The US has carried out air strikes against Iran-linked militia groups in eastern Syria in retaliation for recent attacks on American and coalition personnel in Iraq. The military action on Thursday was the first ordered by President Joe Biden since taking office and was described by John Kirby, Pentagon press secretary, as a proportionate response. “At President Biden’s direction, US military forces earlier this evening conducted air strikes against infrastructure utilised by Iranian-backed militant groups in eastern Syria,” Kirby said in a statement. He added that the US strikes had “destroyed multiple facilities located at a border control point used by a number of Iranian-backed militant groups”. A defence department official said it was believed that “up to a handful” of people had been killed in the operation. Shia militia groups have claimed responsibility for attacks on US facilities in Iraq in recent weeks. A rocket attack last week killed a civilian contractor and injured several others, including a member of the US military. One of the most powerful US bond managers has warned of an “inflation head fake”, where misplaced concerns about a rise in consumer prices cause a jump in bond yields. The comments by Dan Ivascyn, chief investment officer at Pimco, which has $2.2tn under management, come after long-dated US Treasury yields climbed to their highest level in a year. The dramatic move reflects expectations of a robust economic recovery, further fiscal stimulus from Joe Biden’s administration and the willingness of the Federal Reserve to tolerate core inflation running above 2 per cent. “There is a material risk for the bond market of an inflation head fake,” Ivascyn told the Financial Times. “This could be a powerful recovery and we have never gone from locking down an economy to opening it back up with this amount of stimulus.” Pimco expects any inflation pick-up will prove temporary, but “the bond market may not come to that conclusion in the near term”, Ivascyn said. Inflation will remain contained because of long-established trends such as technological innovation cutting costs and the weakness of organised labour, Pimco has argued. Slack will also linger in the labour market due to high unemployment, Ivascyn said. “We still see powerful disinflationary trends. After an initial recovery [from the pandemic] there is likely a world of excess capacity,” he said. The global government bond sell-off deepened on Wednesday, with the 10-year US Treasury yield jumping above 1.4 per cent for the first time since the start of the coronavirus crisis. European government bonds were also caught-up in Wednesday’s selling, sending yields on British, French, German and Italian bonds rising. The drop in prices is the latest leg of a broad shift away from government debt that has been driven by a more upbeat global economic outlook and rising concerns over inflation. The 10-year Treasury yield rose as much as 0.09 percentage points on Wednesday to reach 1.4337 per cent, having started the year at around 0.9 per cent. Longer-term Treasuries faced more intense selling since they are more vulnerable to changes in inflation expectations. The global bond market is suffering its worst start to a year since 2015 as investors grow increasingly confident that the rollout of Covid-19 vaccines will boost economic growth and fan serious inflationary pressures for the first time in decades. As the pandemic ravaged the US economy in 2020, Jay Powell publicly pushed Congress to approve more government stimulus to support the recovery and complement the central bank’s easy money policies. But in recent weeks, the Fed chair has switched to a more neutral stance on the need for more fiscal support, just as US President Joe Biden and Democratic lawmakers are trying to approve an additional $1.9tn in government spending. The shift was apparent as Powell faced two days of questioning from lawmakers on Capitol Hill this week and repeatedly refused to take a position on Biden’s top legislative priority, which is staunchly backed by Democrats and resisted by Republicans. Facebook has agreed to restore Australian news on its platform “in the coming days” following an agreement with the government on amendments to a proposed law that would force Big Tech to pay for news. The world’s largest social media company said on Tuesday it was satisfied that “a number of changes and guarantees” it had agreed with Canberra addressed its concerns over the bill. The proposed law is being debated in parliament and could become a model for other governments’ efforts to reframe the relationship between dominant tech platforms and the media. Facebook had argued that the legislation “fundamentally misunderstood” its interaction with publishers and penalised the company “for content it didn’t take or ask for”. It abruptly blocked the sharing of news in the country altogether last week, causing a public backlash after access to critical emergency services and health pages was cut off. “Facebook has refriended Australia, and Australian news will be restored to the Facebook platform,” said Josh Frydenberg, Australia’s treasurer. “Facebook has committed to entering into good faith negotiations with Australian news media businesses and seeking to reach agreements to pay for