Economy

SYDNEY (Reuters) – Share markets idled in Asia on Monday as investors braced for a week littered with 13 central bank meetings that are certain to see borrowing costs rise across the globe and some risk of a super-sized hike in the United States.Markets are already fully priced for a rise of 75 basis points from the Federal Reserve, with futures showing an 18% chance of a full percentage point.They also show a 50-50 chance rates could soar as high as 5.0-5.25% as the Fed is forced to tip the economy into recession to subdued inflation.”How high will the funds rate ultimately need to go?” said Jan Hatzius, chief economist Goldman Sachs (NYSE:GS).”Our answer is high enough to generate a tightening in financial conditions that imposes a drag on activity sufficient to maintain a solidly below-potential growth trajectory.”He expects the Fed to hike by 75 basis points on Wednesday, followed by two half-point moves in November and December.Also important will be Fed members “dot plot” forecasts for rates which are likely to be hawkish, putting the funds rate at 4-4.25% by the end of this year, and even higher next year.That risk saw two-year Treasury yields surge 30 basis points last week alone to reach the highest since 2007 at 3.92%, so making stocks look more expensive in comparison and dragging the S&P 500 down almost 5% for the week.Early Monday, holidays in Japan and the UK made for a slow start and S&P 500 futures were up 0.1%, while Nasdaq futures were flat.MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%, after losing almost 3% last week. Japan’s Nikkei was shut, but futures implied an index of 27,335 compared to Friday’s close of 27,567.HIKES ALL ROUNDBofA’s latest fund manager survey suggests allocations to global stocks are at an all-time low.”But with both U.S. yields and the unemployment rate headed to 4-5%, poor sentiment isn’t enough to keep the S&P from making new lows for the year,” warned BofA analysts in a note.”Our suite of 38 proprietary growth indicators depict a grim outlook for global growth, yet we are staring at one of the most aggressive tightening episodes in history, with 85% of the global central banks in tightening mode.”Most of the banks meeting this week – from Switzerland to South Africa – are expected to hike, with markets split on whether the Bank of England will go by 50 or 75 basis points.”The latest retail sales data in the UK supports our view that the economy is already in recession,” said Jonathan Petersen, a senior market economist at Capital Economics.”So, despite sterling hitting a fresh multi-decade low against the dollar this week, the relative strength of the U.S. economy suggests to us the pound will remain under pressure.”Sterling was stuck at $1.1436 having hit a 37-year trough of $1.1351 last week, [GBP/]The odd man out is the Bank of Japan which has so far shown no sign of abandoning its uber-easy yield curve policy despite the drastic slide in the yen.The dollar was steady at 142.78 yen on Monday, having backed away from the recent 24-year peak of 144.99 in the face of increasingly strident intervention warnings from Japanese policymakers.The euro was holding at $1.1021, having edged up from its recent low of $0.9865 thanks to increasingly hawkish comments from the European Central Bank.Against a basket of currencies, the dollar was steady at 109.60, just off a two-decade high of 110.79 touched earlier this month.The ascent of the dollar and yields has been a drag for gold, which was hovering at $1,678 an ounce after hitting lows not seen since April 2020 last week. [GOL/]Oil prices were trying to bounce on Monday, having shed around 20% so far this quarter amid concerns about demand as global growth slows. [O/R]Brent was up 60 cents at $91.95, while U.S. crude rose 55 cents to $85.66 per barrel. More

