Economy

The Westpac-Melbourne Institute index of consumer sentiment released on Tuesday slid 6.9% in November from October, to be down almost 26% on a year earlier. The index reading of 78.0 meant pessimists greatly outnumbered optimists and back to lows not seen since the start of the pandemic.”Prior to that, we need to go back to the deep recession in the early 1990s to find a weaker read,” said Westpac chief economist Bill Evans.”Interest rate rises were a clear factor weighing on confidence in the month,” said Evans. The Reserve Bank of Australia (RBA) raised rates a quarter point to a nine-year high of 2.85% early in November and Evans noted that survey results taken after the hike showed a very sharp fall.The result was echoed by a separate weekly survey from ANZ which showed a drop of 1.5% in its sentiment index last week and a rise in inflation expectations to 6.8%, the highest since the report began in 2010.The surge in inflation has led RBA to hike rates by a blistering 275 basis points since May.Yet ANZ also reported that customer spending held up well in the first week of November, with strength in Queensland and Western Australia pointing to the return of tourism.Westpac’s measure of the economic outlook for the next 12 months slid 7.0% in November, while the outlook for the next five years dived 7.3%.Measures of family finances compared with a year ago fell 3.4%, while outlook for finances over the next 12 months tumbled 11.2% likely impacted by reports electricity prices could rise more than 50% over the coming year.Westpac’s measure of whether it was a good time to buy a major household item fell 4.3%, to be down 27.3% on a year earlier. More

SYDNEY (Reuters) – Australia’s centre-left government on Tuesday said it plans to scale back tax concessions for pension funds of the super rich, as it looks to plug a budget deficit gap and ease its rising debt pile.Prime Minister Anthony Albanese’s Labor government, which came to power in May, aims to debate the curtailment of tax concessions once it legislates on the future of superannuation -or retirement funds. Curtailment of tax concessions paid to people with multi-million-dollar superannuation accounts would raise billions of much-needed dollars annually for the government.”We have 32 self-managed super funds with more than $100 million in assets – the largest self-managed super fund has over $400 million in assets,” Assistant Treasurer and Minister for Financial Services Stephen Jones said at the AFR Super & Wealth Summit in Sydney.”The government celebrates success, but the concessional taxation of funds like these has a real cost to the budget,” he said. The government said in its federal budget announcement last month that it sees its annual deficit widening to around A$50 billion ($32 billion) by the 2025/26 financial year, as commodity prices cool and spending pressures mount.Debt is forecast to bulge to A$1.16 trillion by that year, equivalent to 43% of gross domestic product, due to the financial impact of the pandemic over the last two years.Pension fund managers have benefited from a system of compulsory employer contribution introduced in the early 1990s. That has left funds flush with money to invest, but with limited domestic assets in which to invest.Jones said providing a clear objective for super funds will enable the sector to identify opportunities where the national interest and member interests align.The government last month said it had discussions with super funds to look at investing in affordable housing projects, to help fix a housing crisis.”Superannuation funds have endorsed our Housing Accord and will work with us to leverage more investment that delivers for their investors’ and members’ interests, and for the national interest,” Jones said.($1 = 1.5449 Australian dollars) More

Equities, event-driven and macro hedge fund indexes went up last month, according to HFR, adding two-thirds of all hedge funds posted gains. Only macro hedge funds, however, delivered positive returns to investors in the first 10 months of 2022.”Macro strategies extended strong year-to-date performance as equities reversed intra-month declines, while the U.S. Federal Reserve prepared to raise interest rates to slow generational inflation, with performance led by multi-strategy and commodity-focused exposures,” said HFR.In October, macro funds rose 0.95%, raising their gains in the year to 11.51%.Event-driven hedge funds soared 3.7% in October, the highest return among all categories. HFR said distressed assets, activist and special situations exposures drove performance. Still, they are down 4.31% for the year.Equities hedge funds jumped 2.93%, posting their first gain since August and their highest monthly return this year. In the year they are still negative by 11.28%.”Hedge funds advanced to begin 4Q, as funds opportunistically navigated both political uncertainties, as well as inflation and interest rate driven volatility, with gains distributed across the universe of both directional and uncorrelated strategies,” said Kenneth J. Heinz, president of HFR. More

