Aurelia Butler

LONDON (Reuters) – Emerging market sovereign debt is at the “mercy” of the Federal Reserve’s interest rate decisions, JPMorgan (NYSE:JPM) analysts said in a note on Monday, as the U.S. central bank’s rate raises drain capital from developing markets. JPMorgan removed Nigeria from its list of emerging market sovereign recommendations that investors should be ‘overweight’ in, saying the country had not taken advantage of high oil prices, while adding Serbia and Uzbekistan. Last week, the Fed raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, as it seeks to tame high inflation while its rate increases also buffet higher-yielding emerging markets.JPMorgan’s Emerging Markets Bond Index Global Diversified (EMBIGD) index has fallen 16% this year, the analysts said, “with most of the losses having come from rates” and $4 billion in net outflows from emerging markets since mid-April.”The external and fundamental backdrop has become increasingly difficult for EM sovereigns,” the analysts said. “The COVID lockdown in China poses further downside risks.”They noted that riskier sovereign yields were now 10.6%, the highest level since the first wave of the coronavirus pandemic in April 2020, reducing market access and increasing the risk of debt defaults.However, the analysts said the “front-loaded pain” for emerging market bonds, which they said had begun underperforming in September 2021, was a positive.Russia’s invasion of Ukraine in February caused commodity prices to spike, benefiting exporters. The over-performance of bonds issued by oil exporters now “looks to have played out”, JPMorgan said.The analysts said Nigeria’s national oil company did not transfer any revenue to the government from January to March this year, due to petrol subsidies and low oil production, as it moved Nigeria’s debt out of the bank’s ‘overweight’ category.”Nigeria’s fiscal woes amid a worsening global risk backdrop have raised market concerns despite a positive oil environment,” they said.It moved Serbia to ‘overweight’ as risks had been priced in and the country had high reserves and a fiscally cautious government, the note said, while relatively low debt despite Russian exposure led them to put Uzbekistan in the same category. More

JERUSALEM (Reuters) – Israel’s central bank said on Monday it had received public support for its plans to possibly issue a digital shekel on grounds it would help the economy by supporting innovation in the payments system, reducing the amount of cash and bolstering the fintech sector.The Bank of Israel last November stepped up its research and preparation for the possible issuance of a digital shekel to create a more efficient payments system after first considering issuing a central bank digital currency in late 2017.In March, it said a digital shekel was unlikely to significantly erode the banking system’s business results.It has called on the public to weigh in, and on Monday it said it had received 33 responses from various sectors, half of them from abroad. Some 17 replies came from the fintech sector.”The Bank of Israel has still not made a final decision on whether it will issue a digital shekel,” the central bank said.”But all of the responses to the public consultation indicate support for continued research regarding the various implications on the payments market, financial and monetary stability, legal and technological issues, and more,” it said in a report. Some other central banks are also considering the possibility of issuing digital currencies.Respondents believe a digital shekel should encourage competition in the payments market, while there was a split on privacy issues, the central bank said. Some want full anonymity like cash, while others believe a digital shekel should be subject to money laundering rules and helping the war on the “black economy.”A digital shekel should also come at a zero or low costs to business owners and consumers and be easy to use for all, including the elderly.”The Bank is committed to openness and transparency in its continued research regarding the digital shekel, and expects to continue fruitful dialogue with all interested parties at all stages of research and development in the digital shekel project,” the central bank said. More

Data from the Organisation for Economic Co-operation and Development shows companies in Britain invest the equivalent of 10% of gross domestic product a year, compared with 14% in similar countries, the ministry said.Prime Minister Boris Johnson has promised to deliver a high-wage economy but to do that his government must improve Britain’s productivity record which lags behind that of many of its peers.During the coronavirus pandemic, Sunak introduced a temporary “super-deduction” incentive, allowing companies to cut their tax bill by up to 25 pence for every pound they invest, but it is due to expire in April next year.The two-year tax break is expected to cost 21.3 billion pounds ($26.2 billion), Britain’s budget watchdog forecast in October.The ministry said options for future incentives included increasing the permanent level of an annual investment allowance or the rates for writing down allowances, introducing general first-year allowances for qualifying expenditure on plant and machinery and possibly additional such allowances.A permanent full expensing of investment costs was also on the list but the ministry said it would cost more than 11 billion pounds a year.”The government is keen to hear views as to whether that would be well targeted if funding is available, and if it isn’t available, how to best target our approach,” it said.The ministry said businesses should submit their views by July 1.($1 = 0.8129 pounds) More

BEIRUT (Reuters) -The World Bank on Monday approved a $150 million loan to help Lebanon fund wheat imports and keep bread prices stable for nine months, the country’s economy minister told Reuters.The program, known as the Lebanon Wheat Supply Emergency Response Project, still needs approval by the country’s cabinet and parliament, said Amin Salam.A World Bank spokesperson said the loan aimed to “finance immediate wheat imports to avoid the disruption in supply over the short term and help secure affordable bread for poor and vulnerable households including… refugees in Lebanon.”Lebanon is heavily reliant on food imports and pays for them in dollars, which have become increasingly difficult to obtain since its economy crashed in 2019.Since then, the Lebanese pound has lost more than 90% of its value while food prices have gone up more than 11-fold, according to the World Food Programme.The bread shortage has been exacerbated by the war in Ukraine, which supplies most of Lebanon’s wheat, and by Beirut’s inability to store wheat reserves since its largest silos were destroyed in the 2020 Beirut port explosion. More