content.” Microsoft has joined forces with Europe’s publishers to deepen the troubles of Google and Facebook, launching a project to develop an Australia-style arbitration system for the EU that would force Big Tech to pay for news. The move by the Seattle-based company is one of its most brazen yet to align with the press industry, exploit the difficulties of its Silicon Valley rivals and promote its own search engine Bing as a copyright-friendly alternative for news. The project announced on Monday will involve Microsoft working with Europe’s four leading lobby groups for news publishers to develop a legal solution to “mandate payments” for the use of content by “gatekeepers that have dominant market power”. The informal coalition, which will propose that the plan is added to upcoming EU legislation on Big Tech, includes the European Publishers Council, News Media Europe, and the associations for European magazine and newspaper publishers, which together represent thousands of news outlets. Microsoft and the publishers said on Monday that they would support a form of arbitration, and would look closely at the model developed in Australia, which prompted Google to strike a flurry of licensing deals and Facebook to stop sharing Australian news on its service. The plans — this time guided by a cautious “data not dates” approach — detail dates for the reopenings of schools and businesses alongside new rules for socialising, while the vaccination programme rolls on. Data permitting, all restrictions are set to vanish by the end of June. Three studies on vaccine effectiveness, released today to buttress the government’s proposals, will also be noted closely by other countries. The UK was not only the first to begin mass vaccination with authorised jabs but also — controversially — extended the interval between doses from four to 12 weeks, a decision seemingly justified by the new data that show single doses can significantly cut the risk of hospitalisation, even among the elderly. Donald Trump was acquitted of inciting an insurrection in last month’s deadly assault on the US Capitol, as Republican senators closed ranks at the former president's second impeachment trial. The Senate voted 57-43 on the question of whether Trump was guilty of inciting an insurrection. Seven Republicans — Richard Burr, Bill Cassidy, Susan Collins, Lisa Murkowski, Mitt Romney, Ben Sasse and Pat Toomey — joined Democrats in voting to convict the president. Trump was cleared because two-thirds of the Senate would have needed to find the former president guilty for him to have been convicted under the US constitution. Democrats had hoped to convict Trump and then hold a simple majority vote to bar him from holding public office in future. Trump has not ruled out running for president in 2024. The acquittal caps a dark period in US political history that began with Trump's rejection of the November 3 election results and culminated in the worst episode of political violence in the halls of the US Congress in more than two centuries. The swift conclusion of the trial after five days will free up political space and the legislative calendar for Congress to move ahead with talks to pass Joe Biden's $1.9tn economic stimulus plan, his top priority since his inauguration on January 20. Donald Trump has not spoken in public in more than three weeks, an uncharacteristically long stretch of silence for the former president who built his political career on nonstop social media posts and television appearances. But his voice was omnipresent in Washington this week, as Democrats repeatedly used Trump’s own words against him. They deployed hundreds of tweets and videos to burnish their argument that he must be convicted at his Senate impeachment trial for inciting the deadly January 6 siege of the US Capitol. Many Republicans were unimpressed. Rick Scott, a senator from Florida, spent much of Thursday doodling on blank maps of Asia and Europe at his desk in the Senate chamber, while others distracted themselves by reading books or their iPads. Some of Scott’s colleagues left the room for extended periods of time. Their abject lack of interest underscored what many Democrats and Republicans already know to be a fait accompli: Trump won’t be convicted. Trump’s all but certain acquittal — which could come as soon as this weekend, after the former president’s lawyers make their own arguments — will be a blow to opponents who wanted to see the former president convicted and barred from holding future office. Mario Draghi has been sworn in as Italy’s new prime minister after forming a national unity government that faces the tough task of marshalling a recovery from the Covid-19 crisis. On Saturday Draghi, a former president of the European Central Bank, was officially appointed by Sergio Mattarella, Italy’s head of state, in a ceremony held in the Italian presidential palace in Rome. Draghi becomes Italy’s 30th prime minister since the birth of the republic in 1946 and, having won the backing of almost every large Italian party, will lead a mixed government of made up of a number of technocrats in central roles as well as politicians. Draghi, one of Europe’s most highly regarded public officials, was unexpectedly called in by Mattarella earlier this month after the