Aurelia Butler

“While Ukraine is benefiting from large commitments of international financial support, helping to mitigate immediate liquidity risks, the resulting significant rise in government debt is likely to prove unsustainable over the medium term,” the ratings agency said.The agency, which earlier kept the country’s outlook under review, revised it due to uncertainty around the evolution of the war and credit implications associated with it.The Group of Seven’s financial leaders agreed on $9.5 billion in new aid to Ukraine on Friday and promised enough money to keep the country’s devastated economy afloat as long as it fights against Russia’s invasion.Moody’s said it expects the military conflict in Ukraine to be more prolonged than initially assumed and forecasts the country’s real gross domestic product (GDP) to shrink by about 35% in 2022.The agency expects the Ukrainian economy to start a recovery from 2023, but expects Russia’s invasion to cause a permanent damage to the country’s GDP. More

NEW YORK (Reuters) – The stock market’s brutal year neared a grim milestone as the S&P 500’s slide on Friday threatened to leave it in a bear market for the first time since March 2020, fueled by worries over sky high inflation, a hawkish Federal Reserve and future economic growth.The benchmark S&P 500 index fell below 3837.248 during Friday’s session, a decline that on an intraday basis put it more than 20% below its Jan. 3 record closing high. However, the index closed above that level, and did not confirm it was in a bear market – frequently defined as a drop of at least 20% from a closing high.If history is any guide, a bear market would mean more pain could be in store for investors. The S&P 500 has fallen by an average of 32.7% in 13 bear markets since 1946, including a nearly 57% drop during the 2007-2009 bear market during the financial crisis, according to Sam Stovall, chief investment strategist at CFRA.It has taken a little over a year on average for the index to reach its bottom during bear markets, and then roughly another two years to return to its prior high, according to CFRA. Of the 13 bear markets since 1946, the return to breakeven levels has varied, taking as little as three months to as long as 69 months. Graphic: S&P 500 bear markets since 1946 – https://graphics.reuters.com/USA-STOCKS/BEAR/zjvqkmznwvx/chart.png The S&P 500 surged some 114% from its March 2020 low as stocks benefited from emergency policies put in place to help stabilize the economy in the wake of the COVID-19 pandemic. That decline went into reverse at the start of 2022 as the Fed grew far more hawkish and signaled it would tighten monetary policy at a faster-than-expected clip to fight surging inflation. It has already raised rates by 75 basis points this year and expectations of more hikes ahead have weighed on stocks and bonds. Fed Chairman Jerome Powell has vowed to raise rates as high as needed to kill inflation but also believes policymakers can guide the economy to a so-called soft landing.Adding to the volatility has been the war in Ukraine, which has caused a further spike in oil and other commodity prices. Graphic: S&P 500 timeline in 2022 – https://fingfx.thomsonreuters.com/gfx/mkt/jnvwezxjgvw/Pasted%20image%201653063479826.png A few areas of the stock market have been spared. Energy shares have soared this year, along with oil prices, while defensive groups such as utilities have held up better than broader markets. Graphic: S&P 500 sectors since all-time high – https://graphics.reuters.com/USA-STOCKS/BEAR/znpnemwbdvl/chart.png On the flip side, shares of technology and other high-growth companies have been hit hard. Those stocks — high fliers during much of the bull market over the past decade — are particularly sensitive to higher yields, which dull the allure of companies whose cash flows are weighted more in the future and diminished when discounted at higher rates.Some of the biggest of these companies, such as Tesla (NASDAQ:TSLA) and Facebook (NASDAQ:FB) owner Meta Platforms, are also heavily weighted in the S&P 500 index. Graphic: Casualties in 2022 stock market – https://graphics.reuters.com/USA-STOCKS/BEAR/egpbkwajjvq/chart.png Investors have looked at various metrics to determine when markets will turn higher, including the Cboe Volatility Index, also known as Wall Street’s fear gauge. While the index is elevated compared to its long-term median, it is still below levels reached in previous major selloffs. Graphic: VIX and bear markets – https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoxrbyvr/Pasted%20image%201653068998738.png More

