Aurelia Butler

Raising cash on Wall Street is becoming increasingly difficult as market gyrations close the door on big initial public offerings and the Federal Reserve’s turn to a more restrictive monetary policy forces companies to pay up to borrow through debt markets.The dramatic tightening of financial conditions over the past three months has accompanied violent swings in stock, bond and Treasury securities. The price moves have inflicted losses on fund managers and sapped some of the speculative energy from US financial markets.Borrowing costs for companies and individuals have been rising since late December, after Fed policymakers indicated they were prepared to cool the economy to tamp down rampant inflation. This week US government bond yields rose to their highest level in nearly three years. Those yields are the risk-free benchmark for virtually all financial markets, and increases bleed through to everything from home mortgage rates — which last week eclipsed 4 per cent for the first time since 2019 — to the cost of raising corporate debt. “The marginal higher-risk company is having a more difficult time accessing capital than they would have a month ago,” ​​said Steven Oh, the head of credit and fixed income at asset manager PineBridge. He added the Fed wanted “to dampen excess demand, and the way you dampen that excess demand is tightening financial conditions to the consumer and businesses and beyond”.Treasury yields have climbed as investors raise their forecasts for how high inflation will run, figures that have been pushed up by higher energy costs linked to the Russian invasion of Ukraine, which has rocked commodity markets. In the days leading up to the Fed’s decision to raise interest rates last Wednesday, a closely followed gauge of US financial conditions produced by Goldman Sachs showed tightness in financial conditions nearly at levels recorded just before the coronavirus pandemic. “We know the economy no longer needs or wants this very highly accommodative stance,” Jay Powell, Fed chair, said after the central bank’s monetary policy committee meeting. “It’s time to move to a more normal setting of financial conditions. And we do that by moving monetary policy itself to more normal levels.”While financial conditions eased slightly immediately after the rate rise — thanks largely to a rebound in the stock market — Powell on Monday reiterated that the Fed could soon reduce its $9tn balance sheet, which would tighten conditions further.Financial markets have spent much of this year girded for higher interest rates. New public listings have slowed to a standstill in the US, with no big IPOs between February 17 to March 14, according to Dealogic. Outside of a holiday period, it marked the longest period without one since 2017. Separate data from Refinitiv showed that cash raised through equity sales has fallen 88 per cent from the previous year to $23.8bn, marking the slowest start to a year since 2009 — the midst of the financial crisis.The drop-off in flotations has been prompted by high volatility across financial markets and a sell-off that has wiped more than 31 per cent off the average company in the Russell 3000 index — one of the broadest US stock market gauges.Companies have also shied away from US debt and loan markets where trillions of dollars are borrowed each year for businesses to fund their operations. Riskier companies whose bonds are rated junk by the big debt rating agencies have borrowed just $38.8bn this year, down 71 per cent from a year prior.This month, banks led by RBC Capital Markets pulled a $1.7bn loan deal to fund SS&C Technologies’ takeover of software company Blue Prism after facing weak demand, one person familiar with the matter said. Electric carmaker Tesla delayed a planned asset-backed debt sale, Bloomberg reported, as has buy-now, pay-later company Affirm.Companies that have moved ahead with debt offerings have encountered far more demanding investors. Last week, bankers at Bank of America and Citigroup had to offer discounts to investors on a bond and loan deal to fund the takeover of pump manufacturer SPX Flow by private equity group Lone Star, according to people briefed on the matter.That the arrival of tighter financial conditions preceded the Fed’s decision to lift interest rates signals that policymakers’ tough talk on inflation allowed the market to temper activity without a traditional central bank intervention. Investors said that could ultimately mean the Fed may not have to raise rates as aggressively in order to rein in inflation.“There is a little bit of a game here where the Fed can use some of this hawkish talk to tighten without actually having to tighten,” said Ashish Shah, a chief investment officer at Goldman Sachs Asset Management. “That buys them the ability to be a little bit more flexible if the data comes out weaker.”  More

(Reuters) – Gold prices held steady on Tuesday as U.S. Treasury yields hit multi-year highs following an aggressive inflation stance by the Federal Reserve chairman, while an intensifying conflict between Russia and Ukraine supported bids for the safe-haven metal. Spot gold was flat at $1,936.82 per ounce by 0347 GMT. U.S. gold futures were up 0.4% at $1,937.30. “There are no new inputs to materially move the price in Asia today, leaving gold stuck between higher U.S. yields and a ramp-up in risk-aversion sentiment,” said OANDA senior analyst Jeffrey Halley. Fed Chairman Jerome Powell indicated that the U.S. central bank would raise interest rates by bigger-than-usual amounts if necessary to bring down inflation that was running “much too high.” The yield on the benchmark 10-year Treasury note jumped above 2.3% for the first time since May 2019, while a closely watched gap between rates for two- and 10-year Treasury notes flattened further, a potential sign of an economic downturn. Sharp (OTC:SHCAY) moves in the U.S. Treasury market are increasingly pointing to the risk of an approaching recession, with markets doubting the Fed’s plan to engineer a “soft landing” for the economy as it hikes interest rates to fight inflation, market experts said. Higher yields and interest rates tend to increase the opportunity cost of holding non-interest paying gold. Slowing gold’s slide was Ukraine’s remark on Monday that it would not obey ultimatums from Russia after Moscow demanded it stop defending besieged Mariupol. “Ukraine (conflict) is likely to go on and increase supply-chain tensions and inflation pressures, supporting gold,” said Nicholas Frappell, a global general manager at ABC Bullion. Palladium, used by automakers in catalytic converters to curb emissions, fell 0.5% to $2,572.69 per ounce. Spot silver rose 0.5% to $25.32 per ounce and platinum gained 0.3% to $1,039.99. More

