by Samuel Mbaki | Jun 1, 2023 | Banking, Finance
Key Points
- Eurozone inflation has fallen faster than anticipated a month ago, easing living costs.
- U.K. house prices are falling at the fastest annual rates since 2009
- Former U.S. Treasury Secretary Larry Summers says Brexit was a “historic economic error” that has hurt the U.K. economy, driving up inflation.
Eurozone inflation falls further than anticipated easing pressure on the U.K. economy
The inflation rates in the Eurozone have fallen faster in May than previously anticipated resulting in lower energy prices and a drop in core CPI (Consumer Price Index.) The zone’s CPI slowed to 6.1% in May YoY (Year over Year) vs. the expected 6.3%, a significant drop from the 7.0% rise recorded in April.
The Core CPI also dipped to 5.3% in May vs. 5.5%, which was expected, a significant drop from the 5.6% recorded in April.
The fall in the inflation rates takes the annual inflation closer to the European Central Bank’s (ECB) target of 2%. However, the prices are still rising three times fast as the ECB is aiming for. The inflation rates in commodities are as follows:
- Food, alcohola& tobacco +12.5%
- Other goods +5.8%
- Services +5.0%
- Energy -1.7%
European stock markets are rising from their lowest level in two months
The FTSE 10o index has gained 48 points/ 0.65% to 7494, following news that the U.S. House of Representatives had passed the Fiscal Responsibility Act n Wednesday. Investors are taking this news well, sending the U.K. stock market into greener zones, last recorded two months ago.
U.K. house prices fall at the fastest pace since 2009 while mortgage approvals fall
The prices of houses in the U.K. are falling fast at an annual rate last seen in 2009. The prices of houses decreased by 3.4% in the past 12 months ending May 2023, the biggest drop since July 2009, when an annual fall of prices by 6.2% was recorded.
A report from Nationwide indicates that house prices had remained flat over the past month after seasonal effects had been considered. Now they stand at an average price of £260,736 which remains 4% below the peak last seen in August 2022.
Though the prices are falling, Robert Gardner, the Nationwide chief economist, has warned that headwinds to the housing market will most probably strengthen over the coming months. He says investors should prepare to acquire mortgage deals for fixed rates above 5% as the government may keep increasing interest rates.
“If maintained, this is likely to exert renewed upward pressure on mortgage rates, which had been trending down after spiking in the wake of the mini-budget in September last year.”
The housing market is still unstable in the U.K. economy as the number of mortgage approvals has fallen as buyers return. A report from the Bank of England shows that there were 48,690 new mortgages signed off in April, down from 51,488 recorded in March.
The new mortgage figures are also 26.0% lower than the average numbers recorded between 2018 and 2019.
Brexit was a catastrophic economic mistake; Larry Summers
In an interview with Radio 4, Larry Summer, a former U.S. Treasury Secretary, said that Brexit was a historic economic error that pushed up inflation and will go down as the event that reduced the competitiveness of the U.K. economy globally.
When asked why inflation is haunting the U.K. in a significantly bigger way than the U.S., Summers said:
“I think Brexit will be remembered as a historic economic error that reduced the competitiveness of the U.K. economy, put downward pressure on the pound and upwards pressure on prices, limited imports of goods, and limited in some ways the labor supply. All of which contributed to higher inflation.”
Reports have found that Brexit food trade barriers have cost the U.K. economy 7 billion Euros. As such, it has made the inflation rates more menacing, pushing citizens to the corner. When asked about the possibility of a recession, Summers said he would be surprised if two more years passed before the U.K. entered a recession.
Keep watching Fintech Express for updates on finance, banking, and other FinTech-related developments.
by Samuel Mbaki | Jun 1, 2023 | Banking, Finance
Key points
- Tesla CEO Elon Musk has regained his status as the world’s richest man once again as he overtakes Bernard Arnault.
