Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Asian markets are set for an explosive open on Wednesday after a below-consensus reading of headline U.S. inflation lit the touchpaper for a rally across all risky assets on Tuesday, although investors will be mindful of the steep rise in U.S. bond yields. The fall in U.S. inflation to a two-year low has convinced investors the Federal Reserve will pause raising rates on Wednesday, and they like what they see – the S&P 500, Nasdaq and MSCI World index all hit their highest levels since April last year, the dollar fell and cash flowed out of safe-haven bonds.The rush into riskier assets was also supported by China’s de factor policy easing as the central bank cut reserve repo rates for the first time in 10 months. This could be a precursor to lower benchmark interest rates in the coming weeks – yuan traders certainly seem to think so.Indian wholesale price inflation, unemployment and import and export prices from South Korea, and New Zealand’s first quarter current account top the Asian and Pacific data calendar on Wednesday. India’s annual WPI inflation could be especially important. Economists expect a fall of 2.35% in May, pointing to the strongest deflationary pressures in three years. With the year-on-year global oil price still down around 40%, it could be even lower.But the driving forces for markets will likely be global. Traders are putting a 95% probability on the Fed standing pat on Wednesday, a consensus so strong the Fed will almost certainly respect. The focus for investors will be on the statement and Fed Chair Jerome Powell’s press conference for signs on whether it will be a ‘hawkish’ or ‘dovish’ pause. All of that will come after Asian markets close, so in the meantime local investors will take their cue from yet another remarkable performance on Wall Street, especially tech stocks and the Nasdaq.The NYSE FANG+ index of mega tech stocks rose 0.9% for a fourth consecutive daily rise, bringing its year-to-date gains to 72%. The index has posted only four declines in the past 21 trading sessions.Even beleaguered Chinese tech stocks are finally feeling the glow – the Hang Seng tech index is up 11% so far this month, outperforming the broader Hang Seng (up 7%) and significantly outpacing the main Chinese indices, which are up 1% or 2%. The MSCI Asia ex-Japan index rose more than 1% on Tuesday, its second best day since March, while Japan’s Nikkei hit a fresh 33-year high above 33,000 points. Momentum across all these markets is coming from strong technical, positioning and ‘fear of missing out’ tailwinds. One major headwind, particularly for Asian assets, could be the surge in U.S. Treasury yields, although that for now at least is being mitigated by the dollar’s slide to a three week low.Here are key developments that could provide more direction to markets on Wednesday:- India WPI inflation (June)- South Korea unemployment (May)- New Zealand current account (Q1) (By Jamie McGEever) More

NEW YORK (Reuters) – The number of people globally who initially access news through a website or app has dropped by 10 points since 2018, and younger groups prefer to access news through social media, search or mobile aggregators, according to a report released on Tuesday.Audiences pay more attention to celebrities, influencers, and social media personalities than journalists on platforms such as TikTok, Instagram, and Snapchat, the Reuters Institute for the Study of Journalism said in its annual Digital News Report. TikTok is the fastest growing social network in the report, used by 20% of 18- to 24-year-olds for news, up five percentage points from last year. Fewer than half the survey respondents expressed much interest in news at all, down sharply from 6 out of 10 in 2017.“There are no reasonable grounds for expecting that those born in the 2000s will suddenly come to prefer old-fashioned websites, let alone broadcast and print, simply because they grow older,” Reuters Institute Director Rasmus Nielsen said in the report, which is based on an online survey of roughly 94,000 adults, conducted in 46 markets including the U.S.Less than a third of the survey’s respondents said that having stories selected for them based on their previous consumption is a good way to get news, a 6-point decline from 2016, when the survey last asked the question. Yet people still slightly prefer to have their news chosen by algorithms than by editors or journalists. Trust in the news has fallen by 2 percentage points in the last year, reversing gains made in many countries at the peak of the coronavirus pandemic. On average, 40% of people say they trust most news most of the time. The United States has seen a 6-point increase in trust in news, to 32%, but remains among the lowest in the survey. Across markets, 56% of people say they worry about identifying the difference between real and fake news on the internet – up 2 percentage points from last year. The survey found that 48% of people say they are very or extremely interested in news, down from 63% in 2017.The Reuters Institute for the Study of Journalism is funded by the Thomson Reuters (NYSE:TRI) Foundation, the philanthropic arm of Thomson Reuters. More

