Aurelia Butler

With the government’s promise to halve inflation this year looking on increasingly shaky ground, chancellor Jeremy Hunt this week unveiled an “action plan” with regulators to help consumers as the cost of living crisis intensifies. Insisting that businesses from banks to broadband providers and utility companies “must play their part” to curb soaring bills, it is a message that plays well for the cameras. But consumer campaigners believe a more radical approach is needed. One of the first to sit down with Hunt was Martin Lewis, the consumer champion and founder of the Money Saving Expert advice website, who believes that savings rates should be top of the chancellor’s agenda. “When you are trying to curb inflation under standard orthodoxy, what you want to do is squeeze borrowers’ disposable income and encourage savers to spend less by giving them better savings rates,” he said. “We’re doing the painful bit that really hurts and destroys people’s lives, but we’re not doing the bit that’s actually rewarding people, which is upping savings rates commensurately. That seems to be bad politics, if I’m honest, and secondly, it’s just not fair.” While the average interest rate on a two-year fixed mortgage has risen to 6.37 per cent this week, the average easy access savings account pays just 2.37 per cent, according to Moneyfacts, the data provider.The gap between the two has been narrowing since the disastrous “mini” Budget last autumn as more banks up their rates, but savers must be prepared to switch products and providers to access the best deals. At a time when UK households are raiding their savings at a record rate, Hunt has ordered banks and building societies to report back by the end of July on how they are “proactively supporting savers to switch”. Moneyfacts said challenger banks were offering the best deals with a choice of easy access accounts paying 4 per cent or more, and the best one-year savings bonds nudging 6 per cent. But while political pressure could drive more rapid change in savings rates, in other consumer facing industries the convoluted process of regulatory consultations is a barrier to more rapid price falls. Lewis believes that banning mobile and broadband operators from making mid-contract price rises is “the lowest hanging fruit” to pluck in the battle to reduce bills. Telecoms regulator Ofcom launched a review in February after some operators passed on price rises of 17 per cent, but the chancellor’s action plan notes it will not report back until the end of this year. Applying increases at the point of contract renewal would incentivise consumers to “ditch and switch” to save money, said Lewis. “We are fighting against many billions of pounds of powerful marketing and deliberate entrenching as companies make it as difficult as possible [to switch] so what we have to do is take as much friction out of the system as possible,” he added. He highlighted the huge number of out-of-contract mobile phone users who could cut monthly bills from £30 to as little as £5 by moving to a Sim-only deal as “the one area where we currently have true price deflation”.“You now have the right to get your mobile phone unlocked so you can move to a different network. But why do we lock it in the first place?” he asked.Lewis welcomed the chancellor’s fresh push on social tariffs, which could save millions of households on low incomes more than £200 a year on broadband and mobile costs, but added: “I haven’t seen proactivity [from telecoms providers] and there are things that we could do to identify those vulnerable customers.”The energy price cap may be falling, but both Lewis and Centrica chief executive Chris O’Shea have gone further than the chancellor this week, urging Ofgem to scrap standing charges in favour of higher unit rates. “We think it’s really unfair that many customers have no option but to pay a fixed charge per day for their energy, regardless of how much energy they actually use,” said O’Shea. “The standing charge hits people who are careful about their energy use hardest — and these people are often from low-income households, and prepayment meter customers in particular.”As mortgage rates rise and more household budgets come unstuck, Lewis and others also argue that funding for free debt advice must increase. StepChange, one of the UK’s biggest debt charities, has seen a 15 per cent year-on-year increase in the numbers of people seeking its help and expects volumes to keep rising. Since January 2022 there has been a threefold increase in the number of clients citing the cost of living as their main reason for being in debt. For the first time in the charity’s 30-year history, utility companies are its largest source of referrals, passing on customers who cannot afford to pay their bills. Yet under the current funding model for free debt advice, energy firms, telcos and water companies are not obliged to contribute to the service, with costs shared by the consumer credit industry and the government.Roughly one in six StepChange clients are homeowners, but as more roll off fixed-rate mortgage deals the charity expects this proportion to increase.

