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How can the next UK Prime Minister revive the economy? Channel Richard Nixon: Mike Peacock
The country has been unable to govern itself for the past decade. Andy Burnham may be Keir's likely successor. He has a plausible but narrow path to galvanize Britain's economy. To do this, he may need to channel the former U.S. president Richard Nixon. Burnham has a lot of time on his side. Burnham has three years before the next general election, which gives him time to implement fundamental changes. It's possible that the population is ready for change. Most Britons believe that the country has been heading in the wrong direction for a while, according to polls. Since the global financial crises, productivity growth has slowed. Since the global financial crisis, economic growth rates have dropped from 2.5% per year before the crisis to a little over 1%. Public debt, which was around 36% GDP in 2007, has now risen to almost 100%. Some may be willing accept difficult choices if they believe that it will lead to better times in the future. Burnham is a better communicator and may be able to weave a narrative that Starmer could not. Influence is the next factor. Starmer, despite having a large parliamentary majority in favour of his plans to reduce the over-bloated welfare system in the country, was unable to convince the vast majority of Labour MPs to back him. Burnham has the chance to achieve this by channeling the "Nixon effect" in China. The former U.S. President's conservative, hawkish reputation allowed him to pursue rapprochement in the 1970s with Communist Beijing. A more left-leaning leader could not. Burnham might do the same thing in the other direction. Burnham has supported progressive economic policies for many years, calling it "business-friendly socialistism." This track record, combined with his popularity among his left-leaning party members, may help him convince them that he can be trusted to face the fiscal realities of the country. How could Burnham pursue economic reforms? First, he must get the message right to both his party and to markets. Burnham, who was just re-elected to parliament in 2018, could claim that the global landscape has dramatically changed since Labour came to power in 2024. This means that he's not bound by Starmer’s commitments to not raise the personal tax rates, or to touch the generous state retirement arrangement known as "triple lock." Next step is to surround himself with the best people. It's a good sign that Jim O'Neill - former minister of the government and chief economist at Goldman Sachs - has advised him, along with Andy Haldane, former BoE Chief Economist. Burnham's selection of a finance minister is the key to his fiscal intentions. He must also be prepared to take risks. O'Neill told BBC radio recently that "we need someone who is willing to do something bold, different and unique." Burnham, he said, should cut spending on welfare, healthcare, and state pensions to free up resources for productive investments without ballooning deficits. This move could win over bond investors and businesses, just as the early 1997 Labour decision to hand the Bank of England the control of interest rates had done. Burnham would have more room to invest with this trust without worrying the bond market. The fact that Canada is not an outlier in terms of debt should be helpful. Burnham had a rough start in this regard, declaring early this year that "no government should be?hocked" by the bond market. Burnham has since changed his mind and agreed to keep the fiscal rules of current Finance Minister Rachel Reeves, which require that day-to-day expenditures be covered by income in three years, and net debt as a percent of GDP must drop within five years. The UK's politicians are aware that they cannot play with the public's money, given the legacy of Liz Truss’ brief premiership, which was cut short in 2022 by the bond market's reaction to the?unfunded tax reductions. GREAT COMMUNICATOR? Burnham is likely to face many of the challenges that his predecessor faced, but he may be luckier than?Starmer. If the Iran peace agreement?holds' and the Strait of Hormuz is reopened fully, the inflation rate could fall soon and the prospects of interest rates being cut next year may grow. This would help to reduce the country's debt. The strength of the opposition is another issue. In successive by-elections there has been evidence that voters have voted tactically, backing the party they think will best defeat the right-wing Reform Party, and not necessarily their preferred candidate. This assumption may be correct. Burnham, who overwhelmingly defeated the Reform candidate at his by-election victory last week, could have more room to implement reforms. As with Starmer's case, it will ultimately come down to personal conviction and personality. Starmer came to power with no clear vision of the future for Britain, and little ability to articulate a path forward. When his party objected, he abandoned important policy plans. Burnham is a great communicator, but this only counts if Burnham has a solid plan to sell. Burnham's former colleagues and even his allies say that he doesn't 'enjoy making unpopular decisions. His ability to make unpopular decisions will determine the fate of government and economy until 2029. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks. (Writing and Editing by Margueritachoy and Anna Szymanski.)