NEW YORK (Reuters) – When it comes to passing money smarts to children, many parents know where to start.In the beginning, they introduce kids to the concept, giving them small amounts of money like allowances or tooth-fairy gifts to handle. The end goal is a fully-functioning financially responsible grownup – earning money, handling a budget, paying bills, saving for retirement.The real challenge though is the in-between years. How exactly do you get them across the finish line?That is the puzzle that was driving Bobbi Rebell nuts. The author, certified financial planner and former business news anchor for Reuters found herself frustrated trying to get her two then college-age stepkids to embrace ideas around financial literacy.“Even though I spent decades writing business and personal-finance news, I was failing so miserably at it,” says Rebell. “There are lots of amazing educational materials for little kids out there, but I couldn’t find anything for parents of people emerging into adulthood.” Presto: Her new book “Launching Financial Grownups”.There are a few reasons why launching our kids into the real world is so challenging. Often adults do not have their own financial house in order, so we lack the knowledge or tools to teach the next generation.In addition, the last thing any teenager wants to do is patiently listen to, and learn from, parents. And schools are not a big help, either. Money skills are now part of some curriculums, but the reality is personal finance often gets overlooked as a subject.The result is that teenagers often absorb money lessons from elsewhere, if at all. According to one survey by banking giant Wells Fargo (NYSE:WFC), 35% of teens say they get information about handling money from social media.Every family’s resources and financial journeys are different, but these core principles can serve as a compass to raise money-smart kids:FIND THAT BALANCEIt is usually unrealistic to launch kids at 18 and expect them to handle all their financial affairs from day one. At some point, though, you need to set them free. Yet 74% of parents help their adult children out financially – and half say they are cutting into their own retirement savings to do so, according to surveys by the personal finance site Bankrate.That is why where you need to find that delicate balance, Rebell says: Helping out in moments of crisis, making contributions if you can to major expenses like their first car or their college tuition, but not doing everything for them so that they have no skin in the game. “Just because you can subsidize them, doesn’t mean you should,” Rebell says. “You need to be strategic about it.”USE THE COVID YEARS AS AN OPPORTUNITYThis unique pandemic era rewired family dynamics in a lot of ways. In many cases, young adults are living with parents for reasons like saving money, job loss, or colleges shutting down for in-person instruction.If your kid is around more often than you anticipated, use the opportunity. Have money conversations, invite them into budgeting decisions and ask them to contribute to household expenses. They are learning more than you think just by watching what you do, so be transparent about how running a household means making difficult choices.AVOID ‘CONCIERGE’ PARENTINGIf you troubleshoot every financial issue that comes their way, then they are not doing much learning on their own. Resist the need to intervene in everything, and let them make some decisions, and deal with the consequences. That means letting them fail sometimes.Think back to your own financial history: Probably the best money lessons you ever learned were from when you had very little and had to get creative. “A lot of parents are so well-intentioned, and they just don’t want their kids to suffer,” Rebell says. “But you have to let your kids come up short sometimes.”DO NOT JUST TEACH – LISTENHelping your kids understand money is not just a one-way, teacher-student dynamic, of presenting a lesson plan and having them digest it. After all, they are not you: They are (or will be) independent, with their own ideas of what they want from life. As a result they will have their opinions about money and how they want to make, spend, save and give it —and that is okay.“It’s a conversation, so let them talk more than you,” Rebell says. “Figure out what matters to them, and don’t assume their priorities are yours. Then you can help guide them.” More

Boris Johnson has told Rishi Sunak that his Spring Statement on Wednesday must prove that the government is on the side of people struggling with the crisis in the cost of living.The prime minister’s edict will reinforce expectations that Sunak will cut taxes on fuel, with speculation of either a temporary reduction in VAT or 5p coming off fuel duty to offset high prices at the pumps.The chancellor is also under pressure to soften his planned £12bn national insurance rise, intended to raise money to clear an NHS treatment backlog and to fund social care, or to cut other taxes.One ally of Johnson said: “The prime minister is acutely aware of the pressure on people’s household budgets. He has made it clear to the chancellor we should be on their side.”The prime minister said that as well as “cushioning” the cost of living now, he also wanted to take some “long-term bets” — for example investing in nuclear energy, according to his aides.Sunak’s team say the chancellor has been making those points himself ahead of the Spring Statement and that he has a record of helping people in difficulties, notably over Covid.Treasury insiders say the Spring Statement will be a “policy-light” event. Sunak has been adamant that it is not a “mini Budget” and that major fiscal decisions will be taken in the autumn.But they confirm that even if there are relatively few new policies in the statement, the chancellor will take decisive action to alleviate pressures on households caused by rising fuel bills and higher inflation.

