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Calm or misfortune? by Reuters




© Reuters. FILE PHOTO: People walk through the City of London during rush hour in London, Britain, October 3, 2022. REUTERS/Henry Nichols/

LONDON (Reuters) – For now, Britain is still the key to seeing whether a calmer mood can dominate markets wary of turmoil in the United Kingdom that has fueled broader concerns about financial stability.

Traders are back to watch for intervention in the Japanese yen, as earnings season kicks off in the US and the ruling Communist Party congress in China.

Here’s a look at next week’s markets from Kevin Buckland in Tokyo, Louis Krauskopf in New York, and Tommy Wilkes and Dara Ranasinghe in London. Vincent Flasser’s drawings.

1/ Another resort buyer


Except for a last-minute extension, from Monday, the Bank of England will not be the last buyer of troubled UK bonds.

The government’s “mini-budget” on September 23 triggered some of the biggest jumps ever in UK bond yields, sparked fears in broader markets and sparked a crisis among pension funds that need to find ample amounts of cash.

The Bank of England has had to intervene frequently to ensure financial stability, even as these measures run counter to its mission to combat inflation by raising interest rates and selling some of its bonds.

The pension industry has warned that plans are not ready to end bond buying, while the government has suggested that if more volatility occurs, the blame lies with the Bank of England. Rising expectations that the government will move the most unfunded tax cuts should end much of the pain. If it doesn’t, prepare for a messy Monday.

Chart: UK government bond yields soar –


2/ Pressure test

On top of the turmoil in the UK, anxiety caused by decades of high inflation, an energy shock and skyrocketing global interest rates are putting markets to a stress test.

The massacre in British bonds exposed weaknesses in the pension sector, and highlighted financial stability risks. Therefore, the coming days will see increased focus on other potential hotspots that have come under the radar of regulators.

The IMF warns of “disorderly re-pricing of assets” and “contagion of financial markets”. Asset manager PIMCO believes the UK is unlikely to be the only source of instability, adding that private loan and credit markets may also face pressure.

Graph: US fixed income market volatility-


3/ Earnings of the season

Earnings season in the US in the third quarter heated up as companies reported results in a tough operating environment due to a strong dollar and rising inflation.

Overall corporate earnings are expected to rise 4.1% compared to the same period a year earlier, the slowest growth since the fourth quarter of 2020.

But there may be more focus on how CEOs envision the future; Analysts estimate a roughly 8% rise in profit next year, according to Refinitiv IBES, but many investors are skeptical of that forecast as recession risks loom.

The slide in the market has moderated stock valuations, but lowering earnings expectations could weaken the stock’s attractiveness. Upcoming earnings reports include results from Tesla (NASDAQ :), Netflix (NASDAQ :), and Johnson & Johnson (NYSE:).


Chart: Scary US earnings season –

4 / Not the economy, my friend

China’s twice-a-decade congress kicks off on Sunday and the week-long closed chamber is set to give Xi Jinping an unprecedented third five-year term as supreme leader, ensuring his place as the country’s most powerful ruler. Since Mao Zedong.

It puts Xi in a position to pursue his vision of “the rejuvenation of the Chinese nation,” which includes “common prosperity” policies that have toppled giants including Ali Baba (NYSE:) and Evergrande. The desire to bring Taiwan under Beijing’s control is escalating tensions with Washington.

As for the economy, Xi has let that fall victim to other priorities: Growth is set to miss the 5.5% target after repeated shutdowns under the Zero COVID program. The latest GDP reading is due on Tuesday, after real growth stalled in the second quarter.


Hopes for an easing of epidemic controls at this conference may turn out to be unfounded, considering how Beijing faced an escalation of cases just before that by preventing many travelers on the last Golden Week holiday from returning to the capital.

Graphic: Lukewarm Economic Growth in China

5 / hour intervention

Traders are back on the lookout for currency intervention as the dollar climbed to a 24-year high against the yen and returned to multi-year highs against the Korean won.

The Japanese currency drifted to the cusp of 147 against the dollar on Wednesday, crashing through the bottom at 145.89 that prompted the Bank of Japan to intervene last month to support the yen for the first time since 1998.


South Korea also sold billions of dollars in the last quarter to prop up its currency, with the won dropping to a 13-year low of 1,445 against the dollar last month. However, it hasn’t strayed far from there, getting close to 1440 this week.

China is likely to deploy state banks to sell dollars and ease the yuan’s slide to 14-year lows, and traders are concerned about more serious steps ahead.

