Donald Trump became the fourth US president to face impeachment proceedings after Democratic House speaker Nancy Pelosi accused him of betraying his oath of office and US national security by seeking a foreign power’s help in the 2020 election. In a televised address, Ms Pelosi said the House would look into claims that Mr Trump pressed Ukraine’s president to investigate the local business activities of the son of former vice-president Joe Biden, one of the leading Democratic presidential contenders. The impeachment inquiry announced by Ms Pelosi in a six-minute statement is the first since the House impeached Bill Clinton in 1998. The move came only hours after Mr Trump sought to blunt Democratic criticism by promising to release a transcript of his controversial July 25 telephone call with Volodymyr Zelensky, Ukrainian president. The UK Supreme Court has ruled that Boris Johnson’s advice to the Queen on suspending parliament was unlawful, plunging the government’s Brexit strategy into turmoil and prompting demands that the prime minister resign. In a damning unanimous ruling, Britain’s highest court concluded that Mr Johnson acted unlawfully in suspending parliament for five weeks — a move that his critics claimed was intended to stifle debate on Brexit. Parliament will now be recalled and Labour leader Jeremy Corbyn said: “I invite Boris Johnson in the historic words, to consider his position and become the shortest serving prime minister there has ever been.” Mr Johnson now stands accused of asking the Queen — on his behalf — to unlawfully suspend or prorogue parliament, in one of the UK’s most important constitutional cases. The collapse of Thomas Cook spread chaos through the international travel industry on Monday as the failure of the 178-year-old travel company left hundreds of thousands of travellers stranded and sent business partners reeling. Thomas Cook’s board said on Monday morning that the failure of rescue talks between banks, shareholders and the UK government meant “it had no choice but to take steps to enter into compulsory liquidation with immediate effect”. The collapse of the travel company leaves 21,000 jobs at risk and 150,000 UK holidaymakers stranded abroad, reliant on an effort by the government’s Civil Aviation Authority to put together the biggest emergency repatriation in peacetime. The Federal Reserve cut US interest rates by 25 basis points, to a range of 1.75 to 2 per cent and signalled that it could stop there despite uncertainty over trade and fierce pressure from the White House for more accommodation. The cut, the second this year, was in line with the expectations of investors and economists but the central bank’s projections indicated a more hawkish line than markets had anticipated. The median forecast among its rate-setting committee was that rates would be at the same level at the end of 2020. Futures data compiled by Bloomberg before the meeting showed that investors had expected two more cuts by the end of 2020. In morning trading in Asia, Japan’s benchmark Topix rose 1.2 per cent as the yen slipped against the US dollar to as low as ¥108.47, its weakest since early August. South Korea’s Kospi gained 0.8 per cent, while Australia’s S&P/ASX 200 index was up 0.7 per cent. Hong Kong’s Hang Seng index and mainland China’s CSI 300 were little changed. The Fed statement drew an immediate attack from President Donald Trump, who tweeted: “[Fed chairman] Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!” The Federal Reserve Bank of New York announced plans to inject another $75bn into the US financial system when trading resumes on Wednesday, a day after making its first such intervention in more than a decade to alleviate funding pressures in short-term lending markets. The cost of borrowing cash overnight via repurchasing agreements, known as repos, surged on Tuesday morning to as high as 10 per cent, a more than fourfold increase from Monday morning, according to Refinitiv data. A senior executive at a large US bank said the sharp rise in the so-called repo rate, reflected a “pretty sizeable dislocation between funding needs and funding” in a key portion of the US money market. Repos are vital to the financial system because they give companies access to cash overnight using US Treasuries as collateral. Ashish Shah, co-chief investment officer for fixed income at Goldman Sachs Asset Management, described the abrupt tightening of the US money market as a “big deal”. Donald Trump said Iran appeared to be responsible for a strike against Saudi Arabian oil facilities that knocked out more than half the kingdom’s production, as the Pentagon revealed that it was working with US partners on a response. Iran-backed Houthi militias in