Inflation is “taking a lot longer” than hoped to come down, Bank of England governor Andrew Bailey said on Tuesday, as investors bet on further interest rate rises on the back of strong wage data.Following the release of figures showing annual private-sector wage growth climbing to 7.6 per cent in the three months to April, short-term gilt yields rose above the highs reached during the turmoil around Liz Truss’s “mini” Budget last autumn. “As I’m afraid this morning’s numbers illustrate, we’ve got a very tight labour market,” Bailey said. “We still think the rate of inflation is going to come down, but it’s taking a lot longer than we expected.”Lord Nick Macpherson, Treasury permanent secretary in 2005-2016, raised the grim prospect for Rishi Sunak on Tuesday that the prime minister could be fighting an election in 2024 in the face of a recession.“It’s still possible the government may get lucky: underlying inflation may come down quicker than expected,” he wrote on Twitter. “But I wouldn’t bet on that. Much more likely that the Bank of England will raise rates to a level where a recession next year becomes inevitable.”Alongside still low unemployment, the rise in wages was far above the level the BoE thinks is consistent with bringing inflation back to its 2 per cent target.Two-year gilt yields on Tuesday rose 0.26 percentage points to 4.89 per cent, compared with their peak of 4.64 per cent in the aftermath of the unfunded tax cuts announced in the “mini” Budget in late September. Yields on gilts with longer maturities have not exceeded last autumn’s levels. The pound gained 0.8 per cent against the dollar, rising to $1.2610.With borrowing costs rising across the board, many of the UK’s biggest lenders have pulled mortgage deals or raised their interest rates in recent days.On Monday, Santander temporarily withdrew all of its fixed and tracker mortgages for new borrowers “in light of changing market conditions”, it said.The prospect of more financial stress to come for households with mortgages heaped pressure on government ministers as the Labour party blamed the government for “economic irresponsibility” and creating mortgage misery. Responding to a question as part of a discussion on creative industries on Tuesday, Jeremy Hunt, the chancellor, said that he was “really very aware of the pain felt by many families”.“The biggest single thing that we can do to reduce the pressure on families is to support the Bank of England as they bear down on inflation,” Hunt added. For financial markets, the strong wage data compounded April’s high 8.7 per cent inflation rate, which suggested UK price growth was returning to normal levels much more slowly than in other countries. “If there was still any doubt about the direction of monetary policy, these data should solidify another interest rate increase from the Bank of England next week and probably more in the coming months,” said Yael Selfin, chief economist at KPMG.Markets expect the BoE to increase rates from the current 4.5 per cent to 5.76 per cent by the end of this year, pushing up borrowing costs for the government and mortgage holders.Megan Greene, who will join the BoE’s Monetary Policy Committee in July, told MPs on Tuesday that she thought high inflation was now driving wages higher. “There are second-round effects that seem to be seeping in,” she told the Treasury committee of the House of Commons. 

While she did not indicate how she would vote in her first MPC meeting in August, Greene said the BoE was right to have raised rates in May, something that Silvana Tenreyro, who she is replacing on the committee, voted against. “I think there is some underlying persistence [to inflation] and so getting from 10 per cent to 5 per cent . . . is probably easier than getting from 5 per cent to 2 per cent,” she added. Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said wage growth had “far too much momentum” for the MPC to stop raising rates. He noted that although analysts had expected April’s increase in the statutory minimum wage to cause a one-off bump in pay, the data showed wage growth was being driven primarily by higher-paying sectors such as finance and manufacturing and could therefore be expected to continue at a similar pace.Additional reporting by Daniel Thomas and James PickfordThis article has been amended to correct the peak two-year gilt yield in the wake of the “mini” Budget More