Graphic: Japan’s history of yen support-

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Bad Job Data | financial times




This article is an in-site version of the unprotected newsletter. Participation over here To have our newsletter sent straight to your inbox every day of the week

good morning. It turns out that the United States is not going to win the World Cup. Another bad prediction for the Unhedged Foundation, but we won’t be disappointed. We now expect a glorious victory for England, which will close immediately UK stock discount. Email us: &

Bad news about jobs

The stock market bulls have no use for strong job growth now. A strong economy means a relentless Fed and thus a greater chance of a recession.

In this context, the headline for the November payroll report on Friday looked bad, which means strong. Average hourly earnings grew at the fastest pace over the year. Combined with upward revisions to wage data for September and October, many concluded that it was time to dash hopes that the labor market would cool off without help from a hawkish Federal Reserve.

However, the report was noisy. Some wondered if, after A.J Steep decline In survey response rate, data should be taken at face value. Others have argued that lower hours may have tainted hourly earnings data. Here is Preston Moy at Employment America:


Average hourly earnings are derived by dividing “total dollars spent on payroll” by “total hours worked,” so bustling movements in hours worked are reflected in average earnings. For example, higher workplace absences due to illness can increase working hours while keeping total payroll expenses high, resulting in higher average earnings. Sectoral inflection points – such as the recent downturn in transportation and warehousing jobs – could raise average earnings if disproportionately low-wage workers are let go.

Moi prefers to focus on the recent slowdown in other wage measures. That’s fair enough. Wage growth appears to have peaked.

These details are important, and the big picture is clear enough. By most measures, the job market is very tight (although it has softened slightly) and wage growth is very hot (although a little cool). Some are reassured by marginal changes in the right direction, but charts like the one below, from Barclays, don’t make us feel confident that normalcy is on the horizon:

It is worth explaining why wage growth is important to inflation. Here’s what Jay Powell thought of his speech last week:

Finally, we come to basic services other than housing. . . This may be the most important category for understanding the future development of core inflation. Since wages constitute the largest cost in providing these services, the labor market holds the key to understanding inflation in this category

The idea that wages drive higher prices for services seems counterintuitive. You get your hair cut and most of what you pay goes to the hairdresser. The price of a haircut and the wages of a hairdresser are closely related.

In reality, though, not all services work this way (car repairs depend on parts costs, transit on fuel costs, etc.). As we wrote last Thursday, Powell’s claim is perfect. The best way to understand the wage inflation link is that it works through consumption, as Matt Klein explained in his latest issue of override:

It is not that higher wages increase corporate costs. . . The bigger issue is that income from business is the largest and most reliable source of financing consumer spending. Wages can rise 1-3 percentage points faster or slower than consumer prices for a variety of reasons – including but not limited to compositional and definitional differences – but larger gaps between wage and price growth rates do not exist essentially outside of World War II and the rationing of war Korean, the productivity boom of the late 1990s, and the first year of the pandemic.

High wage growth is important because it keeps consumption above trend, which supports inflation. High wages are not the only reason behind high rates of consumption. Consumers still have a lot of savings. Strategas puts the excess savings balance (relative to pre-pandemic levels) at $1.3 trillion, which, on current trend, could take about 14 months to run out. But the Fed cannot withdraw savings from individuals’ bank accounts. The lever to reduce consumption makes the labor market worse for workers, forcing them to rely on dwindling savings until spending falls as well.


The market believes that the Fed will succeed in bringing inflation back to target, and quickly. See the dark blue line in the Barclays chart. Other lines show past market efforts to forecast inflation:

Hence the rebound in stocks since October. The market is pricing in some type of soft landing.

There are three main ways it could be wrong. First, the Fed manages to deal with inflation, but that takes time and causes a recession at the same time. This is an Unhedged view. Secondly, the Federal Reserve accept inflation slightly above its current target, and it’s fortunate enough to avoid a recession and inflationary spiral. The third is a big, stupid mistake in Arthur Burns style policy, as Bank of America’s Ralph Axel argues in a recent note:

We believe that the markets have become complacent with how simple the Fed’s path has been, and therefore the markets’ trajectory. The current view of the market is that it is one battle and once victory is declared the game is over and it is time to buy. . .

The main flaw in our view of the Fed in the 1960s and 1970s is the same as it is today: The Fed wants to do no harm. While today the Fed is aware of its protectionist policy “mistakes” in the recent inflationary episode, it has already demonstrated its penchant for continued dovish choices with its slow transition away from easy policy in 2021 and its desire to move closer to bound rates more often. Slower pace while inflation is still very high and jobs average around 300k a month. . .

