Economy

More than 5mn households in Britain are set to see their annual mortgage payments increase by an average of £5,100 by the end of 2024, in the wake of high inflation and the “mini” Budget.More than 1mn households with a variable-rate mortgage already face higher repayments after the chancellor’s fiscal statement last month. However, the figure is set to rise to 1.7mn by the end of this year, as people on fixed-rate offers move on to new deals, according to research by the Resolution Foundation published on Saturday.By the end of 2024, 5.1mn households — about one-fifth of the total — will be paying more for their mortgages compared with today.Affected households will typically be paying £5,100 more a year by the end of 2024, which adds up to £26bn in additional mortgage payments, the think-tank found.While a large part of the expected increase in mortgage payments is the result of the rise in the Bank of England policy rate, £1,200 is due to changes in interest rates expectations following the “mini” Budget, according to the study. Lindsay Judge, research director at the Resolution Foundation and author of the report, said the rise in interest rates “will cause a fresh living standards crunch for mortgaged households across Britain”.Affected households in London will see the biggest increase — with average payments set to rise by £8,000 over the same period, more than twice the level of the £3,400 increase experienced by mortgagors in Wales.However, the impact in the capital will be more concentrated as only 19 per cent of households have a mortgage, by far the lowest of any region and well below the 29 per cent in the South East. Although higher-income households will face the biggest increases in mortgage costs in cash terms on average, it is lower income families that face the largest rise as a share of income.The think-tank estimated that the typical household with a mortgage will spend about 5 per cent more of their income on their housing costs by the end of 2024. However, the figure rises to 10 per cent for those on lower pay.With inflation at its highest level for 40 years, the Bank of England has increased its policy rate from a historical low of 0.1 per cent last year to 2.25 per cent. Meanwhile, markets are pricing in an increase of 75 or 100 basis points at the BoE’s next policy meeting in November, with the rate expected to rise to more than 5 per cent by early next year.Policy interest rates expectations for next year have jumped up by about 2 percentage points in response to the unfunded tax cuts announced by the government on September 23.Even after the government’s U-turn on its corporation tax cut on Friday, 2023 policy interest rates expectations remained above 5 per cent and well above those of mid-September. The think-tank forecast that mortgage rates will rise to between 6 and 7 per cent for those on fixed rates, soaring to more than 8 per cent for those on floating rates.The analysis showed that one in three Conservative voters have a mortgage. For Labour voters and those in “red wall” constituencies in the north and Midlands, won by the Tories in the last general election, the share rises to two in five. More

NEW YORK (Reuters) – Gut-wrenching market volatility and attractive valuations are prompting some investors to keep their bullish views on energy stocks, one of the few bets that have thrived in an otherwise punishing year.It’s not an easy call. The S&P 500 energy sector is already up around 46% this year and monetary policy tightening around the world has bolstered the chances of a global recession that could curtail energy demand. Still, signs that supply will remain comparatively scarce are prompting some investors to stick with the sector, drawn by attractive earnings prospects and valuations that remain comparatively low despite big gains in many energy stocks this year. The S&P 500 energy sector trades at a trailing price-to-earnings ratio of 9.9, nearly half the 17.4 valuation of the broader index. Few also see any end to the selloff in broader markets, as stubborn inflation boosts expectations for more market-punishing rate hikes from the Federal Reserve and other central banks. The S&P 500 is down around 24.5% this year while bonds – as measured by the Vanguard Total Bond Market index fund – are down nearly 18%. “It’s hard to see people giving up on energy because it’s the best of both worlds,” said Jack Janasiewicz, portfolio manager with Natixis Investment Managers Solutions, referring to the sector’s low valuation and potential for more gains if supply remains tight. “If you’re worried about the direction of the market it’s a great place to hide.” GRAPHIC: Energy Sector Far Outpacing Broad S&P 500 – https://graphics.reuters.com/MARKETS-SECTORS/ENERGY/dwvkrombmpm/chart.pngAnalysts expect third-quarter earnings per share growth for energy companies of 121% compared with the same period a year ago, while those for the broader index excluding energy fall 2.6%, Refinitiv data showed.Energy is the only sector in the S&P 500 expected by analysts at Credit Suisse to post positive revisions to their third quarter earnings. U.S. oil giants Exxon (NYSE:XOM) Mobile Corp and Chevron Corp. (NYSE:CVX) report earnings on Oct. 28. In the coming week, investors will be focused on earnings from Tesla (NASDAQ:TSLA) Inc., Netflix (NASDAQ:NFLX) and Johnson & Johnson (NYSE:JNJ), among others. Expectations for further tightness in the oil market have been boosted by recent production cuts by OPEC+, as well as the European Union’s plans to move off Russian crude by February. U.S. output in 2022 is expected to average 11.75 million bpd, down from a previous estimate of 11.79 million bpd, according to the U.S. Energy Department.Prices for Brent crude stood at $91.46 per barrel on Friday, up nearly 10% from a recent low after falling by nearly a third between July and September. “There is an outsized probability that crude prices can surge higher, particularly if demand concerns fail to materialize to the extent some bears expect,” wrote analysts at TD Securities, who expect oil prices to hit $101 in 2023. Analysts at UBS Global Wealth Management expect oil to hit $110 by year-end.Some fund managers remain skeptical that energy can continue its outperformance if the global economy slows in the face of monetary policy tightening from central banks. “We’re surging toward recession all over the world and that’s going to cut into the demand side,” said Burns McKinney, a portfolio manager at NFJ Investment Group, who is increasing his overweight in dividend-paying tech companies such as Texas Instruments (NASDAQ:TXN) and Cisco (NASDAQ:CSCO).At the same time, the selloff in the S&P 500 is creating buying opportunities in consumer discretionary and large-cap tech stocks that are more attractive over the long run than energy, said Lamar Villere, a portfolio manager at Villere & Co. “We’re starting to see opportunities that are harder to not take advantage of,” he said. Others, however, believe that the fundamentals remain aligned for the sector and see more upside. Saira Malik, chief investment officer at Nuveen, believes that fund managers will remain lightly positioned in energy shares despite recent gains. She is also betting that China’s economy will rebound in coming months, supporting global oil prices “We still think energy has legs here,” she said. More

WASHINGTON (Reuters) – Western countries this week ratcheted up their criticism of China, the world’s largest bilateral creditor, as the main obstacle to moving ahead with debt restructuring agreements for the growing number of countries unable to service their debts.U.S. Treasury Secretary Janet Yellen said on Friday that high inflation, tightening monetary policies, currency pressures and capital outflows were increasing debt burdens in many developing countries, and more progress was urgently needed.She said she discussed those issues during a dinner with African finance ministers and in many other sessions. The Group of Seven rich nations also met African finance ministers, who worry that the focus on the war in Ukraine is draining resources and attention from their pressing concerns.”Everyone agrees Russia should stop its war on Ukraine, and that would address the most significant problems that Africa faces,” Yellen told reporters at the International Monetary Fund and World Bank annual meetings in Washington. But she said a more effective debt restructuring process was also needed, and China had a big role to play.”Really, the barrier to making greater progress is one important creditor country, namely China,” she said. “So there has been much discussion of what we can do to bring China to the table and to foster a more effective solution.”As China is the missing piece in the puzzle of a number of debt talks under way in developing markets, the Group of 20 launched in 2020 a Common Framework to bring creditors such as China and India to the negotiation table along with the IMF, Paris Club and private creditors. Zambia, Chad and Ethiopia have applied to restructure under this new, yet-to-be tested mechanism. Sri Lanka is set to start talks with bilateral creditors including China after a $2.9 billion staff level agreement with the IMF under a similar platform. The Paris Club creditor nations last month reached out to China and India seeking to coordinate closely on Sri Lanka’s debt talks, but are still awaiting a reply. The world’s poorest countries face $35 billion in debt-service payments to official and private-sector creditors in 2022, with more than 40% of the total due to China, according to the World Bank.Spanish Finance Minister Nadia Calvino, who chairs the IMF’s steering committee, told Reuters in an interview on Thursday that there was increasing concern about China not participating fully in debt relief efforts, noting that China had not sent officials to participate in person at this week’s IMF and World Bank meetings.”China is a necessary partner. It’s indispensable that we have them in the room and in the discussions when it comes to debt relief,” Calvino said, adding that many heavily indebted countries were also being hit hard by inflation and climate shocks.German Finance Minister Christian Lindner also joined the growing criticism of China’s lack of timely participation in debt restructuring for lower-income countries. China has argued it would not take part in some cases unless the IMF and World Bank also took a haircut.Lindner told reporters he regretted that China had not accepted his invitation to participate in the G7 roundtable with African countries. More