TOKYO (Reuters) -Something has gone missing from Bank of Japan statements about elevated inflation: the word “temporary”.No longer signalling that robust price rises will be short-lived, the central bank might soon go further by saying they will become faster than expected for the rest of this year, driven in part by the yen’s slide to 24-year lows, said three sources familiar with its thinking.The Bank of Japan (BOJ) still expected inflation to slow next year, but maybe not as much as previously thought, they said.The implication is that the country’s ultra-easy monetary policy, holding both short- and long-term interest rates near zero, may not last as long as forecasters believe, though the sources said that, with the economy weak, the stimulus would not be withdrawn soon.Most of 36 economists surveyed by the think tank Japan Center for Economic Research this month expected monetary policy to remain unchanged until the end of next year.But one of the sources, describing BOJ internal debates, said: “Companies are passing on rising costs to households at a faster-than-expected pace. Inflation may not slow much next year if consumption holds up.”Consumers’ inflation expectations are also heightening, and price rises in the deflation-prone country have clearly spread to items not directly affected by rising fuel costs.Until June, BOJ officials, making speeches and internally discussing policy, frequently described underlying rises in inflation as “temporary”. But they stopped doing so in July, according to transcripts and minutes of the policy meetings.While the speeches were public, few people, if any, noticed the tweak.”It was probably not the best language to describe what was happening in the global and domestic inflation landscape,” a second source said on the word “temporary.”Other central banks, notably the U.S. Federal Reserve, European Central Bank and the Bank of England, last year similarly said rising inflation would be only temporary. Caught off guard, now they have raised interest rates much further than they expected.PRICE PRESSUREAmong the latest evidence in Japan of rising price pressures, annual core consumer inflation, which excludes fresh food but includes fuel costs, hit a seven-and-a-half year high of 2.4% in July, exceeding the BOJ’s 2% target for a fourth straight month.The BOJ currently forecasts the rate will fall below 2% next year.Nearly 80% of Japan’s listed food companies have either raised prices this year or plan to do so, four times the ratio of last year, according to a survey by private research firm Teikoku Databank.These rises affect more than 20,000 food items, which will go up by an average of 14%. One-third of the increase is scheduled to take effect in October, a sign that inflationary pressure could intensify later this year.Most BOJ policymakers now expect core consumer inflation to reach 3% in October, with some projecting the upward pressure to persist well into next year, the sources said.A consumer price index that excludes both fresh food and fuel costs – closely watched by the BOJ as a key barometer of domestic demand – was 1.2% higher in July than a year earlier, marking the fourth straight month of annual gains.Some BOJ officials saw a chance of inflation as measured by that index reaching 2% in coming months, the sources said.They predicted that the stronger price outlook would lead to an upward revision to the BOJ’s inflation forecasts when the board next revises its quarterly projections in October.The key would be whether wages would start to rise in response to the increasing cost of living. Only when wages rose faster would Japan experience a demand-driven, sustained increase in inflation that the BOJ is seeking to achieve.CURRENCY MOVESThe role of the weakening yen, which is down nearly 20% so far this year, is becoming a focus for the BOJ.”Currency moves are among key factors that affect the economy and prices. For the BOJ, the impact on prices warrants particular attention,” a third source said, signalling that rising inflationary pressure from the weak yen would be a key topic in the bank’s public communications in coming months.There are early signs Japan is finally losing its sticky deflationary mindset. In August, more than 90% of households expected prices to increase over the following 12 months, a government survey showed, with nearly 60% projecting a rise of 5% or more.But there is also uncertainty about Japan’s growth outlook as the U.S., European and Chinese economies face headwinds.”Cost-push pressure is heightening at a degree never seen before, prodding firms to raise prices. Some profitable firms are raising wages, too,” said former BOJ board member Goushi Kataoka.”The problem is that the global economy may enter a slump before this positive cycle gains momentum.” More

