Economy

Currencies plumbing multi-year lows in Australia and New Zealand are ramping up pressure on policymakers there, and Brazil’s voters head to the ballot box in a continent in political flux. Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Ira Iosebashvili in New York, and Dhara Ranasinghe, Marc Jones and Karin Strohecker in London. Graphics by Vincent Flasseur and Sumanta Sen.1/ KAMI-KWASI? When Britain’s new finance minister Kwasi Kwarteng speaks at his Conservative Party’s annual conference, which kicks off Sunday, it’s not just the party faithful that will tune in.Britain is at the centre of an economic firestorm, triggered by Kwarteng’s Sept. 23 fiscal plan that spooked markets with its unfunded tax cuts. Sterling hit record lows, and surging bond yields forced the Bank of England (BoE) to intervene to stem a market rout.The BoE’s pledge to buy $69 billion of long-dated gilts has calmed markets for now, but it’s too soon to say the rout is over. And buying bonds at a time when the BoE is hiking rates to contain inflation could hurt its credibility. The IMF, among others, has weighed in on UK events and their impact globally. That leaves the spotlight firmly on Kwarteng. Graphic: UK government bond yield spread UK government bond yield spread https://graphics.reuters.com/BRITAIN-MARKETS/lbvgnqgwrpq/chart.png2/ LABOUR OF LOVE U.S. jobs data on Oct. 7 will show whether the Fed’s rate hike barrage is finally making an impact. Past employment data suggested the economy was humming along despite several jumbo sized rate increases — evidence usually corroborated by strong inflation readings a few weeks later.Another such report for September could help bolster the case for even more hawkishness from the world’s top central bank, potentially roiling markets already bruised by worries over how high rates could soar in a bid to tame the worst inflation in forty years. Conversely, signs of rapidly deteriorating jobs growth could fuel worries that aggressive Fed tightening is pushing the economy towards a recession.Economists polled by Reuters expect the United States to have created 250,000 jobs last month. Graphic: Non-farm payrolls https://graphics.reuters.com/GLOBAL-MARKETS/lgvdwrlqbpo/chart.png3/ DROPPING DOWN UNDER    The freefall in antipodean currencies to multi-year lows is piling pressure on central banks to deliver tighter policy.For Australia’s Reserve Bank, bets are fifty-fifty for a half-point or quarter-point hike on Tuesday. Traders fully price another half-point rate increase by the Reserve Bank of New Zealand on Wednesday and lay 1-in-5 odds on a 75 basis point bump.     New Zealand was first out of the gate among developed markets a year ago, while Australia has delivered one of the most aggressive campaigns in its history.    But accelerating policy tightening elsewhere, particularly in the United States, has cut into the yield advantage. With the Aussie and Kiwi both hyper-sensitive to swings in risk sentiment, policymakers may have little ability to arrest the slide.Graphic: Hiking aggressively https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/klpykxdglpg/chart.png4/ THE BOYS FROM BRAZIL Leftist former union leader Luiz Inacio Lula da Silva is on track to replace Brazil’s right-wing President Jair Bolsonaro and looks ready to tear up the most important fiscal rule in the world’s 10th largest economy. Some polls indicate Lula might get more than 50%, clinching a first round victory.Markets seem largely unfazed by Sunday’s highly polarized election, with an even-keeled outlook for Brazil, where the local currency and stock market have rallied this year in a sign of confidence the vote won’t ruin the relative safe haven of Latin America’s largest economy.But politics can be febrile in the region. An assassination attempt in Argentina and spurts of election-linked violence in Brazil are the latest signs of growing political strife. Investors are looking for a calm transition as Bolsonaro lays the groundwork to contest a defeat, but Brazil’s institutions have closed ranks to guarantee the integrity of the vote.Graphic: Real gains https://graphics.reuters.com/GLOBAL-MARKETS/gkvlgrxzwpb/chart.png5/ BUCKLE UPThe last few months have rained yet more pain down on financial markets, meaning this year is firmly on course to be the most painful ever for anyone lucky enough not to have experienced World War II, unless they had all their chips on king dollar.Free and easy central banks have morphed into inflation-fighting machines. Another 5% has been lopped of world stocks since June, oil has slumped more than 20% and Japan and Britain have both had been forced into currency or bond interventions. Whether the next few months will be any better is no easy call. While there are some signs global inflation might be peaking, major central banks look stuck on the rate hike hamster wheel. Geopolitics will continue to be high on the agenda, with China’s Communist Party Congress getting underway in October, while Russia’s nuclear threats and annexation of Ukraine’s territory have marked the start of a new phase in the seven month old conflict. Grpahics: Global markets – Q3 2022 https://graphics.reuters.com/GLOBAL-MARKETS/zdpxolrzdvx/chart.png More

