What to expect from this week’s Fed meeting
The US Federal Reserve is expected to hold its benchmark lending rate steady as it waits for more data to assess how previous rate hikes have affected the economy. The central bank raised rates in July to their highest level in 22 years. The Fed is also set to release a fresh set of economic projections that will likely show stronger growth and slightly lower unemployment levels than previously thought.
The Fed’s Next Challenge: $100 Oil
Rising oil prices are putting pressure on central banks in their fight against inflation. Benchmark Brent crude is close to $100 a barrel, a result of record levels of oil demand outstripping production. Many analysts expect crude prices to continue to rise, which could lead to higher fuel bills, inflation and potentially higher interest rates. Rising oil costs have driven up inflation in the US, with gasoline prices rising from $3.68 to $3.88 a gallon in the last year.
Canadian markets fall after report that inflation rose, U.S. markets also move lower
The Toronto Star
Canada's main stock index, the S&P/TSX Composite, fell 1.3% on Tuesday after the latest inflation data came in higher than expected. Year-over-year inflation in August was 4%, higher than the 3.8% increase economists were expecting. Investors are now considering the possibility of another interest rate hike from the Bank of Canada. Meanwhile, US stock markets also moved lower ahead of the US Federal Reserve's interest rate decision. The Bank of Canada is under pressure to keep the difference between its key rate and the Fed's small to avoid weakness for the Canadian dollar and higher inflation.
Italy’s push to reform its capital markets hits a hitch
Italy is set to approve a range of measures aimed at improving its capital market and attracting local businesses. The new rules include simpler listing requirements and the option to issue shares with greater voting rights. However, politicians have proposed amendments that would change the way directors are appointed, potentially curbing the ability of boards to renominate directors. Critics argue that these proposals would give excessive power to boards of directors and could deter foreign investors.
Bankrupt drugmaker Mallinckrodt considers sale of opioid business - WSJ
Bankrupt drugmaker Mallinckrodt is reportedly in talks with major investors about selling some or all of its business units, including a potential exit from the opioid business. Investors involved in the company's bankruptcy proceedings are suggesting that Mallinckrodt break up its business units. The Ireland-based company filed for its second bankruptcy in the US last month, with a restructuring plan that would cut $1 billion from what it owes to victims of the US opioid crisis. Mallinckrodt had previously filed for bankruptcy in 2020 to address its high debt load, litigation over its marketing of highly addictive generic opioids, and disputes over its drug pricing.
Dollar Rally Is Crushing One of the Most Popular Trades of 2023
The US dollar has unexpectedly rebounded against virtually every major currency over the past two months, causing investors to unwind trades and officials in China and Japan to protect their currencies. The greenback's resurgence is a result of the US economy's surprising resilience and persistent inflation. The Bloomberg Dollar Spot Index has experienced an eight-week rally since mid-July, pushing it back near this year's highs. The rise in the dollar has caused US companies to brace for a hit to their earnings, and has evoked painful memories of 2022 when the dollar pushed up commodity prices and increased the burden of foreign debts. The dynamics behind the dollar's recent rise are expected to continue, causing analysts to abandon bearish calls on the currency. However, a US downturn could restrain the dollar. Overall, emerging-market nations are expected to bear the brunt of the dollar's rise as it makes imports more expensive, exaggerates inflation pressures, and encourages central banks to hold interest rates high.
JPEX scandal another reminder for financial regulators to be alert
The JPEX cryptocurrency scandal in Hong Kong, which has seen 1,641 complaints from clients involving HK$1.2bn ($153m), has raised questions about whether authorities should have done more to protect investors. The Securities and Futures Commission (SFC) lacks the power to act against unregulated platforms like JPEX, though it did issue an alert 14 months ago urging investors to be cautious. The scandal comes after the collapse of US cryptocurrency exchange FTX and raises further questions about the suitability of cryptocurrencies as an investible asset class.
Warm weather, cost of living tempers Kathmandu’s momentum
The Sydney Morning Herald
Retailer KMD Brands, the owner of Kathmandu and Rip Curl, has reported $1.01bn in sales for the first time in its history. Sales for Kathmandu rose over 10% to $422.2m, while Rip Curl reported a sales increase of 8.3% to $571.5m. However, the company revealed that demand for outdoor clothing was tempered in the last three months of the year due to a warmer winter in Australia and rising living costs, causing a slowdown in consumer spending.
The era of skimping on military spending is over – this stock remains a scarce investment opportunity
BAE Systems' share price has risen 87% since Questor's recommendation in December 2019, outperforming the FTSE 100 by the same amount. The defence company has benefited from elevated geopolitical risk and increased defence spending in major economies. The world economy's growth rate is also expected to improve, which should boost defence stocks. Furthermore, ongoing tensions between the US and China and the war in Ukraine indicate rising demand for military assets. BAE's half-year results showed an 11% rise in sales and a 10% increase in underlying operating profits. Questor recommends buying BAE shares.
UBS bondholders tee up risky goldfish impression
UBS may issue contingent convertible bonds (CoCos) in a test for Switzerland’s reputation with bondholders. The country’s reputation was damaged in March after the takeover of Credit Suisse, resulting in a total loss for bondholders. However, UBS hybrid debt prices have recovered since the deal, with investors valuing them with a lower yield than equivalent securities issued by BNP Paribas. This suggests that investors are not demanding a premium to compensate for the uncertainty of how they would be treated in a future crisis. A successful return for UBS would help restore the reputation of the AT1 market, drawing more investors to the asset class and enabling other banks to issue debt at lower cost. However, if bond markets do not punish bad behaviour, regulators will have less incentive to play by the book in the future.
