Aurelia Butler

Another dam has burst, with the two-year rise to a 15-year high just shy of 3.50% flooding global markets with extra uncertainty and fear.Wall Street managed to claw back some of its earlier losses on Monday but still closed in the red, a noteworthy development given the extent of Friday’s selloff. The failure to bounce back at all is a reflection of how jittery investors are right now.Not only are they having to adjust to a hawkish Federal Reserve, the European Central Bank also appears poised to accelerate the pace of interest rate hikes. Bonds are selling off globally, the dollar is surging, and no corner of the investment world is being spared the fallout. The scale of the two-year U.S. bond yield rise is truly remarkable – a year ago it was as low as 16 basis points, today it nudged 350 bps. With the Fed likely to continue tightening, few would bet against it rising further.(Graphic: U.S. Treasury 2-year yield – https://fingfx.thomsonreuters.com/gfx/mkt/akpezkdmlvr/us2y.png)China’s travails aren’t helping either. The yuan has sunk to a two-year low against the dollar and the psychological 7.00/$ barrier is within touching distance. Chinese corporate earnings reports on Tuesday could give further clues on the health – or otherwise – of the property and financial sectors, with ICBC, Bank of China, China Construction Bank (OTC:CICHF), and China Resources Land all releasing first-half results. Japanese jobs data is the headline release on Asia’s macro calendar on Tuesday – the unemployment rate is expected to hold steady at 2.6% – while rising rates are expected to put a dent in Australian house building approvals.Key developments that should provide more direction to markets on Tuesday: Japan unemployment (July)Australian building approvals (July) More

COLOMBO (Reuters) – Sri Lankan President Ranil Wickremesinghe will on Tuesday slash defence and other expenditures in a bid to win International Monetary Fund (IMF) support as he presents his first budget since taking over as leader of his crisis-hit country.Officials hope the interim budget for the rest of the year will be followed by a staff-level agreement on extending much-needed IMF help for Sri Lanka to tackle its worst economic turmoil since independence from Britain in 1948.COVID-19 battered the island’s tourism-reliant economy and slashed remittances from workers overseas. The damage was compounded by rising oil prices, populist tax cuts and a seven-month ban on the import of chemical fertilisers last year that devastated agriculture.The result has been chronic shortages of basic goods, sky-high prices and mass protests that forced President Gotabaya Rajapaksa to flee the country, leaving his successor, Wickremesinghe, to handle restructuring billions of dollars in debt to China and other countries while seeking a bailout from the IMF.Six-time prime minister Wickremesinghe, who holds the finance portfolio, told Reuters this month that expenditure would be slashed by a “few hundred billion” rupees, including on defence, in the budget he will present to parliament.Sri Lanka aimed for 3.9 trillion rupees ($11 billion) in expenditure in its last budget, presented in November.Wickremesinghe is also expected to outline measures to support low-income communities worst hit by the crisis and announce new taxes to shrink its fiscal deficit.The deficit target is likely to be reduced from about 12% of gross domestic product to 9.9% in the interim budget but analysts warn this is an ambitious goal since the economy is projected to contract by an estimated 8% this year.”A long-standing problem is budgets don’t meet revenue and deficit targets so this budget will have to really focus on proper revenue-based fiscal consolidation,” said Shehan Cooray, head of research at Acuity Stockbrokers.”The key things will be the budget deficit and primary deficit targets, which will be in line with an IMF plan.”The nation of 22 million missed interest payments due on June 3, June 28, and July 18, and a principal payment due on July 25, according to rating agency S&P Global (NYSE:SPGI).An IMF team that arrived last week concludes its visit on Wednesday, and Sri Lankan officials hope to have a staff-level agreement in place to advance talks for an emergency loan of about $3 billion.($1 = 355.0000 Sri Lankan rupees) More

