Ecuadorian President Guillermo Lasso has activated a “mutual death” clause to dissolve congress and trigger new elections after he was faced with impeachment charges for alleged embezzlement. During the next six months, Lasso will rule by decree and legislative and presidential elections will be convened. Lasso’s activation of the clause known as mutual death, which has been in the country’s constitution since 2008, comes at a time of heightened turmoil in Ecuador.
Global debt has risen to nearly $305tn in the first quarter of 2021, according to the Institute of International Finance (IIF). The IIF is concerned about the rising cost to service this debt and what it could mean for the financial system's leverage. Aging populations and increasing healthcare costs are creating pressure on governments, with rising national defence spending also expected. The IIF is also anxious that liquidity problems for smaller banks could restrict their lending to households and businesses, while the report also discussed the "large portion" of corporate debt held by life insurance companies and rising shadow banking.
Asian investors are eyeing several significant economic indicators from Japan and Australia on Thursday, as well as an interest rate decision from the Philippines. However, the main hope for a rebound in Chinese markets could be the prospect of a US deal on the federal debt ceiling, which has boosted stocks and the dollar. The mettle of that claim may be tested, however, after the poorest set of Chinese economic indicators in over six months caused a 1% decline on Wednesday. Nonetheless, Japan is on a high after Q1 GDP growth outperformed expectations and the Nikkei rose over 30,000 points for the first time in 20 months.
Former UK Chancellor Kwasi Kwarteng has refused to apologise for financial turbulence triggered during his time in office with Liz Truss. These results included raised mortgage rates amid market uncertainty caused by Kwarteng's mini-budget, which Truss's successor and Chancellor Jeremy Hunt moved to counteract. Kwarteng refused to apologise, instead calling for loyalty to the Tory party leader while suggesting cutting taxes in a careful but inventive way. Truss's brief time as prime minister came to an end after her budget reportedly cost British taxpayers tens of billions of pounds and resulted in Bank of England intervention to prevent pension fund collapse.
Column: Investors favor Japan's rising sun over China's fading star: McGeever
Reuters
23-05-18 00:21
Bank of America's latest surveys, reissued Wednesday, shows investors both in favour of Japanese equities and selling off Chinese assets amid changing economic fortunes for both countries. While Japanese stocks are now at levels not seen for over 30 years, Chinese assets - particularly bonds - are falling out of favour among investors as the country's economic growth slows.
European stocks have rallied as concerns over a potential US government default and the health of regional banks have eased. The Stoxx 600 rose 0.4% following two days of losses, while France’s Cac 40 moved up 0.6% and Germany’s Dax 1%. London's FTSE 100 also rose 0.5%. The gains in Europe followed a 1.2% rise for the S&P 500 and a 1.3% gain for the Nasdaq Composite in the US. The rally came after US President Joe Biden said he was "confident" of reaching a budget agreement with Congress. The KBW regional banking index rose 7.3% on Wednesday after share-buying in the banking sector boosted sector confidence, helped by reports that Western Alliance's deposits grew by $2bn in Q2. Asian markets also rose following the Wall Street jump.
The European Central Bank (ECB) will need to continue raising interest rates further to reach its inflation goal of 2%, according to ECB Vice President Luis de Guindos. He said that most of the tightening has been done, but there is still "some way to go". Markets expect another 25-basis-point increase at the ECB's June meeting, with de Guindos also stating that he hopes growth will continue in Spain and Italy. Eurozone inflation rose to 7% from 6.9% in March, while the underlying price growth slowed a touch, but the services component continued to accelerate.
The FTSE 100 recovered on Thursday, rising 0.5% due to optimism in global markets, despite BT Group's stock falling 8.6% as it reported weak cash flows and a plan to cut up to 55,000 jobs by 2030. Luxury carmaker Aston Martin saw its shares rise over 21% after announcing that Geely Automobile Holdings had pledged to invest £234m ($295.33m). Burberry Group's fourth-quarter sales exceeded expectations, although its shares lost 5%. The domestically focused FTSE 250 rose 0.3%.
China woos Central Asia as Ukraine war weakens Russian influence
CNN
23-05-18 07:21
Leaders from Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, are meeting in Xi’an, China, to discuss trade, regional stability and security. It is the first in-person meeting of the Central Asian heads of state together with China since the establishment of diplomatic relations after the fall of the Soviet Union. China hopes to expand its influence over the region, which has long been considered Russia’s sphere of influence. China presents these meetings with the Central Asian leaders as the “first major diplomatic activity” it has hosted this year and an opportunity to draw a “new blueprint” with the post-Soviet states that lie between its western borders, Europe and the Middle East. Beijing and Central Asian nations are expected to sign agreements on economic co-operation, as the region suffers from the knock-on economic effects of Russia's war in Ukraine. The leaders will also discuss security co-operation and ensuring stability in the wake of unrest and militant threats, with China seeking to ensure security but not take up Russia's broader regional security role.