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Mike Dolan: No silver bullet to solve Fed's inflation problem with the Iran peace deal
The Gulf peace may reduce pump prices but it won't solve the Federal Reserve’s biggest problem. That is, a U.S. Economy that was already overheating prior to the Iran War. Oil prices falling to levels seen before the war could spur demand and increase cost of living fears at a crucial time. This sounds like "damned-if-it does, damned-if-it doesn't" dilemma. Normalizing fuel prices may not solve the Fed's dilemma over inflation and interest rates as quickly as President Donald Trump or the Fed would like. The 'inflation debate' before the conflict was ambiguous, as markets sided with the Fed's guidance for further easing, and viewed the arrival of the new Chair Kevin Warsh to be a dovish message. After the U.S. and Israeli attacks on Iran, on February 28, headline inflation forecasts were re-evaluated after a spike in gasoline and crude prices. This was due to the unprecedented closure of Strait of Hormuz which froze a fifth of world oil supplies. The impact of four months of high inflation and a Fed policy meeting that was hawkish last week has been felt: the dollar, the short-term Treasury yields, and futures markets have priced in two rate increases over the next year. Not even the framework agreement between the U.S. and Iran last week has shaken these bets. Reopening Gulf shipping lanes have brought crude prices back to pre-war level, wiping out a 70% rise in only four months. Yet, expectations of rate hikes barely changed. According to Apollo Chief Economist Torsten Slok, on Wednesday the market narrative has changed from one that sees oil prices as an inflation driver directly to one in which lower energy costs can fuel demand in a hot economy. Slok, pointing out that the link between oil and the yields on two-year Treasury bonds has been broken, wrote: "The narrative now suggests the reopening of Strait of Hormuz could further heat up the economy." There has always been two narratives about the energy shock. It's not clear if a return to the status quo of February will remove inflation or just temporarily lift the brakes on household and business demand. The fact that core inflation rates in January and Feb were already more than one point above the Fed target, a complete reversal in energy prices related to Iran is not enough to solve the problem. The AI investment boom has also brought about additional problems. The 'PERSISTENT TUG OF WAR' will be tested by the personal consumption expenditures (PCE) reading on Thursday for May. This is the preferred inflation indicator of Fed. Core PCE should have increased to 3.4% annually. Data is from the time before the Iran deal last week, so it will not reflect any impact. U.S. Business Surveys for June showed a rebound from the lows of March, with both composite manufacturing and service indices by S&P Global beating expectations. The pressures on input and output prices remained high. The stock market continued to soar despite the war, energy shortages and the AI spending frenzy. The Philadelphia Semiconductor Index is up 60% since the Iran War began, and the S&P 500 gained 8%. This adds to the wealth effects?and consumption tailwinds, as bottlenecks are fed through from the surging AI investments. JPMorgan's mid-year forecast raised its S&P500 year-end target, and stated that the next Fed rate increase is higher, even if it comes later than expected, in 2027, rather than now, as futures market prices currently indicate. JPMorgan strategists, looking at the second half of 2018, wrote that markets will be in a constant tug-of-war between an energy supply shock and still resilient growth. As the growth/inflation balance worsens, the chances of a Goldilocks result diminish -- increasing the case for selective interest rate increases. The return of oil to pre-war prices will be a cause for celebration for most governments and investors. But whether it will make central banks turn the dial 180 degrees is another question. Warsh's desire to reduce the guidance and signaling of future policy directions will complicate matters for the markets. This may cause markets to become more jittery and require a risk premium as the rest of the year progresses. Morgan Stanley's team, for example, believes that this will lead to increased market sensitivity in the future, which could mean greater volatility for short-dated fixed income. The fog that surrounds everything else may replace the clarity of energy prices. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Wall Street Journal, June 25,
These are the most popular?stories from the Wall Street Journal. The Wall Street Journal has not verified these stories and cannot vouch for their accuracy. Donald Trump has ordered the Department of Justice (DOJ) to investigate oil companies that have not reduced gasoline prices in line with the falling crude cost, accusing them of "gouging". The Pentagon has awarded Lockheed Martin a contract for up to 35 billion dollars worth of Thaad interceptors?to replenish U.S. stocks after the 'Iran War. SK Hynix, a memory-chip giant, plans to raise more than $29 billion via a Nasdaq IPO to fund its expansion in the AI chip boom. Qualcomm has agreed to purchase AI software company Modular for $3.9 billion in order to improve artificial intelligence. LVMH 'denied involvement in a legal Dispute brought by 'Hermes heir Nicolas Puech regarding the disappearance his fortune. It said that it was wrongly implicated in a lawsuit centered on alleged mismanagement of Puech’s?late Wealth Manager, Eric?"Freymond. Warehouse giant Prologis approached its U.K. counterpart Segro with a takeover offer of $16.6 billion, but the latter rejected it unanimously. (Compiled by Bengaluru Newsroom)