Yemen claimed responsibility for the weekend attack, which caused oil prices to spike as much as 20 per cent to above $71 a barrel on Monday — the biggest rise in percentage terms since the 1990 Iraqi invasion of Kuwait. Following a briefing from his military and intelligence advisers at the White House on Monday, Mr Trump was asked whether Iran was to blame for the attack. He responded: “Well, it’s looking that way . . . That’s being checked out right now.” Oil prices rose as much as 20 per cent to above $71.00 a barrel — the most in nearly three decades — as markets reopened after an attack on Saudi Arabia’s oil infrastructure at the weekend cut more than half the country’s production. The rally, which followed news that Saudi Arabia’s oil production is expected to be well below maximum capacity for weeks, set oil on course for one of its biggest one-day gains as traders worried over the extent of the outage. Brent crude oil, the international benchmark, gained almost $12 to trade as high as $71.95 a barrel, before easing back to $66.37 by late morning in Asia, still up by more than 10 per cent. The US benchmark, West Texas Intermediate, was up by as much as 16 per cent to $63.64 a barrel before paring back these gains in the Asian morning to 9.2 per cent. The attack, which the US has said was orchestrated by Iran, has sharply raised geopolitical risks in global energy markets and may reverberate through the wider economy. The short-term fear is about the lack of clarity from Saudi Arabia, the world’s largest oil exporter, over how long it will take to restore output towards the 9.8m barrel a day level of before the attack. Treasuries chalked up their worst week — and small-caps their best — since 2016 as investors extended a sweeping rotation away from the momentum plays and bonds that had been favoured over summer. The yield on the benchmark 10-year note surged 34 basis points since last Friday to a six-week high of 1.90 per cent, the largest weekly rise since mid-November 2016. An iShares exchange traded fund tracking US Treasuries fell 2.1 per cent over the past five sessions, putting it its worst weekly performance also since that same November week nearly three years ago. The yield on the 10-year Treasury rose for an eighth consecutive session, the longest streak since March 2017. (Yields went without a decline for eight straight days in April 2018, but one of these sessions saw yields finish flat.) The Hong Kong bourse’s audacious £32bn bid for the London Stock Exchange faces rejection amid doubts about political risk and deal structure, according to people briefed on the offer. The unsolicited bid on Wednesday from Hong Kong Exchanges and Clearing stunned investors in the LSE, one of London’s most high-profile financial institutions. The LSE said it was committed to its own blockbuster deal, the $27bn acquisition of data and trading group Refinitiv. It is leaning towards rejecting the Hong Kong approach, two people close to the board said. In early trading in Hong Kong on Thursday, HKEX’s stock fell 3 per cent, wiping about $1bn in share capital from the company, which runs the world’s fourth-biggest equity market by turnover. HKEX’s bid values LSE shares at £83.61 and in its offer document said it hoped to combine “the largest and most significant financial centres in Asia and Europe”. The European Central Bank has announced its biggest package of rate cuts and economic stimulus in three years as President Mario Draghi warned governments that they needed to act quickly to revive flagging eurozone growth. The ECB cut interest rates further into negative territory and revived its contentious €2.6tn programme of buying bonds for an unlimited period, in the latest sign of concern over the health of the global economy. It also eased lending terms for eurozone banks and offered them tiered interest rates in a bid to ease the pressure on their lending margins. The stimulus was immediately seized upon by US President Donald Trump, who demanded that the US Federal Reserve join the round of central bank rate cuts when it meets next week. “European Central Bank acting quickly,” Mr Trump tweeted. “They are trying, and succeeding, in depreciating the euro against the VERY strong dollar, hurting US exports . . . And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”. US President Donald Trump has fired John Bolton as national security adviser after months of tension over policy towards Iran and North Korea, saying he “disagreed strongly” with the hawkish aide on many positions. “I informed John Bolton last night that his services are no longer needed at the White House,” Mr Trump tweeted on Tuesday, adding that “others in the administration” had also disagreed with the White