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☆ Global equity, bond funds see outflows for eighth successive week
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +2 min

Oct 14 (Reuters) - Global equity and bond funds faced outflows for the eighth time in a row in the week ended Oct. 12, Refinitiv Lipper data showed, undermined by worries over a recession as global interest rates surged further. According to the data, investors dumped $7.3 billion worth global equity funds and $14.27 billion worth bond funds. The equity outflows were focused on European equity funds, which witnessed net sales worth $7 billion, while U.S. equity funds had outflows of $2 billion. Register now for FREE unlimited access to Reuters.com RegisterGlobal fund outflowsAmong bond funds, European funds again led with outflows worth $8.8 billion, while U.S. bond funds had an outgo of $4.9 billion. EM flowsAmong commodity funds, precious metal funds had a small inflow of $83.2 million, while energy and industrial metal funds witnessed outflows.

☆ Take Five: Calm or calamity?
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +5 min

Traders are back on Japanese yen intervention watch, while the U.S. earnings season and a congress of China's ruling Communist Party kick off. Growing expectations of a government u-turn on most of its unfunded tax cuts should end much of the pain. The carnage in British gilts has exposed vulnerabilities in the pensions sector, shining a light on financial stability risks. The IMF warns of "disorderly asset repricings" and "financial market contagion." A market slide has moderated stock valuations, but a downgrade in the earnings outlook could dampen equities' attractiveness.

☆ British government performs major U-turn on tax cuts. But markets are far from convinced
▼ + stars: | 2022-10-14 | by ( Hannah Ward-Glenton | ) www.cnbc.com time to read: +2 min

British Prime Minister Liz Truss attends a news conference in London, Britain, October 14, 2022. Daniel Leal | ReutersLONDON — A major reshuffle and the scrapping of a key tax-cutting pledge by U.K. Prime Minister Liz Truss on Friday wasn't enough to placate markets with the pound and government bonds continuing to sell off. It seems that Truss's speech did little to reassure markets, or to convince analysts that Britain's financial storm has passed. Rather than settling the waters, Truss's U-turn on tax decisions will leave investors cautious of future political upheaval, according to Mike Owens, a U.K. sales trader at Saxo. "The costs of the mini-budget horror show have already been high and it's not clear that the expected corporation tax U-turn will sustainably calm markets," he said.

☆ Jamie Dimon says expect 'other surprises’ from choppy markets after U.K. pensions nearly imploded
▼ + stars: | 2022-10-14 | by ( Hugh Son | ) www.cnbc.com time to read: +2 min

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., during a Bloomberg Television interview in London, U.K., on Wednesday, May 4, 2022. JPMorgan Chase CEO Jamie Dimon says investors should expect more blowups after a crash in U.K. government bonds last month nearly caused the collapse of hundreds of that country's pension funds. That averted disaster for pension funds using leverage to juice returns, which were said to be within hours of collapse. The upshot: Leverage that had been hiding in unexpected places, like U.K. pension funds, will continue to unwind, according to Dimon. Mishaps could manifest in emerging markets or at hedge funds with high leverage, Dimon said.

☆ Reactions: UK's Truss fires Kwarteng, set to U-turn on tax cuts
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +5 min

LONDON, Oct 14 (Reuters) - British Prime Minister Liz Truss fired her finance minister Kwasi Kwarteng and news reports said she will scrap later on Friday parts of the economic programme of big, unfunded tax cuts that they delivered last month. Consequently, the scope for a rally in gilts (move lower in yields) and sterling would seem to be limited." BENJAMIN NABARRO, ECONOMIST, CITI"The key issue in the near term is the contradiction between monetary and fiscal policy. RACHEL REEVES, OPPOSITION LABOUR PARTY'S FINANCE CHIEF"This humiliating u-turn is necessary - but the real damage has already been done. We may well be through the worst of the volatility but I fear that the UK is nowhere near out of the woods."

☆ Sterling clings to bulk of U-turn-driven gains as dollar firms
▼ + stars: | 2022-10-14 | by ( Alun John | ) www.reuters.com time to read: +2 min

LONDON, Oct 14 (Reuters) - Sterling fell against a strengthening dollar on Friday, though held on to most of its gains from the previous day on reports the British government will reverse more of its controversial mini-budget. That plan triggered turmoil in financial markets, sending yields on British government bonds soaring and the pound to a record low of $1.0327. Register now for FREE unlimited access to Reuters.com RegisterTruss is due to hold a press conference at 1300 GMT. The dollar rebounded on Friday after sliding against most other major currencies on Thursday. Register now for FREE unlimited access to Reuters.com RegisterReporting by Alun John; Editing by Frank Jack Daniel, Kirsten DonovanOur Standards: The Thomson Reuters Trust Principles.

