Economy

The one-day walkout is seen as a test of the unions’ ability to mobilise support and a barometer of potential social unrest as President Emmanuel Macron decides whether to push ahead with plans to reform the pension system.The more moderate CFDT union has shunned the strike call, but its boss Laurent Berger has promised street protests later this year if the government goes too far and too fast on pension reforms.Europe’s cost-of-living crisis is putting upward pressure on wage inflation as private and public companies across the continent face demands from workers to cushion the impact of rising prices.”Wages must be increased as there is a purchasing power problem in the country”, Philippe Martinez, whose CGT union is spearheading Thursday’s protests, told BFM television.The CGT, whose membership includes transport and energy sectors, backs raising the minimum wage to 2,000 euros ($1,947.80) per month, a 32-hour week and retirement at 60. Martinez called on other unions to support the strike action.”If we want to win, all the unions must be together,” he added.Striking CGT workers this week forced the shutdown of TotalEnergies Gonfreville refinery and disrupted deliveries at others.Nuclear power industry workers are expected to join Thursday’s industrial action, removing some capacity from the French power grid when France already faces a record number of nuclear reactor outages. In French primary schools, the SNUipp-FSU union expects one in every 10 primary schools to close in Paris. Disruption to commuter train services into the capital and metro operations should not be severe, according to strike participation forecasts. On average two out of three buses are expected to run in the capital.($1 = 1.0268 euros) More

Britain’s pound coin — rimmed in nickel and brass with an embossed image of Queen Elizabeth II at the center — could always be counted on to be significantly more valuable than the dollar.Such boasting rights effectively came to an end this week when the value of the pound sank to its lowest recorded level: £1 = $1.03 after falling more than 20 percent this year.The nearly one-to-one parity between the currencies sounded the close of a chapter in Britain’s history nearly as much as the metronomic footfalls of the procession that carried the queen’s funeral bier up the pavement to Windsor Castle.“The queen’s death for many people brought to an end a long era of which the soft power in the United Kingdom” was paramount, said Ian Goldin, professor of globalization and development at the University of Oxford. “The pound’s demise to its lowest level is sort of indicative of this broader decline in multiple dimensions.”The immediate cause of the pound’s alarming fall on Monday was the announcement of a spending and tax plan by Britain’s new Conservative government, which promised steep tax cuts that primarily benefited the wealthiest individuals along with expensive measures to help blunt the painful rise in energy prices on consumers and businesses.The sense of crisis ramped up Wednesday when the Bank of England intervened, in a rare move, and warned of “material risk to U.K. financial stability” from the government’s plan. The central bank said it would start buying British government bonds “on whatever scale is necessary” to stem a sell-off in British debt.The Bank of England’s emergency action seemed at odds with its efforts that began months ago to try to slow the nearly 10 percent annual inflation rate, which has lifted the price of essentials like petrol and food to painful levels.Rising Inflation in BritainInflation Slows Slightly: Consumer prices are still rising at about the fastest pace in 40 years, despite a small drop to 9.9 percent in August.Interest Rates: On Sept. 22, the Bank of England raised its key rate by another half a percentage point, to 2.25 percent, as it tries to keep high inflation from becoming embedded in the nation’s economy.Energy Bills to Soar: Gas and electric charges for most British households are set to rise 80 percent this fall, further squeezing consumers and stoking inflation.Investor Worries: The financial markets have been grumbling with unease about Britain’s economic outlook. The government plan to freeze energy bills and cut taxes is not easing concerns.The swooning pound this week has carried an unmistakable political message, amounting to a no-confidence vote by the world’s financial community in the economic strategy proposed by Prime Minister Liz Truss and her chancellor of the Exchequer, Kwasi Kwarteng.To Mr. Goldin, the pound’s journey indicates a decline in economic and political influence that accelerated when Britain voted to leave the European Union in 2016. In many respects, Britain already has the worst performing economy, aside from Russia, of the 38-member Organization for Economic Cooperation and Development.