Aurelia Butler

Investing.com — The Bank of England raised its key refinancing rate by 50 basis points on Thursday, responding to the highest inflation in over 30 years with its biggest hike in 27.At 1.75%, the refinancing rate is now at its highest since 2009.The nine members of the bank’s Monetary Policy Council voted 8-1 for the measure, a surprising show of unity given that some members had indicated ahead of time that they favored a smaller 25 basis point step due to increasingly clear signs that the U.K. economy is heading into recession.The bank reaffirmed that it expects the economy to start contracting later this year, but was forced to take aggressive action by a new forecast that sees inflation rising to over 13% by the fourth quarter, due largely to another big increase in regulated household energy prices that is scheduled to take effect in October. In its previous quarterly report on monetary policy in May, it had forecast a peak in CPI inflation of only 9.4%.”The labour market remains tight, and domestic cost and price pressures are elevated,” the Bank said. “There is a risk that a longer period of externally generated price inflation will lead to more enduring domestic price and wage pressures.”It noted that it expected inflation to remain “at very elevated levels” for most of next year before starting to decline to its 2% target.The new forecasts drove sterling over half a percent against the dollar. The FTSE 100 trimmed its gains for the day, while the yield on the U.K.’s benchmark 10-Year bond fell by 4 basis points to 1.87% by 07:15 AM ET (1115 GMT).Separately, the Bank also indicated that it will reverse the ‘quantitative easing’ of the last couple of years twice as fast as it previously estimated. The MPC is now targeting a reduction of 80 billion pounds of U.K. government bonds, known as Gilts, over the next year, half of which will come from letting maturing bonds ‘roll off’. Sales are due to start shortly after the MPC’s September meeting, subject to market conditions.The plans make for a difficult environment for Gilts over the coming months, Panmure Gordon chief economist Simon French said via Twitter.There’s a “big question mark whether (the) private sector will absorb these Gilts at current yields given where U.K. inflation is heading,” French said.(CORRECTION: An earlier version of this story incorrectly stated that the vote for 50 basis points had been unanimous.) More

The writer is professor of the practice at Georgetown University and a former IMF deputy research directorIn a speech last month, US Treasury secretary Janet Yellen lamented the loss of economic potential across the globe from low female labour force participation. Meanwhile, commerce secretary Gina Raimondo has called attention to the urgent need for childcare policies to attract women back into the workforce following the pandemic. And recent research has produced eye-catching estimates of the economic growth dividend from higher FLFP.Those estimates, impressive as they are, nevertheless considerably understate the economic gains from higher FLFP. Economists approach the question of how gender inclusion affects economic wellbeing through a so-called headcount exercise: adding a woman to the labour force yields the same benefits as adding a man. A worker is a worker, and the gender of the worker is immaterial. What matters for economic growth is the total headcount.There is a range of microeconomic evidence, however, suggesting that female and male workers are not perfect substitutes in production. For example, financial performance (profits, stock market valuations) of large companies and banks has been shown to improve when women are brought into previously male-dominated management teams and oversight boards. Some studies attribute this effect on performance to different attitudes toward risk and collaboration, as just two possible channels. As a former senior Federal Reserve official noted, the models researchers use to understand the macroeconomy are gender-blind, as if macroeconomic policies affect women the same as men. Increasingly, these look out of touch with reality.A recent study that I led supports a fresh approach to the issue by asking the data to tell us whether economic gains from increasing labour force participation depend on the gender composition of the additional workers. Macroeconomic data strongly reject the notion embedded in most models that women and men are perfectly interchangeable in production, and point to economic gains from raising FLFP that could be up to a fifth larger than estimates from headcount exercises which ignore the gender composition of the headcount.Women complement men in the production process, and there is thus value in gender diversity as such (as there is in diversity more generally in teams of workers). Hiring women can increase the productivity of women already in a company, by reducing within-firm discrimination. Gender inclusion also seems to have favourable effects on the value of companies whose strategies depend on innovation, including high-tech manufacturing and knowledge-intensive services. Our interpretation of economic growth data is also affected by the complementarity of women and men in production: indeed, a portion of the measured gains in economic wellbeing over the past half century probably reflects the narrowing of gender participation gaps that has not been properly accounted for in our economic models.In a world where women are under-represented in the workforce, and men and women are imperfect substitutes in production, the gains from gender inclusion are likely to be far larger than our standard models estimate. My research also finds that, because of the complementarity in production between women and men, boosting FLFP is likely to raise real incomes of men. Gender inclusion in the workforce is thus a positive-sum game: both women and men should see increases in their economic wellbeing as a result.The unlevel playing field in the workplace is more costly than standard models allow for, and the urgency of levelling up is thus likewise greater. Gender blindness in macroeconomics is a poor operating assumption that leads economists and policymakers to understate the gains from gender inclusiveness. More