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At least 32 people are killed and hundreds injured in Venezuela after a series of earthquakes
Interim President Delcy Rodriguez confirmed that two powerful earthquakes hit Venezuela on Wednesday. At least 32 people were killed and 700 others injured as buildings in and around Caracas collapsed. According to the U.S. Geological Survey, a magnitude-7.2 earthquake struck about 160 km (100 mi) west of Caracas. It was followed by a magnitude-7.5 tremor less than a second later. The USGS used predictive modeling to estimate that the death toll would "most likely" be in the thousands with a high probability of exceeding 10,000. Rodriguez stated that the initial numbers 'do not include casualties in La Guaira, near Caracas, home to Caracas airport and the state most affected by the disaster. She said this in an interview with state television shortly before 1 a.m. local (0500 GMT), on Thursday. "I would also like to add that this is an absolute tragedy." We send our message to show our solidarity. To the families that have lost loved one, we reiterate our condolences. She thanked the leaders, including U.S. president Donald Trump, for their support. Trump stated in a social media post that the U.S. is ready, willing and capable to assist in the disaster. "The two earthquakes that have just struck the people of Venezuela were both massive in size and have left behind a number of devastating deaths," said Trump. He was the one who ordered the capture in January of Venezuelan president Nicolas Maduro during a violent raid. The district mayor of Caracas posted on social media that two buildings had collapsed in the Baruta District in Caracas, resulting in three deaths. Gustavo Duque told journalists that four buildings completely collapsed and one person died in the Chacao district of the capital. On state television, Interior Minister Diosdado Cabello said: "We are dealing with the collapse of buildings, homes and houses, and we're doing everything we can to provide security and civil assistance." As night fell, video footage showed emergency workers climbing the ruins of an erupting building in the capital while distraught family members sought help for loved ones they believed were trapped. "When we went down, it was like a horror film," said Maria Alejandra from a nearby apartment building. She did not reveal her name. "We had to climb through the rubble. The baby, the building's?superintendent and the surrounding neighbors were all falling down. "But from that building, I saw only one family get out." Residents rush into the streets The tsunami warning was quickly canceled once the danger had passed. The quakes hit during a holiday in Venezuela, and many Venezuelans were home. "There was an extremely loud crash. The refrigerator was filled with jugs and things fell into the house. Coro Martinez, 56 and a resident of eastern Caracas, said, "I've never seen anything like it." As buildings began to shake, residents in Caracas, also affected by a deadly earthquake of magnitude 6.3 in 1967, fled. Astrid Ramirez is a 41-year old publicist from western Caracas. "Everyone ran down the stairs." Maria Romero (80) a pensioner from southern Caracas said that police helped her to get out of her house. She said, "This earthquake is worse than 1967." A 41-year old office worker, who refused to be identified, also said that she received a quake alert on her phone, just before the shaking intensified. As I started to listen, I felt a light shaking. In less than two second, everything began moving. The U.S. State Department announced that it is in contact with Venezuelan authorities, and has mobilized assistance. Rodriguez, who has run the country since the U.S. ousted Maduro, has said that she has ordered the Foreign Ministry to coordinate the assistance offers. The U.S. Embassy in Caracas stated that it closely monitored the aftermath of this quake, and encouraged citizens to seek shelter. Venezuela is located in an earthquake-prone zone, where the Caribbean Plate and the South American Plate meet. According to the USGS, a powerful earthquake in 1812 caused extensive destruction in Merida and Caracas. HOSPITALS BRACE FOR THE INJURED A worker at the Hospital de Clinicas in Caracas said that staff was asked to work double shifts to treat injured patients. Rodriguez reported that the damage to Venezuela's biggest airport in Maiquetia, on the coast north from Caracas, has caused it to be closed. As authorities started to assess the damage, classes were cancelled for the remainder of the week. The tremors did not appear to have affected Venezuela's oil-related infrastructure. Civil protection authorities near Lake Maracaibo in Maracaibo reported no injuries. A worker at El Palito near Moron, the epicenter of the earthquake, also confirmed that there was no damage. Shell UK, which is evaluating the development of gas fields in Venezuela said that all its employees are in Venezuela and have not been injured. Sources have noted that a prolonged loss of electricity could affect crude production levels until service is restored. Venezuela's oil minister, the state-run PDVSA, and its main partner abroad, Chevron did not immediately respond to requests for comments.