BUENOS AIRES (Reuters) – Argentina’s monthly inflation rate came in lower than expected in September, a rare reprieve for the embattled economy and struggling residents, which may allow the central bank to pause its aggressive rate hiking cycle for the time being.The government’s INDEC statistics agency reported on Friday the monthly inflation was 6.2% last month, slower than in August and undershooting analyst forecasts of a 6.7% increase.Reuters reported earlier on Friday, citing sources, that the central bank was minded to hold off on a new interest rate hike due to optimism that inflation was on a downward path, which would break a string of successive raises this year that have seen the benchmark rate climb to 75% from 38%.Still, annual inflation is predicted to top a whopping 100% by the end of the year, one of the highest rates around the globe, as the grains-producing South American nation faces a wide array of economic crises and an embattled peso currency.Inflation in the 12 months through September hit 83%, as President Alberto Fernandez’s government fights to rein in surging prices that are sapping people’s wages and savings. Prices were up 66.1% in the first nine months of the year.Aldo Abram, executive director at consultancy Libertad y Progreso, said inflation would remain high into next year, before easing back ahead of presidential elections.”It is likely that it will go down a bit, after rising even to 110% or more in the first half of the year,” he said.Argentines on the street said they were increasingly struggling to afford things as prices outstripped salaries.”You have to pay attention to how much things cost because there are things that you can’t pay for. You have to eliminate things from your diet because wages can’t keep up,” 53-year-old housewife Claudia Villalba told Reuters.”Some people are having a really bad time.” More

NEW YORK (Reuters) -Atlanta Federal Reserve President Raphael Bostic on Friday said that over the last few years some of his personal investing activity inadvertently happened in periods where it was forbidden by U.S. central bank ethics rules at the time. Bostic explained in a note that accompanied revised financial disclosure forms going back to the start of his tenure as Atlanta Fed president in 2017 that trades violating the ethics code were made by financial advisors and were not done under his direction. “Since I assumed office, I have ensured that my assets were held in managed accounts that neither I nor my personal investment adviser had the ability to direct,” Bostic wrote.”Due to my reliance on a third-party manager, I was unaware of any specific trades or their timing, including a limited number that took place during Federal Open Market Committee … blackout periods or financial stress periods,” Bostic wrote. “Similarly, I was unaware of when my holdings of U.S. Treasury funds in 2021 exceeded the limits set forth by the FOMC’s trading and investing rules.””At no time did I knowingly authorize or complete a financial transaction based on nonpublic information or with any intent to conceal or sidestep my obligations of transparent and accountable reporting,” Bostic said, adding that he sincerely regretted if his actions had raised questions about his or the Fed’s standards and behavior. Under the rules then in place, Fed officials were prohibited from owning stocks in banks overseen by the central bank. They were also prohibited from trading during the so-called blackout periods around the meetings of the Fed’s policy-setting FOMC, when officials are not supposed to speak publicly on economic or monetary policy issues. The rules also told Fed policymakers and senior staff to avoid engaging in investments that would create the appearance of a conflict of interest. Fed ethics rules are designed to ensure that officials who set the central bank’s policy are not profiting off their decisions and knowledge.In the revised disclosure form for 2020, Bostic noted a number of sales of various investment funds that happened in the days leading up to a key announcement by Fed Chair Jerome Powell on Feb. 28 of that year that indicated the central bank was about to act as the global economy was slammed by the shock of the coronavirus pandemic. Amid high volatility in financial markets, in short order the Fed slashed interest rates and started buying massive amounts of bonds, while launching emergency lending programs to help shore up financial markets.In his statement, Bostic said he thought he was complying with the rules as they stood then and had communicated to those managing his money about blackout trading restrictions. He said that once he understood there were problems with his disclosures he acted quickly to address them. INDEPENDENT REVIEWBostic’s revised financial statements are the latest development in a broader controversy facing the central bank. Just over a year ago, the leaders of the Dallas and Boston Fed banks resigned after their financial disclosure forms showed both had been actively trading in financial markets while also helping to set monetary policy. Robert Kaplan, who was then the leader of the Dallas Fed, had reported trading millions of dollars in stocks and other investments since taking over as head of that regional bank. Eric Rosengren, who had led the Boston Fed since 2007, reported more modest trades. At the start