Good morning, and we start with an exclusive from our reporters Ryan McMorrow in Beijing and Kana Inagaki in Tokyo. SoftBank, the Japanese technology investor led by billionaire Masayoshi Son, has raised $22bn in cash from deals that would sharply reduce its stake in Chinese ecommerce giant Alibaba.The Japanese group has sold about one-third of its Alibaba stake or 213mn shares through prepaid forward contracts — a type of derivative to which SoftBank has increasingly turned to raise cash immediately while retaining the possibility of holding on to the shares.It has now sold more than half its Alibaba holdings through these financial contracts. That could shrink its stake in the Chinese group to below the threshold for retaining its board seat and prevent SoftBank from recognising its share of Alibaba’s income in its financial statements.Alibaba, which reports quarterly earnings later today, was founded more than two decades ago by Chinese entrepreneur Jack Ma. Son built his fortune on the back of leading a $20mn funding round for Alibaba’s fledgling ecommerce start-up, generating a huge return on his investment.But SoftBank has scrambled to raise cash this year as dozens of its investments have slumped amid a broader market sell-off in tech stocks. Thanks for reading FirstFT Americas. Here is the rest of the day’s news — Gordon.Five more stories in the news1. China unleashes wave of military drills around Taiwan China’s armed forces have begun live fire military exercises in six exclusion zones surrounding Taiwan. The unprecedented scale of the operations forced the Taiwanese government to warn commercial ships and planes to avoid the area. The exercises began after the visit of US House Speaker Nancy Pelosi who pledged support for the government of President Tsai Ing-wen. In South Korea today President Yoon Suk-yeol refused to meet Pelosi.