Sunak wants to be a tax-cutting chancellor and might make a downpayment on this by reducing income tax, perhaps by increasing tax allowances or the threshold where people start paying national insurance contributions.Sunak’s officials have also considered raising the employment allowance, which allows small companies to reduce their annual national insurance liability by up to £4,000. That figure could increase, perhaps to £5,000.Ministers do not expect Sunak to increase next month’s planned 3.1 per cent rise in benefits, including universal credit, even though inflation is predicted to be heading towards a peak of 10 per cent.Sunak’s statement will also set out how he hopes to boost the growth potential of the economy. A shake-up of business taxation and incentives for investment and research will feature in his October Budget.Labour wants Sunak to levy a windfall tax on North Sea oil companies, but the chancellor has so far resisted, arguing that he wants them to invest more in developing new fields as Britain “transitions” to a net zero economy.However, some Tory MPs believe he could yet raise some kind of tax on businesses benefiting from the big spike in energy prices. Italy last week imposed a windfall profit tax of 10 per cent on some energy companies that will raise more than €4bn.The automotive industry is also expecting to hear more details of the government’s strategy to boost the use of electric vehicles, including the rollout of car-charging points. More

TOKYO (Reuters) -The Bank of Japan must maintain ultra-loose monetary policy as recent cost-push inflation could hurt the economy, Governor Haruhiko Kuroda said on Tuesday, highlighting a widening gap with the U.S. Federal Reserve’s aggressive tightening plan.The central bank’s increasingly isolated dovish stance helped push the yen below 120 to the dollar on Tuesday for the first time since 2016, drawing a warning from the finance minister against rapid exchange-rate moves.Kuroda said consumer inflation was expected to accelerate as some firms pass on rising energy and food costs to households.”Instead of leading to higher wages and corporate profits, such cost-push inflation will weigh on the economy in the long run by hurting corporate profits and households’ real income,” Kuroda told parliament.While nominal wages may increase “quite significantly”, the rise in consumer inflation may sap households’ purchasing power by pushing down price-adjusted real wages, he added.”Given recent price developments, we need to patiently maintain our powerful monetary easing,” Kuroda said.Kuroda’s remarks came in the wake of those by Fed Chair Jerome Powell, who pledged on Monday to move “expeditiously” to raise rates to keep an upward price spiral from getting entrenched.A weak yen has become a politically sensitive topic for Japan as it pushes up already rising import costs for energy and raw materials, adding pain to an economy only just emerging from the coronavirus pandemic’s wounds.Finance Minister Shunichi Suzuki warned that while a weak yen helped boost exporters’ profits, it added a burden to importers and households.”A weak yen has both positive and negative effects on the economy,” Suzuki told reporters.”It’s undesirable for currencies to swing sharply … The government is closely watching how currency moves may affect the economy,” he added.As part of efforts to fire up inflation to its elusive 2% target, the BOJ caps long-term borrowing costs at around zero. While it has slowed purchases of government bonds and exchange-traded funds (ETF) in recent years, it continues to hold huge amounts of assets on its balance sheet.In the event the BOJ decides to reduce its ETF holdings, it will do so in a way that minimises the central bank’s losses and any disruption to financial markets, Kuroda said on Tuesday.But it was premature now to debate an exit from easy policy, including how the BOJ could reduce its ETF holdings, with inflation yet to sustainably hit 2%, he said. More

Waymo in August started giving autonomous rides free of charge to a limited number of people in San Francisco, with safety drivers on board, using its Jaguar electric vehicles. Waymo co-CEO Tekedra Mawakana said on Monday that it has given hundreds of people ‘robo-taxi’ rides for the past six months since the rollout in the densely populated city. The planned driverless operation would mark “a major step on our path to deploying a fully autonomous commercial service,” Mawakana said in a blog posting. Waymo and its rival Cruise, majority owned by General Motors (NYSE:GM), earlier this month obtained permits from the California Public Utilities Commission (CPUC) to allow them to charge riders for trips with a safety driver present in California.They need to obtain separate permits from the CPUC to start collecting fares for driverless passenger service in California. Waymo declined to comment on the status of its driverless permit application with CPUC. More