US Business

European stocks rose Thursday as the Bank of England delivered its biggest interest rate hike in 27 years and traders tracked Chinese military drills around Taiwan.

Although economists had anticipated the 0.50-percentage point rise, the UK central bank also grimly predicted the country would dip into a lengthy recession later in the year.

The rate hike mirrored aggressive monetary policy from the US Federal Reserve and the European Central Bank last month, as the world races to cool red-hot inflation that has been fuelled by Russia’s invasion of Ukraine.

Underscoring the urgency, the Bank of England also predicted that UK inflation would peak this year at just over 13 percent, its highest level since 1980.

Analyst Kallum Pickering, from Berenberg, said the UK central bank’s moves would “contribute to a further tightening of UK financial conditions”.

“While this will do little to dampen the likely further rise in inflation near-term, it should help to contain inflation expectations. This will reduce the risk that high inflation persists once its mostly external triggers have faded,” he said. 

After the rate hike announcement, the British pound sank 0.7 percent versus the euro and dollar as dealers fretted over the gloomy outlook.

In mid-afternoon trading, shares in London were 0.2 percent higher, while Paris and Frankfurt were both nearer one percent higher.

Wall Street stocks treaded water early on ahead of key US jobs data.

– Oil tumbles –

Oil prices tumbled with the main US oil contract falling back down to levels not seen since before the war in Ukraine sent crude prices soaring.

The drop comes after a decision by the OPEC+ oil cartel, led by Saudi Arabia and Russia, a day earlier to undertake just a small increase in production.

US energy data also revealed unexpectedly weak gasoline demand.

“The oil market is a mixed bag as demand destruction is met with limited spare capacity,” said Edward Moya, analyst at OANDA trading platform.

Most Asian indices tracked a Wall Street rally the previous session fuelled by healthy economic and earnings data, despite lingering Taiwan concerns.

New York surged Wednesday after a report on the crucial US services sector showed surprise improvement, soothing recession fears in the world’s top economy.

Markets have swung this week after a number of Federal Reserve officials lined up to suggest there were still some big US rate hikes likely and talk of cuts next year might be overdone.

– Pelosi visit –

The mood in Asia was also a lot more settled after the upheaval of this week’s visit to Taiwan by US House Speaker Nancy Pelosi, which sparked outrage in China with warnings of stern military and economic responses.

Beijing has suspended a limited amount of cross-strait imports and exports, and on Thursday began its largest-ever military exercises encircling Taiwan that are expected to last for days.

Soon after, Taiwan’s defence ministry said it was “preparing for war without seeking war”.

Taipei stocks fell again on worries that the Chinese manoeuvres would hit shipping lanes and flights into Taiwan.

– Key figures at around 1345 GMT –

London – FTSE 100: UP 0.2 percent at 7,462.37 points

Frankfurt – DAX: UP 0.96 percent at 13,717.96

Paris – CAC 40: UP 0.8 percent at 6,524.47 

EURO STOXX 50: UP 0.8 percent at 3,761.31 

New York – Dow:  DOWN 0.04 percent at 32,787.82 

Tokyo – Nikkei 225: UP 0.7 percent at 27,932.20 (close)

Hong Kong – Hang Seng Index: UP 2.1 percent at 20,174.04 (close)

Shanghai – Composite: UP 0.8 percent at 3,189.04 (close)

Euro/dollar: UP at $1.0195 from $1.0166 Wednesday

Pound/dollar:  DOWN at $1.2112 from $1.2149

Euro/pound: UP at 84.18  pence from 83.63 pence

Dollar/yen: DOWN at 133.52  yen from 133.86 yen

Brent North Sea crude: DOWN 1.5 percent at $95.28 per barrel

West Texas Intermediate: DOWN 1.4 percent at $89.43 per barrel

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Jeff Bezos’ Blue Origin on Thursday launched six people to space, including the first from Egypt and Portugal, on the company’s sixth crewed flight. 

Mission “N-22” saw the New Shepard suborbital rocket blast off around 8:58 am local time (1358 GMT) from Blue’s base in the west Texas desert.

