Aurelia Butler

ORLANDO, Fla. (Reuters) – Hedge funds went into the Fed’s Sept. 20-21 policy meeting betting on a sign that a dovish pivot is looming onto the horizon. They got a pivot, but unfortunately for them it was a double-down, hawkish signal that interest rates will continue rising until inflation is firmly heading back towards target, no matter the economic fallout.The latest Commodity Futures Trading Commission’s report shows that speculators cut their short positions in interest rate, S&P 500, and Treasuries futures in the week to Sept. 20, and significantly reduced their net long dollar position.A short position is essentially a wager that an asset’s price will fall, and a long position is a bet it will rise. In bonds and rates, yields fall when prices rise, and move up when prices fall.Perhaps it was inevitable that funds scaled back exposure ahead of the Fed’s decision. Some positions, and the underlying assets, were already at or close to historical extremes – the dollar at a 20-year peak, implied Fed rates near 4%, and Wall Street and Treasuries having one of their worst years ever.In the days following the third rate hike of 75 basis points and clear message of more tightening ahead, however, stocks and bonds sank, and rates and the dollar soared. There’s every chance funds will have re-loaded up on their “doom and gloom” trades.”With financial conditions expected to become even more restrictive, our outlook now incorporates a shallow (GDP) downturn in 2023,” Barclays (LON:BARC) U.S. economists wrote on Friday. “With a higher bar for ending hikes, risks of significant overtightening have intensified.”According to Goldman Sachs (NYSE:GS), U.S. financial conditions are now the tightest since April 2020WORST SINCE THE DEPRESSIONThe most remarkable position shifts in the week to Sept. 20 were in currencies, where CFTC speculators and leveraged accounts slashed their bullish dollar bets by around $7 billion to $10.2 billion.That was the biggest weekly shift against the dollar since March 2020. Most of it was due to funds flipping to a net long euro position for the first time since June. The 45,000-contract swing was the biggest since March 2020 and sixth largest since euro futures contracts were launched in the 1980s. It looks like speculators latched onto the European Central Bank’s newfound hawkishness, although that seems misplaced now with the euro comfortably below dollar parity. Similarly, funds reduced their net short sterling position by 13,000 contracts, the biggest move in six weeks. That was before the pound’s 3.5% fall against the dollar on Friday, the seventh largest one-day decline in over 50 years. In rates, CFTC speculators cut their net short position in three-month “SOFR” futures by 33,000 contracts to 788,000 contracts, the smallest net short in seven weeks. They reduced their net short position in 10-year Treasuries futures by 123,000 contracts, the biggest short-covering move in almost five months.And in equities, they scaled back their net short position in S&P 500 futures by 61,500 contracts to 219,500, the smallest net short in two months. That was the most “bullish” weekly swing since May.The selloff across all markets since then, however, has been brutal. According to Charlie Bilello of Compound Capital Advisors, a typical 60/40 portfolio of U.S. stocks and bonds is down 19.3% so far this year, putting 2022 on course to be the second worst year in history after 1931.(The opinions expressed here are those of the author, a columnist for Reuters.)Related columns: In reverse currency war, there’s only one winner (Sept 23) Jittery markets? Just wait ’til QT really kicks in(Sept 16) Murmurs of ‘sterling crisis’ no longer fanciful (Sept 7) (By Jamie McGeever; Editing by Lisa Shumaker) More

NEW DELHI (Reuters) -U.S. startup Fisker Inc will begin selling its Ocean electric sport-utility vehicle (SUV) in India next July and could begin manufacturing its cars locally within a few years, the company’s chief executive officer told Reuters. Sales of electric cars in India will gather pace by 2025-26, Henrik Fisker said in an interview in New Delhi, adding that the company wants to secure a first-mover advantage. “Ultimately, India will go full electric. It may not go as fast as the U.S., China or Europe, but we want to be one of the first ones to come in here,” Fisker said.Electric cars currently make up just 1% of India’s roughly 3 million annual car sales, with insufficient charging infrastructure and high battery costs partly to blame for the slow shift.The government, which wants to increase this share to 30% by 2030, is offering companies billions of dollars in incentives to build their EVs and associated parts locally.Fisker rival Tesla (NASDAQ:TSLA) Inc put its India entry plans on hold after failing to secure a lower import tariff for its cars. Like Fisker, it first wanted to import vehicles to test the market before committing to local manufacturing. While Fisker admitted it is “very expensive” to import vehicles into India, the company wants to use the Ocean to build its brand, with its premium pricing likely to limit numbers, he said.The Ocean retails at around $37,500 in the United States but importing it to India would add logistics costs and a 100% import tax. That would put it out of reach of most buyers in a market where the bulk of cars sold are priced under $15,000.”Ultimately, if you want to have somewhat of a larger volume in India, you almost have to start building a vehicle here or at least do some assembly,” Fisker said. The company’s next EV – the smaller, five-seater PEAR – is being considered for production in India but not before 2026, he said. “If we can get that vehicle just below $20,000 locally in India, that would be ideal. Then I think we’ll get to a certain volume and market share,” he said, adding that if they find the right local partner the timeline could be shorter.To set up a plant in India would require volume of at least 30,000 to 40,000 cars a year, Fisker said.He did not directly comment on the size of investment the company considered necessary, but said that to set up a plant with an annual production capacity of 50,000 cars would likely cost $800 million in India.Fisker has a contract manufacturing agreement with Magna International (NYSE:MGA) which will produce the Ocean at its Austrian unit and ship it to India. It also has an agreement with Foxconn to build the PEAR.The company is scouting for real estate space to open a New Delhi showroom and is meeting auto component suppliers to source parts for its global production, he said.”Already we are starting to build some relationships,” he said. More