of this year, Richard Clarida, who was then second-in-command of the central bank, resigned from his position early amid questions about his trading in 2020. Earlier this year, the Fed imposed a much more stringent code limiting what officials and senior staff can invest in, while also requiring pre-approval of trades. It extended the new ethics restrictions to family members of central bank leaders and senior staff. In his statement on Friday, Bostic said that as soon as he realized his financial activities strayed beyond what the rules allowed, he brought it to the attention of the Atlanta Fed’s board of directors and top lawyer, as well as the U.S. central bank.It is unclear when Bostic recognized his disclosure information was incorrect. With the first news of the trading issues at the Fed coming in September 2021, Bostic wrote “only in recent months did I learn that the approach I was taking for managing my assets generated several issues.” Elizabeth Smith, who chairs the Atlanta Fed’s board, said in a statement that the panel “acknowledges the violations and accepts President Bostic’s explanation. My board colleagues and I have confidence in President Bostic’s explanation that he did not seek to profit from any FOMC-related knowledge.”A Fed spokesperson said in a statement that Fed Chair Jerome Powell “has asked the Office of Inspector General for the Federal Reserve Board (of Governors) to initiate an independent review of President Bostic’s financial disclosures.” “We look forward to the results of their work and will accept and take appropriate actions based on their findings,” the Fed spokesperson said. A spokesman for the Inspector General said “we are aware of the matter and will conduct an independent and comprehensive investigation. We have no further comment at this time.” Bostic’s investing issues echoed those of Powell. In July, a report from the central bank’s Inspector General identified that he also had some trades that happened during blackout periods in 2020. The Inspector General cleared Powell and Clarida of wrongdoing, but said an investigation of regional Fed trading activity is ongoing.Of the 12 regional Fed banks, 11 reported 2021 financial disclosures for their respective leaders in June. Bostic had an extension for the release of his disclosure forms. More

The sharp policy U-turn by Liz Truss, Britain’s prime minister, reveals the perils of taking the wrong path in the fight against scalding inflation.Government leaders in the West are struggling with rising inflation, slowing growth, and anxious electorates worried about winter and high energy bills. But Liz Truss, Britain’s prime minister, is the only one who devised an economic plan that unnerved financial markets, drew the ire of global leaders and the public and undermined her political standing.On Friday, battered by savage criticism, she retreated. Ms. Truss fired her top finance official, Kwasi Kwarteng, for creating precisely the package of unfunded tax cuts, billion-dollar spending programs and deregulation that she had asked for.She reinstated a scheduled increase in corporate taxes to 25 percent from 19 percent, a rise she had previously opposed. That announcement came on top of backtracking last week on her proposal to eliminate the top 45 percent income tax on the highest earners. The prime minister, in office a little over five weeks, also promised that spending would grow less rapidly than proposed, although no specifics were offered.The drama is still playing out, and it’s unclear if the Truss government will survive.In the United States, President Biden, while waging his own political battles over gas prices and inflation, has not proposed anything like the kind of policies that Ms. Truss’s government attempted, nor have any other leaders in Europe.Still, for European governments whose economies are suffering greatly from shocks and energy price surges caused by Russia’s war in Ukraine, there are timely lessons from the debacle playing out in London.One of the strongest was delivered early on by the International Monetary Fund: Don’t undermine your own central bankers. The I.M.F., which usually reserves such scoldings for developing nations, on Thursday doubled down on its message. “Don’t prolong the pain,” Kristalina Georgieva, the managing director, admonished.How to blunt the impact of inflation on the most vulnerable without further stoking inflation is the dilemma that every government is confronting.The Bank of England in London has aggressively tried to slow the sharp rise in prices by slowing the British economy.Alberto Pezzali/Associated Press“That is the question of the hour,” said Eswar Prasad, an economist at Cornell University who was attending the annual meetings of the World Bank and I.M.F. in Washington this week.Tension between the fiscal spending policies proposed by a government and the monetary policies controlled by central banks is not unusual. At the moment, though, central bankers are engaged in delicate policy maneuvers in the fight against a level of inflation not seen in decades. With the rate in Britain nearing 10 percent, the Bank of England has moved aggressively to slow down climbing prices through a series of interest rate increases aimed at crimping consumer and business spending.Any expansion of government spending is going to interfere with that aim to some degree, but Ms. Truss’s plan was far too big and too ill defined, Mr. Prasad said.