Yet he ultimately carried the can for an unwelcome fiscal plan that roiled bond markets, spooked investors and sparked a major backlash from governing Conservative Party lawmakers. Cutting his visit short, he flew back to London on Friday to "continue work at pace" for a medium-term fiscal plan due at the end of the month. Nor were further moves to re-embrace Treasury orthodoxy through the choice of Scholar's replacement and a decision to bring forward a medium-term fiscal plan and forecasts. In a reply to Kwarteng, Truss said she was deeply sorry to lose a long-standing friend from government. But a finance minister being ditched so quickly for his policies - especially when they were so closely aligned with the prime minister - is unprecedented in modern times.

☆ Liz Truss was defeated by the bond market. Investors aren’t satisfied yet
▼ + stars: | 2022-10-14 | by ( Julia Horowitz | ) edition.cnn.com time to read: +5 min

London CNN Business —After a bruising three-week battle with bond markets, UK Prime Minister Liz Truss admitted defeat on Friday. The price of 30-year UK government debt, which has been whipsawed in recent weeks, fell after the press conference. The Bank of England was forced to announce three separate interventions to avoid a full-scale meltdown in the UK government bond market. That’s putting investors on edge, especially since more details on the revised Truss plan aren’t formally expected until Oct. 31. Global dynamics could also make it more difficult for UK markets to find their footing even as the government backtracks.

☆ Asian shares track Wall Street higher as jitters abound
▼ + stars: | 2022-10-14 | by ( Stella Qiu | ) www.reuters.com time to read: +5 min

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 1.6% in early Asia trade. Offshore, risk appetite is already softening, with U.S. S&P 500 futures sliding 0.1% while the Nasdaq futures falling 0.2%. Wall Street had a volatile session, after initial sell-off on the data proved short-lived with technical support and short-position covering helping stocks stage a strong rebound. Futures have also suggested that rates would now peak at 5%, bringing them to levels not seen since 2007. read moreOil prices fell in early Asian trade.

☆ Morning Bid: Mystery Dance
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +4 min

A look at the day ahead in U.S. and global markets from Mike Dolan. Sudden and sometimes unexplained stock rallies are often hallmarks of prolonged bear markets. U.S. stock futures have retraced a bit - but an hour is a long time in markets these days. read moreElsewhere, China's stocks surged ahead of the Communist Party Congress and amid an expected rise in domestic inflation. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

London CNN Business —UK Prime Minister Liz Truss has fired finance minister Kwasi Kwarteng and ditched a big part of her discredited economic strategy in a desperate bid to rescue her month-old premiership. “It was right, in the face of the issues we had, that I acted decisively to ensure that we had economic stability,” Truss said Friday. Kwarteng presented a “mini budget” just three weeks ago, promising tax cuts worth £45 billion ($50 billion) and increased borrowing with the hope of boosting UK economic growth. “Liz Truss’ reckless approach has crashed the economy, causing mortgages to skyrocket, and has undermined Britain’s standing on the world stage,” he said. Kwarteng had flown back from the IMF meeting in Washington, D.C., overnight for discussions with Truss.

Other media said Truss would allow corporation tax to rise in April, reversing a decision to freeze it that was part of Kwarteng's "mini-budget" announced last month. Yields for index-linked gilts also fell sharply. Bets on a peak for rates to hit 5.5% next year were no longer fully priced in. They have gathered pace as investors offered more bonds to the central bank with the scheme nearing its end. LDI funds had been hit hard by the record slump in long-dated gilt prices after Kwarteng's mini-budget.

Overall net inflows were positive in the quarter, with long-term net inflows of $65 billion, as momentum from ETFs offset the hit from retail clients withdrawing about $5 billion. Net inflows into ETFs were about $22 billion in the quarter, boosted by $37 billion of flows in bond ETFs. "We saw $37 billion of net inflows into bond ETFs, which is the second best quarter we've had in history ... Net income fell to $1.4 billion, or $9.25 per share, for the three months ended Sept. 30, from $1.68 billion, or $10.89 per share, a year earlier. Fink said BlackRock has about 20% of the LDI market in the U.K., or about $250 billion.