SYDNEY (Reuters) – Sterling slumped to a record low on Monday as investors piled in to dollars and out of almost everything else, spooked by the prospect of high interest rates and poor growth ahead.The pound plunged nearly 5% at one point to $1.0327, breaking below 1985 lows as confidence in Britain’s economic management and assets evaporated. Even after stumbling back to $1.05, the currency is down 7% in two sessions.”It’s a case of shoot first and ask questions later, as far as UK assets are concerned,” said National Australia Bank (OTC:NABZY)’s head of currency strategy, Ray Attrill in Sydney. The collapse sent the dollar higher broadly and it hit multi-year peaks on the Aussie, kiwi and yuan and a new 20-year top of $0.9528 per euro.In stocks MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1% to a two-year low. It is heading for a monthly loss of 11%, the largest since March 2020. Japan’s Nikkei fell 2.2%.The dollar made new highs on sterling, the euro and the Aussie in the thin early hours of the Asia day. [FRX/]Last week, stocks and bonds crumbled after the United States and half a dozen other countries raised rates and projected pain ahead. Japan intervened in currency trade to support the yen. Investors lost confidence in Britain’s economic management.The Nasdaq lost more than 5% for the second week running. The S&P 500 fell 4.8%. [.N]Gilts suffered their heaviest selling in three decades on Friday and on Monday the pound made a 37-year low at $1.0765 as investors reckon planned tax cuts will stretch government finances to the limit. [GB/]Sterling is down 11% this quarter. [GBP/]Five-year gilt yields rose 94 basis points last week, by far the biggest weekly jump recorded in Refinitiv data stretching back to the mid 1980s. Treasuries tanked as well last week, with two-year yields up 35 bps to 4.2140% and benchmark 10-year yields up 25 bps to 3.6970%. [US/]The euro wobbled to a two-decade low at $0.9660 as risks rise of war escalating in Ukraine, before steadying at $0.9686.In Italy, a right-wing alliance led by Giorgia Meloni’s Brothers of Italy party was on course for a clear majority in the next parliament, as expected. Some took heart from a middling performance by eurosceptics The League.”I expect relatively little impact considering that the League, the party with the least pro-European stance, seems to have come out weak,” said Giuseppe Sersale, fund manager and strategist at Anthilia in Milan.Oil and gold steadied after drops against the rising dollar last week. Gold hit a more-than two-year low on Friday and bought $1,643 an ounce on Monday. Brent crude futures sat at $86.29.[GOL/][O/R] More

On Monday we will be picking over the fallout from Italy’s lurch to the right after the completion of a bad-tempered election campaign. The Financial Times got in early with a Big Read on what a far right administration means for the rest of Europe.We also have elections in Latvia, Bulgaria, Kuwait and Bosnia and Herzegovina this week. But the big one will be on Sunday with the first round of the Brazilian presidential election. The race frontrunner is left-wing former president Luiz Inácio Lula da Silva, but incumbent Jair Bolsonaro is far from out of the race. Tensions are running high.A smaller but nonetheless significant ballot takes place on Thursday, when the alderman of the City of London will decide the next lord mayor. This largely ceremonial role will be key to promoting the UK’s financial centre, so it’s important. Hopefully the ballot will not prove as contentious as last year’s.Aside from elections, it is a strong week for space travel. On Monday, Nasa will be crashing a spacecraft into an asteroid at 23,000kph in order to divert its path. The $300mn Dart mission, short for Double Asteroid Redirection Test, has picked as its target an asteroid called Dimorphos because it orbits another asteroid rather than the sun.The US space agency will be busy again the next day with the launch of Artemis I, the first in a series of increasingly complex missions to establish a permanent human base on the moon.If that were not uplifting enough the week will end with the return of the London Marathon, albeit six months later than its usual April slot to enable it to take place at all after the disruption the pandemic brought. CompaniesContinuing the theme of play, Lego (the name is derived from the Danish phrase leg godt, or “play well”) reports half-yearly results on Wednesday. The toymaker has guided analysts to expect a normalising of sales after its pandemic boom but expectations are high that sales will continue to outpace rivals in the sector.For petrol heads, Thursday is an exciting day because shares in Porsche will begin trading on the Frankfurt stock exchange after the long-awaited flotation of the luxury car brand.It is a more sombre week for lovers of the silver screen. Ailing movie house chain Cineworld will report its half-year results on Friday. Although the group is expected to post a profit, contrasting with last year’s loss, focus will turn to its latest cash position and net debt level after the company filed for bankruptcy protection in the US earlier this month.Economic dataThis will be a week of finding out how economies are performing and how the public expect them to perform with gross domestic product figures from the US, Canada and the UK as well as several consumer confidence surveys.We will also get further insights into the battle in Europe to calm inflation with the release of consumer price index and producer price index readings from Germany, France and Italy.Read the full week ahead calendar here. More