“It’s just a question of time before it falls out of the top 10 economies in the world,” Mr. Goldin said. Britain ranks sixth, having been surpassed by India.Eswar Prasad, an economist at Cornell University, said this latest plunge had delivered a bracing blow to Britain’s standing. A series of “self-inflicted wounds,” including Brexit and the government’s latest spending plan, have accelerated the pound’s slide and further endangered London’s status as a global financial center.Dozens of currencies, including the euro, the Japanese yen and the Chinese renminbi, have slumped in recent weeks. Rising interest rates and a relatively bright economic outlook in the United States combined with turmoil in the global economy have made investments in dollars particularly appealing.But the revival by the Truss government of an extreme version of Thatcher and Reagan-era “trickle-down” economic policies elicited a brutal response.“The problem isn’t that the U.K. budget was inflationary,” wrote Dario Perkins, a managing director at TS Lombard, a research firm, on Twitter. “It’s that it was moronic.”To some, the pound’s journey indicates a decline in Britain’s economic and political influence.Suzie Howell for The New York TimesDuring the more than 1,000 years in which the pound sterling has reigned as Britain’s national currency, it has suffered its share of ups and downs. Its value in the modern era could never match the value of an actual pound of silver, which in the 10th century could buy 15 cows.Over the centuries, British leaders have often gone to extraordinary lengths to protect the pound’s value, viewing its strength as a sign of the country’s economic power and influence. King Henry I issued a decree in 1125 ordering that those who produced substandard currency “lose their right hand and be castrated.”In the 1960s, the Labour government under Harold Wilson so resisted devaluing the pound — then set at a fixed rate of $2.80, high enough to be holding back the British economy — that he ordered cabinet papers discussing the idea to be burned. In 1967, the government finally cut its value by 14 percent to $2.40.Other economic crises thrashed the pound. In the 1970s, when oil prices skyrocketed and Britain’s inflation rate topped 25 percent, the government was compelled to ask the International Monetary Fund for a $3.9 billion loan. In the mid-1980s, when high U.S. interest rates and a Reagan administration spending spree jacked up the dollar’s value, the pound fell to a then record low.The pound’s dominance has been waning since the end of World War II. Today, the global economy is experiencing a particularly tumultuous time as it recovers from the aftermath of the coronavirus pandemic, supply chain breakdowns, Russia’s invasion of Ukraine, an energy shortage and soaring inflation.As Richard Portes, an economics professor at London Business School, said, currency exchanges have enormous swings over time. The euro was worth 82 cents in its early days, he recalled, and people referred to it as a “toilet paper” currency. But by 2008, its value had doubled to $1.60.What might cause the pound to revive is not clear.The Truss government’s economic program has forcefully accelerated the pound’s slide — the latest in a series of what many economists consider egregious economic missteps that peaked with Brexit.Much depends on the Truss government.“The plunge in the pound is the result of policy choices, not some historical inevitability” said Ian Shepherdson, chief U.S. economist at Pantheon Macroeconomics. “Whether this is a new, grim era or just an unfortunate interlude depends on whether they reverse course or are kicked out at the next election.”As it happens, the Bank of England is preparing to issue new pound bank notes and coins featuring King Charles III, at the very moment that the pound has dropped to record lows.“The death of the queen and the fall of the pound do seem jointly to signify decisively the end of an era,” Mr. Prasad of Cornell said. “These two events could be considered markers in a long historical procession in the British economy and the pound sterling becoming far less important than they once were.” More

WASHINGTON (Reuters) -The International Monetary Fund said on Wednesday that its staff has agreed on some $293 million in new financing for Barbados, including $183 million via a new trust fund created to help vulnerable middle-income and island countries.The staff-level agreement is the first under the Resilience and Sustainability Trust approved by the IMF board in April, the IMF said. The Fund also said it reached agreement with Barbados on a new, 36-month Extended Fund Facility (EFF) loan of about $110 million. Both agreements need approval from the IMF Executive Board, which is expected to consider the staff agreement in November or December, Bert van Selm, IMF mission chief for Barbados, told reporters.Van Selm, who announced the agreements in Barbados with Prime Minister Mia Mottley, said the Caribbean nation was ideally suited to be the first country to use the new trust given its successful execution of an earlier IMF program, its location in a region exposed to climate change, and Mottley’s leadership.He said Barbados had not completed all the reforms intended during its previous four-year EFF program due to the COVID-19 pandemic and had sought a follow-on program to complete those efforts. He said it needed to reduce its debt and was planning to start carrying out financial stress tests in coming years that took climate risks into account, he said. The new trust expands access