previous coalition collapsed in the middle of the latest pandemic wave. A flurry of tech and ecommerce listings have given Europe’s market for initial public offerings its best start to the year since 2015, as extended pandemic lockdowns fuel investor enthusiasm for digital companies. So far this year, companies listing on European stock exchanges including London’s have sold €8.4bn in equity through 16 deals, according to Refinitiv data. That figure, which includes new funds raised and owners cashing out stakes, was the biggest haul and number of IPOs for the comparable period since 2015. It was the second-biggest amount raised in data going back to 1998. About 70 per cent of the equity sold was in companies that have benefited from the shift online by businesses and consumers during the pandemic, including card retailer Moonpig and parcel locker business InPost. “We have witnessed some tectonic shifts in the ecommerce landscape as a result of Covid — things we thought would take five years have taken five months,” said James Fleming, global co-head of equity capital markets at Citigroup. As a result, he added, there has been a “significant re-rating of tech company valuations”. The IPO surge highlights how lockdown winners are capitalising on increased demand from investors and a recovery in valuations across global markets. US listings have also soared, fetching a record $22.6bn over the same period. Investors poured a record $58bn into stock funds this week while slashing their cash holdings, in the latest sign of the fervour sweeping global financial markets. Technology-focused funds were at the centre of the surge, with net inflows reaching an all-time high of $5.4bn in the week to Wednesday, according to EPFR data collated by Bank of America. The US had the lion’s share of overall stock inflows, at $36.3bn. Investors also piled $13.1bn into global bond funds while pulling $10.6bn from their cash piles. The data underline how historically low interest rates and expectations for a big rebound this year in global economic growth have whet investors’ appetite for riskier assets. The shift is causing rising unease among some investors and analysts, who worry that asset prices have become overextended. Investor bullishness has been stoked by hopes that coronavirus vaccines are speeding up the fightback against the pandemic and that US president Joe Biden’s $1.9tn stimulus proposal will help the economy recover from the coronavirus-driven recession. Amsterdam surpassed London as Europe’s largest share trading centre last month as the Netherlands scooped up business lost by the UK since Brexit. An average €9.2bn shares a day were traded on Euronext Amsterdam and the Dutch arms of CBOE Europe and Turquoise in January, a more than fourfold increase from December. The surge came as volumes in London fell sharply to €8.6bn, dislodging the UK from its historic position as the main hub for the European market, according to data from CBOE Europe. The shift was prompted by a ban on EU-based financial institutions trading in London because Brussels has not recognised UK exchanges and trading venues as having the same supervisory status as its own. Without this so-called equivalence to ease cross-border dealing, there was an immediate shift of €6.5bn of deals to the EU when the Brexit transition period concluded at the end of last year. It was about half of the amount of business that London banks and brokers would normally handle. Analysts and executives say the transfer would not mean thousands of jobs leaving London, while the tax hit would be limited to the effects the move in trading would have on the profits of companies involved, they said. Financial services contributed almost £76bn in tax receipts to the UK Treasury last year. EU lawmakers overseeing new digital regulation in Europe want to force Big Tech companies to pay for news, echoing a similar move in Australia and strengthening the hand of publishers against Google and Facebook. The initiative from members of the European parliament would be a serious blow to Google, which has threatened to leave Australia in protest at a planned new law that would compel it to pay for news. Facebook has also warned it will stop users in Australia from sharing news if the legislation is passed in its current form. MEPs working on two landmark draft European digital regulations, the Digital Services Act (DSA) and the Digital Markets Act (DMA), told the Financial Times the laws could be amended as they pass through the EU parliament to include aspects of the Australian reforms. These include the option of binding arbitration for licensing agreements and requiring tech companies to inform publishers about changes to how they rank news stories on their sites. Spain has attracted more than €65bn in orders for a new 50-year bond on the same day Italy’s borrowing costs reached a historic low, underscoring the sizzling conditions in Europe’s debt markets. Spain raised €5bn in Tuesday’s debt sale at a coupon of 1.45 per cent, according to a term sheet seen by the Financial Times. UniCredit noted that this was the country’s first 50-year deal organised by investment banks since 2016, when buyers demanded a much higher borrowing cost of 3.45 per cent. Meanwhile, Italy’s benchmark 10-year bond