☆ As Bond Investors’ Bets Blow Up, They Might Usher In Era of Higher Rates
▼ + stars: | 2022-10-13 | by ( Greg Ip | ) www.wsj.com time to read: 1 min

In 2018, the Bank of England investigated whether a big rise in interest rates would trigger a cascade of forced selling by bond investors, destabilizing the financial system. The answer was no, even if long-term rates rose a full percentage point in a week, which had never happened in records going back to 1990. In the days surrounding the British government’s tax-cut announcement on Sept. 23, yields on British government bonds, called gilts, gyrated as much as 1.27 points in a single day as pension funds dumped bonds and closed out bond-linked derivatives positions to meet margin calls. The Bank of England was forced to step in and buy bonds to stem the selloff.

☆ Absolutely, absolutely!
▼ + stars: | 2022-10-13 | by ( ) www.reuters.com time to read: +2 min

A look at the day ahead in European and global markets from Ankur BanerjeeAll sides in the UK gilt markets are hanging tough. Prime Minister Liz Truss is 'absolutely' committed to her spending plans, the Bank of England is absolutely determined to end its bond-buying by Friday and the markets are absolutely unconvinced about stability and calm. If that wasn't enough cause for worry, August GDP data showed the United Kingdom is on the brink of recession. Yet, he points to how that may not mean the BoE continues buying gilts in conflict with its inflation objective. Meanwhile, investors anxiously await U.S. inflation data for September later on Thursday.

☆ Asian stocks weaken as Fed, BoE fuel uncertainty before U.S. CPI data
▼ + stars: | 2022-10-13 | by ( Kevin Buckland | ) www.reuters.com time to read: +4 min

U.S. long-term Treasury yields languished near the lows of the past two days, sitting little changed at 3.9227% in Tokyo trading. Treasury yields turned lower after the minutes, reversing an earlier rise, with investors focusing on the dovish undertones in taking yields back from near two-decade highs. The dollar index, which gauges the greenback against six major rivals, stuck near the middle of its range this week, trading little changed at 113.27. But the dollar was little changed versus sterling , which had rebounded strongly from a two-week trough of $1.0925 on Tuesday. Benchmark 10-year gilt yields had swung from a fresh 14-year peak at 4.632% to close at 4.429% on Wednesday, little changed from the previous session.

☆ Morning Bid: Core beliefs
▼ + stars: | 2022-10-13 | by ( ) www.reuters.com time to read: +4 min

A look at the day ahead in U.S. and global markets from Mike Dolan. And that core inflation rate is forecast to have higher again in September to 6.5% from 6.3%. Ten-year Treasury yields have risen about 60bp to just under 4%, the S&P500 (.SPX) has lost more than 10% and the dollar (.DXY) has boomed almost 5%. Worryingly for Tokyo, the latest G7 finance ministers statement mentioned nothing about currency market ructions. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ British pound jumps on reports UK government may reverse parts of its tax-cutting proposals
▼ + stars: | 2022-10-13 | by ( Sam Meredith | ) www.cnbc.com time to read: +1 min

In this photo illustration, the British pound is seen displayed. LONDON — Sterling jumped against the U.S. dollar on Thursday following multiple reports that the British government is in talks to scrap parts of its unfunded package of tax cuts. The British pound traded 1.5% higher at $1.1269 during afternoon deals in London, before paring gains on robust U.S. inflation data. Long-dated U.K. government bonds — known as "gilts" — rallied sharply, pushing yields down to just over 4.41%. Truss and Kwarteng have both insisted the government's proposals are necessary to get the economy growing.

☆ Inflation and bond yields are peaking as demand destruction starts to dominate, economist says
▼ + stars: | 2022-10-13 | by ( Brian Evans | ) www.businessinsider.com time to read: +2 min

Inflation and bond yields are close to peaking, according to top economist Komal Sri-Kumar. He also told CNBC that he expects a severe recession in the wake of monetary tightening and inflation. "I think we are reaching the point where demand destruction is going to dominate over supply uncertainties, and that's what is happening." "The only thing unknown is, what is the top for inflation and what is the top for the bond yield? "The question now in terms of controlling inflation [and] keeping bond yields under manageable levels is if Jerome Powell can do that, and I doubt it very much," Sri-Kumar said.