India's Gland Pharma reports lower Q4 profit on soft demand
Reuters
23-05-18 13:51
Gland Pharma, the majority of which is owned by Shanghai Fosun Pharmaceutical, reported its Q4 2019 profit fell 56% due to weak sales in its key markets. Consolidated profits before tax and exceptional items fell to INR 1.68bn ($20.54m) from INR3.80bn from the previous year. The Indian company has a business-to-business model and depends on core markets including the US, Canada, Europe, New Zealand and Australia, which provide 70% of its revenue; access to capital markets for funding and the stability of these markets has therefore been key to success.
Banks should collaborate on data to improve their fight against financial crime by enabling financial institutions to share information from within and outside their networks, according to the CEO of Nasdaq, Adena Friedman. Speaking in the Financial Times, she said the increase in financial crime was partly due to regulations that limited banks’ use of data and technology. Friedman spoke of the benefits of the New York exchange's own approach to combating financial crime, in which data from over 2,400 banks was used in conjunction with advanced artificial intelligence algorithms. Regulators should also allow banks to use data sets in order to combat crime and employ cloud-based AI and machine learning to tackle the problem.
Chile's economy up for 2nd straight quarter as recovery tries to gain steam
Reuters
23-05-18 13:22
Chile's GDP increased by 0.8% in Q1 2023 from the previous three-month period, marking the Andean country's second consecutive quarter of positive growth after the economic decline resulting from the COVID-19 pandemic. However, the new figure is lower than market expectations and the country is still facing challenges arising from high inflation. Internal demand fell by 8% in the period because of lower investments and consumption, while falling commerce and agriculture and forestry also had a downward influence on activities, according to the central bank.
Bank of New York Mellon has priced a $500m debt offering using minority-owned investment firms as underwriters. The bookrunners, all led by diverse entities, will handle senior medium-term bank notes. The offering is expected to close on 24 May. It is the first time a global systemically important bank has completed an offering in this way, according to the firm. The underwriters included R Seelaus, Ramirez & Co, Academy Securities, Siebert Williams Shank, and Loop Capital Markets.
Bank of Canada Governor Tiff Macklem has suggested that April's rise in inflation in the country, the first increase in ten months, was an anomaly and consumer prices would continue to decline leading to markets scaling back their predictions for interest rate hikes. Prior to his comments, money markets were positioned with an 80% chance of a rate hike in July, a probability that has now reduced to 60%. The central bank affirmed that it is increasingly worried about households' abilities to pay off debts, revealing that it has detected signs of financial stress among borrowers.
The ministers of commerce and trade representatives of the US and China are set to meet next week in the US, according to Liu Pengyu, a spokesperson for China's embassy in Washington. The Chinese Commerce Minister, Wang Wentao, is expected to meet with Commerce Secretary Gina Raimondo in Washington before heading to Detroit for an Asia Pacific Economic Cooperation trade ministers meeting. While both China and the US have expressed a willingness to communicate, Liu noted that talks must be founded on mutual respect. Neither Raimondo nor US Trade Representative Katherine Tai have responded to requests for comment.
The Turkish lira reached an all-time low against the dollar following President Erdogan's stronger-than-expected showing in the recent presidential election, with the currency losing over 1% since the vote. The equity markets and banking stocks fell further, leaving many of the bonds and issues below the 70 cent margin for distressed territories, although the cost of insuring the country's debt against default fell slightly. Foreign investors have become increasingly wary of investing in Turkey, with net international reserves dropping to over a 21-year low, while Turkish banks are restricting access to individual loans and postponing decisions on extending corporate loans.
The Canadian dollar has weakened against the US dollar, losing 0.5% and trading at 1.3520 to the US$ as oil prices fell and Bank of Canada Governor Tiff Macklem failed to endorse the economic markets' recent move to price in another interest rate hike by the central bank. Macklem commented on April's inflation increase, saying he believed that this was an anomaly, and that consumer prices would continue to come down, following the release of the Bank of Canada's financial system report. This differs from the views of the economic market, which sees an estimated 60% chance of the central bank increasing interest rates again by July 2018. The result of this is that the money markets lowered this percentage from 80% prior to the comments made by Macklem.
Turkey’s lira hit a new all-time low of 19.8050 against the dollar on Thursday following the recent election in which President Recep Tayyip Erdogan unexpectedly emerged as the frontrunner. The currency has already lost more than 1% since the outcome of the vote was announced earlier this week. Its decline of 44% this year and 30% so far in 2022 is primarily attributable to Erdogan’s economic policies.
Brazilian retailer Americanas is seeking potential buyers for its Hortifruti Natural da Terra business unit. The details of the sale process were disclosed by the firm in a securities filing. Americanas disclosed it has hired Citigroup Global Markets Brazil to manage the sale process. The company has approached several parties over the sale of its Ame financial services arm, and has said it will consider strategic alternatives for the business if the Ame deal fails to materialise.
Bank of Canada Governor Tiff Macklem has said that Canadians should not expect interest rates to drop back to the very low levels seen over the past decade. Macklem stressed that the era of historically low borrowing costs that followed the 2008/09 financial crisis is a thing of the past and that the surge in inflation over the past two years, followed by the central bank’s recent rate-hike campaign, have put the economy on a path on which borrowing costs are to be persistently higher. His comments suggest that the bank is prepared for an extended battle to combat inflation.