to low-interest loans to about 140 countries, double the number that could tap such resources under the IMF’s Poverty Reduction and Growth Trust. That will be a big help for middle income countries, such as those in the Caribbean, that were hard hit by a loss of tourism during the pandemic and are highly vulnerable to climate change.”It’s obvious to everybody that climate change is the major challenge of our day, and we need to address it, if we can,” van Selm said.IMF managing director Kristalina Georgieva first discussed the new trust in June 2021, telling Reuters it would help a broader range of countries get the aid they needed to tackle climate change and other sustainability challenges.Bangladesh and Argentina have also expressed interest in tapping funds under the trust, which offers 20-year financing. Van Selm said a few more countries were in talks with the IMF and he expected more announcements before the end of the year. More

China’s renminbi fell to the lowest level since 2008 yesterday as the country’s central bank holds back from intervening to prop up the currency in response to the rallying dollar. The renminbi is the latest major currency to succumb to a wave of dollar strength that has sent exchange rates from the pound to the yen spiralling lower this year. As the People’s Bank of China pursues monetary easing to shore up economic growth, continued policy divergence with the hawkish US Federal Reserve is expected to push the Chinese currency down further. The PBoC has so far stopped short of deploying significant foreign exchange reserves, instead relying on indirect measures to discourage bets on continued falls and slow the pace of depreciation.The onshore exchange rate for the currency fell 0.7 per cent to Rmb7.2268 on Wednesday, bringing it 13.8 per cent lower for the year to date.Go deeper: For a heavily-managed currency, the recent weakening trend is pretty stark, writes Robin Wigglesworth in Alphaville. Thanks for reading FirstFT Asia. Here’s the rest of today’s news — EmilyFive more stories in the news1. Bank of England launches £65bn move to calm markets The Bank of England took emergency action yesterday to avoid a meltdown in the UK pensions sector, unleashing a £65bn bond-buying programme to stem a crisis in government debt markets.Go deeper: The Bank of England has gone into full crisis management mode.2. India bans leading Muslim group over terrorism accusations India’s prime minister Narendra Modi has outlawed the Popular Front of India and its affiliates for five years, accusing it of links to terrorist organisations. The move, which followed the arrests in recent days of more than 200 of its members and searches of top leaders’ houses and offices, is likely to foment the country’s deepening communal tensions. 3. EU vows response to ‘deliberate’ pipeline sabotage Norway is deploying the military to oil and gas installations and the EU vowed “a robust and united response” to “deliberate” leaks in two gas pipelines between Russia and Europe. Nato and a growing number of European governments said they believed the leaks were a case of sabotage, while Moscow has denied involvement.Explainer: Here’s what we know so far about the Baltic Sea gas pipelines4. Iran’s morality police disappear from streets Guidance Patrol vans, used by Iran’s morality police to monitor and arrest women who defy the Islamic dress code, have in recent days disappeared from the streets of Tehran. The change comes after massive street protests followed Mahsa Amini’s death while in the custody of the morality police. 5. UK in ‘difficult’ talks over access to India’s financial sector Lord Mayor of London Vincent Keaveny acknowledged in an interview with the Financial Times that India might reject British calls to ease its tight restrictions on foreign financial services firms.The day aheadUS-Philippine bilateral talks US defence secretary Lloyd Austin and Philippine counterpart Jose Faustino Jr will join bilateral military co-ordination talks today, the first time such senior government figures have participated in the annual discussions. The two militaries also plan to double the scale of their annual joint exercise next year.Kuwait parliamentary election The sixth vote in 10 years, which is set to be held today, is a product of the political crises that have rocked the country in the past decade. (Barron’s)Porsche begins trading Shares in the carmaker will begin trading on the Frankfurt stock exchange after the long-awaited flotation of the luxury car brand.What else we’re readingThe soaring value of my second-hand Toyota There’s a silver lining to the fact that the global shortage of semiconductors remains unresolved and broader disruption in the parts and materials supply chain continues. As a result, Leo Lewis found that his Toyota dealer would offer 10 times the expected value to trade in his car — as AI shapes a booming second hand market.Why the strength of the dollar matters In times of trouble, the dollar is the world’s refuge. Messing up macroeconomic policies, especially fiscal management, proves particularly dangerous when the dollar is strong, interest rates are rising and investors seek safety. Kwasi Kwarteng, please note, writes