“Interest rates are not going to be back at 1 per cent in six months’ time,” said Richard Lane, the charity’s director of external affairs, referring to the temporary nature of forbearance measures in the chancellor’s mortgage charter.Describing the agreement as a “welcome step”, he nevertheless urged mortgage lenders to go further.“If a customer is coming to you saying ‘I need six months because I’m struggling’, at that point you should be asking about their broader situation and signposting them to free debt advice rather than wait. The sooner people reach out, the more we can do to help.” More

Dozens of ASML chipmaking machines destined for China will soon need a licence to be shipped after the Dutch government followed the US and Japan in imposing tough curbs on technology exports. The Hague said that, from September 1, it will bar high-end chipmaking machines, which could be used for “advanced military applications”, from being exported abroad without such a permit.The Dutch trade minister insisted the controls were “country neutral” but in practice exporters expect Chinese companies will be among the few that will be refused a licence.“We have taken this step in the interest of our national security,” Liesje Schreinemacher said on Friday.The US, Japan and the Netherlands are keen to form a united front in depriving China of the most advanced silicon chips. The move came after heavy US pressure and will primarily affect ASML, which makes the world’s most advanced semiconductor-making tools. The controls are similar to those recently imposed by Japan, which included machines capable of producing chips of 45nm and below. Both countries had lengthy talks with the US and had agreed to take steps in January. Washington is seeking to curb China’s access to advanced weaponry as it threatens Taiwan and adopts a more assertive military stance.ASML said the Dutch controls would cover its most advanced “immersion DUV lithography systems”, which use ultraviolet light. Three of ASML’s four systems for immersion lithography will be captured by the new rules, leaving Chinese chipmakers unable to manufacture at commercial scale semiconductors smaller than 28nm. That scale leaves cutting-edge applications such as the latest processors for smartphones and artificial intelligence largely out of reach for Chinese manufacturers such as SMIC. According to two people familiar with the situation, several dozen machines ordered by Chinese companies from ASML that had been scheduled for delivery over the coming years are now unlikely to be delivered. ASML declined to comment on specific sales figures but said it did “not expect these measures to have a material impact on our financial outlook that we published for 2023 or for our longer-term scenarios as communicated during our investor day in November 2022”. Those scenarios were based on booming global demand, it added. ASML’s most modern machines have been banned from China since 2019. China accounted for about 15 per cent of ASML sales in 2022. “We have looked at this very carefully and have been as precise as possible,” said Schreinemacher. “This way we can address the most important vulnerabilities without unnecessarily disrupting the global production of chips.”The announcement came while Dutch prime minister Mark Rutte attended a summit in Brussels discussing EU policy towards China, which has hardened in recent months. The 27 member states agreed to “de-risk” their exposure to China and build up alternative sources of critical raw materials, green technology and the like.China’s foreign ministry spokesperson Mao Ning criticised the export controls on Friday, saying the restrictions impose “a technological blockade against China” and “seriously undermine market rules and the international trade order”.China will stay close to relevant developments and “firmly defend our lawful rights and interests”, Mao said.Janardan Menon, technology analyst at Jefferies, said the new rules were broadly in line with expectations following the Dutch government’s announcement of its plans for more controls in March. Menon estimates that ASML ships fewer than 100 immersion systems globally each year, of which about 20 per cent have previously gone to China. “Most Chinese companies have already converted all their orders” to the ASML machine that is still permitted to ship there, Menon said. More