2. Tiger Global blames inflation after 50% drop in flagship hedge fund Chase Coleman’s hedge fund Tiger Global ended the second quarter nursing heavy losses amid a tech stock rout that has caused performance across one of the world’s largest hedge funds to plummet. A long-only fund the firm manages ended the second quarter down 63.6 per cent after fees, according to a letter sent to investors and seen by the Financial Times.3. Argentina’s new economy minister pledges to restore fiscal order Sergio Massa, the third person to take charge of Argentina’s economy in barely a month, yesterday pledged to bring fiscal order to the country as the Peronist administration attempts to restore its crumbling credibility and regain market confidence. In his first speech since being appointed last week, Massa said he would establish a “super ministry” to tackle double-digit inflation.4. Virginia pension fund invests in crypto lending in bid to boost returns The $6.8bn Fairfax County Retirement Systems pension fund is looking to boost its returns by investing in crypto lending markets despite a crisis in the sector that has pushed several companies into bankruptcy and left retail investors with heavy losses. 5. Elon Musk subpoenas Goldman Sachs and JPMorgan in Twitter takeover fight The Tesla chief executive is seeking any documents and communications exchanged between the social media group and the banks that advised it on the $44bn takeover that Musk is now seeking to abandon. The day aheadMarket outlook US stock markets are predicted to have a subdued start to trading when they open later after closing at a three-month high yesterday. The rally was driven by better than expected quarterly earnings from PayPal, as well as strong results from the US services sector.Company earnings Private equity groups Apollo Global and Blue Owl Capital both report before the opening bell and could offer investors greater detail on the state of dealmaking and financing markets. A batch of consumer goods and entertainment companies also report this morning, including Kellogg and theme park group SeaWorld. Lyft, the ride-hailing company, reports after the market closes.Economic data The US labour department releases data on new applications for unemployment aid. Economists estimate jobless claims will tick up to 259,000 from 256,000 a week earlier.Monetary policy A 50-basis-point rise will be “on the table” today as the Bank of England considers its next move on interest rates, according to governor Andrew Bailey. At a husting last night, the frontrunner to be the next British prime minister, Liz Truss, said she would look to change the Bank of England’s mandate if she won.Nuclear talks resume Iran is expected to resume nuclear talks with world powers in Vienna today. Iran’s negotiator Ali Bagheri Kani and US envoy Rob Malley flew into the Austrian capital yesterday in an attempt to revise the 2015 agreement and rein in the Islamic republic’s atomic activities.What else we’re readingThe women calling out Apple In interviews with the Financial Times, more than a dozen past and present employees accused Apple’s human resources team of putting the Silicon Valley giant’s reputation ahead of workers’ welfare. Inspired by the #MeToo movement, more women are sharing allegations of apathy and retaliation in the face of misconduct claims.Scientists revive cells and tissues in dead pigs Yale University scientists have used a new procedure to restore many biological functions in pigs that had been dead for more than an hour, raising profound questions about the boundary between life and death.Donald Trump-backed candidates prevail in US primaries Several candidates endorsed by Donald Trump prevailed in their Republican primaries across five US states on Tuesday.Go deeper: But a roster of Republican candidates backed by Donald Trump is struggling to raise money in some of the country’s most competitive races.Himars fuels Ukraine hopes of ‘limited’ counter-offensive In less than a month the precise, long-range rockets from the US, which have a range of 80km, have delivered Ukraine some striking battlefield wins. Four additional American units arrived this week, bringing the total number of Himars in Ukrainian hands to 20. But Kyiv says it needs more if it is to defeat Vladimir Putin’s army. The Taliban’s black gold Thanks to a global surge in commodity prices after the Ukraine war and Covid-related disruption, business is booming in Afghanistan’s coal mines. The fossil fuel offers a crucial revenue stream to the militant group after it seized power a year ago, which led to international sanctions that crippled the country’s economy.

The number of children working the mines has reportedly increased as the economic crisis forces them out of school © Oriane Zerah/FT

Colombia’s military eyes new president with ‘deep unease’ This weekend, a ceremony will take place in Bogotá that would have been unimaginable just a few years ago: outside the presidential palace, the top brass of Colombia’s armed forces will stand before former leftwing guerrilla Gustavo Petro and acknowledge him as their new commander-in-chief. The significance of the moment is unlikely to be lost on Colombians.Property The popularity of the Hudson Valley, the farm-filled, culture and creativity-rich region two hours north of New York City, rose sharply throughout the pandemic. But the boom seems to be waning.

The town of Kingston had the fastest-rising home prices in the US twice in the past two and a half years © Chris Boswell/Getty Images/iStockphoto More

