Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.An expected interest rate hike in New Zealand will be the main regional focus for Asian and Pacific markets on Wednesday, as another day without agreement in Washington over the U.S. debt ceiling looks certain to sour global investor sentiment. Wall Street ended sharply lower on Tuesday and U.S. yields spiked higher – a 21-day T-bill auction drew a high yield of 6.2% and the one-month bill yield surged to historic highs of 5.888% – as an unprecedented potential U.S. default drew closer.There had been positive noises in recent days from both sides of the discussions in Washington, but the upshot is no agreement has been struck. Markets have mostly shrugged off the impasse – after all, Congress has acted 78 times to permanently raise, temporarily extend, or revise the definition of the debt limit since 1960.But they are wobbling now, and if Treasury Secretary Janet Yellen is right, the government will run out of cash on Thursday next week.U.S. and global economic indicators, however, have been surprisingly upbeat lately, as broadly highlighted by the flash purchasing managers index reports for May. The feel-good factor around Japan continues – manufacturing is growing for the first time in seven months and service-sector growth is at a record high.The main event in Asian hours on Wednesday will be the Reserve Bank of New Zealand’s expected 25-basis point hike to 5.50%, but the focus will be on whether rates go higher than previously thought in the wake of last week’s stimulatory budget.On the other hand, after surprising financial markets with a 50 bps hike to 5.25% in April, the RBNZ is also under pressure to moderate its tightening pace as the economy teeters on the verge of recession.Investors will also be keeping tabs on U.S.-China trade relations, which appear to be deteriorating by the day into tit-for-tat ban and counter ban in the chips and cybersecurity sectors. A top congressional figure said on Tuesday that the Washington should add Chinese memory chip maker Changxin Memory Technologies (CXMT) to a trade blacklist after Beijing this week banned the sale of some chips by U.S.-based Micron Technology Inc (NASDAQ:MU.O).Here are three key developments that could provide more direction to markets on Wednesday:- New Zealand interest rate decision – UK inflation (April)- Germany Ifo business climate index (May) (By Jamie McGeever) More

WASHINGTON (Reuters) – What could happen on Main Street if Washington’s political showdown over the debt ceiling stopped the government from cutting checks that fund a quarter of the economy? Americans could quickly notice painful blows dealt to their retirement accounts as stock markets swooned, and within days the lack of federal payments could weigh heavily on doctors’ offices, retirees and workplaces throughout the country.HOW WOULD IT START?If the U.S. Congress and the White House failed to lift the self-imposed $31.4 trillion legal limit on federal debt, the Treasury Department could start missing payments on its obligations as soon as June 1, according to the department’s chief, Janet Yellen.At that point, Washington would be under severe pressure to keep making payments on U.S. bonds, which underpin the global financial system. Missing a payment would trigger a Wall Street meltdown of historic proportions. “It would be downright cataclysmic,” said Mark Zandi, an economist at Moody’s (NYSE:MCO) Analytics. Even if the Treasury paid bondholders on time, as most observers expect it would try to, the political dysfunction driving the crisis would sow distrust in America’s economic prospects, and the value of most everything owned by Americans, from their homes to their retirement portfolios, would drop. “Stock prices would fall, commercial real estate values, house prices. Everything would fall,” Zandi said.Interest rates would increase, making it harder to buy a home or car or borrow money to start a business.Within days, the financial mayhem would be a principal force putting the economy on the path to recession, Zandi said.COULD IT GET WORSE?The mass layoffs that normally come with recession could be weeks away following a default. More immediately, hundreds of billions of dollars in federal spending could be withheld from the economy. Doctors’ offices, hospitals and insurance companies could be among the first to get stiffed. On June 1, they are due about $47 billion in payments through Medicare, America’s public health insurance program for older Americans, according to the Bipartisan Policy Center, a think tank that estimates Washington’s day-to-day schedule of bills due.Because Medicare funds about a fifth of U.S. healthcare, some doctors might not have money to pay staff and other bills. Hard decisions would have to be made on scheduling surgeries and other procedures without being able to pay for them. “The longer this goes on, the more disruptive it could be,” said Tricia Neuman, a health policy expert at the KFF research group.WHO ELSE COULD TAKE A DIRECT HIT?On June 2, about a quarter of the nation’s retirees could check their bank accounts and see that $25 billion in expected Social Security payments were not deposited. Payments could also stop going out to government contractors, including $1 billion due to defense contractors on June 2. On June 9, $4 billion in salaries could go unpaid for parts of the 2-million-strong federal workforce and schools expecting $1 billion in federal funding could have to do without. Some payments could go out with significant delays.People would keep one eye on their bank accounts for missed deposits and the other on Wall Street, where concerns over the nation’s creditworthiness could be savaging the value of people’s life savings.”One is days of delays for their Social Security check, and the other is a 20% drop in their 401(k),” said Shai Akabas, the director of economic policy at the Bipartisan Policy Center. More

NEW YORK (Reuters) – The U.S. Securities and Exchange Commission (SEC) on Tuesday said it obtained an order to shut down an alleged Ponzi-like scheme run by two individuals who raised nearly $62 million from investors for a sham cannabis business. Since at least June 2019, Rolf Max Hirschmann and Patrick Earl Williams promised investors returns as high as 36% on funds they said would go toward expanding facilities for Integrated National Resources, or WeedGenics, in California and Nevada, the SEC said in a statement and court filing.Those facilities did not exist, according to the SEC.Hirschmann and Williams used most of the funds to pay off other investors, finance home upgrades, and buy luxury cars, jewelry and “adult entertainment,” the SEC said in a complaint filed in federal court in California.Neither Hirschmann nor Williams could be reached immediately for comment. Williams, 34, lives in Florida and spent the money on his career as a rap musician known as “BigRigBaby,” the SEC said. Hirschmann, 52, lives in Idaho and went by “Max Bergmann” while communicating with investors, according to regulators.”Rolf Hirschmann and Patrick Williams allegedly had no real company, no product, and no business, yet despite this, they promised investors everything and then delivered nothing,” Michele Wein Layne, director of the SEC’s Los Angeles regional office, said in the statement.WeedGenics described itself as a vertically-integrated manufacturer of cannabis products on its website. “It was all a sham,” the SEC said. More

The country’s central bank has maintained its key interest rate at a six-year high of 13.75% at recent meetings to prevent a possible resurgence of high inflation, which hit an annual rate of 4.18% in April. President Luiz Inacio Lula da Silva’s government, however, is pressing for rate cuts.The new inflation estimate for next year is below the 4.13% average estimate of private economists, according to the latest Focus survey from the central bank, which has a 3% target for 2024 with a tolerance margin of 1.5 percentage points. More