The autonomous, re-usable vehicle sent its crew capsule soaring above the Karman line, the internationally recognized space boundary, 62 miles (100 kilometers) above sea level. 

“I’m floating!” a crew mate could be heard saying on a livestream, as the capsule coasted to its highest point and the passengers experienced a few minutes of weightlessness. 

Both the rocket and capsule separately returned to the base — the latter using giant parachutes — completing the mission around 11 minutes after lift-off.

The crew included Egyptian engineer Sara Sabry, and Portuguese entrepreneur Mario Ferreira, both the first people of their countries to leave Earth.

It also included Coby Cotton, one of five co-founders of the YouTube sports and comedy channel Dude Perfect, which boasts more than 57 million followers.

A Blue Origin spokeswoman confirmed all six crew were paying passengers — though Sabry’s seat was sponsored by nonprofit Space for Humanity.

Blue Origin has not revealed its ticket prices. 

Past flights have included celebrity guests who have flown for free, including Star Trek legend William Shatner. 

American exports set another record in June, narrowing the US trade gap for the third consecutive month, according to official data Thursday.

Goods and services exports rose by $4.3 billion last month to $260.8 billion, topping the prior record set in May, while imports fell by $1 billion, the Commerce Department reported.

That trimmed the US trade deficit by 6.2 percent to $79.6 billion, the data showed.

Sales of US goods abroad were boosted by gold, natural gas, aircraft, and foods and feeds. 

Petroleum exports were the highest on record at $29.1 billion, but petroleum imports also hit an all-time high of $27.8 billion, the report said.

Services exports, including travel and transport, rose slightly hitting a new peak.

Meanwhile, imports of autos and parts fell sharply.

The US trade gap with China rebounded after narrowing in May, rising $4.7 billion to a new record of $36.9 billion on a surge in imports after dipping the prior month, the report said. That was the highest in nearly three years.

Companies in recent months rushed to replenish depleted inventories amid strong demand from American shoppers, but sky-high inflation has raised concerns that consumers will pull back causing firms to become more cautious.

The Federal Reserve is raising interest rates aggressively to dampen demand and cool inflation, and many families are having to spend a greater share of their incomes on staple goods.

Mahir Rasheed of Oxford Economics said that despite the headwinds in the global economy “exports have maintained stronger than expected resilience.”

But he cautioned that with the Fed moving to cool demand and tamp down inflation “we expect the ongoing slowdown in the economy to further arrest trade flows in the second half of 2022.”

In the first half of 2022, the total trade deficit increased 33.4 percent from the same period in 2021 as the rapid rise in imports outpaced the increase in exports, the report said.

Chinese e-commerce giant Alibaba reported flat revenue growth on Thursday for the first time ever, as the country grappled with an economic slowdown and Covid-19 resurgences kept consumers jittery.

Alibaba’s performance is widely seen as a gauge of Chinese consumer sentiment, given its market dominance, and its revenue growth has slowed markedly over the past year.

Revenue came in at 205.6 billion yuan ($30.7 billion) in the April-June quarter, beating analyst expectations despite being slightly below the same period last year, following a decline in the company’s China commerce segment revenue, Alibaba said.

The company has been grappling with growing competition and economic fallout from strict Covid restrictions that have battered consumer sentiment, pushed the unemployment rate up and tangled supply chains.

“Following a relatively slow April and May, we saw signs of recovery across our businesses in June,” said Alibaba Group’s chairman and chief executive Daniel Zhang in a statement.

“Despite the soft economic conditions, we managed to deliver stable revenues and narrowed losses in several strategic businesses by improving operating efficiency,” he added in an earnings call.

The company’s revenue growth was flat “primarily due to a decline in China commerce segment revenue” although this was offset by growth in the cloud segment, Alibaba said.

Many parts of China have faced harsh lockdowns in recent months, as officials struggled to stamp out the Omicron variant under the country’s zero-Covid policy. 

Shanghai, China’s biggest city and a major economic hub, was sealed off for two months due to Covid-related restrictions during the quarter.