Investing.com — China fires missiles into the sea around Taiwan as it vents its anger at Nancy Pelosi’s visit earlier in the week. Alibaba reports earnings amid reports that its biggest foreign shareholder is unloading its position. The Bank of England is poised to raise interest rates. The U.S. releases weekly jobless claims and monthly trade data, and oil hits a six-month low after another big build in U.S. inventories trumped inaction by OPEC. Here’s what you need to know in financial markets on Thursday, August 4.1. China starts live-fire drills around TaiwanChina launched what is set to be four days of live-fire drills in the sea around Taiwan, venting its fury at the visit earlier this week by U.S. House of Representatives Speaker Nancy Pelosi.The drills are set to disrupt shipping coming into and out of Taiwanese ports for the next few days, at a time when lingering bottlenecks from China’s own COVID-19 lockdowns are still pressuring supply chains (as reflected in earnings overnight from Adidas).The visit has also had an impact on cross-border investment decisions, with battery maker CATL (SZ:300750) putting on ice a decision about building a factory in the U.S. to serve Tesla (NASDAQ:TSLA) and other EV makers. However, China’s stock markets recovered after three days of selling, while Taiwan’s only slipped another 0.5%.2. Jobless claims to shine light on labor market cool-off; trade data dueThe U.S. will release weekly jobless claims data at 08:30 AM ET, with expectations firmly set for another rise after the Labor Department’s Job Openings survey for June showed a sharp drop in the number of vacancies.Analysts expect initial jobless claims to have risen to 259,000 last week. Anything more would almost certainly be the biggest number since mid-January. The Challenger Job Cuts survey for July is also due an hour earlier at 07:30 AM ET.U.S. trade data for July is also due at the same time as the claims data, while Cleveland Fed President Loretta Mester may deliver a verdict on the numbers when she speaks at 11:00 AM ET.3. Stocks set to build on Wednesday gains; Alibaba in focusU.S. stock markets are set to open higher later, building on the gains posted on Wednesday in response to the drop in oil prices after U.S. inventory data (see below).By 06:20 AM ET, Dow Jones futures were up 65 points, or 0.2%, while S&P 500 futures were up 0.3%, and Nasdaq 100 futures were up 0.4%.Stocks in focus on Thursday include Alibaba (NYSE:BABA), which is set to report earnings at 07:00 AM ET against a difficult backdrop: the Financial Times reported earlier that its biggest foreign investor, Japan’s Softbank (TYO:9984) – has sold forward over half of its remaining stake, potentially creating a big overhang in the stock in the coming months.Other companies reporting Thursday include Eli Lilly (NYSE:LLY), ConocoPhillips (NYSE:COP), Datadog (NASDAQ:DDOG), Cigna (NYSE:CI), and Duke Energy (NYSE:DUK). Profitless Tech is represented by Lordstown Motors (NASDAQ:RIDE) and Nikola (NASDAQ:NKLA).4. Bank of England set (possibly) for biggest rate hike since 1990sThe Bank of England is set to raise interest rates at its regular policy meeting, with the announcement coming at 07:00 AM ET.Economists are split between expecting a rate hike of 25 or 50 basis points. The latter would represent the Bank’s biggest rate hike since it regained its operational independence under Tony Blair’s government in the 1990s.While inflation – running at its highest in over 30 years – appears to justify such a step, uncertainty over the outcome stems from the clear recession risk in the U.K., with current indicators pointing to a sharp slowdown owing to an energy-driven cost-of-living crisis.Governor Andrew Bailey is also likely to be questioned about the implications for monetary policy from the ongoing Conservative Party leadership contest, which has boiled down to promises of what looks like a highly inflationary relaxation of fiscal policy.5. Oil bounces weakly from 6-month low, hurt by U.S. stock buildCrude oil prices fell to their lowest in six months after a surprisingly large build in U.S. inventories added to evidence that, as always, the cure for high prices is – high prices.The 4.467 million barrel increase in crude stocks overshadowed the refusal (or inability) of OPEC and its allies to meaningfully increase supplies to the global market at their meeting on Wednesday. Rights to the promised 100,000 barrel-a-day increase will be distributed among countries which, with the exception of Saudi Arabia, the UAE, and arguably Kuwait, are already pumping at maximum capacity.By 06:35 AM ET, U.S. crude futures were at $91.61 a barrel, up 1% from their overnight lows, while Brent was up 0.6% at $97.39 a barrel. More