LIVERPOOL, England (Reuters) – Britain’s Labour Party will unveil on Monday its plans to set up a national wealth fund to invest in green projects which will benefit the public, part of the opposition party’s answer to the Conservative government’s tax-cutting approach.At their annual conference, Labour lawmakers are sensing a change in their fortunes after a punishing loss at a 2019 election, feeling they can now offer a real choice to voters after the government announced a “growth plan” that handed tax cuts mostly to big business and the wealthiest. The so-called mini-budget has opened up a divide between Prime Minister Liz Truss’s Conservatives and the Labour Party of Keir Starmer, who wants to use the years before an expected election in 2024 to prove his team is ready for power. Rachel Reeves, Labour’s finance policy chief, will tell the conference in the northern English city of Liverpool the party wants to “build British industry” by using a national wealth fund similar to funds in Norway and Singapore, with an initial 8 billion pounds ($8.7 billion) earmarked for green projects.”Because conference, when I say I want to buy, make and sell more in Britain I mean it,” she will say, according to excerpts of her speech. “That is a real plan for growth,” she will say, taking aim at the “Growth Plan” presented by finance minister Kwasi Kwarteng on Friday, when Labour accused him of prioritising the wealthy over working people struggling with rising prices by turning to the discredited theory of “trickle-down economics”.That plan has shifted the government to the right, handing Labour a chance to prove that it could run the economy efficiently but also help those on lower incomes and protect public services, a source close to the leadership said. Kwarteng scrapped the country’s top rate of income tax and cancelled a planned rise in corporate taxes, all on top of a hugely expensive plan to subsidise energy bills for households and businesses, with little detail of how it would be paid for in the short term beyond increasing government debt.In response, sterling fell by more than 3% to its lowest since 1985 against the U.S. dollar on Friday, and weakened against the euro and Japanese yen as well, while government bonds recorded their sharpest daily sell-off in decades.On Sunday, Starmer pledged to reverse the abolition of the top rate of income tax and restore it to 45%, saying tax cuts for the wealthy would not spur growth.Ed Miliband, Labour’s climate policy chief, said Labour’s plans would return jobs to Britain.”This is about good jobs that pay well, with strong trade unions, and with money that flows back into the pockets of the British people.”($1 = 0.9211 pounds) More

Expect an ugly open to Asian markets on Monday as investors try to shield themselves from the fallout from the widespread selling that battered stocks, bonds, and currencies on Friday.The historic rout in UK bonds and sterling took center stage on Friday but at the heart of the gloom shrouding world markets is the Fed’s drive to raise rates far higher than most people had bargained for, and the effect that is having on global rates.And the dollar.The dollar’s ‘wrecking ball’ status is being painfully felt in Asia, where several currencies have sunk to multi-year or record lows, and central banks have intervened to try and stop the rot.On Friday, India’s rupee hit a record low, Indonesia’s rupiah and China’s yuan fell to their weakest levels since mid-2020, the Thai baht slumped to a 16-year low, and South Korea’s won hit a 13-year trough. Falling currencies increase inflationary pressures, forcing policymakers to turn more hawkish, tightening financial conditions, and crushing demand. Central banks will find it hard to break this doom loop.Their pool of FX reserves for intervention purposes is also limited – even the Bank of Japan will be aware its $1.3 trillion stash won’t last forever if it follows last week’s historic dollar-selling intervention often enough. And talking of doom loops, if Asian central banks sell chunks of their U.S. Treasuries holdings to support their domestic currencies, U.S. yields rise, Treasuries are more attractive, investors pile in, and the dollar strengthens. Asia’s economic and corporate calendars on Monday are light. A batch of Japanese economic data, including retail sales and consumer confidence, and China’s September PMIs will give an insight into the health of the region’s two largest economies at the end of the week. India’s central bank announces its latest interest rate decision on Friday too.Key developments that could provide more direction to markets on Monday:German Ifo (September) More