US stocks finished higher on Monday as investors prepared for this week’s inflation data and the midterm elections, while keeping close tabs on China’s Covid-19 measures.Wall Street’s benchmark S&P 500 added 1 per cent and the tech-heavy Nasdaq Composite closed 0.9 per cent higher in New York.Monday’s session came on the eve of the US midterm elections. Pollsters expect a tight Senate race that could result in the Democrats losing their razor-thin majority, and Republicans reclaiming the House of Representatives, which could slow down president Joe Biden’s expansive economic agenda.“If Republicans retake one or both chambers of Congress, sweeping fiscal policy changes seem unlikely over the next two years, absent a crisis like the one that occurred in 2020,” Wells Fargo economists wrote on Monday.Shares of Digital World Acquisition — a special purpose acquisition company that plans to take Donald Trump’s social network public — surged 66.5 per cent on Monday after The Wall Street Journal reported on Friday that the former US president would this month announce a run for the 2024 presidency.Investors are still processing the effect on global economic growth of the aggressive rate rise campaign by the Federal Reserve. The US central bank signalled last week that interest rates will rise slower, but higher than previously expected.Jobs data last Friday also indicated the US labour market was still running hot, although a small rise in the unemployment rate helped ease those concerns. A reading on inflation in the world’s biggest economy, due later this week, should provide further clues on the trajectory for domestic interest rates.In government bond markets, the yield on the two-year US Treasury added 0.07 percentage points to 4.73 per cent, while the yield on the 10-year was up 0.06 percentage points at 4.22 per cent. Prices fall when yields rise.The dollar index, which measures the US currency against a basket of peers, fell 0.7 per cent.Traders, meanwhile, continued to bet that China would soften its zero-Covid policy, a move they hope will boost flagging global economic growth. China equities rose sharply, before trimming their gains, as the government said there would be no change to its stringent Covid prevention measures. The daily number of Covid infections in the country hit a six-month high of 4,420 on Saturday, official data showed. Hong Kong’s Hang Seng index added 2.7 per cent, while China’s CSI 300 rose 0.2 per cent.Emmanuel Cau, European equity strategist at Barclays, said a “quick and broad reopening [in China] seems highly unlikely”, but that “there may be a case for authorities to turn more supportive of growth into 2023, which could be a game changer for markets”.Adding to the sense of uncertainty, Chinese exports also contracted 0.3 per cent in October compared with the same period a year before, well below economists’ forecasts of a 4.3 per cent expansion. Imports also shrank 0.7 per cent, missing expectations for 0.1 per cent growth, according to customs data released on Monday.Elsewhere in Asia, Japan’s Topix rose 1 per cent and South Korea’s Kospi gained 1 per cent. Europe’s Stoxx 600 closed up 0.3 per cent. The FTSE 100 fell 0.5 per cent.European gas prices fell sharply on Monday, with Dutch TTF gas futures, the region’s benchmark contract, down as much as 10 per cent to €108 per megawatt hour. The wholesale European gas price hit an intraday high of €343 per MWh in late August but has dropped thanks to relatively warm weather and greater than expected supplies. Investors welcomed better than expected German economic data. Industrial production rose 0.6 per cent month on month in September, better than the 0.2 per cent decline expected by economists polled by Reuters. Even so, Franziska Palmas, an economist at Capital Economics, maintained that Europe’s largest economy would plunge into a “deep recession” in the new year. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Figures from Beijing on Monday showed that China’s FX reserves unexpectedly rose in October, but there are unlikely to be similar surprises in Japan’s numbers due early on Tuesday. They will almost certainly show a decline in official reserves, with investors hoping the data sheds light on exactly where Tokyo’s record $42.8 billion yen-buying currency market intervention last month came from.China’s official stash rose $23.47 billion last month to $3.052 trillion – analysts had expected a fall to $3.018 trillion – while Japan held $1.24 trillion at the end of September.China’s increase may be down to the euro’s rise of almost 1% against the dollar last month. A fairly large chunk of China’s FX reserves are thought to be in euro-denominated assets, unlike Japan’s, which are overwhelmingly invested in dollar assets.Japan’s Ministry of Finance spent $42.8 billion last month to prop up the yen. This followed almost $20 billion of intervention in September. China and Japan are the world’s top two FX reserves holders, and how they manage their $4 trillion of reserves has huge ripple effects for world markets, especially U.S. Treasuries. If either or both sell Treasuries outright to support their exchange rates, U.S. yields could spike up, tightening U.S. and global financial conditions. There are already growing concerns surrounding U.S. bond market liquidity without two of the world’s largest holders of Treasuries actively selling.Around 10% of Japan’s reserves are held as deposits parked with foreign official institutions and can be readily tapped for dollar-selling intervention. Maybe Tokyo dipped into this pool of funding before directly selling Treasuries. Japan’s reserves fell a record $54 billion in September and in percentage terms, the 4.2% decline was the biggest since 1998. That was in large part due to valuation effects though – some form of dollar asset sales will figure more prominently in October’s report.Three key developments that could provide more direction to markets on Tuesday:Japan household spending (September)Australia consumer sentiment (November)India trade balance (October) More