“No matter what you may be selling, your business in China should be enormous, if the Chinese who should buy your goods would only do so.” Never did an “if only” clause carry more weight. In the 85 years since Carl Crow, a Shanghai-based American advertising executive, wrote these words in his book Four Hundred Million Customers, China’s population has grown by 1bn people. Their combined spending power is now second only to that of Americans.Yet the gulf between promise and reality in China’s fabled market haunts foreign corporations as much today as when Crow was trying to market American lipstick and French brandy to the emerging middle class of the 1930s. A host of political and regulatory issues — exacerbated by Xi Jinping’s strict Covid policies and his stance over Russia’s war in Ukraine — are conspiring to eviscerate the dreams of many multinationals.The result is that direct investment into China by foreign companies is falling off a cliff. Joerg Wuttke, president of the EU Chamber of Commerce in Beijing, says the unpredictability is prompting the European business community to put investments into China “on hold”. “Many of our members are now taking a wait-and-see approach to investments in China,” he adds, citing an attitudes survey this month of the chamber’s 1,800 members. “Twenty-three per cent of our members are now considering shifting current or planned investments out of China, the highest level on record. And 77 per cent report that China’s attractiveness as a future investment destination has decreased.”Pessimism has infected the US business community, too. Michael Hart, president of the American Chamber of Commerce in China, warns that the travel hassles encountered by foreign executives seeking to visit their Chinese operations — including flight cancellations, visa complications and lengthy quarantines on arrival — will lead to a “massive decline” in investment “two, three, four years from now”.The despair and anguish of expat families locked down in their apartments for weeks in Shanghai and elsewhere is persuading many to bolt for the departure gates as soon as they can. A survey by the German Chamber of Commerce found that nearly 30 per cent of foreign employees had plans to leave China. “Did you see the video of the guy in Shanghai shouting ‘I want to die’?” asked one British teacher based in the city, who declined to be further identified. “Well, that has done the rounds here as well. A lot of people are suffering from mental health issues. It is really hard to be cooped up at home for weeks, especially with young children.”All of this may portend a fundamental shift in how the global economy works. For decades China has been one of the hottest destinations for western multinationals seeking to offshore manufacturing operations or ramp up sales in the world’s biggest emerging market. In 2020 it passed a milestone, overtaking the US as the world’s leading destination for new foreign direct investment, according to UN data. Now a reversal seems to be underway. A tally of greenfield foreign investment projects — which includes new factories and other plans announced by foreign companies — showed the lowest quarterly total in the first quarter of this year since records began in 2003, according to fDi Markets, an FT database.Data collected by Rhodium Group, a consultancy, shows a similar trend. The headline FDI number for EU companies was boosted by one long-planned corporate acquisition, but the value of new greenfield projects slipped to its lowest level in years. “The bloom is coming off the rose,” said Mark Witzke, an analyst at Rhodium, who notes that China’s official FDI figures are inflated by factors such as counting multinationals’ earnings in China as investments.To be sure, some multinationals still do good business in China, but increasingly tales of sudden ruptures capture the headlines. Boeing’s biggest customer in China announced the removal this month of more than 100 of the US manufacturer’s 737 MAX jets from its planned purchases.US sportswear group Nike and Swedish fashion retailer H&M were among brands targeted by Chinese consumer boycotts last year after they made comments about forced labour in Xinjiang, where Chinese authorities run internment camps for Uyghurs and other minority peoples. Friction deriving from the US-China trade war has swelled the number of multinationals shifting manufacturing capacity out of China to Vietnam, Malaysia and other countries in south-east Asia, Latin America and eastern Europe. Added to this are concerns over China’s loyalty to Russia as it inflicts slaughter upon Ukraine, prompting fears that Beijing too will one day become the west’s military adversary. Wuttke says businesses in China are being forced to “seriously consider how to mitigate the risks of any potential deterioration of EU-China relations”.George Magnus, author of Red Flags, a book about China’s vulnerabilities, perceives an inflection point. “I think China’s support for Putin and the government’s zero-Covid response to its own citizens are watershed moments that are forcing people now to review and reconsider consequences and meaning for the business operating environment in China,” he [email protected] More

The value of the net long dollar position drifted lower to $19.75 billion in the week ended May 17, from $19.82 billion the previous week.The dollar has been underpinned overall in recent months by safe-haven bids amid soaring inflation, a hawkish Federal Reserve and the Russia-Ukraine conflict.That rally, however, fizzled this week due to increased volatility in global financial markets after the lofty levels the dollar had scaled in recent months.Bitcoin futures, on the other hand, posted their largest net long position since the contract was launched in 2018.For the week of May 17, net longs in bitcoin rose to 806 contracts, compared with net longs of 703 contracts the previous week, CFTC data showed.Bitcoin BTC=BTSP, the largest cryptocurrency by market value, last fell 3.6% to $29,203, not far from a December 2020 low of $25,400 it hit a few weeks ago.Japanese Yen (Contracts of 12,500,000 yen) $9.884 billion17 May 2022 Prior week week Long 12,113 11,196 Short 114,422 121,650 Net -102,309 -110,454 EURO (Contracts of 125,000 euros)$-2.681 billion17 May 2022 Prior week week Long 230,770 228,230 Short 210,431 211,701 Net 20,339 16,529 POUND STERLING (Contracts of 62,500 pounds sterling)$6.186 billion17 May 2022 Prior week week Long 26,613 29,469 Short 105,854 109,067 Net -79,241 -79,598 SWISS FRANC (Contracts of 125,000 Swiss francs)$2.088 billion17 May 2022 Prior week week Long 5,240 4,727 Short 21,832 20,490 Net -16,592 -15,763 CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)$1.132 billion17 May 2022 Prior week week Long 36,069 38,679 Short 50,565 44,086 Net -14,496 -5,407 AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)$3.138 billion 17 May 2022 Prior week week Long 41,473 36,869 Short 86,115 78,583 Net -44,642 -41,714 MEXICAN PESO (Contracts of 500,000 pesos)$-0.708 billion17 May 2022 Prior week week Long 77,819 63,921 Short 49,604 47,196 Net 28,215 16,725 NEW ZEALAND DOLLAR (Contracts of 100,000 New Zealand dollars)$1.13 billion 17 May 2022 Prior week week Long 14,998 15,203 Short 32,765 28,199 Net -17,767 -12,996 More

S&P upgraded its outlook from “stable” and affirmed the “BB-/B” foreign currency as well as “BB/B” local currency ratings on South Africa.”Recent favourable terms of trade in South Africa have improved the external and fiscal trajectory, while the country’s reasonably large net external asset position, flexible currency and deep domestic capital markets provide strong buffers against shifts in external financing,” S&P said in its report.S&P said it expects South Africa’s fiscal deficit to remain elevated, but gradually narrow to 5% of GDP by fiscal 2025.The economic growth of Africa’s most industrialised country is expected to slow to 1.7% this year, according to the central bank’s forecast on Thursday, from a 4.9% expansion last year, as it recovers from a contraction in the wake of the COVID-19 pandemic. More