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South Korea's KOSPI recoups its losses with SK Hynix led tech rally
South Korea's benchmark index continued its recovery for a second session on Thursday as investors returned to the market after a historic tech crash earlier in the week. As of 04:18 GMT, the benchmark KOSPI was up 466.67 or 5.51% at 8,937.69. The?rise has now reached 9% in two sessions. The?drop of nearly 10% on Tuesday was the biggest since March. The movements underscore a 'volatile tug-of war between rising interest rates anxiety and opportunistic buying of Korean tech shares at dips. SK Hynix, a?peer company, gained 12.17%, tagging a rally among U.S. chips stocks following Micron's earnings report and outlook. Hyundai Motors and its sister company Kia Corp both saw their shares fall by 0.59%, while rising by 1.15%. Steelmaker POSCO Holdings shed 2.26%, ?while drugmaker Samsung BioLogics rose 0.94%. Out of the 915 shares traded, 402 advanced and 475 declined. The 'KOSPI', the world's top-performing equity index is up 112.09% this year, thanks to the phenomenal demand for semiconductors at Samsung Electronics & SK Hynix. The dollar was quoted at 1,542,2?per won on the settlement platform onshore. This is 0.23% lower than its previous closing of?1,542.7. In non-deliverable futures trading, its one-month forward contract was quoted at 1,555.9. Harikrishnan Nair, Harikrishnan Kim and Cynthia Kim report.
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Shanghai Aluminium hits 2026 Low on Lower Middle East Risk Premium
Aluminum prices fell on Thursday as the Middle East war-risk premium faded, as the fragile peace in?region continued to hold. The Shanghai Futures Exchange's most traded aluminium contract fell 2.75% to?22.825 yuan (3,354.55) per ton after?falling?to an earlier 2026 record low price of 22.665 yuan per ton. The benchmark three-month aluminum on the London Metal Exchange was up 0.13% to $3,126.5 per metric ton at 0339 GMT. This marks an 8% decline since the beginning of the week. As ships passed through the Strait of Hormuz, prices for the light metal fell this week. A fragile peace seemed to hold. The aluminium market had a sharply increased risk premium due to disruptions in freight and higher energy prices from the Middle East conflict. Brent crude oil fell by 1.82%. Middle East supply is increasing quickly, and Iran is expected to boost its sales after a temporary reprieve of U.S. sanctions. Aluminium's production cost is also expected to decrease due to lower energy costs. For its high energy intensity, the metal is often called "congealed electric". Base metals were impacted by global economic headwinds. The U.S. Federal Reserve is expected to increase interest rates in this year due to persistent inflationary pressures. Investors are now waiting for the U.S. Personal Consumption Spending data?will provide further clues about monetary policy. As they dampen economic activity, higher interest rates hurt industrial minerals that are dependent on growth. This week, the outlook for growth was also clouded by the underperformance of technology stocks. Copper has been able to benefit from the projections that demand will increase due to AI infrastructure, grid investments and electric vehicles. Benchmark LME 3-month copper rose 0.35% while the most traded SHFE?contract fell by 1.82%. Zinc fell 0.09% on the LME, while lead rose?0.29%. Nickel gained 0.64%, and tin grew 1.65%. The SHFE saw a drop of 1.64% in zinc, 0.72% in lead, 0.92% for nickel and 1.76% for tin. ($1 = 6.8042 Chinese Yuan Renminbi) Reporting by Solomon Cefai, Editing by Ronojoy Mazumdar
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Oil extends decline on rising Middle East supply
The oil prices continued to fall on Thursday, dipping near the levels seen just before the Iran War. This was due to a 'rising'?supply expectation from the Middle East that outweighed the demand concerns. Brent crude futures, for delivery in August, fell by $1.22 or 1.65% to $72.52 a barrel as of 0337 GMT. U.S. West Texas Intermediate dropped $1.02 or 1.45% to $69.32 a barrel. Both contracts have reached their lowest levels since February 27, Brent for August was cheaper than September at $73.59, indicating ample supply in the short term. In a recent note, IG analyst Tony Sycamore stated that "the speed of this drop has?caught many off guard" as the markets have priced in a faster return of Middle Eastern crude barrels than what most people had expected just a 'fortnight ago." Brent fell more than $3 Wednesday, as