Martin Wolf.The 90km journey that changed the Ukraine war A lightning assault by Ukrainian forces this month allowed Kyiv to reclaim as much territory in a few days as Moscow had captured in months. Our interactive story traces how the counteroffensive dramatically turned the tide of the invasion. Biden’s renewables push to deliver big benefits to South Korea There was consternation in Seoul when President Joe Biden eliminated subsidies for electric vehicles assembled outside of North America. But what amounts to a short-term setback pales in comparison with the benefits likely to be accrued by Korea Inc overall, writes Christian Davies. Related read: As the EV battery race rages on, our reporters go inside the struggles of Britishvolt, which could determine the fate of the UK automotive industry.Deflecting asteroids is only one thing on our worry list Nasa’s mission to slam a small asteroid 11mn km from Earth was, literally, a striking achievement that gives hope we can defend our planet. But human nature and technology present risks of their own, writes Anjana Ahuja.House & HomeDame Prue Leith’s Gloucestershire house is a real showstopper. Leith and her husband John Playfair were never going to go monochrome when they built their dream Gloucestershire home. For this story we went inside the Bake Off star’s technicolour home. More

(Reuters) – The wild swings seen in British markets provided an “opportunity of a lifetime” to trade currencies and bonds, hedge funds and traders said on Wednesday.Sterling and British gilts were whipsawed after the Bank of England stepped into stem a rout in bond markets triggered by Friday’s mini-budget. The BoE said it would buy 65 billion pounds ($71 billion) of UK bonds as needed between now and Oct. 14 to stabilise markets.Since Friday’s UK mini-budget flagged 45 billion pounds worth of unfunded tax cuts, sterling has lost 6% of its value and hit record lows while British bond prices soared.Investors that use signals in the economy to trade in government bonds and currencies say that Wednesday was a day to go big or go home. John Floyd, a currency trader for 30 years and running his own hedge fund, Floyd Capital Management said a UK government policy to bulk up on UK debt and a central bank intent on raising rates but ending up buying bonds had created a perfect storm. Floyd declined to comment on how much money he had under management. “The macroeconomic and geopolitical environment is providing some of the greatest profit opportunities in the currency space since the end of Bretton Woods in the early 1970s,” said Floyd, referring to the U.S. global conference that established a set of guidelines for the international financial system. Floyd is long the dollar and short the pound. He believes Wednesday’s BoE intervention will shake confidence in the pound and “encourage people to look for further weakness.””Intervention only works if it is in line with macro-economic fundamentals,” said Floyd. “Intervention in the gilt market to lower rates will make it that much more challenging to fund the external deficit and a weaker currency will be the equilibrating mechanism.”Family office portfolio manager John Taylor, a veteran currency trader, said the volatility he saw was worse than trading in 2008 when the global financial crisis took hold.”The problem with today’s markets is that I can’t see the conclusion of all of this but it started with Brexit – when people decided that the world getting along was a thing of the past,” said Taylor. Taylor said he was short sterling and had been for most of the year. However, even if he had started trading now, he was still likely to have the same view on the pound.”It’s never too late to be short sterling,” he said. Another fund, with over $4 billion assets under management, which declined to be named, said that they were trying to maintain a measured approach. The fund, which was short the pound, said they were not trading as actively today because being short sterling was a longer-term strategy.Year to date, hedge funds that trade on macroeconomic signals were up on average, 6.47% according to HFRX, a daily reporting index of hedge fund performance from HFR. More

Investors might not often pay much heed to Vladimir Lenin, but they would surely agree with the Soviet revolutionary’s 1917 observation that: “There are decades where nothing happens; and there are weeks where decades happen.”Take Britain, where a government budget on Friday sparked a run on the pound and gilts, accelerated the downdraft across world markets, before prompting an astonishing policy U-turn from the Bank of England on Wednesday. The BoE – which is raising rates and had been about to start ‘QT’ sales of gilts back into the market – intervened in bonds, pledging to buy unlimited quantities on a “temporary” basis to restore order in what was effectively a broken market. This unleashed a wave of buying across British assets – the 30-year gilt yield sank a record 100 basis points and sterling rose 1.5% – and triggered a pent-up recovery across world markets. The relief was palpable: world stocks and the S&P 500 snapped six-day losing streaks, with the S&P 500 jumping around 2%. The 10-year U.S. Treasury