House’s top foreign policy official. But Mr Bolton offered a different account of his departure, saying he had resigned. “I offered to resign last night and President Trump said, ‘Let’s talk about it tomorrow’,” Mr Bolton tweeted shortly after Mr Trump made the announcement. Mr Trump said he would name a new national security adviser next week. SoftBank, the biggest outside shareholder in WeWork, is urging the lossmaking property group to shelve its hotly anticipated initial public offering after it received a cool reception from investors, according to people briefed on the discussions. WeWork’s parent company, the We Company, has been aiming to raise between $3bn and $4bn in its flotation. But it has faced criticism from investors and analysts on Wall Street over its governance, payments made to co-founder and chief executive Adam Neumann and its use of a complicated corporate structure. SoftBank and its Saudi-backed Vision Fund have pumped more than $10bn into the office space provider. But SoftBank’s enthusiasm for a listing has waned as bankers have slashed the valuation they believe the We Company can attain when it lists. Advisors for the We Company were said to still be testing investor appetite at a valuation of between $15bn and $20bn, according to people briefed on the matter. That is far below the $47bn valuation given to WeWork when SoftBank invested $2bn in the business this year. Executives from some of America’s biggest banks will this week tell investors how badly their businesses are being hurt by falling interest rates and an inverted yield curve, setting the scene for a raft of cuts to profit forecasts. Wall Street’s big six — JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Citigroup and Morgan Stanley — last gave guidance to investors at their second-quarter earnings in July, when most envisaged short-term interest rate cuts, like the one made by the Federal Reserve in July on the back of a slowing economy. Since then, further deceleration and fears over President Donald Trump’s trade wars have triggered widespread anticipation of more aggressive cuts, forcing down the rate on longer-term debt. The 10-year yield on US government debt fell more than 50 basis points and 10-year debt briefly commanded a lower interest rate than two-year borrowings in August — an inverted yield curve that signals an economy in distress. Wells Fargo analyst Mike Mayo said the deterioration in the 10-year rate — which implies a greater likelihood of recession and therefore a greater likelihood of Fed rate cuts — was far sharper than banks envisaged in July, when many pared back their earnings outlooks. Companies across the world, from iPhone maker Apple to German financial technology group Wirecard, sold more bonds this week than ever before, abruptly waking the market from its summer slumber to take advantage of historically low borrowing costs. Investors lapped up more than $140bn of new corporate bonds, marking the biggest weekly volume to hit global markets on record, according to data from Dealogic. The debt binge was fuelled by investment-grade companies in the US where $72bn was raised across 45 deals in a single week, roughly equalling the total issued in the whole of August. “We have had a month of issuance in three days,” said Andrew Brenner, head of international fixed income at National Alliance Securities. “There is tremendous demand out there.” Apple returned to the market for the first time since November 2017, selling $7bn of debt on Wednesday, following media giant Disney which also sold $7bn of bonds the previous day. Google is secretly using hidden web pages that feed the personal data of its users to advertisers, undermining its own policies and circumventing EU privacy regulations that require consent and transparency, according to one of its smaller rivals. New evidence submitted to an investigation by the Irish data regulator, which oversees Google’s European business, accused the US tech company of “exploiting personal data without sufficient control or concern over data protection”. The regulator is investigating whether Google uses sensitive data, such as the race, health and political leanings of its users, to target ads. In his evidence, Johnny Ryan, chief policy officer of the niche web browser Brave, said he had discovered the secret web pages as he tried to monitor how his data were being traded on Google’s advertising exchange, the business formerly known as DoubleClick. Revenues at the world’s top investment banks plunged to a 13-year low in the first half of 2019 as geopolitical tensions, slowing growth and low interest rates compounded a structural decline that set in after the financial crisis. The 12 biggest US and European