Latest news with #MoodysAnalytics
CNA
2 days ago
- Business
- CNA
CNA938 Rewind - Stock take today: Market wipes out rally on downbeat forecasts
CNA938 Rewind - Albanese-Xi meeting: Improved ties between Australia, China Australian Prime Minister Anthony Albanese said on Tuesday (Jul 15) that "dialogue" must be at the heart of ties between Canberra and Beijing as he met with President Xi Jinping. Xi, in turn, hailed the "benefits" of improved ties between China and Australia, saying the relationship had "risen from the setbacks and turned around". Andrea Heng and Hairianto Diman assess the relationship between the two countries against the wider geopolitical context with Professor Carlyle Thayer, Emeritus Professor at the University of New South Wales Canberra, at the Australian Defence Force Academy. CNA938 Rewind - Can China sustain its 5% GDP growth target as US tariff risks mount? China's GDP grew 5.2 per cent in the April to June quarter from a year earlier, slowing from 5.4 per cent in the first quarter, but just ahead of analysts' expectations in a Reuters poll for a rise of 5.1 per cent. Andrea Heng and Hairianto Diman speak with Sarah Tan, Assistant Director Economist at Moody's Analytics, to examine the factors that have contributed to this unexpected growth and whether China would be able to maintain its 5% GDP growth target in the face of a trade war.
CNA
2 days ago
- Business
- CNA
CNA938 Rewind - Albanese-Xi meeting: Improved ties between Australia, China
CNA938 Rewind - Albanese-Xi meeting: Improved ties between Australia, China Australian Prime Minister Anthony Albanese said on Tuesday (Jul 15) that "dialogue" must be at the heart of ties between Canberra and Beijing as he met with President Xi Jinping. Xi, in turn, hailed the "benefits" of improved ties between China and Australia, saying the relationship had "risen from the setbacks and turned around". Andrea Heng and Hairianto Diman assess the relationship between the two countries against the wider geopolitical context with Professor Carlyle Thayer, Emeritus Professor at the University of New South Wales Canberra, at the Australian Defence Force Academy. CNA938 Rewind - Can China sustain its 5% GDP growth target as US tariff risks mount? China's GDP grew 5.2 per cent in the April to June quarter from a year earlier, slowing from 5.4 per cent in the first quarter, but just ahead of analysts' expectations in a Reuters poll for a rise of 5.1 per cent. Andrea Heng and Hairianto Diman speak with Sarah Tan, Assistant Director Economist at Moody's Analytics, to examine the factors that have contributed to this unexpected growth and whether China would be able to maintain its 5% GDP growth target in the face of a trade war.
Yahoo
3 days ago
- Business
- Yahoo
Posthaste: This shift in Canada's bond market is raising red flags
There's been a shift in Canada's bond market and it's raising red flags with some observers. As the Government of Canada bond market expands, hedge funds are grabbing a bigger share. In recent auctions, these funds bought nearly half of the bonds available in some maturities, and took a 30 per cent share of secondary trading, said a report by Moody's Analytics. In 2010, hedge funds purchased less than 2 per cent of these bonds at auction. 'Hedge funds are now at the core of the Government of Canada bond market,' said Moody's Analytics economist Charles Houston. 'This shift in market structure has important consequences for financial stability.' One reason for the increase in hedge fund buying is that the Government of Canada has issued more bonds, with the value rising by more than 60 per cent since the start of the pandemic, says Moody's. Bank-owned dealers, who used to be the main buyers, have not been able to absorb the higher issuance because of their capital constraints and risk management policies. 'Hedge funds have stepped in to fill the gap,' he said. Where the vulnerability lies is that hedge funds tend to use a strategy called cash-futures basis trade, which involves buying a bond in the cash market and selling a futures contract tied to that same bond. These transactions are often financed through short-term borrowing in the repurchase (repo) market and their popularity is growing. Volumes linked to this strategy hit $51 billion in April 2024, almost 10 per cent of the government of Canada bond market, according to the Bank of Canada. When the bond market behaves predictably, the strategy works well, especially when trades are scaled up by borrowing. But when it doesn't, things can go very bad, very quickly. If bond volatility spikes, margin calls can increase and banks cut back on funding hedge funds' positions, said Moody's. Funds