“Measures to help households hit hard by energy increases, by themselves, would not have created that much of a stir,” he said. Many other countries have proposed exactly that. And the European Union has proposed a windfall tax on energy profits to help finance those subsidies.Ms. Truss, instead of coming up with a way to pay for energy assistance, pushed to eliminate a corporate tax increase and cut income taxes for the wealthiest segment of the population. The result was a reduction in government revenue and a ballooning of Britain’s debt.“Overall, the package did not have much clarity in terms of how it would support the economy in the short run without raising inflation,” Mr. Prasad said.By contrast, Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, cited the way governments and central banks worked in tandem when the pandemic struck in 2020 to keep economies from collapsing, issuing vast amounts of public debt.“Central banks printed every single dollar, euro and pound that governments spent” to support households and businesses because of the Covid crisis, Mr. Vistesen said. But now the circumstances have changed, and inflation is setting economies aflame.The actions of the Federal Reserve in the United States illustrate the switch central banks have made: In the harrowing early weeks of the global outbreak of the coronavirus, the Fed embarked on an extraordinary program to stimulate the economy and stabilize markets. This year, the Fed has been swiftly raising interest rates in a bid to slow growth.Both the United States and eurozone countries have somewhat more wiggle room than Britain, because the dollar and the euro are much more widely used around the world as currencies held in reserve than the British pound.Kwasi Kwarteng, Britain’s former chancellor of the Exchequer, left 11 Downing Street after Ms. Truss fired him on Friday.Kirsty Wigglesworth/Associated PressEven so, European governments can help households and businesses get through an energy crisis, Mr. Vistesen said, but they can’t embark on an open-ended spending spree.They also need to take account of what is happening in other economies. The richest countries that make up the Group of 7 are essentially part of the same “monetary and fiscal convoy,” said Will Hutton, president of the Academy of Social Sciences. By championing a Thatcher-era blend of steep tax cuts and deregulation, he said, the Truss government strayed too far from the rest of the flotilla and the economic mainstream.The adherence to 1980s-era trickle-down verities also revealed the risks of sticking with outdated policies in the face of changing circumstances, said Diane Coyle, a ​​public policy professor at the University of Cambridge.“The situation in 1979 was very different,” Ms. Coyle said. “There were sclerotic high taxes and an overregulated economy, but not anymore.” Today, taxes in Britain are lower, and the economy is less regulated than the average member of the Organization for Economic Cooperation and Development, a club of 38 major economies.“The character of the economy has changed,” she said. “Public investment in research and skills are more important.”In that sense, what was missing from Ms. Truss’s economic plan was as important as what was included. And what Britain is lacking, said Mariana Mazzucato, an economist at University College London, is a visionary public investment program like the trillion-dollar climate and digitalization plans adopted by the European Union or the climate and infrastructure program in the United States.A rate of Inflation nearing 10 percent in Britain has affected the price of groceries and how people spend their money.Alex Ingram for The New York Times“If you don’t have a growth plan, an industrial strategy innovation policy,” Ms. Mazzucato said, “then your economy won’t expand.”Both Ms. Mazzucato and Ms. Coyle emphasized that Britain had some specific economic handicaps that predated the Truss administration, including the 2016 vote to exit the European Union, a stubborn lack of productivity, anemic business investment, and lagging research and development.Still, Ms. Coyle offered some advice that referred pointedly to Ms. Truss. “I think the main lesson is: Don’t shoot yourself in the foot.” More

The president’s plans to bolster America’s electric vehicle and battery production have opened a rift in relationships in Asia and Europe.WASHINGTON — President Biden’s efforts to bolster domestic manufacturing are coming under diplomatic fire from key allies, with European governments accusing his administration of undercutting the trans-Atlantic alliance with “Made in America” policies that threaten their economies.The objections center on policies included in the Inflation Reduction Act, which aims to make the United States less reliant on foreign suppliers by providing financial incentives to locate factories and produce goods in the United States, including electric vehicles. Mr. Biden has touted the law as key to creating “tens of thousands of good-paying jobs and clean energy manufacturing jobs, solar factories in the Midwest and the South, wind farms across the plains and off our shores, clean hydrogen projects and more — all across America, every part of America.”But that has prompted cries of protectionism by foreign officials and accusations that the Biden administration is violating trade laws by giving preferential treatment to U.S.