SINGAPORE (Reuters) -Dealmakers, fund managers and CEOs are flocking to Singapore for a slew of high-profile conferences this month, as the city-state burnishes its credentials as a major global financial centre.While COVID curbs continue to hinder large in-person gatherings in rival financial hub Hong Kong, Singapore has mostly returned to pre-pandemic life with indoor mask rules loosened last month.Business is booming – hotel room rates are at a decade-high, conference venues have been booked for weeks and restaurants are packed.”We have had a funny two years being locked down and isolated from our peers, so the in-person conferences feel like a small step back to normality and a big step back into humanity,” Rachel Lau, managing partner at Southeast Asian-based investment firm RHL Ventures.The first of these events starting Monday is SuperReturn Asia, an annual private equity and venture capital industry conference being held in Singapore for the first time instead of Hong Kong as usual.Some 1,000 executives from over 40 countries are expected to participate over four days – a record number for the event and which compares with about 800 in 2019. Delegates are paying as much as 4,000 pounds ($4,600) to attend.”We’ve been planning the event for many months now,” said Dorothy Kelso, global head of SuperReturn, adding that demand for the chance to meet physically in Asia was high amongst the international community.Other conferences in Singapore this month include the Milken Institute Asia Summit run by U.S. billionaire Michael Milken’s think tank, the Forbes Global CEO conference and Token2049, a crypto event that will also take place in the city for the first time.The conferences, which offer networking opportunities with investors from India and China as well as sovereign wealth funds, will be attended by executives from investment giants such as Carlyle Group (NASDAQ:CG), PIMCO and Franklin Templeton.Indian and Southeast Asian startups and representatives from cryptocurrency exchanges OKX and FTX will also be attending.The revival in Singapore conference activity puts it on a similar footing to New York where big business gatherings have resumed. London has also largely returned to pre-pandemic levels of in-person gatherings in recent months, although smaller-scale events are more common than bigger multi-day conferences. SINGAPORE VS HONG KONGSingapore is also set to see a surge in tourism with the F1 night race resuming at end-September after a two-year hiatus. Other major tourist draws being organised include concerts by Maroon 5 and Guns N’ Roses in November.”Singapore has come roaring back,” said Curtis Chin, a former U.S. ambassador to the Asian Development Bank and an Asia Fellow at the Milken Institute.Singapore has long been locked in fierce competition with Hong Kong to be considered Asia’s premier financial centre with both cities keen to lure global banks as well as wealth and asset managers. But Hong Kong’s unrelenting COVID curbs have battered its economy and standing as a financial centre. It is one of the few places in the world still requiring arriving travellers to quarantine.Its restrictions have only added to an exodus of finance and business talent in recent years as Beijing began to exert more control over Hong Kong’s government and limit freedoms – all of which has worked in Singapore’s favour.”With Hong Kong increasingly linked to mainland China both economically and policy-wise, Singapore is able to further differentiate itself as a controller of its own destiny and as a hub for major international events,” said Chin.Wealthy families, especially from China, and super-rich individuals have set up hundreds of so-called ‘family offices’, tapping into Singapore’s generous tax incentives and stable political system.Singapore authorities have also just unveiled new work visa rules to attract executives earning at least S$30,000 ($21,300) a month, hoping to draw in global “rainmakers”.($1 = 1.4083 Singapore dollars) More

Speaking at a housing conference, Reserve Bank of Australia (RBA) Assistant Governor Jonathan Kearns said the 225 basis points of rate hikes already delivered could lower prices by at least 15 percent over a two-year period, while also cutting borrowers’ maximum loan size by around 20 percent.”Estimates suggest the net effect is that mortgage payments for new buyers would be higher for about two years as a result of higher interest rates,” said Kearns.”But after that, the declines in housing prices and mortgage size begin to dominate,” he added. “It suggests that because higher interest rates reduce housing prices and so mortgage sizes, mortgage payments for new borrowers could ultimately be lower than if interest rates had not increased.”The central bank has faced much criticism for lifting rates for five months in a row to 2.35%, having last year forecast that rates were unlikely to rise until 2024.The housing market has cooled rapidly as a result, with data from property consultant CoreLogic showing prices nationally sank 1.6% in July from June.That was the largest monthly drop since 1983 and dragged annual price growth down to 4.7%, compared to a peak above 21% late last year.Kearns also noted that around 35 percent of housing credit is fixed-rate debt, and these borrowers would not face an increase in their interest expenses and loan payments until that fixed rate expired, likely from next year on.Kearns emphasised that there were many factors other than interest rates that affected house prices, including income growth, migration and building costs.”So overall we know that higher interest rates will tend to depress residential and commercial property prices but there is considerable uncertainty about the magnitude and even the timing,” said Kearns. More

The payment covers tax liabilities of a fund called BC German Equity Special Fund, which a Warburg subsidiary managed as an investment company in 2009. The custodian bank was BHF Asset Servicing, which was later swallowed by the U.S. bank, the report said.Deutsche Bank will contribute an amount of less than 10 million euros. A spokesman for Deutsche Bank told Handelsblatt that it was making a payment but declined to provide details. BHF earlier belonged to Sal. Oppenheim and was then taken over by the German lender.BNY Mellon (NYSE:BK) said the Handelsblatt report contains inaccuracies and false misrepresentations, while Deutsche Bank did not immediately respond to Reuters’ request for comment.The share-trading scandal known as “cum-ex”, which has blighted German political and financial circles for several years, has cost taxpayers billions of euros, lawmakers claim.A large number of banks have been searched by prosecutors investigating possible wrongdoing, with raids being conducted on the German branches of Barclays (LON:BARC), Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) in recent months.Government officials say the investigation involves some 100 banks on four continents and at least 1,000 suspects.($1 = 0.9985 euros) More