"The chancellor will come to the despatch box," he said when asked by Sky News whether the corporation tax plan would definitely stay. Newspapers reported that some lawmakers who never wanted Truss to replace Boris Johnson as leader in the first place already wanted her out. "I think that changing the leadership would be a disastrously bad idea, not just politically but also economically, and we are absolutely going to stay focused on growing the economy," Cleverly said of Truss. But a fire-sale in the government bond market has driven up borrowing costs and mortgage rates and forced the Bank of England to intervene to protect pension funds. read moreMeanwhile, as Truss battled with the turmoil, she met King Charles for a weekly audience at Buckingham Palace between monarch and prime minister on Wednesday.

☆ Asian economies may have to brace for rising debt and capital flight, IMF warns
▼ + stars: | 2022-10-13 | by ( Su-Lin Tan | ) www.cnbc.com time to read: +4 min

watch nowAsia's biggest economic challenges will be rising debt and capital flight as interest rates continue to rise, the International Monetary Fund has warned. The warnings come as the IMF trimmed its global growth predictions in its latest economic outlook this week and warned the new year would feel like a recession for many parts of the world. "Debt has gone up in Asia," IMF Deputy Director of Asia and Pacific Department Anne-Marie Gulde told CNBC's "Squawk Box Asia" on Wednesday. "First, private sector debt has gone up since the global financial crisis but afterwards since Covid, public sector debt has gone up. The crisis in the U.K stemmed from rising yields and plunging bond prices, which sparked collateral calls for pension funds to cover their LDI-related derivatives.

☆ Strikes, possible blackouts and a plunging currency: Brits are being hit by a wave of bad news
▼ + stars: | 2022-10-13 | by ( Elliot Smith | ) www.cnbc.com time to read: +7 min

'The recession has begun' The U.K. is the only G-7 economy not to have re-attained its pre-pandemic GDP level by the second quarter of 2022, Citibank Chief U.K. The ONS said GDP was only just returning to its pre-pandemic level, highlighting the challenge facing Prime Minister Liz Truss' "growth, growth, growth" agenda. "We now believe the recession in the U.K. has begun in the third quarter of 2022 and will likely last for three quarters. "The cost of living crisis is having a detrimental effect on individuals, not only financially, but physically and mentally too." Members of the CWU (Communication Workers Union) also continue to strike, including 115,000 postal employees of former state monopoly Royal Mail.

☆ Morning Bid: Absolutely, absolutely!
▼ + stars: | 2022-10-13 | by ( ) www.reuters.com time to read: +2 min

☆ Fear of Looking Political Is Making Central Banks Mess Up
▼ + stars: | 2022-10-12 | by ( Jon Sindreu | ) www.wsj.com time to read: 1 min

Seeing central banks break things for appearances’ sake is disquieting. It could also be a sign that parts of the bond market can’t get much worse. Andrew Bailey warned pension funds that they had “three days left” to sort out liquidity problems, leading sterling to drop 1% against the euro. Selling appetite fizzled somewhat as Wednesday trading started, after the Financial Times wrote that the BOE privately told bankers that purchases could be prolonged. Long-term gilts still came under pressure, especially after the central bank denied the report.

☆ Asian stocks stall, dollar wallops pound and yen
▼ + stars: | 2022-10-12 | by ( Kanupriya Kapoor | ) www.reuters.com time to read: +3 min

SINGAPORE, Oct 12 (Reuters) - Asian stocks wallowed at two-year lows on Wednesday, after a strengthening dollar, instability in the U.K. bond market, and upcoming U.S. inflation data spelled a wild session on Wall Street and further volatility for investors. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.87%, while Seoul's KOSPI index (.KS11) fell 0.41% and Australia's resources-heavy index (.AXJO) was up 0.05%. China's CSI300 index (.CSI300) was down 0.96% in early trade and Hong Kong's Hang Seng index fell 1.94%. The British financial turmoil combined with a burst of U.S. dollar strength that sent the sterling to a two-week low of 1.0949, while the risk-sensitive Australian dollar fell to $0.6247, the lowest since April 2020. It was the third straight dip in prices as investors worried about falling fuel demand and tightening COVID-19 curbs in China.

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