LAHORE, Pakistan (Reuters) -The International Monetary Fund (IMF) has reached a staff-level pact with Pakistan on $3 billion in short-term financial help, the lender said, a decision long awaited by the South Asian nation which is teetering on the brink of default.The deal, subject to approval by the IMF board in July, came hours before the current agreement with the IMF expires later on Friday. Although essentially a bridge loan, it offers much respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.The so-called Stand-by Arrangement (SBA) will enable Pakistan to achieve economic stability, and put the country “on the path of sustainable economic growth, God willing,” Prime Minister Shehbaz Sharif said. Pakistan will receive formal documents on the deal later on Friday from the IMF, Finance Minister Ishaq Dar told Reuters, which he said he would “sign, seal and return by tonight.” He had said on Thursday the deal was expected any time soon. Pakistan’s sovereign dollar bonds were trading higher after the announcement, with the 2024 issue enjoying the biggest gains, up more than 8 cents at just above 70 cents in the dollar, according to Tradeweb data.The gains were most pronounced in shorter-dated bonds, reflecting lingering scepticism over the longer-term fiscal outlook for the country. The country’s domestic stock and currency markets were closed on Friday due to Eid festival holidays. With sky-high inflation and foreign exchange reserves barely enough to cover one month of controlled imports, analysts say Pakistan’s economic crisis could have spiralled into a debt default in the absence of an IMF deal. The $3 billion funding, spread over nine months, is higher than expected as it looks set to replace the remaining $2.5 billion from a $6.5 billion Extended Fund Facility longer-term bailout package agreed in 2019, which expires on Friday.The IMF funding will also unlock other bilateral and multilateral external financing and debt rollovers, particularly from friendly countries like Saudi Arabia and the UAE, which have already pledged around $3 billion. “This will support near-term policy efforts and replenish gross reserves, with the aim of bringing them to more comfortable levels,” the IMF said. POWER PRICE HIKES The new stand-by arrangement builds on the 2019 programme, IMF official Nathan Porter said on Thursday, adding that Pakistan’s economy had faced several challenges in recent times, including devastating floods last year and commodity price hikes following the war in Ukraine. “Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute,” Porter said in a statement.”Given these challenges, the new arrangement would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead.”Porter also pointed out the power sector’s buildup of arrears and frequent power outages.Reforms in the energy sector, which has accumulated nearly 3.6 trillion Pakistani rupees ($12.58 billion) in debt, has been a cornerstone of the discussions with the IMF.The IMF would want steadfast policy implementation by Pakistan to overcome challenges, “particularly in the energy sector,” the statement said.”The authorities’ programme also includes ongoing efforts to strengthen the viability of the energy sector (including through a timely FY24 annual rebasing),” the lender said, which means a rise in electricity tariffs in the fiscal year.Government sources told Reuters that the hike will come ahead of the IMF board review of the bailout in mid-July. “Reform does not — must not — mean raising tariff endlessly,” Pakistan’s Minister for Power Khurram Dastgir told Reuters in a text message following the deal.With the tenure of the current government ending in August, Dastgir said the Sharif administration had put in place an “aggressive medium-to-long-term plan” to increase renewable energy generation dramatically in order to reduce cost.He said this was only possible if long-term assistance is available to put that plan into place. He did not confirm whether there was an imminent hike in base tariffs on the cards. PAINFUL REFORMS Islamabad has taken a slew of policy measures since an IMF team arrived in Pakistan earlier this year, including a revised 2023-24 budget last week to meet the lender’s demands.Other adjustments demanded by the IMF before clinching the deal included reversing subsidies in power and export sectors, hikes in energy and fuel prices, jacking up the key policy rate to 22%, a market-based currency exchange rate and arranging for external financing.It also got Pakistan to raise over 385 billion rupee ($1.34 billion) in new taxation through a supplementary budget for the 2022-23 fiscal year and the revised budget for 2023-24.Going forward, the IMF said, the central bank should remain pro-active to reduce inflation and maintain a foreign exchange framework. The painful adjustments have already fuelled all time high inflation of 38% year-on-year in May.”The FY24 budget advances a primary surplus of around 0.4 percent of GDP by taking some steps to broaden the tax base and increase tax collection from under-taxed sectors,” Porter said, adding it also ensured space to strengthen support for the vulnerable through a cash handout programme.He said it will be important that the budget is executed as planned, and authorities resist pressures for unbudgeted spending or tax exemptions in the period ahead.”This new programme is far better than our expectations,” said Mohammed Sohail of Topline Securities in Karachi, adding there were a lot of uncertainties on what would happen after a new government comes to power later in the year. “This funding of 3 billion dollars and for 9 months will definitely help restore some investor confidence,” he said. ($1 = 286.1500 Pakistani rupees) More

(Reuters) – U.S. stock indexes were on track to open higher on Friday, setting up Wall Street for a strong quarterly performance, as signs of easing inflation offered relief to investors worried about more interest rate hikes from the Federal Reserve.A Commerce Department report showed the Personal Consumption Expenditure index (PCE), the Fed’s preferred inflation gauge, advanced 3.8% compared to a 4.3% rise in April. Excluding the volatile food and energy components, the PCE price index gained 0.3% after rising 0.4% in the previous month.”It is showing hints of stability and that we’re headed in the right direction,” said Peter Andersen, founder of Andersen Capital Management in Boston.”As we close out this quarter and turn to the second half, I’m optimistic that the economy and the consumer are in good shape and will continue to recover.”Traders were pricing in an 86.8% chance that the Fed will hike rates by 25 basis points to 5.25%-5.50% range in its July meeting, according to CMEGroup’s Fedwatch tool, down slightly from the 89.3% seen on Thursday.Hawkish remarks from Fed Chair Jerome Powell and strong economic data this week boosted bets that the U.S. central bank will continue to raise interest rates, but stock markets were buoyant on signs of strength in the U.S. economy. Despite a recent streak of losses, the three main U.S. indexes are on course to end June and the second quarter on a high note as investors expect the Fed’s aggressive tightening will not derail the U.S. economy. Meanwhile, artificial intelligence (AI)-inspired frenzy in technology and megacap stocks set the tech-heavy Nasdaq for a near 30% gain in the first half – in what could be its best such performance in 40 years. Treasury yields slipped following the data, with the yield on two-year notes, most reflective of short-term rate expectations, dipping from March highs to 4.86%, while benchmark 10-year yield also fell to 3.83%. [US/]At 8:55 a.m. ET, Dow e-minis were up 163 points, or 0.47%, S&P 500 e-minis were up 27.75 points, or 0.63%, and Nasdaq 100 e-minis were up 131.75 points, or 0.87%.Apple Inc (NASDAQ:AAPL) rose 1.3% in premarket trading after Citigroup (NYSE:C) started coverage on the stock with a “buy” rating. If the premarket gains hold, the iPhone maker is set to hit $3 trillion in market capitalization when markets open. Nike Inc (NYSE:NKE) fell 2.7% after it forecast first-quarter revenue below Wall Street expectations as cost-conscious consumers in North America cut back on sneaker and sports apparel purchases.Carnival (NYSE:CCL) Corp rose 3.2% after Jefferies upgraded the cruise operator’s stock to “buy” from “hold”.Adobe (NASDAQ:ADBE) slipped 0.5% after the UK’s competition regulator ordered a second round of review of its deal to buy Figma. More

