23/05/2025

FRIDAY | MAY 23, 2025

18

BIZ & FINANCE

Investors fret over long-term US debt

UK budget strains deepen ahead of spending review LONDON: Britain’s government kicked off the 2025/26 financial year in April by again borrowing more than expected, suggesting no let-up in the pressure on the public finances ahead of a major review of spending. Public sector net borrowing was £20.155 billion (RM115 billion) in April, according to official data. A Reuters poll of economists showed a median forecast of £17.9 billion for public sector net borrowing. Economists have routinely underestimated the extent of Britain’s budget deficit each month over the past year. Finance Minister Rachel Reeves is due to deliver her first multi-year spending review on June 11 to set the budgets for public services. She outlined her first annual tax and spending plans last October when she raised social security contributions paid by employers but held off from broader tax increases. “The decision to hold off on tax rises in the Spring Budget increasingly looks like a temporary reprieve,” said Lindsay James, investor strategist at wealth management firm Quilter. “As borrowing continues to outstrip forecasts and debt interest costs remain elevated, pressure is building on the chancellor to make tougher choices.” With Reeves’ budget plans hinging on a tiny buffer against the government’s self-imposed fiscal rules – equivalent to less than 1% of annual spending – investors are watching public sector finance data closely. The British government bond market has become increasingly volatile in recent years, reflecting unease among investors over Britain’s mix of slow economic growth, high debt interest costs and persistent inflation. Yesterday’s figures from the Office for National Statistics (ONS) were the first to estimate the impact of the large hike in employer social security payments, known in Britain as National Insurance contributions (NICs), which came into effect in April. A major source of funding for the Labour government’s spending plans, the ONS said compulsory social security contributions increased by 12.8% compared with a year ago. – Reuters Gold prices edged up for the fourth-straight session, helped by a softer dollar and safe-haven demand. – Reuters The modest progress to date on trade deals has also kept investors jittery. Attention will also be on a Group of Seven meeting in Canada, where finance ministers put a positive spin on discussions to try to reach an agreement on a joint communique largely covering non-tariff issues. Investors have also been scouring for any hints that currency markets could be part of trade negotiations, but Thai and Japanese officials said currency markets were not part of their discussions. Meanwhile, bitcoin rose for the fifth-straight session and touched a record high of US$111,862.98 as the world’s most valuable cryptocurrency recovers from the tariff-induced selloff last month. It was last up 2.8%. Oil prices eased yesterday, following a strong surge in the previous session, after unexpected builds in US crude and fuel inventories raised demand concerns.

was evident on Wednesday after the US Treasury Department saw tepid demand for the US$16 billion sale of 20-year bonds that pushed bond yields higher. Yield on 30-year Treasury bonds steadied above 5% after hitting a 1-1/2 year high earlier in Asian hours. “Tariff concerns have firmly shifted to concerns about global bond supply and the reverberations are being felt across all asset classes globally,” said Ben Wiltshire, global rates strategist at Citi. “Yields are not shifting higher due to economic optimism but rather a renewed focus on net bond supply. This is why we’re seeing equities and long-end bonds both sell off.” The bond market in Japan has also been in focus as a relentless selloff continued, with the 30-year JGB yield at 3.155%, not far from the record high of 3.185% hit in the previous session. Stocks in Asia fell, with MSCI’s broadest index of Asia-Pacific shares outside Japan 0.6% lower, while Japan’s Nikkei fell 0.8% on the stronger yen.

two weeks against other major currencies. European futures indicated a sharply lower open, tracking a dour Asian session, ahead of surveys on overall sector activity in Europe for May. The data could offer some insight into how businesses have been grappling with the challenges of a cloudy outlook for the trade-reliant economy. Investors have been looking for options outside the US based on expectations it would not be immune in the event of a global recession spurred by Trump’s erratic trade policy. “We continue to have uncertainty and worries about growth and worries about the ability of the US government to raise more debt,” said Vis Nayar, chief investment officer at Eastspring Investments in Singapore. “We’re not expecting some sort of mean reversion back toward dollar strength, but longer-term that all leads to diversification into these emerging market countries.” Investor reluctance about buying US assets

WASHINGTON: Stocks and the US dollar fell on yesterday, while longer-dated Treasury yields steadied near their highest in 18 months as worries of a worsening fiscal outlook in the world’s biggest economy remained at the top of investors’ minds. The spotlight is on President Donald Trump’s tax bill that is expected to be voted on in the House of Representatives within hours and investors are worried it could add about US$3.8 trillion to the US$36 trillion US debt pile. The sombre mood among investors after Moody’s downgraded the US credit rating last week has left markets slightly listless as a “Sell America” narrative gains traction, with the greenback hovering near its lowest in o Dollar swoons, 30-year Treasury yields at 5%, bitcoin hits record high

People walking past a Nike store in New York. – REUTERSPIC

Nike says raising prices in America without citing Trump tariffs NEW YORK: Athletic footwear and apparel giant Nike said on Wednesday it would raise prices on many items in the United States next month, but did not blame President Donald Trump’s tariffs for the move. while those more than US$150 would be subject to price hikes up to US$10. There will be no increases on children’s products, items priced less than US$100, Air Force 1 sneakers and non-shoe items from the Jordan line. though he issued a temporary reprieve for most countries a week later. Currently most countries are subject to 10% baseline tariffs, but Chinese imports face levies of 30%. Nike manufactures the majority of its products in China, Vietnam and Indonesia.

“We regularly evaluate our business and make pricing adjustments as part of our seasonal planning,” the Oregon-based company said. Sneakers currently between US$100 and US$150 would see increases of up to US$5,

Increases on other Nike apparel and equipment would range from US$2 to US$10. Trump last month imposed steep tariffs on many US trading partners, including major clothing manufacturers China and Vietnam,

Asked about links between the upcoming price increases and the tariffs, Nike said the prices of its products are based on a variety of factors. – AFP

British airline EasyJet first-half loss widens LONDON: British no-frills airline EasyJet yesterday announced a widening of net loss for the first half of its financial year as fuel and other costs increased. Many airlines tend to post losses during the northern hemisphere winter owing to weaker demand compared with the peak summer season.

adding that the airline would continue “to drive efficiency and enhance... customer experience both in the sky and on the ground”. EasyJet said it was assessing “the possible impact” of US tariffs on its cost base and “supply chain resilience” but noted that any fallout “remains uncertain at this early stage”. The airline meanwhile continues to suspend flights to Tel Aviv amid the Israel-Gaza conflict. – AFP

“We remain focused on delivering another record summer this year,” EasyJet chief executive Kenton Jarvis said in the earnings statement. “We continue to see strong demand for EasyJet’s flights and holidays,” he noted,

EasyJet, which flies mainly in Europe, said loss after tax increased 16% to £297 million (RM93 million) in the six months to the end of March. Group revenue climbed to £3.53 billion, while fuel costs rose 4%.