirates, which will host the UN’s COP28 climate summit this year, has offered to also host the follow-up meeting, giving it large influence over global climate policy during a key two-year period. COP29 was due to be held in eastern Europe but Russia has blocked any EU member country becoming host in the wake of the Ukraine war.Zimbabwe’s president Emmerson Mnangagwa is preparing to restart talks on $14bn of unpaid debt as deep divisions persist over disputed elections. His government is grappling with the collapse of the revived Zimbabwe dollar and triple-digit inflation.UBS settled with the government of Mozambique over Credit Suisse’s involvement in a £2bn alleged “tuna bond” fraud that wrecked the country’s finances. The 2013 loans were ostensibly to fund projects including a state tuna fishery but later collapsed into default over the alleged looting of hundreds of millions of dollars. Japan’s prime minister Fumio Kishida asked investors to “reassess our economy” as heads of global funds gathered in Tokyo for a series of events to attract investment. Read more in our special report: Investing in Japan.The Revival of the Japanese Stock Market: Is this time different? Register today for our exclusive subscriber webinar this Wednesday October 11 at 14:00 BST. Need to know: businessTrading in options tied to the Vix volatility index — known as Wall Street’s “fear gauge” — is set to hit a record high as cautious investors look to protect themselves from the risk of a sudden stock market reversal.“There’s a dark cloud hanging over green stocks.” Shares in renewable energy companies have sold off sharply in recent months, significantly underperforming fossil fuel companies, as higher interest rates take their toll.Wall Street bankers are hoping a rebound in dealmaking will lift bonuses and morale, but a return to the industry’s 2021 peak looks a long way off. Fees on corporate mergers, equity raises and debt underwriting surged in 2020 during the pandemic and hit record highs in 2021, but activity plummeted when central banks began aggressively lifting interest rates. The trial of FTX founder Sam Bankman-Fried, former poster child of crypto, gets under way tomorrow. He is accused of having defrauded dozens of the world’s top investors as well as millions of customers at his FTX cryptocurrency exchange and stealing billions of dollars entrusted to his custody.America’s shale pioneers vowed to keep a lid on drilling even if oil hits $100 a barrel, hitting out at what they claim is a “war” on fossil fuels waged by the Biden administration. Production cuts by Saudi Arabia and Russia have put up petrol prices, causing Biden a political headache as he seeks re-election. UK water bills are set to soar by an average £156 a year as providers seek £96bn to fund investment in the water and sewage network. The plans, submitted today to regulator Ofwat, come amid public anger over sewage outflows and the effect of price increases during a cost of living crisis. Lovers of coffee and chocolate face higher prices and “shrinkflation” in product sizes as underlying commodity costs surge. Sugar prices hit their highest level in 12 years this month while cocoa futures reached a four-decade high. It’s not looking great for cheese lovers either: recent floods have devastated Greek production of Feta.The World of WorkRecent visits to picket lines by president Joe Biden and potential rival Donald Trump highlight how workers’ rights are moving to the centre stage of US political debate. The Hollywood writers’ strike is a case in point.What is the difference between a hook-up, a fling and a relationship? Management editor Anjli Raval says this may now be required knowledge for directors at big companies as personal conduct becomes a growing risk for business.Hybrid working has exposed the inadequacies of modern office design, says columnist Pilita Clark.Some good newsWhat is believed to be the first baby beaver born in London for hundreds of years has been spotted in Enfield after the council and Capel Manor college began reintroducing the animals back to the capital.[embedded content]Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More