In the 1960s, the Fed eased after periods of high unemployment, raising rates again and then easing again, allowing inflation to fester for 15 years in this halting approach. We think the Fed is liable to repeat these mistakes

We don’t think the Fed will make that mistake. Yes, it will likely raise rates by 50 basis points instead of 75 at this month’s meeting, and future rate increases could come in 25 basis point increments. But this option is about preserving discretion, not a policy of facilitation. Federal Reserve officials are Aware Stop and go hazards. Don’t overthink: The biggest risk to markets is that the Fed needs to be tough, and it is. (Wu & Armstrong)


Good read

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Global central banks extend November rate hike push by Reuters




© Reuters. FILE PHOTO: The Federal Reserve building is seen in front of the Federal Reserve Board and is expected to signal plans to raise interest rates in March as it focuses on fighting inflation in Washington, US, January 26, 2022. REUTERS/Joshua Roberts/File Photo

Written by Karen Stroeker and Vincent Flasser

LONDON (Reuters) – The pace and scope of interest rate hikes by central banks in November accelerated again as policymakers around the world grappled with decade-long high inflation.

Central banks that oversee six of the 10 most traded currencies delivered 350 basis points of rate increases between them last month.

The US Federal Reserve, the Bank of England, the Reserve Bank of Australia, the Norwegian Bank of Norway, Sweden’s Riksbank and the Reserve Bank of New Zealand all raised interest rates in November.


The European Central Bank, Bank of Canada, Swiss National Bank and Bank of Japan did not hold rate-setting meetings in November.

The recent moves raised the total interest rates in 2022 from the G10 central banks to 2,400 basis points.

Interest rates will continue to rise, said Alexandra Dimitrijevic of global agency Standard & Poor’s (NYSE:) in Standard & Poor’s (NYSE:) ratings, looking forward to 2023. “Central banks’ determination to lower inflation suggests that interest rates should continue to rise. “.

Interest rates in developed markets

Global financial markets have been in a tailspin in recent weeks as investors try to gauge how quickly and to what extent the US Federal Reserve and other major central banks will raise interest rates to combat inflationary pressures, while fears of a slowdown in global growth linger. spread out.


Some nascent signs that US inflation may be slowing have cheered markets in recent days, as Federal Reserve officials are scheduled to meet on December 13-14.

On Wednesday, Federal Reserve Chairman Jerome Powell said the US central bank may lower the pace of interest rate hikes “as early as December.”

Data from central banks in emerging markets showed a similar pattern. Eight of the 18 central banks delivered a total of 400 basis points to raise interest rates in November – from 325 basis points in October, but somehow less than 800 basis points per month in both June and July.

Emerging market interest rates

Indonesia, South Korea, Mexico, Thailand, Malaysia, the Philippines, Israel and South Africa all raised interest rates in November, indicating the wave of policy tightening towards Asia and a shift away from emerging Latin America and Europe, as the cycle draws to a close.


Nafez Zouk said Aviva (LON:) Investors.

Outside Turkey, where President Recep Tayyip Erdogan is pushing for lower interest rates, it made another record cut of 150 basis points to bring rates down to single digits, even though inflation has soared to more than 80%.

Not all EM central banks in the sample held rate-setting meetings last month.

Calculations showed that central banks in emerging markets raised interest rates by a total of 7,165 basis points year-to-date, more than double the 2,745 basis points for the full year of 2021.

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FirstFT: CBI warns of a one-year recession in the UK




good morning. This article is an in situ version of our website FirstFT the news. Subscribe to our site AsiaAnd the Europe/Africa or The Americas A release to send straight to your inbox every weekday morning

The United Kingdom will fall into recession for a year in 2023 As “stagflation” the combination of high inflation, negative growth and declining business investment affects the economy, according to Britain’s largest business group.

The Central Bank of Iraq warned that the gross domestic product will decline by 0.4 percent in 2023, which is a decrease from its previous forecast for growth of 1 percent set in June. She said consumer spending would decline throughout the year as inflation remained above the BoE’s target.

The lobbyist gave its own gloomy forecasts for business investment, which it said would start to decline from the middle of next year when the current “super-deductible” tax break scheme designed to boost investment ends.

Business investment is expected to be 9 per cent below pre-Covid pandemic levels by the end of 2024 – the equivalent of around £5 billion.