- Elon Musk toured China for the first time in three years on May 31, 2023, meeting China’s foreign minister Qin Gang.
- Musk commented on the status of China and America as co-joined twins saying the two world’s largest economies shouldn’t be breaking their ties through de-dollarisation
Elon Musk regains his richest man status as he tours China
Tesla CEO Elon Musk has regained his status as the world’s richest man. According to a report by Bloomberg, Tesla’s CEO and Twitter’s new owner passed Benard Arnault as the richest man on Wednesday after the shares of Arnault’s LVMH fell by 2.6% in Paris Trading.
Now, Musk’s total net worth stands at around $192B. The report comes when Elon Musk is on his Chinese tour for the first time in the last 3 years. Musk met with China’s Minister of Foreign Affairs, Jin Zhuanglong, and discussed the development of electric vehicles.
Though Musk has yet to speak publicly about the contents of his meeting with the Chinese executive, the minister said that Elon Musk agreed to build more factories to produce electric vehicles.
Elon Musk is now among a growing list of US executives to visit China this year on business trips as economic relations continue to sour. JP Morgan Bank Chief Executive Officer also visited China this week. Apple CEO Tim Cook was also there in March following a series of strikes that had affected his company in earlier months.
Though the ties between Washington and China are growing as the Asian nation is planning on ditching the dollar in favor of a new economic trade bloc, BRICS, Dan Ives from investment firm Wedbush Securities has said that it’s a key chess move for Wall Street executives to foster a great business relationship with Beijing.
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by admin | Jun 1, 2023 | Banking, Finance
Key Points
- The House passed a debt ceiling bill on Wednesday night, days before the U.S. Treasury runs out of money to pay its bills.
- The Fiscal Responsibility Act was formed due to a deal between Speaker Kevin McCarthy and President Joe Biden in May.
- Though the bill has been met with opposition along the way, it is currently the only solution to the looming debt default crisis. Senate Majority Leader Chuck Schumer has said the Senate will do all it can to move the bill quickly.
Debt default deadline days away as Debt Ceiling bill heads to the Senate
The Fiscal Responsibility Act, a bill meant to push the U.S. debt ceiling, passed in the House of Representatives on Wednesday night by a wide margin. It will now head to the Senate for another voting process ahead of the June 5, 2023, deadline for the U.S. Treasury to default on its debt.
The Fiscal Responsibility Act passed with 314-117 votes receiving more support from Democrats and Republicans than expected. The majority leader of the Senate, Chuck Schumer, has said that the Senate will do all it can to move the bill along quickly, signaling that it has a high expectancy of being passed and signed into law by President Biden.
The new developments culminated in a sensitive two weeks of tense negotiations between lawmakers on how to go forward as the economy was under the threat of debt default. The bill has now reached the Senate stage, and the leaders on both sides want to pass it within 48 hours.
Senate Majority Leader Chuck Schumer commented on the story, saying:
“There’s been a very good vote in the House. I hope we can move the bill quickly here in the Senate and bring it to the president’s desk as soon as possible.”
Keep watching Fintech Express for updates on this and other Finance related updates.
by Samuel Mbaki | May 31, 2023 | Banking, Finance
Key Points
- U.S. Treasury Yields have fallen as investors wait for a crucial debt ceiling vote to be held in the House of Representatives later in the day.
- House Rules Committee voted in favor of the debt ceiling vote on Tuesday with a 7-6 majority.
- April’s JOLTs job opening report is due today.
U.S. Treasury Yield recedes as investors await debt ceiling vote
U.S. Treasury yields declined on May 31, 2023, as investors fretted over the ongoing debt ceiling crisis. The House of Representatives is set to vote for a bill that could see the U.S. evade defaulting on its debt, which could have adverse effects and be the first one in its history. Additionally, Investors are also awaiting the April report on key jobs data.
At 5:34 a.m. ET, the yield on the 10-year Treasury was trading 4 basis points lower at 3.654%. The 2-year Treasury yield was last down by more than 3 basis points at 4.436%.
