Aurelia Butler

Economic data: France is to release gross domestic product and inflation figures today, while Germany is set to publish inflation numbers and Spain is to update GDP growth.Earnings: UK lender NatWest reports first-half results today, after it was embroiled in a dispute with British broadcaster Nigel Farage, who was “debanked” by NatWest subsidiary Coutts allegedly because of his political views. Air France-KLM and IAG, which owns British Airways, Iberia and Vueling, report second-quarter figures. Other major companies releasing results include French consultancy Capgemini, Anglo-Swedish drug giant AstraZeneca, UK luxury car maker Aston Martin Lagonda, French telecoms operator Bouygues and Italian energy major Eni.Industrial action: A four-day strike by 450 workers at the UK’s Gatwick airport begins today in a dispute over pay.Cowes Week: The world’s largest and longest-running international sailing regatta begins on the UK’s Isle of Wight on Saturday.Russia’s Navy Day: The country will display its naval warships, weaponry and aircraft on Sunday. More

SYDNEY (Reuters) – Foreign bank lending to Australian office real estate hit a record high in the first quarter as overseas lenders continued to stump up cash for a struggling corner of the property market out of favour with local banks.Foreign bank loans to Australian office property rose by A$1.2 billion ($816.1 million) to A$35.5 billion in the March quarter, the highest level in a series going back to 2004, according to the latest data from the prudential regulator. The data does not identify individual banks, however a separate dataset covering overall corporate lending showed European, Japanese, Singaporean and Chinese banks had led the increase in foreign lending since 2019.Loans from Australia’s biggest banks fell A$2.3 billion to A$83 billion over the same period, similar to levels in late 2021, the data showed.The shift reflects greater risk appetite among foreign banks, a virtue in a sector where lenders often wait years for delay-prone construction projects to complete before rents flow, according to Jonathan Kearns, chief economist at investment management firm Challenger and a former head of financial stability at the Reserve Bank of Australia. Australia is a way for these banks to diversify into a market with a good record of economic growth and credit performance, Kearns added. So, as Australian lenders have retreated to the relative safety of retail mortgages, foreign banks have stepped up. “It’s an easier area to expand into than say housing, which is competitive and depends on broker relationships and branch networks,” Kearns said.The flow of money from Asia and Europe is a vote of confidence for a sector where rising rates and the shift to home working are forcing owners to mark down the value of office assets and pay out investors pulling money from office funds.Dexus, one of Australia’s largest office block owners, sold a premium downtown Sydney office in June for a 17% discount to its most recent valuation.But with foreign lenders now accounting for roughly a third of outstanding office loans following an 82% surge in lending since 2019, they are materially exposed to big losses should office markets suffer a prolonged and permanent downturn.Asset prices falling by 20% may be enough to trigger loan rules forcing borrowers to stump up more capital, according to a senior executive in loan syndication at a major Australian bank, who is not authorised to speak with media.Investment bankers say unlisted office prices could fall 20% to 30%, although investors remain divided about how far values will drop.Sydney was the worst-performing major Asian office market in the first quarter, according to research from global property services firm Jones Lang LaSalle.($1 = 1.4704 Australian dollars) More

Could this be a landmark day for the Bank of Japan?Asian markets are likely to come under pressure on Friday, backing down from five-month highs as the Bank of Japan opens the door to allowing long-term interest rates to rise beyond the 0.5% cap as it discusses potential amendments its yield curve control (YCC) program.A Nikkei report on Thursday pointing in that direction coincided with a downturn for U.S. stocks, a fall that snapped the Dow Jones Industrial Average’s 13-day winning streak, it’s longest since 1987.The news was “the biggest driver of today’s performance,” according to Michael Green, portfolio manager and chief investment strategist at Simplify Asset Management.It also prompted the dollar to fall against the yen.The BoJ’s tentative step away from its ultra-loose monetary policy inches it closer inline with its global peers, which have tightened their monetary policies to combat inflation. On Wednesday, the U.S. Federal Reserve implemented another 25 basis point interest rate hike as widely expected, and the European Central Bank followed suit on Thursday, even as central banks around the world have assumed a more cautious posture amid signs that inflation is in a cooling pattern. Earlier in the day, U.S. stocks were buoyed and fears of a global economic slowdown were abated by upbeat earnings reports and a raft of better-than-expected U.S. economic data.Topping that list was the U.S. Commerce Department’s robust initial take on second quarter GDP – coming in at 2.4%, blasting past the 1.8% consensus – supporting U.S. Federal Reserve Chairman Jerome Powell’s view that a the economy can achieve a so-called “soft landing.”The Commerce Department is due to release its broad ranging and hotly anticipated Personal Consumption Expenditures (PCE) report on Friday, which will cover income, spending, and crucially, inflation.Here are key developments that could provide more direction to markets on Friday:- Japan is scheduled to issue its Tokyo CPI report- Australia expected to post June retail sales, Q2 PPI- South Korea is due to release industrial output and retail sales for June More