NEW YORK (Reuters) – The dollar rose against the euro on Friday but pared gains late in a session that was muddied by quarter-end trading while riskier commodity-led currencies fell sharply after European inflation hit a record high and U.S. consumer spending increased faster than expected.But while the dollar index was showing its biggest quarterly gain since the first quarter 2015 it was set for its first weekly decline in three weeks.Sterling rose against the dollar after falling earlier in the day. The pound last showed four straight sessions of gains followed by wild declines on concerns about Britain’s plan to slash taxes and pay for it with more borrowing. After hitting a record low on Monday, the British currency was on track for a weekly gain after the Bank of England bought British government bonds, known as gilts, on Wednesday, Thursday and Friday. [GBP/]Data on Friday showed euro zone inflation zoomed past forecasts to hit 10.0% in September, reinforcing expectations for another jumbo European Central Bank rate hike next month. The U.S. Commerce Department said the personal consumption expenditures price index (PCE), which the Federal Reserve targets at 2%, rose 6.2% year-on-year in August. This gave the Fed less reason to slow down its rate hiking cycle after raising U.S. borrowing costs faster in 2022 than any time since the 1980s.”Today’s trading is distorted by quarter-end and month-end order flows,” as investors focused on rebalancing portfolios rather than on data said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi U.S. in Boston.But the strategist expects to see the dollar continue its upward direction as investors revert to trading on fundaments such afundamentalsamentals end. “At this point you can’t fight the strong bullish dollar trend since its underpinned by counter cyclical factors such as concerns about global growth, geopolitical risk and rising U.S. interest rates,” Upadhyaya said.Meanwhile, trading in currencies from countries that are heavily dependent on commodities reacted strongly to the hot inflation data on Friday due to concerns about demand and global economic growth, according to Upadhyaya.The U.S. dollar was up 1.04% against the Canadian dollar while New Zealand’s kiwi was down 2.24% and the Australian dollar was down 1.62.The pound, after touching $1.1235, was last up 0.28% on the day at $1.11500.The euro was down 0.10% at $0.98055. The dollar index, which measures the greenback against a basket of major currencies, was down 0.08% on the day but on track for a quarterly gain of 7.2%. But on a weekly basis the index was set for its first decline in three, last down 0.899%. “The inflation data today surprised higher once again. That will keep upward pressure on interest rates and the dollar,” said Adam Button, chief currency analyst at Forexlive, a currency analysis firm in Toronto.But at the quarter-end Button also said “fundamental considerations often take a back seat.”Foreign exchange volatility has surged as investors have fretted about inflation and economic growth in the face of aggressive global monetary tightening. Also fraying nerves has been the Britiah mini-budget fallout and concerns about escalation in the Russia-Ukraine war. In a sign of the rush for the safety of the dollar, demand for the U.S. currency in derivative markets surged on Friday to its highest since the COVID-19 crisis in 2020.So far this year, the dollar index has soared almost 17%. For the month, the index was on track for a 3.15% gain, its biggest since April. The dollar was up 0.2% against the yen at 144.765, and has been mostly tracking sideways since early September.Japan made its first yen buying intervention since 1998 last week to prop up its currency. It spent a record 2.8 trillion yen ($19.7 billion), Ministry of Finance data showed on Friday, draining nearly 15% of funds it has available for intervention.Elsewhere, China’s yuan recouped come losses from from the previous day’s session after Reuters reported the central bank had told major state-owned banks to be ready to support the currency in offshore trading.The Swiss franc fell after the Swiss National Bank said it had intervened in the foreign exchange market in the second-quarter to support the currency. The dollar rose 1.05% versus the franc. More

The move comes at a time when several technology companies, crypto exchanges and financial firms are cutting jobs and freezing hirings as global economic growth slows due to higher interest rates, red-hot inflation and an energy crisis in Europe.Most recently, Facebook-parent Meta Platforms said it is freezing hiring, according to a Bloomberg News report which quoted Chief Executive Mark Zuckerberg’s communication with employees.Stanley Black & Decker, whose brands include DeWalt and Craftsman tools, looks to cut up to $200 million in costs by the year end, WSJ reported. The job cuts are a part of broader layoffs within the company that started in July, according to the report. The company had 71,300 employees globally as of January this year. In July, Stanley Black & Decker cited rising interest rates and slower demand in late May and June for missing second-quarter profit and sales estimates.Stanley Black & Decker did not immediately respond to a Reuters request for comment. More