Good morning. Donald Trump has pleaded not guilty to the first federal criminal charges brought against a former US president.Trump was arraigned on a 37-count indictment tied to his handling of classified documents. He was arrested upon arrival at a Miami federal court before departing roughly two hours later. The former president has accused prosecutors of conducting a “witch hunt” in bringing the case over his alleged failure to return sensitive national security records after leaving office. Jack Smith, the special counsel appointed by attorney-general Merrick Garland to oversee investigations into the former president, was present in the courtroom, according to US media reports.The federal case is the second time Trump has been indicted in less than a year. In April he pleaded not guilty to 34 felony counts of falsifying business records in a case brought in a state court by the Manhattan district attorney. The indictments have the potential to upend the 2024 presidential campaign, with Trump the clear favourite to win the Republican nomination, while also deepening divisions among Americans.Explainer: The federal criminal charges are the latest of at least six legal cases against Trump. Here’s what else I’m keeping tabs on today:Monetary policy: The US Federal Reserve is expected to forgo an interest rate increase today after 10 consecutive rate rises since March 2022. Economic data: New Zealand’s first-quarter GDP figures are due. Some economists expect the data to show the economy contracting for a second straight quarter, putting it into recession. (Bloomberg)Partygate scandal: British MPs are set to publish a “damning” report on the conduct of former prime minister Boris Johnson.The Financial Times is launching a podcast version of its popular Unhedged newsletter. Find out more. Five more top stories1. China unexpectedly cut a key interest rate and announced tax breaks for businesses, amid signs that the post-Covid recovery in the world’s second-largest economy is losing steam. Analysts said the move probably signalled more substantial monetary easing and stimulus measures to come.Related: The Chinese renminbi dropped to a more than six-month low against the dollar after the country’s central bank cut its short-term lending rate.2. EY’s global chief executive Carmine Di Sibio has told partners he plans to retire next year, sparking a race to lead the accounting and consulting firm. Di Sibio’s future has been in doubt ever since the failure of his plan — codenamed Project Everest — to spin off EY’s consulting arm and list it on the stock market.3. The annual pace of US inflation eased last month to its lowest level in more than two years. The consumer price index climbed 4 per cent year on year, but lingering price gains will keep pressure on the Federal Reserve to consider additional interest rate increases. 4. A four-week-old French start-up founded by a trio of former Meta and Google artificial intelligence researchers has raised €105mn in Europe’s largest-ever seed round. Mistral AI’s first round of financing values the Paris-based company at €240mn, highlighting the growing frenzy surrounding AI. 5. British distributor Bunzl is “de-risking” its supply chain by shifting some of its sourcing from China amid geopolitical concerns in the Asia-Pacific. Chief executive Frank van Zanten said that the company was diversifying its sourcing into countries including Mexico, India, Vietnam and Malaysia.Deep dive

Nearly 1.4mn kilometres of metal-encased fibre criss-crosses the world’s oceans, speeding internet traffic seamlessly around the globe. But driven by fears of espionage and geopolitical tensions, the subsea cable market is in danger of dividing into eastern and western blocks, experts say. The FT explores how the US is pushing China out of the infrastructure underpinning the internet in this visual story.We’re also reading . . . Defence spending: Russia’s invasion of Ukraine has led to a sharp rise in military spending. Among the world’s five biggest spenders, the numbers are mind-boggling. Janan Ganesh: If you were a demagogue, would you choose to operate in Britain or America?China-South Korea relations: Beijing has pressured South Korea over closer ties with the US and Japan. But now, Seoul is pushing back. Chart of the day

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The dire situation on debt has become pressing, and substantial relief is needed, writes Martin Wolf. Much of that will have to come, in one way or the other, from China. Today, remarkably, bilateral debt owed by low-income countries to the high-income members of the Paris Club has become less than half that owed to non-Paris Club countries, mainly China.Take a break from the newsBooks about large regions or countries, be it Europe or China, often stay at the level of the macroscopic and analytical. But Ben Judah’s This Is Europe promises something different — “you want what politicians and pundits and political scientists can’t give you,” he writes in his preface. And Judah delivers on that promise, the FT’s Yuan Yang writes in this glowing review. Additional contributions by Tee Zhuo and Gordon Smith More