are then forced to quickly unwind their trades, swamping the market, and yields rise. This vulnerability blew up in March 2020 in the U.S. Treasuries market when foreign central banks and bond funds dumped their Treasuries in a 'dash for cash.' The Federal Reserve was forced to step in, buying more than US$1 trillion in Treasuries in just one month. More recently, it was seen in early April of this year, just days after Donald Trump's Liberation Day roiled the stock market. In a highly unusual situation, bond yields surged as stocks dropped, and the Treasuries basis trade was named as one of the big culprits. The Bank of Canada identified cash-futures basis trade as a potential risk in a 2024 report that calculated that trading volumes in this strategy had more than doubled since 2016. 'While basis trades help to maintain an efficient government bond market, they can also amplify market stress,' said the report. 'Given the potential implications for financial stability, Bank of Canada staff will continue to monitor the size of the trade and the types of investors that participate in it.' to get Posthaste delivered straight to your trade war has unleashed a tsunami of uncertainty on the world, as shown by this chart from National Bank of Canada tracking the volatility measures, VIX and Bloomberg Global Trade Policy Uncertainty Index, against the United States' effective tariff rate. 'To be frank, the future of U.S. trade policy is as clear as mud,' said Avery Shenfeld, chief economist at CIBC Capital Markets. However, 'amidst all the noise, there's been one point of consistency: no country is getting a 'get out of tariffs free' card from the U.S.' U.S. trade issues will be in focus this week after U.S. President Trump threatened to impose a 35 per cent tariff on Canadian goods last week. Canada and the U.S. are working toward a trade agreement by an Aug. 1 deadline. Today's Data: Canada wholesale trade for May Earnings: PrairieSky Royalty Ltd., Fastenal Co. Trump's new tariff threat hikes uncertainty for Canadian businesses Are Canadian home prices about to roll over? Don't bet the house on it Why was Jersey Milk cut from Canada and could other chocolate makers follow? Once the black sheep of personal finance, reverse mortgages are now lower cost than in the old days, and far more mainstream. In fact, a 2023 Deloitte study found that 17 per cent of soon-to-retire homeowners were ready to tap their home equity to bridge a savings shortfall. Find out what you need to know about reverse mortgages and the best rates, updated daily here. Recently, we published a feature on the death of the summer job as student unemployment reaches crisis levels. We want to hear directly from Canadians aged 15-24 about their summer job search. Send us your story, in 50-100 words, and we'll publish the best submissions in an upcoming edition of the Financial Post. You can submit your story by email to fp_economy@ under the subject heading 'Summer job stories.' Please include your name, your age, the city and province where you reside, and a phone number to reach you. Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@ with your contact info and the gist of your problem and we'll find some experts to help you out while writing a Family Finance story about it (we'll keep your name out of it, of course). Want to learn more about mortgages? Mortgage strategist Robert McLister's Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won't want to miss. Plus check his mortgage rate page for Canada's lowest national mortgage rates, updated daily. Visit the Financial Post's YouTube channel for interviews with Canada's leading experts in business, economics, housing, the energy sector and more. Today's Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg. Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@ Canada's mortgage renewal wave close to cresting It's summertime and the season is ripe for a market meltdown
Telegraph
4 days ago
- Business
- Telegraph
US recession risk soars as Trump tariffs hammer households