The U.S. markets are reacting to the Fiscal Responsibility ACT that seeks to raise the debt ceiling to avoid the government defaulting on its debt which could happen as soon as June 5.
The bill received a win in the House Rules Committee with a 7-6 vote and is now headed to the House of Representatives floor today for tentative voting. If the bill is passed, it would need approval from the Senate before it is effected.
However, a straight win is not guaranteed as politicians on both sides of the aisle have criticized Speaker Kevin McCarthy and President Biden’s compromise. At least 20 Republican lawmakers have asserted that they would vote against the bill. The market is under stress and tensions regarding what might happen.
Meanwhile, a key report on April JOLTs job openings is due today, which will give key hints about the state of the economy and massively affect the decision of the Federal Reserve regarding the next interest rates policy decision.
Whether the bill will pass or not and if the Federal Reserve will hike or pause interest rates again is yet to be seen. Keep watching Fintech Express for updates on this and other stories.
by Samuel Mbaki | May 10, 2023 | Banking, Finance
The Bank of England is expected to propose a 12th consecutive hike in interest on Thursday to keep the fight against inflation lively. The nation’s Core inflation remains unchanged, highlighting the possibility of entrenchment. As such, analysts expect the bank to announce a 7-2 split vote pushing the hikes trend upwards to hit 4.25% to 4.5%.
More pain in Britain Markets?
The Bank of England is expected to hike the interest rates again on Thursday, marking the 12th time the hike has happened. This hike will most likely happen as inflation continues to roar though there are signs to slow down soon.
The U.K. economy has been performing well this year though its GDP flatlined in February owing to strikes due to the rising cost of living. However, now the country’s job market looks resilient and promising.
As such, the market almost unanimously expects the Monetary Policy Committee to opt for another 25 basis point hike on Thursday, taking the total interest rates to a 4.5% high, close to U.S.’s 5%, which was hit last week. Market analysts also expect the U.S. to pause hiking rates starting June.
Similarly, last week, the European Central Bank slowed down its hiking cycle and went for a 25 basis point increment. However, the decision still lifted the rates to levels not seen since November 2008.
Keep watching FinTech Express for updates on this story and other FinTech-related developments.
by Fintech Express | May 4, 2023 | Banking
As most market analysts expected, European Central Bank(ECB) has raised its interest rates again by another 25 basis points. Its President, Christine Lagarde, has announced this decision saying that they are rallying to maintain their battle against inflation.
ECB hikes rates again to hit 3.25%
The main policy rates have been hiked by 25 basis points bringing the total interest rates up by 3.25% in this economic shake-up. The decision by the ECB follows suit Yesterday’s U.S. Federal Reserve decision to hike the rates by another 25 basis points bringing its tally to 5%, the highest range since August 2007.
The European markets reacted to the news from the U.S. financial policymakers earlier today, dipping across almost all sectors as market analysts from the region also expected ECB to do the same.
Central banks have been hiking rates to bring down high inflation that most countries are battling with due to COVID economic disruption. The massive global lockdowns to battle the epidemic disrupted major supply chains, which have caused a crunch in global economics.
Currently, inflation stands at an average of 7% in the 20 countries that use the Euro for trade. That number is more than ECB’s 2% inflation rate target. However, today’s rate hike was lower than the previous ones, which foreshadows plans by the ECB to slow down the program of hikes. The same steps are expected from the U.S. Federal Reserve as it gave hints of pausing the hikes soon in its official statement.
The rising interest rates have resulted in higher profits for lenders, but on the other hand, it’s putting pressure on banks as some government bonds are losing value. However, the E.U. has been experiencing a stronger banking system resilience, unlike the U.S., which has seen the collapse of around 3 major banks collapse.
However, only time will tell how long the battle against inflation will take. Keep watching Fintech Express for updates on Macro-finance and other fintech-related stories.