Good morning. The stock market downturn since the start of the year has caused the longest drought in US technology listings this century, with experts cautious about the pace of a revival even after tentative signs of life in other sectors. Wednesday will mark 238 days without a tech IPO worth more than $50mn, surpassing the previous records set in the aftermath of the 2008 financial crisis and the early 2000s dotcom crash, according to research by Morgan Stanley’s technology equity capital markets team. The US stock market has been rocked this year by the Federal Reserve’s battle to bring down inflation through aggressive interest rate rises. Higher rates hit stock valuations by reducing the value of future earnings, and have sparked fears that the economy will be pushed into recession. High-growth tech stocks dominated last year’s record-breaking IPO market and enjoyed some of the largest gains during the stock market boom, but they have also been disproportionately hit by this year’s sell-off. The tech-dominated Nasdaq Composite has fallen nearly 28 per cent so far this year compared with a drop of just over 19 per cent in the S&P 500, while the Renaissance IPO index, which tracks US companies that listed in the past two years, is down more than 45 per cent. “There’s a tremendous amount of uncertainty in the market right now, and uncertainty is the enemy of the IPO market,” said Matt Walsh, head of tech equity capital markets at SVB Securities. “I think we’ll need to see some stabilisation in the outlook and investors stepping back in to buy existing public securities before they’re willing to move further out on the risk curve and buy tech IPOs.”Do you have any feedback on today’s newsletter? Let us know at [email protected]. Thank you for reading FirstFT Asia and have a great week. — SophiaFive more stories in the news1. Typhoon Nanmadol hits Japan as millions are told to evacuate The storm made landfall yesterday near the city of Kagoshima on Japan’s southern island of Kyushu, with gusts of 100mph that damaged buildings and plunged over 200,000 households into a blackout. Local authorities have issued non-mandatory evacuation orders for millions of people.2. Central banks set to hit peak rates at faster pace After the world’s major central banks strengthened their resolve to tackle soaring prices, investors are pricing in a sharper surge in interest rates over the coming months. Markets expectations for year-end interest policy rates have risen, as policymakers have become concerned that without substantial rate rises, high inflation will prove hard to shift.3. UBS hires Chinese ‘content reviewers’ to vet research reports The Swiss bank is hiring a team to ensure that Chinese research publications by its analysts are free from “sensitivities”. The move comes three years after a top economist at UBS was suspended in a dispute over comments about pigs in China that were perceived as a racist slur.4. EU set to pull €7.5bn from Hungary over rule of law violations The European Commission recommended yesterday that member states vote to suspend around a third of Hungary’s cohesion funding in response to Budapest’s lack of transparency in awarding public contracts, shortcomings in Hungary’s efforts to tackle corruption, and weaknesses in prosecuting those who misused European funds.5. China’s cooling economy hits hot chip sector start-ups In the country’s Covid-ravaged economic climate, workers have been looking to switch careers to an industry being prioritised by Beijing — only to find that it too is suffering in the downturn and job prospects are dimming.The day aheadThe Queen’s funeral The state funeral of Queen Elizabeth II will take place today at Westminster Abbey. 500 heads of state and foreign dignitaries are expected to attend.UK dock workers strike More than 560 port operatives and maintenance engineers at Liverpool docks will begin a two-week strike over pay from Monday evening.Corporate earnings GSK spin-off Haleon reports its first set of earnings today since listing on the London Stock Exchange in July.Join board members and C-suite executives in person or online for the Cyber Resilience Summit on September 21-23 to hear remarks from speakers including Bill Clinton. Register for your pass today.What else we’re reading Xi and Modi’s critique of Putin signals a shift in the Ukraine war Public admonishments of Russian president Vladimir Putin by China and India have signalled a shift in global perceptions of the war, western officials have said, amid efforts by Europe and the US to erode the Kremlin’s international support.The race to reinvent the space station American companies, including Jeff Bezos’s Blue Origin and Lockheed Martin, have been spurred by a Nasa-funded competition to design privately owned replacements for the International Space Station when it is decommissioned by the end of the decadeThe strange death of the company phone number A growing number of organisations have quietly dispensed with customer support phone numbers, to the point that some governments are looking to mandate availability by phone. And those companies which still do offer support by phone are seizing on a competitive advantage. What we keep getting wrong about inflation When things get more expensive, that’s inflation — and it’s bad, so it seems. But an alternative view is Milton Friedman’s “inflation is always and everywhere a monetary phenomenon”. And this distinction matters, argues Tim Harford. Liz Truss’s chief of staff ‘engaged’ with FBI in bribery probe Mark Fullbrook, chief of staff to the UK’s new prime minister, says he is co-operating with US authorities as a witness in their investigation into a Conservative party donor charged over allegations he illegally provided campaign donations to a former governor of Puerto RicoSportRoger Federer, one of the most popular and successful tennis players in the sport’s history, has announced his retirement. He amassed a haul of 20 Grand Slam titles in almost two decades at the top of the game that made him one of the top earners in sport.From the archives: In 2019 Federer sat down with Simon Kuper to talk about his craft, being a father and what he has in common with Lionel Messi.