Total credit increased $25 billion from the prior month, Federal Reserve figures showed Monday. The median forecast in a Bloomberg survey of economists called for a $30 billion advance. The figures aren’t adjusted for inflation. Revolving credit outstanding, which includes credit cards, rose $8.3 billion, the smallest increase in four months. Non-revolving credit, such as loans for school tuition and vehicle purchases, increased $16.7 billion, the most in three months. Inflation has surged across the economy, driving up the costs of everything from necessities like electricity to more discretionary purchases like airfares. As a result, some households are beginning to tighten their belts. Visa Inc (NYSE:V). and Mastercard Inc (NYSE:MA). both noted recently that spending growth had slowed. More broadly though, American households have proved to be largely resilient amid rapid price increases. More

The head of the UN has called for a new “climate solidarity pact” in which rich countries would help poorer nations financially, singling out the US and China, saying they had a “particular responsibility” to make it a reality. UN secretary-general António Guterres said the international financial system should be reformed to support lower income countries that were burdened by debt and which needed money to recover from natural disasters. All countries should make an “extra effort” to cut emissions and end the building of coal plants, he told the opening session of world leaders at COP27.“The two largest economies — the United States and China — have a particular responsibility to join efforts to make this pact a reality,” he said. Humanity must “co-operate or perish”, he added. “We are on a highway to climate hell with our foot still on the accelerator.”China’s president Xi Jinping is skipping COP27, though the country has sent a delegation of negotiators. Other missing leaders from fossil fuel dependent nations are Narendra Modi of India, Anthony Albanese of Australia and Justin Trudeau of Canada.US president Joe Biden is due to arrive in Egypt later this week after the midterm elections on Tuesday. His climate envoy John Kerry is trying to build support for a system in which governments would earn credits for cutting their power sector’s emissions, which companies could then buy to offset their own output.

From left to right, US presidential envoy John Kerry, British prime minister Rishi Sunak, the EU’s Ursula Vonderleyen, South African President Cyril Ramaphosa and German chancellor Olaf Scholtz meet on the sidelines of COP27 © POOL/AFP via Getty Images

French president Emmanuel Macron told the UN climate summit that the Ukraine war should not change plans to limit global warming. He said he recognised the “injustices” of climate risks and impacts around the world, and called for multilateral institutions such as the World Bank and IMF to do more to support vulnerable nations and catalyse private sector investment. The spring meeting of the IMF would mark a “practical step” in the reform of the Bretton Woods institutions, Macron added. “We cannot wait until the next COP.”

