David Fuller and Eoin Treacy's Comment of the Day
Category - General

    End Pay and Price Demands to Curb Inflation, BOE's Bailey Says

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    Workers must stop demanding higher wages and businesses refrain from repairing profit margins if inflation is to come down from current “completely unsustainable” levels, Bank of England Governor Andrew Bailey said.

    In a pooled broadcast clip, Bailey also signalled that rate setters were prepared to push the country into a recession if necessary to curb soaring prices.

    He was speaking shortly after the BOE took markets, businesses and economists by surprise with a half-point increase in interest rates to 5%. A quarter-point rise was expected but the vote was overwhelmingly in favor of moving faster. Seven of the nine members of the Monetary Policy Committee backed it.

    “We’ve got to get inflation and we will get inflation back to its target,” Bailey said. “To do that we cannot continue to have the current level on wage increases and we can’t have companies seeking to rebuild profit margins, which means prices continue to go up at current rates.”

    “What I would say is we expect inflation to come down and it’s important that price setting and wage setting reflects that because the current levels are absolutely unsustainable.”

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    Turkey's Lira Slumps After a Smaller-Than-Expected Rate Rise

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    Turkey’s central bank delivered a significantly smaller interest-rate increase than anticipated, as policy makers embark on what they said will be a gradual transition from an era of ultra-cheap money.

    The Turkish lira slumped as much as 4.3% after the first rate-setting meeting since Governor Hafize Gaye Erkan took over this month. The Monetary Policy Committee increased its policy rate of one-week repo to 15% from 8.5%. 

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    Zambia Wins Debt Relief, Setting Precedent for Stressed Nations

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    Zambia reached an agreement in principle to restructure $6.3 billion of debt with bilateral lenders and will announce a deal Thursday, according to a French official, setting a precedent for countries struggling to service their liabilities.

    The accord marks the first major relief won by a developing country under the Group of 20 nation’s Common Framework that brings the traditional creditor nations of the Paris Club around the same negotiating table with China and India. Details are still unclear, beyond that the creditors led by China and France agreed to extend the maturities on their loans over some 20 years, with a three year grace period. 

    The parties will sign the memorandum of understanding in coming weeks, the official said.

    This could lead the way for other nations — including Ghana, Sri Lanka and Ethiopia — locked in negotiations with creditors from China, the Paris Club and bondholders. More than 70 low-income nations face a collective $326 billion burden, with more than half of them already in or near debt distress, according to the International Monetary Fund. 

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    Fed's Powell Says Higher Interest Rates Needed to Curb Inflation

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    Powell described the labor market as “very tight,” though the unemployment rate rose in May to 3.7%. “There are some signs that supply and demand in the labor market are coming into better balance,” he said.

    Powell cited the Fed’s characterization in its semi-annual report to Congress released Friday of tighter US credit conditions following bank failures in March.

    “The economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation,” he said. “The extent of these effects remains uncertain.”

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    Apple's Taiwan Suppliers See Sales Falter Again on Slow Demand

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    Revenue among Taiwan’s major Apple Inc. suppliers fell for a fourth straight month in May, as high
    living costs keep a lid on consumer discretionary spending.

    The group of device assemblers like Hon Hai Precision Industry Co. and components makers like Taiwan Semiconductor Manufacturing Co. reported overall sales of NT$944.10 billion ($30.5 billion) in May, 7.8% lower than a year ago and worse than April’s 2.1% drop, according to data compiled by Bloomberg.

    Before announcing its long-awaited Vision Pro headset alongside upgraded Macs this month, Apple weathered a tough first quarter where sales of its hardware either slumped or stagnated. A small gain in iPhone revenue was greeted as a positive surprise by the market, which expected an even worse slump.

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    Bitcoin Hits Six-Week High as Financial Titans Push Into Crypto

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    WisdomTree is trying again for permission to start a spot US Bitcoin ETF after being rebuffed in the past. BlackRock made its filing on June 15. The SEC has resisted allowing such spot funds but BlackRock’s attempt carries the heft of the world’s largest asset manager and its track record of winning approvals.

    “The BlackRock filing changed everything, that reignited the race,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.

    BlackRock’s application landed amid Grayscale Investments LLC’s legal battle with the SEC to convert the Grayscale Bitcoin Trust into a physically backed ETF. The trust’s discount to net asset value has narrowed sharply on speculation BlackRock’s step could end up bolstering Grayscale’s case.

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    Crypto Exchange Backed by Citadel Securities, Fidelity Goes Live

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    An expectation among regulators that crypto exchanges should be separated from broker-dealer functions, similar to the structure of traditional financial markets, will create opportunities for EDX, Nazarali said. 

    “We believe crypto is here to stay, but for it to evolve as an asset class it needs to adopt the rules and investor protections that exist in traditional finance,” Nazarali said in an interview. “The message we’ve got from our investors is that this creates an even bigger space for us.”

    Already backed by companies including Paradigm, Sequoia Capital and Virtu Financial Inc., EDX raised new funding through additional investors including Miami International Holdings, GTS, GSR Markets, and HRT Technology. It plans to launch EDX Clearing to settle trades later this year. 

    The US Securities and Exchange Commission recently widened its crackdown on the crypto industry through lawsuits against two of the biggest firms, Binance and Coinbase, alleging that they acted as unregistered securities exchanges, broker-dealers and clearinghouses. The firms have denied the allegations. 

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