WASHINGTON (Reuters) -The International Monetary Fund said its executive board approved a new mechanism for low-condition emergency loans to help vulnerable countries cope with food shortages and rising costs stemming from Russia’s war in Ukraine.The IMF said its new Food Shock Window will be open for one year through its existing Rapid Credit Facility and Rapid Financing Instrument programs for countries with urgent balance of payment needs that “are suffering from acute food insecurity, a sharp food imports shock, or from a cereals export shock.”The IMF’s announcement did not mention any specific countries that would be eligible for low-condition emergency loans under the new window.Two people familiar with the new mechanism said it would allow countries to borrow up to half of their quota, or shareholding, in the fund — similar to the emergency Rapid Financing Instrument and Rapid Credit Facility, which were used to rush billions of dollars worth of financial assistance to IMF member countries struggling with the COVID-19 pandemic.Among eligibility criteria, countries would have to show that the food import price shocks are creating a negative balance of payments impact of 0.3% of GDP. New IMF research identifies at least 48 countries in this category, including many of the world’s poorest, most vulnerable and conflict-affected states.Negative cereals export shocks would have to reach 0.8% of GDP for eligibility, and borrowers with unsustainable debt would be denied — a rule that would cause difficulties for countries such as Lebanon or Sri Lanka.IMF European Department director Alfred Kammer said last week that Ukraine could receive another $1.3 billion in emergency financing from the new food shock window after its approval. He said the Fund was discussing with Ukrainian authorities a new macroeconomic stabilization framework that would help the war torn country identify external financing needs. Ukraine has said that it needs $5 billion a month in external financing to keep its economy functioning. The IMF provided $1.4 billion in emergency financing to Ukraine in March and has helped, along with the World Bank, to facilitate billions more in donor funding.With new emergency food shock financing, the IMF aims to try to ease war-induced shortages that are fast becoming the worst food security crisis since at least the 2007-2008 global financial meltdown, leaving lives and livelihoods of 345 million people in immediate danger and a $9 billion increase in import bills for the most exposed countries. “For some time now, the combination of climate shocks, the pandemic and regional conflicts has disrupted food production and distribution, driving up the cost of feeding people and families,” IMF Managing Director Kristalina Georgieva said in a statement. “Russia’s war in Ukraine has pushed the price of food and fertilizers even higher — hurting food importers and some exporters.” More

Gautam Adani has had a very good year.
The Indian billionaire briefly surpassed Amazon founder Jeff Bezos to become the second-richest person in the world in September, according to Bloomberg. He’s now ranked as the world’s fourth wealthiest person.

Outside Southeast Asia, Adani is hardly a household name. That might be changing now that he’s richer than Microsoft founder Bill Gates and iconic investor Warren Buffett.
“The kind of rise that you have seen is truly phenomenal and probably unprecedented in the world that in such a short time a single individual has been able to acquire assets across industrial sectors and has emerged as one of the largest billionaires in the world,” said Hemindra Hazari, an independent research analyst based in Mumbai, India.
Coming from a middle-class family background, Adani began his entrepreneurial journey in the country’s financial capital, Mumbai, as a diamond sorter in the late 1970s. Adani is now chair of the Adani Group, one of the three largest industrial conglomerates in India.
Adani’s company representatives did not respond to several requests for comment from CNBC.
Why is Adani’s wealth on the rise? Watch the video above to learn more about how Adani’s political connections may have boosted the success of his many companies. 