Good morning. French president Emmanuel Macron has warned against “a new imperialism” in the Pacific on a visit to the region, where China has been extending its influence with security and trade pacts.In a speech on the island of Vanuatu, a French and British-governed territory before it became an independent republic in 1980, Macron said the Indo-Pacific region’s sovereignty was being undermined by “predatory big powers” and that their interference was growing. The Pacific has become a fulcrum for geopolitical tensions in the past decade as China has increased its diplomatic and financial presence in some of the smallest countries in the world. Beijing’s push culminated in a security pact with the Solomon Islands last year, which triggered a more concerted effort from Australia, the US and New Zealand — the region’s traditional powers — to rebuild economic and strategic partnerships in the Pacific and to better engage on issues including climate change.Hervé Lemahieu, director of research at the Lowy Institute think-tank, said: “Macron is looking to distinguish France from the Pacific power plays of both China and the United States. But Paris comes from a long way behind in regional engagement stakes.” Read the full story. Here’s what else I’m keeping tabs on today and over the weekend:US and France wrap up Pacific tours: Emmanuel Macron visits Papua New Guinea, following US defence secretary Lloyd Austin, who was there on Thursday. Austin and US secretary of state Antony Blinken will meet their Australian counterparts in Brisbane on Friday, the last leg of their Pacific tour aimed at boosting Washington’s Indo-Pacific strategy.Japan monetary policy: Investors are widely expecting the Bank of Japan to opt for no change to its policy at a meeting today, but heavy-hitting investment banks are warning them to brace for a shock.Super Typhoon Doksuri: The storm is expected to make landfall this morning in south-east China. Strong winds from Doksuri led to a ferry to capsize in the Philippines, killing at least 25 people. (Reuters)How well did you keep up with the news this week? Take our quiz. Five more top stories1. European Central Bank has raised interest rates by a quarter-percentage point to 3.75 per cent, matching a high last reached in 2001. Thursday’s move was the ECB’s ninth consecutive rate rise, though investors are betting this increase will be the bank’s last as inflation falls faster than expected.US economy: Economic growth in the US was stronger than expected in the second quarter of 2023, as activity proved resilient in the face of the Federal Reserve’s campaign of aggressive interest rate rises.2. Kering has agreed to buy 30 per cent of Valentino from Qatar’s Mayhoola, as part of a “strategic” deal that gives the French luxury group the option to take full control of the Italian fashion house by 2028. The €1.7bn all-cash purchase is “part of a broader strategic partnership” between Kering and Mayhoola, which could lead to Mayhoola becoming a shareholder in Kering, the French group said. Read the full story.3. Yevgeny Prigozhin, founder of the notorious Wagner paramilitary group, has appeared on the sidelines of a Russia-Africa summit in St Petersburg, despite agreeing to go into exile following his failed mutiny last month. The warlord’s continued presence in Russia indicated Prigozhin remains an important part of the Kremlin establishment.More Russia news: Russia’s defence minister has vowed to strengthen military ties with North Korea on a visit to Pyongyang to mark the 70th anniversary of the Korean war armistice.Africa news: Niger soldiers went on television late on Wednesday to say they had removed pro-western president Mohamed Bazoum from power. 4. Coutts chief executive Peter Flavel has stepped down, saying that he bore “ultimate” responsibility for the bank’s treatment of former UK Independence party leader Nigel Farage. Here’s more on the crisis engulfing the private bank and its owner, NatWest.5. Shares in Chinese electric-vehicle makers climbed on Thursday after Volkswagen announced a tie-up with Chinese rival Xpeng designed to boost the German car manufacturer’s lagging sales in the country. The deal will give VW a 5 per cent stake in the Guangzhou-based EV maker as well as a seat as an “observer” on its board. Read more on VW’s EV push in China.The Big Read

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Luvsannamsrain Oyun-Erdene, Mongolia’s Harvard-educated prime minister, wants western mining groups to tap his country’s vast deposits of copper, uranium and other critical minerals essential to the world’s fight against climate change. The government is making sweeping reforms to win over western investors and become less reliant on China and Russia.We’re also reading . . . China’s heft in Brics: The grouping risks looking less like a steering group for the emerging world and more like a fan club for Beijing, writes Alan Beattie. The problem with centrism: The ideology is defined really only by what it is against and often claims a political middle that doesn’t exist, writes Jemima Kelly. FT Magazine: Two shocking murders, 25 years apart, framed an Italian mafia family’s fight for a seat at the top table of organised crime.Chart of the day“The era of global warming has ended; the era of global boiling has arrived.” That’s what UN secretary-general António Guterres said on Thursday as scientific forecasts showed that July is expected to be the hottest month ever recorded.Take a break from the newsThe buzz around this summer’s Ashes series between England and Australia disguises the fact that the pulse of global cricket has moved decisively elsewhere: India. Here’s how the cricket-mad country is revolutionising the game.

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Additional contributions by Tee Zhuo, Leah Quinn and David Hindley More