Fuel poverty campaigners on Thursday hit out at a decision to pass on rises in wholesale gas and electricity prices to British households much faster, after Ofgem confirmed the energy price cap would be altered every three months instead of twice a year.The energy regulator insisted the changes were required to prevent another large-scale crisis in the energy retail sector following the collapse of more than 30 suppliers since January 2021 amid surging wholesale prices. Consumers have been paying for the costs of rescuing customers of failed suppliers via their energy bills.But the decision has deeply angered fuel poverty campaigners, who argue that the current system — whereby the cap is altered only twice a year on April 1 and October 1 — protected households from the worst of the wholesale price increases over the critical winter period when gas usage soars. The regulator, strongly criticised for allowing too many poorly capitalised companies to enter the market in recent years, has been accused of siding with energy groups rather than consumers. Its own consumer research showed households were resistant to another price cap increase next January.Ofgem also confirmed on Thursday other changes to the price cap — which dictates bills for 24mn households — that it said would add about £60 to the average bill between October and December. They included an adjustment to ensure companies could recover the full costs of buying energy for the coming winter at very high prices.Simon Francis, co-ordinator for the End Fuel Poverty Coalition, branded the move to quarterly cap changes “simply inhumane” and claimed it would force more people into fuel poverty in the middle of winter.Caroline Abrahams, charity director at Age UK, called the decision a “hammer blow” that “poses an enormous threat to the health and wellbeing of vulnerable older households across Britain”.Analysts have warned that the price cap, which dictates a maximum price suppliers can charge per unit of energy and limits their profit margins, could rise 70 per cent in October to almost £3,360 a year per household on average, before hitting more than £3,600 in January. Ofgem will confirm October’s price changes on August 26 but energy companies and consumer groups have already called on the government to provide more support for cash-strapped households.Jonathan Brearley, Ofgem chief executive, acknowledged the situation was “deeply worrying for many people” but insisted the changes “ensure the price cap does its job, making sure customers are only paying the real cost of their energy, but also that it can adapt to the current volatile market”.The regulator stressed the changes would also lead to decreases in wholesale prices being passed on to households faster.

Businesses are not covered by the price cap and negotiate bespoke fixed-term contracts with suppliers. But analysts have warned that many companies’ bills could increase fivefold from October, when many commercial energy contracts expire.The Labour party accused the government of being “asleep at the wheel” on energy costs. “Millions of families face a cost of living catastrophe this winter,” said Alan Whitehead, shadow energy minister.The Department for Business, Energy and Industrial Strategy said it recognised “the pressures people are facing with rising costs” and that it was already providing assistance, including a £400 discount on all households’ energy bills this winter. Additional reporting by Jasmine Cameron-Chileshe in London More