WASHINGTON (Reuters) -Starting next week, Americans will no longer be able to order free at-home COVID-19 tests from a website set up by the U.S. government due to limited supply arising from a lack of congressional funding.The COVIDTests.gov website, set up during the Omicron variant record surge in cases, helped U.S. households secure COVID-19 tests at no cost.President Joe Biden in January pledged to procure 1 billion free tests for Americans, including 500 million available through the website. However, ordering through the program will be suspended on Sept. 2.The administration will suspend taking orders for free at-home tests through COVIDTests.gov as of Friday, Sept. 2, “because Congress has not provided the COVID-19 funding we need to replenish the nation’s stockpile of tests,” said a senior administration official.The government will no longer take orders through this program to ensure some tests are still available in the fall in case there is a rise in infections, the official said. “We have already distributed over 600 million tests through this program, and every household has had the opportunity to place three orders for a total of 16 tests,” White House Press Secretary Karine Jean-Pierre said at a briefing.Alternative ways of getting at-home tests will remain, the official said, including getting them reimbursed by private health insurance, Medicare, or Medicaid, which collectively cover over 92% of Americans.The government will continue to distribute free tests directly to long-term care facilities, schools, child care and early learning centers, community health centers, and food banks. The government will also keep supporting around 15,000 free testing sites in pharmacies and libraries.”If Congress provides funding, we will expeditiously resume distribution of free tests through COVIDTests.gov,” the official said.(Reporting Ahmed Aboulenein in Washington and Mrinalika Roy in Bengaluru; Additional reporting by Trevor Hunnicutt in Washington; Editing by Shinjini Ganguli, Bill Berkrot and David Gregorio) More

“I was actually happy to see how Chair Powell’s Jackson Hole speech was received,” Kashkari told Bloomberg’s Odd Lots podcast. “People now understand the seriousness of our commitment to getting inflation back down to 2%.”All three U.S stock benchmarks lost more than 3% on Friday after Powell told the annual central bankers conference in Jackson Hole, Wyoming, that the Fed would raise interest rates as high as needed to slow growth and soften the labor market. He also said the Fed would keep policy restrictive “for some time” to bring down inflation which is running at more than three times the Fed’s 2% goal.“I certainly was not excited to see the stock market rallying after our last Federal Open Market Committee meeting,” he added, referring to the Fed’s policy-setting panel, which last met July 26-27 and delivered a second straight 75-basis-point rate hike. Powell at the time said the Fed would at some point begin to slow the pace of interest-rate hikes, a point he also made on Friday, even as he emphasized that the Fed’s rate hikes would mean “some pain” for households and businesses. More

BRUSSELS (Reuters) – The European Commission said on Monday it fully stood by its proposal to approve Poland’s recovery plan after four associations of European judges asked the EU court to annul it, because the plan disregarded earlier EU court judgements.On the basis of the Commission’s contested recommendation, EU finance ministers approved Poland’s recovery plan in June, paving the way for the disbursement of some 35 billion euros ($34.99 billion) in grants and loans to Warsaw, once it fulfils some conditions.But four associations of European judges – the Association of European Administrative Judges, the European Association of Judges, Rechters voor Rechters and Magistrats Européens pour la Démocratie et les Libertés – asked the EU General Court on Sunday to annul the ministers’ and the Commission’s decisions.The associations say the Commission’s recommendation and the ministers’ subsequent approval should be scrapped because EU’s top court ruled in July 2021 that Polish judges, suspended as a result of unlawful changes made to the judiciary by Poland’s nationalist government, should be reinstated immediately.The Commission, however, had accepted in talks with Warsaw that the suspended judges be subject to a review procedure of more than a year with an uncertain outcome – expressly disregarding the EU courts’ ruling.”We take note of this legal action against the decision of the Council to approve the Polish recovery and resilience plan,” a Commission spokeswoman said.”The Commission stands fully behind its proposal to the Council to approve the plan, which aims to raise the standards on important aspects of judicial protection, thereby contributing to improving the investment climate,” she said.European Parliament member from the liberal Renew group Sophie in ‘t Veld said in a statement she would lobby in the coming weeks for the European Parliament to join the case in support of the judges associations.Poland has not yet fulfilled any of the conditions set in the EU’s approval for its plan, so any disbursements are unlikely anytime soon.But a potential annulment of the plan’s approval by the EU court would close the disbursement option altogether, unless Poland agreed to change its recovery plan to fully implement the earlier EU court ruling.($1 = 1.0003 euros) More