Grab can feast on Delivery Hero’s Asia leftovers
Singaporean ride-hailing and food delivery giant Grab is reportedly in talks to acquire Delivery Hero's Foodpanda business in seven Southeast Asian markets. Grab, which previously purchased Uber's operations in the region, boasts the largest food delivery business in Southeast Asia and has a cash pile of $5bn. Delivery Hero is said to be considering a sale of Foodpanda as it battles for profitability. However, investors are prioritising profitability over growth, potentially causing concerns if Grab decides to acquire its rival.
Qantas chairman refuses to quit amid investor pressure - ABC News
Qantas Airways Chairman Richard Goyder has refused to step down despite calls from investors for his resignation, according to ABC News. The airline is facing a regulatory lawsuit accusing it of breaching consumer law by selling fares for flights that were subsequently cancelled. Goyder stated that he has confidence in the Qantas board and that major investors want him to stay in his position. The article did not name the investors or consumers calling for Goyder's resignation. Goyder also mentioned that Qantas has accepted a recent court ruling that the airline broke the law by laying off ground staff during the COVID-19 pandemic.
Russia's TMK to sell 15 mln shares in secondary issue
Russian steel pipemaker TMK has announced plans to launch a secondary public offering (SPO) of around 15 million ordinary shares. The SPO is expected to raise between RUB 3.08bn ($32m) and RUB 3.53bn ($36.6m), with the final offer price set no later than 29 September. TMK said the funds raised will be used to reduce debt and for other corporate purposes. The company's shares were trading at around RUB 222 per piece, down 2.6% on the day. Russian share offerings have been rare since Moscow sent troops to Ukraine earlier this year.
Defiant JPEX touts new plan to woo users, barks back at regulators
South China Morning Post
JPEX, a cryptocurrency platform in Hong Kong, is offering a dividend plan in an attempt to attract new investors despite being the target of a crackdown by the city's police and regulators. The exchange, which suspended trading earlier this week and was raided by police, has outlined a plan that promises users the chance to invest in a dividend-paying asset, with a potential buyout price of twice its original price after two years. However, the plan has been described as "very suspicious" and "economically unviable" by industry experts.
'I'm praying interest rates have peaked now'
The Bank of England has decided to hold interest rates at 5.25%, after 14 consecutive rises. While this decision is a relief for many homeowners, it still leaves them struggling to cope with the highest interest rates in 15 years. Homeowners are anxious about how they will find the extra money to cover their mortgage payments, with some considering taking in lodgers or cutting back on expenses. While the decision may provide some temporary relief, it does not necessarily mean that rate rises are over, as the governor of the Bank of England has hinted that rates are unlikely to fall for some time.
Investors riddled with FOMO might be re-entering the US stock market
Global fund managers increased their exposure to US stocks this month by a record amount, according to Bank of America survey data going back to 1999. September also marked the first month global fund managers have had an outsized allocation in US equities since last August.
Chairman of Australia’s Qantas Airways reportedly refuses to quit amid investor pressure
The Globe and Mail
Qantas Airways' Chairman, Richard Goyder, has refused to step down despite ongoing calls for his resignation from investors. The Australian airline is facing a regulatory lawsuit over the sale of fares for 8,000 flights that were later cancelled, leading to the resignation of CEO Alan Joyce. Goyder expressed confidence in the Qantas board and stated that major investors wanted him to continue in his position. He did not comment further on the allegations. The company is also facing legal action over the layoff of 1,700 ground staff during the COVID-19 pandemic. Qantas has accepted the ruling and new CEO Vanessa Hudson will work towards settling the case.
Bank of England halts run of interest rate hikes as economy slows
The Globe and Mail
The Bank of England (BoE) has decided to hold interest rates at 5.25% as the UK economy slows. However, the decision was not unanimous, with four out of nine members of the Monetary Policy Committee voting to increase rates to 5.5%. The decision comes after a recent fall in inflation, but the BoE has warned against complacency and stated that it is prepared to raise rates again if needed. The decision follows the US Federal Reserve's choice to hold borrowing costs and the European Central Bank's recent rate increase.
Exclusive Revealed: The five new versions of the Hundred being considered
The English and Wales Cricket Board (ECB) has developed five options to overhaul the Hundred, cricket's newest competition. The radical changes would come into effect as early as 2025. The proposals include the introduction of new teams, the sale of a stake in the competition and the creation of a second division. Other suggestions include expanding the league to 10 teams with the option to franchise or sell a stake to private equity companies, or a joint venture between the ECB and the venue counties. The plans will be presented to counties next month. The ECB has enjoyed a strong season in both the men's and women's competitions. However, it is understood that private investment may be needed to secure the competition's future. The Hundred is set to rise in cost over the coming years as more funds are needed to attract the best overseas players and close the gender pay gap.
Russian firms must return some shares to stock market after buybacks from foreigners -finance minister
The Russian government commission that monitors foreign investment will require public companies buying back shares from Western investors at a discount to return some of those securities to the stock market, according to a finance ministry official. The move comes after retailer Magnit recently completed a $507m buyback of blocked shares from Western investors at a 50% discount, a deal that could encourage other companies to do the same. The Russian presidential office is reviewing a request from oil major Lukoil to buy back up to 25% of its shares from foreign investors. The government is aiming to ensure the stability of businesses whose foreign owners sell, in order to protect jobs and prevent technology and production from leaving the country.