-based firms.“We are having concerns that a number of the provisions are discriminatory against E.U. companies, which of course obviously is a problem for us,” Valdis Dombrovskis, the European Union’s commissioner for trade, told reporters in Washington on Thursday.The disagreement represents the first major rift between the United States and Europe since Mr. Biden took office last year. The president, who promised to take a softer diplomatic touch than the Trump administration had with its “America First” agenda, has worked closely with European allies on a number of priorities, including punishing Russia for its invasion of Ukraine. In his first months in office, Mr. Biden quickly moved to repair relations with Europe, including by resolving a 17-year dispute over aviation subsidies.But the unified front between the United States and Europe showed signs of strain during this week’s annual meetings of the World Bank and International Monetary Fund. European officials complained to the top ranks of the Biden administration that provisions in the expansive climate and energy law to support domestic production of electric vehicles violate international trade rules that require countries to treat foreign and domestic companies equally. They argued the provisions are unfair to their domestic car industries.Mr. Dombrovskis said that he and other European officials would be directing their concerns to Treasury Secretary Janet L. Yellen, whose agency is responsible for implementing much of the law, along with Katherine Tai, the U. S. trade representative, and Gina Raimondo, the commerce secretary.Read More on Electric VehiclesRivian Recall: The electric-car maker said that it was recalling 13,000 vehicles after identifying an issue that could affect drivers’ ability to steer some of its vehicles.China’s Thriving E.V. Market: More electric cars will be sold in the country this year than in the rest of the world combined, as its domestic market accelerates ahead of the global competition.A Crucial Mine: A thousand feet below wetlands in northern Minnesota are ancient deposits of nickel, a sought-after mineral seen as key to the future of the U.S. electric car industry.Banning Gasoline Cars: California is leading the way in the push to electrify the nation’s car fleet with a plan to ban sales of new internal-combustion vehicles by 2035, but the rule will face several challenges.In a meeting with Mr. Dombrovskis on Thursday, Ms. Tai “shared her view that seriously combating the climate crisis will require increased investments in clean energy technologies,” the Office of the United States Trade Representative said in a statement. Both Ms. Tai and Mr. Dombrovskis “asked their teams to increase engagement” on the issue.European officials are discussing whether to contest the law, which was passed by Democrats along party lines, at the World Trade Organization, which could be time consuming and fruitless, or to formally raise the matter through the Trade and Technology Council that was formed last year.The crux of the international fight centers on more than $50 billion in tax credits to entice Americans to buy electric vehicles. The law restricts the credit to vehicles that are assembled in North America. It also has strict requirements surrounding the components that go into powering electric vehicles, including batteries and the critical minerals that are used to make them. That is creating new incentives for battery makers to build recycling and production facilities in the United States.Foreign companies that manufacture cars and car parts in the United States can also qualify for the credit. But some foreign carmakers, particularly those from Asia, tend to import more components for electric vehicles from outside the United States, meaning that fewer of their models qualify.That has sparked accusations that the terms of the law were written to benefit U.S. companies like General Motors or Ford, rather than foreign companies like Toyota and Honda, even though many foreign companies have invested heavily in the United States.“We understand that some trading partners have concerns with how the EV tax credit provisions in the law will operate in practice with respect to their producers,” said Eduardo Maia Silva, a spokesman for the National Security Council. “We are committed to working with our partners to better understand their concerns and keep open channels of engagement on these issues.”European officials are concerned that the U.S. law will drive a wedge between European companies and their home countries if carmakers such as Porsche are under pressure to set up shop in the United States instead of opening more factories in Germany. Since the law went into effect, Honda, Toyota and LG Energy Solutions of South Korea have all announced major battery investments in the United States.A previous version of the bill would have offered the tax credit to only U.S.