concerns about supply eased. WTI also settled down nearly $3. U.S. Energy Sec. Chris Wright said on Wednesday at a forum that the flow of oil through the Strait of Hormuz was close to the level before the start of the Iran War. He added that 20 million barrels of oil had left the strait within the past 24 hours. Wright said that a return to "complete normalcy" would take several weeks due to the need to demine the Strait of Hormuz. The price of crude oil around the globe has been driven down by a combination of rising Middle Eastern supply and Iran's plans to increase sales after a temporary reprieve in U.S. sanction. The U.S. and Israel war against Iran that began on February 28 has been ended by an initial agreement last week. This allowed the traffic to resume through the Strait. The agreement established a 60-day period of negotiations in order to address more complex issues, such as Iran's nuclear program. Wright stated that oil would flow through the Strait even if it did not hold and that Iran "would not be able" to close it. Oman opened Wednesday temporary routes for tanker departures 'from the Strait?of?Hormuz. The International Maritime Organization (IMO) and Omani authorities coordinated movements. Qatar's Prime Minister visited Oman to discuss the beginning of negotiations with Iran, Iraq and Gulf States over future management of the Strait. Macquarie analysts predicted oil prices to return quickly to pre-war levels, as supply chains adapt and the Strait of Hormuz is reopened. Brent and WTI are expected to average $62 and $67 per barrel respectively in the third quarter. This is down from $94 and $87.50 per barrel for the second quarter. Energy Information Administration reported that U.S. crude oil stocks fell to their lowest level since 1984 on Wednesday. This was due to strong refinery demand and the government's release of emergency reserves. The markets, however, seemed unfazed as traders concentrated on the Strait of Hormuz. Reporting by Colleen Waye in Beijing, and Siyi Liu from Singapore; editing by Jacqueline Wong
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Bankers claim that Vedanta Resources returns to the dollar bond market in order to purchase high-cost notes.
Two merchant bankers confirmed on Thursday that Vedanta's wholly owned subsidiary is returning to the dollar bond market in nine months with a three tranche issuance. The issuance will primarily be used to fund Vedanta's buyback of high yielding notes. The bankers said that Vedanta Resource Finance II will raise money through bonds with a coupon of 7.25, 7.6250%, and 8.0%. The company didn't respond to an email asking for comment. They asked to remain anonymous because they aren't authorised to talk to the media. The bonds will be guaranteed by the parent company as well as its subsidiaries Twin Star Holdings and Vedanta Holdings Maritius II. The notes will be rated according to the issuer. The proceeds will primarily be used for refinancing higher yielding debts worth over $2 billion. The company plans to buy back $550'millions of 9.475% 2030 bonds, $500'millions of 11.25% paper in 2031, $500?millions of 9.125% 2032 bonds, and $550 -millions of 9.85% notes. The unit raised $500 million in October by?selling seven year dollar bonds with a coupon of 9.1250%. This is one of the documents that it plans to repurchase.
Spain's Audax plans to takeover Norway's Elmera but is challenged by higher rival approach
Spanish renewable energy company, 'Audax Renovables' announced on Thursday that it plans to make a voluntary takeover bid for Norway's Elmera Group. The bid is valued at 4.5 billion Norwegian crowns (US$456 million). Elmera also said that another strategic player had made a non-binding offer with a "significantly" higher price.
Early trade saw Elmera's shares up by about 43% while Audax's shares fell 1.4%.
The Norwegian 'company' said in a press release that it had entered into an?exclusive agreement and due diligence agreement? with the unnamed interested party, adding that this process has been ongoing for several weeks.
* Elmera refused to make any further comments on the subject, and Audax wasn't immediately available for comment.
Shareholders representing 43.3% of Elmera’s capital have already expressed their support for the Audax deal, which requires a minimum level of acceptance of 66.7%.
The deal will strengthen the European presence of Elmera, especially in the Nordics. It will also diversify the company's energy platform as Elmera operates a multiutility business that includes telecoms.
(source: Reuters)