WATCH LIVEWATCH IN THE APP More

LONDON (Reuters) -If global market investors thought 2022 couldn’t get any more painful or unpredictable the last few months have certainly proved them wrong.Another $9 trillion wiped off world stocks, oil down more than 20%, historic losses for bonds, war, and things became so ugly in G7 Japan and Britain in recent weeks that the authorities had to step in.With inflation-fearing central banks racing each other to ramp up borrowing rates there have now been nearly 300 interest rate hikes over the last year.It seems those goldilocks good times – where markets rally as economies chug along at just the right temperature – are definitively over.Analysts at BofA liken it to going “Cold Turkey” and blame it for causing the third “Great Bond Bear Market”.They calculate the 20% plus losses suffered by government debt investors over the last year are now a par with the post World War I and II years of 1920 and 1949, and the Great Depression rout of 1931. The combined collapse in global stock and bond markets means global market capitalisation has been slashed by over $46 trillion. “2022 in a Nut: Inflation shock caused rates shock which now threaten recession shock and credit event,” BofA analysts said, explaining that peace, globalisation and easy money was being replaced by an “inflationary era of war, nationalism, fiscal panic, quantitative tightening, high rates, high taxes”.This quarter did have a spell of optimism when MSCI’s 47-country world stocks index rallied 10% between July to mid August. But the Fed’s rate hike wrecking ball soon came swinging back in, and that index has plunged 15% since, leaving it down 25% and $18 trillion year to date. Mounting recession expectations, along with the West’s plans to stop buying Russian oil, have seen Brent prices nosedive 20% after their turbo-charged start to the year. Though Europe’s looming energy crisis means its natural gas prices are up 18% since July, back in late August than stat was almost 140%. Wall Street’s bear market meanwhile is now 268 days old and notched a peak-to-trough decline of about 24%. That is still relatively short and shallow compared with past drops though.Since 1950, the average U.S. bear market lasted 391 days with an average peak-to-trough drop of just over 35%, according to Yardeni Research and banks from BofA to Goldman are warning the traditional end-of-year ‘Santa rally’ might be cancelled.”The complacency regarding central banks has disappeared, it’s been, it’s gone. But complacency regarding the macro situation, the geopolitical situation hasn’t,” said Olivier Marciot, head of investments for multi assets and wealth management at Unigestion.”You can just look all over the place, there is no glimpse of hope right now.”KING DOLLARThe only place to really take cover this quarter and for the year has been the dollar.It has charged up another 7% leaving it up 17% for the year against the main world currencies. Against the Japanese yen and UK pound its an even bigger 20% and 18%, putting those currencies on course for their biggest respective yearly falls since 1979 and 2008.The overall crypto market valuation has slumped to $940 billion from $2.2 trillion through 2022 although bitcoin hasn’t added much to its 60% YTD fall this quarter at least, and ether has been boosted by an eco-friendly software upgrade.Staggeringly, no notable EM currency has risen this quarter. China’s yuan has slumped 7% to its lowest since the global financial crisis and a number of eastern Europe units have dropped another 10% as the Ukraine war has rumbled on.Ukraine itself has joined Sri Lanka in default and concerns are rife in both currency and bond markets that Ghana and Pakistan are next. Year-to-date $70 billion has fled EM hard currency bond funds, JPMorgan (NYSE:JPM) estimates, and MSCI’s emerging markets equity index will see its a fifth straight quarter of losses and set its longest ever bear market, Morgan Stanley (NYSE:MS) says.Spluttering growth, the fallout from a prolonged property crash and a strict COVID policy mean Chinese and Hong Kong’s indexes are down more than 15% and 20% for Q3 in what is their worst quarters in seven and eleven years respectively. Remarkably Turkey’s stock index is now up 70% for year after a further 30% rally although with the lira down 10% for the quarter and nearly 30% for the year there are fears that it could all unravel. “The trigger, the reason and the cause of all this has been interest rates and inflation going through the roof,” Robeco’s head of emerging market equities Wim-Hein Pals said of the mass fall in markets this year. “Money is not free anymore”. More

The Federal Reserve’s preferred inflation gauge remained elevated in August, data released on Friday showed, further evidence that the central bank is contending with a stubborn problem as it tries to choke off the worst inflation in four decades.The Personal Consumption Expenditures inflation measure, which is the measure the Fed officially targets as it tries to achieve 2 percent annual inflation, climbed 6.2 percent over the year through August. While that was a slowdown from 6.4 percent in July, it was higher than the 6 percent that economists in a Bloomberg survey had expected.The details of the report were even more concerning. Price increases have been moderating somewhat on an overall basis, partly because gas prices have been declining. But after volatile fuel and food prices were stripped out to get a sense of underlying inflationary pressures, the index climbed 4.9 percent over the year through August, an acceleration from 4.7 percent the month before. And on a monthly basis, the core index picked up by 0.6 percent, the fastest increase since June.Consumers also continued to spend in August, particularly on dining, travel and other services, the report showed, though the pace was slowing. Incomes rose, buoyed by a hot job market.The data underlined the challenging path the Fed faces as it tries to guide the U.S. economy toward slower inflation. Both the economy and price pressures have retained momentum, even as central bankers raise interest rates to try to cool demand. As a result, the Fed has become steadily more aggressive in its efforts to constrain spending and temper inflation, and it is likely to keep raising rates and keep them elevated for a while.Inflation F.A.Q.Card 1 of 5What is inflation? More

“At this point the risk of inflation festering feels like a bigger risk than inflation coming down on its own and us having oversteered,” Barkin said in remarks to reporters after a chamber of commerce event.Barkin said he was reserving judgment on the proper rate increase for the Fed’s next meeting, but that data released Friday showed inflation continued to be both broad and persistent. More