Italian government bonds and stocks took a fresh heavy blow on Friday, after the country’s populist government agreed to a more fiscally aggressive budget than investors anticipated. The coalition government will target a budget deficit for 2019 of 2.4 per cent of gross domestic product, a significant increase from this year and an indication that Italy’s new leaders intend to stick to the election promises that took them to power. The yield on the benchmark Italian 10-year bond jumped 35 basis points (0.35 percentage points) to 3.23 per cent, while that on the three-year note shot 47bp higher to 1.727 per cent. Italian debt has been volatile in recent days, but rallied for much of September in anticipation that economy minister Giovanni Tria would reel in the government’s spending plans.
The Federal Reserve raised US short-term interest rates for a third time this year and signalled it will forge ahead with plans to tighten policy, even as central bankers face White House pressure for low borrowing costs as well as concerns over a trade war. The Federal Open Market Committee boosted the target range for its key rate by another quarter percentage point to 2-2.25 per cent, in the eighth rate rise of the current cycle, while teeing up a further increase in December. The central bank dropped previous assurances that policy was “accommodative” as it reduces the economic stimulus it put in place during the crisis. Median forecasts for interest rates released by the Fed’s policymakers pointed to one more rise this year, followed by three increases in 2019 and another in 2020 — in line with previous expectations.
The International Monetary Fund will lend an extra $7.1bn to Argentina as part of its bailout package, which is now the multilateral lender’s biggest programme ever, its managing director Christine Lagarde announced on Wednesday. The fund added it would allow Argentina to receive more cash up front by increasing the amount available to the Latin American country between now and the end of 2019 by an extra $19bn. The changes swell the size of the total bailout package to $57bn, of which $15bn has already been disbursed and a further $35bn can now be disbursed by the end of next year.
Elon Musk’s continued leadership at Tesla was thrown into doubt on Thursday as US regulators sued him over his claims last month that he was close to a buyout of the electric car maker. The Securities and Exchange Commission filed a fraud complaint in the federal court in Manhattan alleging that the Tesla chief executive made “false and misleading statements” when he made the claims in a series of impromptu tweets. The suit seeks to have Mr Musk barred from serving as an officer or director of a public company, threatening his leadership of Tesla at a critical time. If the charges are upheld it could lead to him being prevented from acting as a chief executive, president, chief financial officer or other top executive at a company registered with the SEC.
Global index provider MSCI is considering substantially increasing the weighting of mainland-listed Chinese shares in its flagship Emerging Markets index, a move that it says could attract inflows of at least $66bn over the next couple of years. MSCI said on Wednesday that it was consulting with the market, including sovereign wealth funds, asset managers and central banks, about boosting exposure to so-called A-shares in the MSCI EM index, which is tracked by some $1.9tn of assets. President Donald Trump stepped up to the iconic dais at the United Nations General Assembly on Tuesday and began his speech much as he would a campaign rally: by boasting that his administration "has accomplished more than almost any administration in the history of our country."
Many of the assembled world leaders and foreign dignitaries responded with laughter. "I didn't expect that reaction, but that's OK," he said, laughing off the chuckles that rippled through the hall.Trump's second-ever address to the international body served to reaffirm to a domestic political audience, just as much as to the world, Trump's continued commitment to the policies and convictions that he has unleashed on the world in the year since he last addressed the UN. US equity market trading volume surged on Friday, as asset managers undertook a massive sector reshuffling involving some of the biggest publicly listed companies. At the close of trading, index provider S&P Dow Jones Indices rebranded the existing telecommunication services sector as “communications”, and added companies including Facebook and Alphabet from the technology sector and Netflix and Walt Disney from consumer discretionary. Some 10.9bn shares changed hands on Friday, according to Bloomberg, the heaviest trading day since a bout of market turmoil in February.
This month the 10-year Treasury yield rose cleanly above the 3 per cent mark for the first time since May, and at 3.07 per cent it is now within a whisker of hitting a new seven-year high. The 30-year Treasury yield, known as the long bond, has also climbed sharply this month, to a four-month high of 3.22 per cent. Should the 10-year and 30-year Treasury yields both close above 3 per cent and 3.25 per cent, it will signal a “game changer” for markets, according to Jeffrey Gundlach, the head of DoubleLine Capital, a big bond investor.
Donald Tusk has called October the “moment of truth” for the EU and UK to agree a Brexit withdrawal agreement, while warning that parts of Theresa May’s Chequers agreement “would not work” for the EU. Speaking after a meeting of European leaders in Austria, the head of the European Council said he was “a little more optimistic” on the chances of getting a Brexit deal and pushed for “maximum progress and results in October”. A possible extraordinary November summit could then be used to “finalise and formalise a deal” he said.
UBS Group AG has picked Frankfurt as its post-Brexit European Union hub and has made preparations for the worst-case scenario of Britain crashing out of the bloc without a deal, Chief Executive Officer Sergio Ermotti said.
The Swiss bank made the decision a few weeks ago, Ermotti said in a Bloomberg Television interview in Singapore on Monday. While Germany’s financial center will be the base, UBS will employ a multi-location strategy in the region, he said, naming offices in Madrid, Paris and Milan. |
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March 2021
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