America's economy is facing the highest chance of recession since the depths of the Covid crisis as Donald Trump's tariffs blitz hammers households. The probability that the US economy falls into recession over the next 12 months has soared to 47.6pc from 33.2pc in March, according to Moody's Analytics. This is the highest reading since April 2020, when the US economy was wracked by the pandemic and shrunk by nearly a fifth. Mr Trump's trade war is hitting consumers across America, triggering alarm bells about the health of the world's largest economy and risking a recession, which is classed as two consecutive quarters of contracting GDP. Mark Zandi, chief economist at Moody's Analytics, said: 'The risk is high that there's a mistake or something else goes wrong when the economy is vulnerable and we actually go into recession.' A slowdown in real consumer spending, which had been growing steadily between 2022 and 2024 but flatlined in December, is a key warning sign, Mr Zandi said. In May, real consumer spending fell by 0.3pc as consumers pulled back on cars, hotels and restaurants, according to the Bureau of Economic Analysis. 'That is signalling real stress because the American consumer drives the train and right now they're AWOL,' Mr Zandi said. Moody's calculation is based on a machine-learning algorithm that assesses existing economic data and lead indicators such as unemployment insurance claims, new building permits and Treasury yields – a model that correctly predicted the last nine recessions with several months' lead time. Investment banks such as JP Morgan had already warned about recession risks in the immediate aftermath of Mr Trump's April 2 'reciprocal' tariffs announcements, but rowed back when the president suspended many of the individual charges on America's trading partners. However, the Moody's analysis shows that since April the president's policies have pushed the US economy into a much more unstable position. Immigration crackdown It comes as Mr Trump announced last week that the reciprocal charges would be reimposed on many of America's trading partners, including Japan and Korea, from August 1. Accountancy firm RSM also puts the US recession probability in the next 12 months at 40pc. Joe Brusuelas, RSM US's chief economist, said: 'That reflects the real economic and financial cost from the global economic reset that the Trump administration is intending to implement. 'If you want to rebalance the global economy to narrow the trade deficit, that entails some cost, it's not free.' Mr Trump's immigration crackdown, which has already triggered a decline in America's foreign-born workforce, is also expected to take a large toll on economic growth, as the US economy relies heavily on migrant labour. Mr Zandi said: 'One element of the secret sauce that means the US has been able to grow more quickly than many other developed economies across the world has been immigration. 'That's under direct assault and the growth in the foreign-born labour force has collapsed. That is a direct hit to the economy's ability to grow more quickly.'
Yahoo
6 days ago
- Business
- Yahoo
Trump's mega tax and spending law will have small economic impact, forecasters say
President Donald Trump's sweeping tax and spending law, which he dubbed "one big, beautiful bill," will likely have a small impact on the U.S. economy, forecasters say, defying Trump's claims that it will turbocharge growth. The legislation, which Trump signed into law July 4, should boost economic output in 2026, but the effects will wane over the next decade as new individual tax breaks expire and cuts to social safety net programs like Medicaid and food stamps ramp up, economists say. 'The GDP effects are on the margin,' said Mark Zandi, chief economist of Moody's Analytics. 'It adds a little to GDP growth in 2026 but over the longer run… it's a wash.' Before signing the bill on the South Lawn of the White House, Trump said, 'After this kicks in, our country is going to be a rocket ship economically.' The legislation chiefly extends Trump's 2017 tax cuts, which had been set to expire this year, and provides new perks for working-class Americans while restoring full tax incentives for business capital investment. It also makes deep spending reductions to programs such as Medicaid, bolsters outlays on immigration enforcement and the military, and scraps dozens of green energy subsidies created by President Joe Biden's Inflation Reduction Act. Though the spending blueprint has been hotly debated because of its effects on household pocketbooks at various income levels, its impact on the overall economy is also a point of contention. Republicans have disputed a Congressional Budget Office analysis that concludes it will add $3.4 trillion to the national debt over a decade, largely by slashing tax revenue. A higher national debt typically means higher interest rates for consumers. Some GOP lawmakers argue the legislation will reduce the deficit or have no effect on it because it will juice economic growth so dramatically that it will yield a windfall of tax revenue. They say it also will save federal dollars by cutting waste, fraud and abuse from Medicaid. And stronger economic growth means more job creation and more prosperous households and businesses. The Trump administration's Council of Economic Advisors