Inflation by the Fed’s preferred personal consumption expenditures index rose last month at a year-on-year pace of 3.8%, data Friday showed, easing from April’s 4.4% pace. Underlying core inflation rose 4.6%, a touch less than the 4.7% economists expected. Futures tied to the Fed’s policy rate, which had before the data priced in a nearly 90% chance of a July Fed rate increase, now reflect about an 85% probability. More

Consumer spending edged up 0.1% last month, the Commerce Department said on Friday. Data for April was revised lower to show spending accelerating 0.6% instead of 0.8% as previously reported. Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, rising 0.2%.Last month’s small gain implies consumer spending moderated in the second quarter after rising at its fastest pace in nearly two years in the January-March period. Nevertheless, the pace is probably still sufficient to help keep the economy expanding. Strong consumer spending accounted for the economy’s 2.0% annualized growth pace last quarter, defying fears of a recession because of the Fed’s hefty rate hikes.Upbeat May data including job growth, housing starts and orders for long-lasting manufactured goods have led economists to expect that second-quarter gross domestic product growth would be close to the first-quarter pace. The Atlanta Fed is currently estimating GDP increasing at a 1.8% rate this quarter.Consumer spending remains underpinned by strong wage gains in a tight labor market. But the outlook is less favorable. Most lower-income households are believed to have depleted savings accumulated during the COVID-19 pandemic. About 26.6 million Americans with federal student loans will start making interest payments in October when a more than three-year moratorium ends. Morgan Stanley (NYSE:MS) estimates that the hit to income at the disposal of households could lower inflation-adjusted consumer spending by about 10 basis points this year and slice off seven basis points from GDP growth.The personal consumption expenditures (PCE) price index gained 0.1% in May after rising 0.4% in April. In the 12 months through May, the PCE price index advanced 3.8% after climbing 4.3% in April.Excluding the volatile food and energy components, the PCE price index gained 0.3% after rising 0.4% in the prior month. The so-called core PCE price index increased 4.6% on a year-on-year basis in May after advancing 4.7% in April. The Fed tracks the PCE price indexes for its 2% inflation target. More

LONDON (Reuters) -Shell’s head of renewable generation Thomas Brostrom is leaving the company, a spokesperson said on Friday, weeks after CEO Wael Sawan scaled back its energy transition plans.Brostrom joined Shell (LON:RDSa) from offshore wind giant Orsted (OTC:DOGEF) in August 2021 to head offshore wind as the company planned to rapidly grow its wind and solar operations as part of a strategy to cut greenhouse gas emissions under previous CEO Ben van Beurden.Brostrom quickly became head of renewables in February 2022 after Elisabeth Brinton stepped down less than two years after taking the reins.Chief Executive Sawan, who took office in January, announced on June 14 a shift back to oil and gas production while paring back investments in renewables following investor pressure to focus on the most profitable businesses.Sawan also introduced a new structure to the company’s top leadership that eliminated Brostrom’s role and split it into regions.”Thomas Brostrøm has elected to leave Shell to pursue an external opportunity,” the company said. He will be succeeded by Greg Joiner, currently VP Shell Energy Australia, as head Shell Energy Europe and Emerging Markets Power. Ajay Shah will lead renewable generation in Asia while Mike Parker will head offshore wind engineering. More

The People’s Bank of China (PBOC) will continue to keep the yuan basically stable and guard against the risk of large exchange rate fluctuations, it said after the second quarterly meeting of its monetary policy committee.The central bank said the current external environment was becoming more complex and trade and investment were slowing down, while inflation remained high.The tightening effect of central bank policies in developed countries was continuing, and international financial market volatility has intensified, PBOC said in the statement posted on its website. China’s overall domestic economy is improving and demand is recovering but with insufficient momentum, the central bank said. Official data on Friday showed China’s factory activity declined in June for a third straight month, with weaknesses in other sectors deepening.The cabinet said on Thursday it planned to take measures to promote household consumption. Earlier this month, China cut key lending benchmark rates to shore up economic activity.During the meeting, the central bank also stated that it would promote the stable and healthy development of the real estate market. More