Barbadian prime minister Mia Mottley doubled down on a push for rich countries to do more to help developing nations suffering the consequences of climate change. “How many more countries must falter?” Mottley said. She called for more “concessional funding” for emerging nations, and the creation of a “climate mitigation trust” that would use $5bn in IMF special drawing rights to “unlock” $5tn in private capital. Former UK prime minister Boris Johnson said on Monday that the UK did not have the financial resources to pay “reparations” to low-income countries. Johnson said climate action had been “one of the most important collateral victims” of Russia’s invasion of Ukraine. “Per capita, people in the UK put a lot of carbon in the atmosphere,” he said. “But what we cannot do I’m afraid is make up for that with some sort of reparations, we simply do not have the financial resources.”His successor, Rishi Sunak, told the COP27 meeting that the UK would triple its funding on “adaptation” projects to cope with more extreme weather events to £1.5bn by 2025.Guterres also launched a plan for a global early warning system for extreme weather events, a project that he said would cost $3.1bn over its first five years. The money would be spent on data collection and analysis, forecasting, building response capabilities and informing people about risks. It would ensure that everyone on the planet was reached by advance warnings about extremes such as hurricanes and heatwaves. Countries with warning systems have been able to limit death rates despite ever-increasing damage to property and infrastructure.The plan, drawn up by groups including the World Meteorological Organization, noted that half of countries globally do not have early warning systems in place. More

The writer is secretary-general of the International Chamber of ShippingThe world breathed a sigh of relief when Russia reversed its recent decision to suspend its involvement in the Black Sea grain initiative. But it was a reminder of just how delicate the situation still is, and how quickly people’s lives can be impacted by a change in policy. As we approach 120 days of the grain corridor being in place, there are still questions which need to be answered about its future. One of the most urgent is how it can support the rescue of hundreds of people who have become de facto prisoners of war in Ukrainian ports. Four hundred seafarers are sheltering on board ships across the Black Sea and the Sea of Azov, in ports such as Chornomorsk, Odesa and Pivdennyi. The grain corridor has been a great success and should continue, but it has so far been unable to address their needs. They are trapped by logistical issues, the danger of crossing through an active conflict zone, even sometimes the need to stay on ship as skeleton crews. Naturally, concerns over a global food crisis, which the deal has sought to address, should be top of everyone’s agenda. But we cannot afford to ignore a separate humanitarian crisis in the Black Sea that has so far gone largely unnoticed.The question urgently needs to be asked: what is to become of the seafarers trapped in these ports? Some 1,600 have been evacuated already, but hundreds remain, many of whom have been stuck there since March. Some ships are running low on supplies and clean water, some seafarers need prompt medical attention. These non-grain carriers, such as container ships, often have crews from dozens of different countries on board. Yet as it stands, the grain corridor is not authorised for the use of evacuating ships stuck at port. Events beyond their control have kept individuals on more than 60 ships away from their families and friends since the beginning of the conflict, far beyond a normal tour of duty. Seafarers are the building blocks of trade around the world. They have kept supply chains going not just during this conflict, but during enormous global challenges such as the Covid-19 pandemic. Their silent suffering cannot be seen as acceptable collateral damage. In the coming months, there should be a provision to evacuate these seafarers from the conflict zone as soon as possible. The alternative is no way to treat the people who keep the global flow of trade moving. Stranded seafarers can no longer be left simply to languish with no indication of when they might leave. The future of the grain corridor deal must allow them to return to their homes, and to resume their careers. Charities, seafarer unions and industry bodies are doing their utmost on the ground to support crews and to get them back where possible. Now they need the support of all parties to the ongoing deal to recognise the scale of this issue and commit to a practical evacuation solution. Agreement across the board on what this might look like will of course need delicate handling and precise negotiations. When the initiative first began in July, ships that were stuck in participating ports but were fit to carry grain were allowed to join and make their way back. Now any remaining seagoing vessels should also be allowed to leave. Parties may see potential for the corridor to be expanded, or for evacuations from mutually agreed locations as an alternative option.The Black Sea grain initiative has been a significant joint success between Russia, Ukraine, Turkey and the UN. Part of this success is that it has not just alleviated global concerns about food security, but that it has given participating ships and those on board assurances about their safety when carrying out necessary jobs in the region. Almost 120 days in, there is now the opportunity to go one step further and facilitate the rescue of hundreds from their confinement in the conflict zone.  More