yield slipped below 0.5 per cent for the first time, reflecting a sharp rally in the price of the asset, Bloomberg data show. Investor optimism about the country has surged since Mario Draghi, the former president of the European Central Bank, agreed to form a new government aimed at implementing the reforms needed to secure more than €200bn of funding from the EU. Elon Musk’s Tesla gave bitcoin its most significant corporate endorsement yet as it revealed that it had ploughed $1.5bn of its reserves into the cryptocurrency, adding another boost to its dizzying rise. Bitcoin climbed more than 10 per cent to a record high of $44,100, extending its 50 per cent surge so far this year, as Tesla also announced plans to accept payments in the cryptocurrency for its electric cars, albeit “initially on a limited basis”. The huge volatility and high costs of using bitcoin have severely limited its use for payments. But if Musk can overcome those limitations, it could enable Tesla to tap a wealthy market of bitcoin speculators who have become avid fans of his outspoken support on Twitter for cryptocurrencies. The carmaker on Monday said its board of directors and audit committee had both signed off on the investment, which represented 11 per cent of the company’s cash, net of the $5.6bn of debt for which Tesla says it is directly liable. Most Tesla observers, though, said the bet on bitcoin looked more like a personal bet by its anti-establishment chief executive. The broad upswing in commodity prices since the depths of the coronavirus crisis represents just the first leg of a sector-wide “bull market” fanned by government spending, analysts and investors say. Wall Street banks are telling their clients to increase their exposure to raw materials, which are poised to benefit from a vaccine-driven global economic recovery, aided by fiscal stimulus. Some are even predicting a prolonger period of commodity-intensive growth that marks a repeat of the so-called “supercycle” of the 2000s — where oil and metal prices hit record highs as China’s rapid industrialisation caught the industry napping. “It’s easy — and largely accurate — to present the 2021 commodity outlook as a V-shaped vaccine trade,” said Goldman Sachs in a recent report. “What we think is key, however, is that this recovery in commodity prices will actually be the beginning of a much longer structural bull market for commodities.” Inflation in the eurozone has shot up to its highest level since the coronavirus pandemic hit last year, ending a five-month spell of falling prices and fuelling investors’ doubts about whether the European Central Bank needs to use more stimulus measures. Headline consumer price inflation hit an 11-month high of 0.9 per cent in January, up from minus 0.3 per cent in December, according to a flash estimate published by Eurostat on Wednesday. Economists polled by Reuters had only expected 0.5 per cent. The fastest jump in more than a decade was driven by a combination of one-off factors rather than a revival in underlying demand, as many of the bloc’s shops, schools and leisure venues remain closed due to lockdowns to stem the spread of the virus. The reversal of a temporary reduction in German value added tax at the start of this year played a role, as did higher energy costs and supply chain disruptions that have raised container shipping prices for retailers and manufacturers. Mario Draghi has accepted a request from Italy’s president to attempt to form a national unity government as the country battles to contain the Covid-19 pandemic and the most severe economic crisis in its postwar history. Mr Draghi, a former president of the European Central Bank who has built a reputation as one of the continent’s most highly regarded public officials, on Wednesday called for unity ahead of starting political consultations with the country’s political parties after receiving a mandate from Italy’s president Sergio Mattarella. “I thank the president of the Republic for the trust he has granted me. It is a difficult moment,” Mr Draghi said in a brief speech delivered at the country’s presidential palace as he outlined the extent of the task facing the eurozone’s third-largest economy. “Defeating the pandemic, completing the vaccination campaign, offering answers to citizens, relaunching the country: these are the challenges we face,” he said. Amazon chief executive Jeff Bezos will step aside later this year to become executive chairman, making way for Andy Jassy, who currently heads up its cloud computing division, AWS, to replace him in the role. The ecommerce group’s founder, 57, on Tuesday said it was an “optimal time” to make the move, which will happen in the third quarter. In a letter to staff, Mr Bezos said he would stay “engaged in important Amazon initiatives”, but would turn much of his attention to his personal climate change initiatives, the space exploration company Blue Origin and The Washington Post newspaper that he owns. Mr Bezos has been chief executive of Amazon since its founding in 1994, during which time he became one of the world’s wealthiest people, with a current net worth of almost $200bn, according to Forbes. |
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March 2021
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