CBI Director General Tony Danker warned:[Companies] Seeing potential growth opportunities, but not having ‘reasons to believe’ in the face of headwinds causes investment to pause.”

The UK’s economic outlook is among the weakest of the developed countries covered in the CBI report, with only Germany’s GDP set to decline at a slightly faster pace next year.

1. Europe cuts gas demand by a quarter Interim data from commodity analytics firm ICIS showed that gas demand in the European Union was 24 percent lower than the five-year average last month, after a similar decline in October, in the latest evidence of the bloc’s success in reduce its dependence on Russian energy Since Moscow’s invasion of Ukraine.

2. War and weather to keep food prices high Bad weather and war events are set in Ukraine Keep food prices high Despite signs of moderation in global commodity markets, economists and agriculture experts have warned. Costs are likely to remain well above pre-pandemic levels because wars and droughts limit producers’ ability to increase supply.

The line graph of annual percentage change shows that the moderation in food prices in world markets has not yet interfered with the decline in consumer inflation.

3. The European Union is pledging to simplify aid rules to compete with Biden’s climate package The European Union should “Simplify and adapt” its rules On government aid to counter the US $369 billion climate package, European Commission President Ursula von der Leyen said yesterday in her first public response to Washington’s support for green energy. EU leaders said the plan risked “dividing” the transatlantic union by enticing European companies to relocate.

4. The court paves the way for the sale of the Belgian steel mills in Gupta Can Sanjeev Gupta He loses control of his steel mills in Belgium After a court in Liège last week upheld a request from workers at its Liberty Steel subsidiary to begin restructuring. The court appointed a legal representative to supervise the sale of two factories at Flémalle and Tilleur.


5. A report calling for the suppression of asylum seekers in the UK Britain’s Home Secretary, Soyla Braverman, has welcomed a report by a centre-right think tank calling for an amendment Great repression of asylum seekers who come to Britain using illegal routes. The report says that “if necessary” the UK should withdraw from the European Convention on Human Rights to address the problem.

next day

economic indicators S&P Global released the November Composite PMI for the European Union, the Services PMI for Russia, and the Composite PMI with Cips for the United Kingdom. In the US, ISM publishes the Non-Manufacturing PMI.

WHO meeting The World Health Organization is meeting in Geneva to review the new pandemic control convention.

Brussels bombing trial Belgium’s largest criminal case against suspects in the 2016 Brussels attacks that killed 32 people and left hundreds injured has been brought to court.

Saint Nicholas Ev Holland celebrates the pre-Sinterklaas night.


cricket England and Pakistan face off on the final day of their first Test match in Rawalpindi.

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FT Person of the Year: Volodymyr Zelensky The 44-year-old Ukrainian president, who before the February invasion was seen by many as something of a joke, embodies the resilience of his people and has become the standard-bearer of liberal democracy. He has earned a place in history for him An exceptional display of ride and stability.

“I wish our students would be more resilient to bad feedback.” She is preparing to step down this month Louise Richardson, Vice-Chancellor of the University of OxfordHe talks to Henry Mance about cancellation culture, public schools, why universities shouldn’t be corporations, and the need for free speech.

Louise Richardson says:
“I worry that academics are afraid of taking on public office because they just don’t want to be subservient to social media,” says Louise Richardson. © Charlie Bibby / FT

How Sam Bankman-Fried blurred the lines between FTX and Alameda In an interview with the Financial Times, the founder of FTX said he did He isolated himself from trading and risk management in the Alameda Research business, which he owns majority, but he also admitted his involvement more closely than he had previously disclosed. “We kind of lost track of the spot risks,” he said.

Find the next market break With soaring inflation, soaring interest rates, and financial shocks sucking liquidity out of the markets, and sudden price moves sparking malicious margin calls and forced sell-offs, where will the next shock come from? Here are the corners of the market Which is closely watched by decision makers and investors.

The 4-Day Week: Does It Really Work? About 70 British companies, involving 3,300 employees, took part in a four-day-a-week trial, with researchers at Cambridge University, Boston College and Oxford University measuring the impact of a shorter week on productivity and well-being. This is what four companies discovered.



Instead of “perfectly” renovating the house, bring it back to imperfection. Maiden outdated – and there A fresh and sustainable aesthetic It displays the scars of the past while preserving the building’s history and collective memory.

Restoration of Clandon Park House in Surrey, which was destroyed by fire in 2015, will preserve parts of its burnt condition
Restoration of Clandon Park House in Surrey, destroyed by fire in 2015, will preserve parts of its burnt condition © National Trust Images / James Do

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