estimates the legislation will allow the economy to grow a relatively robust 3% a year through 2025 compared with 1.8% otherwise, according to the Tax Foundation. But the nonprofit think tank said the council is 'ignoring many of the bill's tax hikes on individuals, such as limitations on credits for health insurance and green energy.' The council also 'does not account for the bill's reductions in spending, which further shrinks the size of the stimulus by about 20%,' the Tax Foundation said in a report. Some independent economists are less sanguine. Zandi estimates the legislation will lift economic growth by a moderate 0.4% in 2026, helping the economy grow a still-tepid 1.3%, up from a projected 0.9%. That should generate an additional 190,000 jobs, he said. The bill largely spurs more economic growth next year by expanding the 2017 tax cuts that already have been lifting Americans' after-tax income in recent years. For example, it eliminates taxes on tips (up to $25,000 a year) and overtime (up to $12,500). It also allows new deductions on Social Security benefits for people over 65, raises the child tax credit and increases the cap on the deduction for state and local taxes from $10,000 to $40,000. The new provisions are expected to put more money in Americans' pockets and increase consumer spending, which makes up 70% of economic activity. The tax breaks also should draw more people on the sidelines into the labor force, according to the Congressional Budget Office. A bigger labor supply helps U.S. businesses increase production. But those tax benefits expire at the end of 2028. By contrast, business tax cuts and capital spending incentives are permanent. Those also increase the economy's productivity through investments in new factory machines, computers and artificial intelligence. Zandi said those tax benefits are small. But economist Bernard Yaros of Oxford Economics expects them to 'play a larger role in boosting the economy' than the individual tax cuts. Meanwhile, reductions to Medicaid and SNAP benefits, formerly called food stamps – through new work requirements and paperwork – as well as to the Affordable Care Act are projected to reduce after-tax income for the poorest one-tenth of households by $1 trillion over the next decade, according to CBO and the left-leaning Center for Economic and Policy Research. The policies also will leave more than 12 million people without health insurance. The reductions, along with the cancellation of Biden's student loan subsidies, are slated to increase from $42 billion in 2026 to $285 billion in 2035, according to Moody's Analytics. A smaller social safety net also could take a big toll on local economies. 'Grocery stores who no longer get as much revenue from (food stamps) will cut back on staffing, hospitals without Medicaid may close or lay off health care workers,' said Robert Manduca, a sociology professor at the University of Michigan. 'Those workers, in turn, will no longer spend as much at local restaurants, hardware stores, etc., prompting further job losses.' Also poised to accelerate are cuts to the Inflation Reduction Act's green energy subsidies, rising from $10 billion next year to $94 billion by 2032, Moody's figures show. From 2027 to 2035, the social safety net and clean energy spending decreases will roughly offset the tax benefits for households and businesses, Zandi said. The economy, he projects, will grow 1.3% to 2.3% over the next 10 years. And the average annual bump from the budget bill is close to zero, according to Yaros of Oxford. By 2030, Yaros of Oxford predicts the nation's gross domestic product will be just 0.1% larger as a result of the budget bill. There's another concern. By goosing consumer demand when unemployment is a historically low 4.1%, the bill is likely to spark more inflation, forcing the Federal Reserve to keep interest rates high and even raise them next year, Carl Weinberg, chief economist of High Frequency Economics, wrote in a note to clients. That would mean 'no incremental GDP growth, higher inflation and much bigger fiscal deficits,' Weinberg said. Some analysts disagree. Adam Michel, director of tax policy studies for the libertarian Cato Institute, said the Medicaid and food stamp cuts 'are often framed incorrectly.' 'Reducing dependency on government programs and encouraging work can strengthen the labor market and improve long-term economic performance,' he said. 'The spending cuts are part of a pro-growth strategy, not an economic drag. My biggest concern with the bill is that it didn't cut spending further.' This article originally appeared on USA TODAY: Trump's sweeping tax law will add just modestly to economic growth