Cash has fled from Hong Kong dollars this year as small depositors to big money managers search for better returns, or “carry”, outside the Asian financial hub, where interest rates have lagged global benchmarks.A dearth of new stock market listings has kept capital away, too, after a couple of boom years.The city’s de-facto central bank has spent this year buying Hong Kong dollars and raising its benchmark repo rate at record speed, trying to staunch the flow – thus reducing balances in the interbank system by more than half in the past three months.The pressure has kept the Hong Kong dollar pinned to the weakest end of its trading band since May. Yet traders and market pricing suggest that it will soon start to press on banks, until they pass it on to borrowers and the economy.”Indirectly, that will be the end game,” said Patrick Law, head of Asia-Pacific FX and North Asia local markets trading at Bank of America (NYSE:BAC).”When everyone’s excess cash becomes smaller and smaller, everyone tries to build some cushion, and that means they need to pay more for it. Banks’ cost of funding will go up,” he said.”So at some point they will want to restore their profit margin by raising the lending rate.”Interbank rates are already on the march, with the benchmark one-month Hong Kong Interbank Overnight Rate up nearly 60 basis points (bps) in three weeks. The gap over comparable U.S. dollar rates in London has narrowed to 106 bps, from a three-year high of more than 140 bps in July.Forwards pricing suggests the gap might close further over the next few months as Hong Kong rates play catch up, while there is a bit of a pause in U.S. hikes.”Now that the gap has narrowed … the carry-led outflow probably will slow,” said Wang Ju, head of Greater China FX and rates strategy at BNP Paribas (OTC:BNPQY).”This is particularly true, given the market now thinks Fed has reached the max hawkishness.”PRIME RATESHong Kong has run what it calls the Linked Exchange Rate System for nearly 40 years, pegging the local currency to the U.S. dollar and moving the city’s base repo rate in lockstep with the U.S. Federal Reserve.Carry opportunities open up whenever market-set local rates in Hong Kong differ from dollar rates, and this year’s outflows are a reversal of inflows, especially through 2020, when the pandemic saw short-term U.S. rates near zero in a hurry.The speed and volume at which the Hong Kong Monetary Authority (HMKA) is buying local currency to defend the peg has revived periodic and unsuccessful speculation that the exchange rate system is at risk of breaking.Most economists and market participants see it as the policy in operation and no threat to markets’ functionality, even if the liquidity drop as a result has been precipitous. Commercial banks’ aggregate reserve balances at the HKMA have fallen from HK$457.4 billion last September to HK$144.8 billion on Wednesday as the HKMA sucks cash from the system.The aggregate balance, the key gauge of cash in the banking system, will decrease to HK$129.293 billion on Aug. 5, an HKMA spokeswoman said on Thursday.Analysts said it is banks that are under the most strain as they have so far kept their own main loan rates steady. Top lender HSBC held its best rate at 5% in July.”The pressure is building, but it’s just not fully reflected in prime rates, which will change everything yet,” said Natixis’ senior economist, Gary Ng, since it would flow through to the economy via businesses and borrowers.A deeper cash drought – if the aggregate balance were to drop below HK$100 billion – or another hefty Fed hike in November might be the trigger for that.”A sudden shot-up seems unlikely… (but) we expect 1-month Hong Kong dollar HIBOR to climb further and banks will probably raise the prime rate after the Fed meeting in September,” said Ken Cheung, chief Asia FX strategist at Mizuho in Hong Kong. More

ISTANBUL (Reuters) – Turkish exporters are revising down year-end targets in a move that could derail the government’s economic plans as new orders drop amid signs of a global slowdown and inflationary pressure.Turkey’s exports rose by 19% year-on-year in the first seven months of 2022 to $144.4 billion, but deteriorating global conditions, exacerbated by the war in Ukraine, have raised concerns for the rest of the year.The trade deficit surged by 143% in the same period to $61.9 billion, mainly due to rising energy import costs, despite exports reaching record levels.The darkening outlook for exports threatens President Tayyip Erdogan’s economic plan, which aims to lower inflation, at nearly 80% in July, by flipping Turkey’s chronic current account deficit to a surplus.Seref Fayat, head of TOBB Garment and Apparel Council, said the clothing industry’s year-end export growth target had been lowered from 15% to hardly any growth at all.”As we see a slowdown in new orders from U.S. and European markets in the recent months, we have lowered our target,” he told Reuters, adding that he expects exports to remain flat compared to last year or rise slightly.Turkey has set a $250 billion export target for this year, after reaching $225 billion in 2021.Carmakers, who are among Turkey’s top exporters, are also revising down their targets. Tofas cut its export target by more than 10%, while Ford Otosan reduced it to 330,000-340,000 units from 350,000-360,000.Ferdi Erdogan, deputy chair of the Turkish Construction Material Producers Association (IMSAD), told Reuters the weakness of the euro against the dollar posed another risk.Trade Minister Mehmet Mus said on Wednesday that Turkey’s exports numbers for the first seven months of this year would have been $7 billion higher had the euro not declined against the dollar.TOBB’s Fayat said the weakening euro had also hit the apparel sector given that European Union was Turkey’s largest export market, accounting for $93 billion, or 41.3%, of exports in 2021.”Current levels of the euro will lead to 7-8% fall in revenues and 5% fall in profit of Turkish apparel exporters” Fayat said. More