-produced vehicles. But Canada and Mexico both lobbied against that draft version, and the measure was ultimately expanded to apply to vehicles produced throughout North America.Asian allies have also expressed concerns about the law.When Vice President Kamala Harris met with South Korean leaders in Tokyo and Seoul last month, the allies did not hesitate to express their frustration.Hours before Ms. Harris attended the funeral of former Prime Minister Shinzo Abe of Japan, Korean officials, including Prime Minister Han Duck-soo expressed their concerns about the legislation to the vice president in a closed-door meeting. The Japanese government has also expressed concerns.Frank Aum, a senior expert on Northeast Asia at the U.S. Institute of Peace, said the tax credit was a “direct harm” to South Korean companies like Hyundai and Kia that wouldn’t get the benefit of the tax credit.“South Korea is feeling very much betrayed because of the investments that they have made in the electric vehicle battery and semiconductor industries in the U.S. over the last couple years,” he said.Just months before he signed it into law, Mr. Biden stood with the chairman of Hyundai in Seoul to celebrate the South Korean company’s investment in a new electric vehicle and battery manufacturing facility in Savannah, Ga. In meetings with Mr. Han and later with President Yoon Suk Yeol of South Korea in Seoul, Ms. Harris said she would consult with South Korea as the law is implemented. The Biden administration has downplayed the tensions, saying that it is relying on its strong relationships with other governments to talk through those differences and fight the bigger battle of climate change.In an Oct. 7 speech at the Roosevelt Institute, a Washington think tank, Ms. Tai called out the European Union’s Carbon Border Adjustment Mechanism — a proposal that would encourage cleaner manufacturing by levying a tax on imported goods based on how many greenhouse gasses their production emits — saying that those European measure could also cause tensions with allies. But the United States and Europe should work through those differences to combat climate change together, she added.“As we seek to reduce our carbon footprints and benefit our industries, we’re each going to do things that cause anxiety, whether it’s the Carbon Border Adjustment Mechanism or the Inflation Reduction Act. But this also creates an opportunity for us to work together, to tackle this existential crisis that threatens all of us,” Ms. Tai said.Still, trade experts have warned that the U.S. efforts could potentially kick off a similar wave of protectionist measures to match those adopted by the United States.Bruno Le Maire, France’s finance minister, said last month that the European Union should consider adopting electric vehicle bonuses for cars that are produced within the E.U. and meet rigorous environmental standards.In that event, America’s policies could backfire in the long run, if American cars or components face similar barriers to being sold in Europe or Asia, said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics.“I think the risk on the U.S. side is that if we don’t address some of their major concerns, that they’ll ultimately do the same thing,” he said.Wally Adeyemo, the deputy Treasury secretary, said at an event this week that he hopes that eventually U.S. allies will benefit from America’s investment in its production of goods such as critical minerals because it will also solidify their supply chains.A Treasury Department spokeswoman declined to comment on how Ms. Yellen responded to the complaints of her European counterparts this week. In remarks at her closing news conference on Friday, Ms. Yellen touted the ambitions of the Inflation Reduction Act without acknowledging the concerns in Europe and Asia.“It’s our nation’s most aggressive domestic action on climate,” Ms. Yellen said. “And it puts us on a strong path to meet our emissions reduction goals.” More

According to the data, investors dumped $7.3 billion worth global equity funds and $14.27 billion worth bond funds.The equity outflows were focused on European equity funds, which witnessed net sales worth $7 billion, while U.S. equity funds had outflows of $2 billion. On the other hand, Asian equities received a small inflow of $410 million during the week.Among bond funds, European funds again led with outflows worth $8.8 billion, while U.S. bond funds had an outgo of $4.9 billion. Bonds globally have been sideswiped by the rout in UK government bonds, known as gilts, pushing yields on U.S. Treasuries up sharply on fears that UK pension funds were being forced into fire sales of assets.The yield on 10-year Treasuries climbed to 4.08% this week, the highest in 14 years, as higher inflation prices raised fears the Federal Reserve’s ongoing efforts to tame inflation will spark a recession.The International Monetary Fund this week warned of a disorderly repricing in markets, saying global financial stability risks have increased, raising the risks of contagion and spillovers of stress between markets.Meanwhile, global investors put their money in safer assets as money market funds and U.S. government bond funds lured about $4.7 billion each during the week.Emerging market (EM) bonds and equities faced outflows worth $2.6 billion and $1 billion respectively, based on an analysis of 24,465 EM funds. Among commodity funds, precious metal funds had a small inflow of $83.2 million, while energy and industrial metal funds witnessed outflows. More