yield, which had topped 4%, plunged 25 bps in its biggest one-day fall since 2009. U.S. 10-year Treasury yield https://fingfx.thomsonreuters.com/gfx/mkt/zgpomqbddpd/US10Y.png But how long will the relief last? Investors’ faith in policymakers’ credibility must surely be dented, and the underlying tightening of financial conditions from the strong dollar and high U.S. bond yields remain in place.Then there’s China. The People’s Bank of China on Wednesday said FX market stabilization is its top priority after the yuan weakened to its lowest level since 2008. Its tinkering at the edges seems to have failed, so will it soon have to take more forceful action to support the yuan? Key developments that could provide more direction to markets on Thursday:U.S. final GDP and PCE (Q2)U.S. weekly jobless claimsFed’s Daly speaks ECB’s De Guindos, Rehn, Panetta speakBoE’s Ramsden speaks More

LONDON (Reuters) – Trading volumes between the British pound and the cryptocurrency bitcoin spiked to a record high after sterling dropped on Monday, according to market data firm Kaiko Research, in what analysts said was likely a rush by investors to dump their sterling for the digital asset or profit from arbitrage.The pound fell to a record low against the dollar on Monday, having plunged the previous Friday after the UK government announced unfunded tax cuts. The volume of transactions in the bitcoin-sterling trading pair across eight major exchanges globally spiked to a record high of 846 million pounds ($920 million) on Monday, according to Kaiko Research, compared with an average of around 54.1 million pounds a day so far in 2022.The surge was likely due to traders swapping sterling for bitcoin, said James Butterfill, head of research at crypto firm CoinShares.”There is a high correlation to bitcoin volume growth and political/monetary instability,” he said.Butterfill said spikes have previously occurred in other currencies’ crypto trading volumes, such as the Russian ruble and Ukrainian hryvnia, but that he had never seen such big moves in the bitcoin-sterling pair’s volume.Conor Ryder, research analyst at Kaiko, said the data suggests cryptocurrency markets reacted to the volatility in fiat currencies. When sterling crashed on Sept. 26, “opportunistic investors rushed to crypto exchanges offering BTC-GBP to try and profit via arbitrage from any mispricing of bitcoin across the major fiat currencies,” he said in emailed comments.Crypto exchange Bitfinex said it saw a “significant spike” in volume and trading activity for the bitcoin-sterling pair on Monday, which Bitfinex analysts said “underlined the potential of the biggest cryptocurrency to benefit from an apparent fragility in fiat currencies.”To be sure, cryptocurrencies are highly volatile and the price of bitcoin has fallen sharply so far in 2022 as rising interest rates prompted investors to ditch riskier assets.Versus the dollar, bitcoin is down around 58% so far this year, while the British pound is down 20%.Bitcoin was trading around $19,515 on Wednesday and at 17,940 versus the British pound. The cryptocurrency hit a two-week high against the British pound on Tuesday.($1 = 0.9195 pound) More

NEW YORK (Reuters) – Recent increases in U.S. Treasury yields are likely to improve the attractiveness of investment strategies such as the 60/40 portfolio, said Ken Griffin, the billionaire founder of Citadel Securities, one of the world’s biggest market-making firms.”The 60/40 portfolio is much better today than at any point in recent time,” he told an investment conference in New York on Wednesday, referring to the common investment strategy, which splits allocations between stocks and bonds on a 60%/40% basis to mitigate risk. The strategy has been badly hit this year amid declines in prices for both stocks and bonds. However, yields on the benchmark 10-year Treasury, which move inversely to prices, topped 4% on Wednesday, hitting a 12-year high. “Right now, that’s a much more compelling value proposition than it was back then at 1% yield,” Griffin said.With the Fed furiously raising rates to stave off the worst inflation in decades, Griffin believes a recession is likely next year. “There will be one. It’s just a question of when and how hard,” he said.Griffin’s Citadel manages more than $50 billion in assets. He believes that volatility in UK assets is unlikely to spill over into other markets, after sterling tumbled to record lows and British bond prices slid on Wednesday following announcements of unfunded tax cuts, forcing the Bank of England to intervene in the fixed income market. Griffin said he was worried about the loss of confidence in Britain. “It represents the first time we’ve seen a major developed market, in a very long time, lose confidence from investors.” He said U.S. equity valuations remain comparatively high, despite a sell-off that has thrown the S&P 500 into a bear market this year. Griffin, whose fortune is estimated at around $27 billion according to Forbes, announced in June he was moving Citadel’s global headquarters to Miami due to concerns about rising crime rates in Chicago.”Crime is just out of control on the streets (of Chicago),” he said at Wednesday’s conference. More