investment banks generated $76.8bn in revenue from their trading and advisory operations during the six-month period, down 11 per cent from 2018. It was the slowest first half since 2006, according to the latest data from industry monitor Coalition. The banks had individually reported poor second-quarter earnings for their markets and investment banking divisions, including an 18 per cent fall in fixed-income revenues at Morgan Stanley and a 32 per cent decline in equities revenues at Deutsche Bank, which is in the process of shutting its stock trading business. Across the group, the most eye-catching fall was in equities, where revenue dropped 17 per cent year on year across all regions because of significant declines in client demand for derivatives and prime brokerage services, the business of lending to and trading for hedge funds. Boris Johnson’s Brexit policy was facing ruin on Tuesday night, after Conservative rebels inflicted a Commons defeat on the prime minister that leaves Britain on the brink of a general election and the Tory party in a state of disintegration. A total of 21 Tory MPs, led by former chancellor Philip Hammond, in effect sacrificed their political careers as they defied Mr Johnson and backed moves to pass an emergency law to stop a no-deal Brexit. The prime minister lost the key vote by 328 to 301, a heavier defeat than expected, and immediately put MPs on notice that he was ready to legislate to hold a snap general election. The so-called “rebel alliance”, which saw Tory MPs join forces with Labour and other opposition parties, defeated Mr Johnson’s government, amid acrimonious scenes in the House of Commons. Mr Johnson had warned the rebels they would have the whip removed and be banned from standing as Tory candidates at the next election if they did not back him — a purge that would see some of the party’s most respected figures ejected. Americans are bracing for the arrival of Hurricane Dorian as the powerful storm slowly makes its way across the Atlantic and toward Florida’s eastern coastline, after it brought “catastrophic” winds and a storm surge to the Bahamas. Dorian, which has been downgraded to category 4, was crawling at a speed of 1 mile per hour over Grand Bahama island with maximum sustained winds of 155mph and gusts up to 190mph, according to an update on Monday from the US National Hurricane Center. The storm is expected to continue to slowly drift west or north-west over the next 24 hours, leading to a prolonged period of devastating effects in the region. News agencies reported that at least five people were killed in the Abaco Islands, in the northern part of the Bahamas, as Dorian continued to hover over Grand Bahama. A Labour government would confiscate about £300bn of shares in 7,000 large companies and hand them to workers in one of the biggest state raids on the private sector to take place in a western democracy, according to analysis by the Financial Times and Clifford Chance. The UK’s 2.6m landlords would also face a moment of reckoning if Labour won the next general election after shadow chancellor John McDonnell said he wanted a “right to buy” scheme for private tenants as well as higher taxes on landlords. With British politics in turmoil and the chances of a snap general election fast increasing, the FT is this week examining the consequences for the UK economy of a Labour government — which would be the most leftwing in modern history. The Labour leadership is determined to shift power away from bosses and landlords and to workers and tenants. The £300bn share seizure would be the consequence of Mr McDonnell’s plans for “inclusive ownership funds”, where every company with more than 250 staff would have to gradually transfer 10 per cent of their shares to workers. More than $4bn has been pulled from UK equity funds since Theresa May announced her decision to step down as Britain’s prime minister as fears mount that the UK is heading for a no-deal Brexit under her successor, Boris Johnson. Investors have withdrawn $4.2bn from UK equity funds since late May, according to EPFR, a data provider. Outflows since the Brexit referendum in 2016 have climbed to $29.7bn. Luke Ellis, chief executive of Man Group, the UK-listed hedge fund manager, said investors had put the UK into the “too hard to think about basket”. Neil Dwane, global strategist at Allianz Global Investors, said the UK stock market was “unloved, under-owned and cheap” and Mr Johnson’s positive rhetoric would fail to shift investors’ cautious stance. “Boris must first resolve Brexit. It will always get in the way until he does,” said Mr Dwane. |
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March 2021
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