Roger Federer posted a message on social media on Thursday explaining his ‘bittersweet’ decision © Neil Hall/EPA-EFE/Shutterstock More

Years of economic mismanagement combined with the COVID-19 pandemic have left Sri Lanka in its worst economic crisis since independence from Britain in 1948, causing it to default on its sovereign debt.The country’s Ministry of Finance said in a statement via legal firm Clifford Chance that an online call on Sept. 23 would be open to all its external creditors and be “an interactive session” in which participants can ask questions.Sri Lanka’s woes came to a head in July when then-President Gotabaya Rajapaksa fled the country and resigned after violent public protests.His replacement Ranil Wickremesinghe has managed to reach a preliminary deal with the IMF that if formalised would provide the country $2.9 billion in loans over four years.”Authorities intend to update their external creditors on the most recent macroeconomic developments, the main objectives of the reform package agreed with the IMF … and the next steps of the debt restructuring process,” the statement dated Sept. 17 said.Debt crisis veterans cite uniquely difficult elements in Sri Lanka. The impoverished population that forced Rajapaksa to flee still needs to accept Wickremesinghe, seen by many as of the same political ilk, and who faces a bristling opposition.The country’s borrowings are so complex that estimates of the total range from $85 billion to well over $100 billion. Perhaps most challenging of all, competing regional powers China, India and Japan must also find common ground on how to reduce debt they are owed by Colombo. More

Interest rate decisions from the Fed, People’s Bank of China, and Bank of Japan – the week ahead doesn’t get much bigger than that, and it couldn’t be coming at a more critical time for Asian and world markets.Investors ran for the hills last week as yet another eye-popping, upward repricing of U.S. interest rates crushed stocks and bonds, sent the dollar soaring, and dramatically tightened financial conditions. It’s not just the levels many key bond yields and exchange rates find themselves at, it is how fast they have gotten there. Six weeks ago the two-year U.S. Treasury yield was around 2.80%. On Friday it rose above 3.90%.The Fed is widely expected to raise rates another 75 bps on Wednesday, with an outside chance of 100 bps. There is far more uncertainty surrounding the PBOC and BOJ, both of whom are seeing the rampant dollar tank their exchange rates.The BOJ has made warning noises that it could intervene in the FX market to support the yen, which is at a 24-year low. It is also under growing pressure to abandon its ultra-loose “yield curve control” policy that’s fueling the yen’s weakness. The PBOC, meanwhile, is faced with a yuan sliding to a two-year low through 7.00 per dollar, but is coming under increasing pressure to inject stimulus into a fragile economy hobbled by a bloated, creaking real estate sector. Difficult decisions in the most testing times. Given how bearish and jittery investors are right now, it is hard to see what might stop the rot and revive the yen and yuan’s fortunes. Rate decisions from the Philippines and Indonesia later in the week, and policy meeting minutes from the Reserve Bank of Australia, will help steer these currencies too. But the three big guns will call the shots.Key developments that should provide more direction to markets on Monday: UK PM Truss meets President Biden ECB’s de Guindos speaksUS NAHB housing data (September)Chinese FDI (August) More