The firm cited “restrictions that resulted in supply chain and logistics disruptions in April and most of May” that bogged down performance in its China commerce sector, although there was a pick-up in demand in June during a popular shopping festival.

Its profit for the latest quarter stood at 22.7 billion yuan, down from 45.1 billion yuan a year earlier.

Alibaba has recently been building its international commerce businesses, such as Lazada in Southeast Asia and Trendyol in Turkey.

It has also shifted from its aggressive market expansion in the past, amid slowing growth.

– Challenges –

Apart from coronavirus curbs, Alibaba has been contending with a regulatory crackdown on China’s tech giants and other challenges abroad.

US authorities have put the company on a watchlist that could see it delisted in New York if it does not comply with disclosure orders, causing its shares to slump.

The company is seeking a primary listing in Hong Kong which could allow it to access mainland China’s vast pool of investors, a move that comes as Chinese tech firms trading in New York grow increasingly worried about regulatory action by US authorities.

Alibaba, a tech behemoth, has also seen its market value plummet after Beijing launched a sweeping crackdown in 2020.

In recent years, Chinese officials have taken aim at alleged anti-competitive practices by some of the country’s biggest names, driven by fears that major internet firms control too much data and expanded too quickly.

This included a last-minute cancellation of a planned IPO by Alibaba’s financial arm Ant Group, which would have been the world’s largest public offering at the time.

Last week, a report said Alibaba co-founder Jack Ma plans to give up control of Ant Group as part of a strategy to appease Chinese regulators and revive the digital payments unit’s initial public offering.

Following the latest results, Alibaba’s US-listed shares rose 4.5 percent in pre-market trading.

China’s economy expanded just 0.4 percent in the second quarter this year, logging its slowest growth since the initial coronavirus outbreak more than two years ago.

The Bank of England unleashed Thursday its biggest interest rate hike since 1995 as it forecast inflation topping 13 percent this year and warned of a looming year-long recession.

, and forecast inflation will top 13 percent this year, sparking a year-long recession in Britain.

The bank’s Monetary Policy Committee voted 8-1 in favour of lifting its key interest rate by 0.50 percentage points to 1.75 percent.

The increase tallied with expectations and took borrowing costs to the highest level since December 2008.

The move also mirrors aggressive monetary policy from the US Federal Reserve and the European Central Bank last month, as the world races to cool red-hot inflation that has been fuelled by Russia’s invasion of Ukraine.

It also ramps up loan repayments for UK consumers and businesses, who are already facing a squeeze from a worsening cost of living crisis.

– Inflation ‘intensifying’ –

UK inflation is set to peak at 13 percent, or the highest level in more than 42 years, according to the BoE.

“Inflationary pressures in the United Kingdom and the rest of Europe have intensified significantly” since May, read a statement after the decision.

“That largely reflects a near doubling in wholesale gas prices since May, owing to Russia’s restriction of gas supplies to Europe and the risk of further curbs.

“As this feeds through to retail energy prices, it will exacerbate the fall in real incomes for UK households and further increase UK CPI inflation in the near term.”

In more grim news, the BoE predicted the UK economy would enter a painful recession that will last until late 2023.

“GDP growth in the United Kingdom is slowing,” the BoE said.

“The latest rise in gas prices has led to another significant deterioration in the outlook for activity in the United Kingdom and the rest of Europe.

“The United Kingdom is now projected to enter recession from the fourth quarter of this year.”

However, the recession will be shallower than the 2008 crash that was sparked by the global financial crisis.

The UK economy is expected to shrink by up to 2.1 percent in size from its highest point, according to the central bank’s forecast.

UK inflation had already jumped to a four-decade high of 9.4 percent in June, deepening the cost-of-living crisis as workers’ wages fail to keep pace.

Global inflation is surging as energy prices continue to rocket on key gas and oil producer Russia’s war on neighbouring Ukraine. 

Consumer prices have also rocketed on supply-chain strains as demand rebounds on the easing of Covid restrictions.

That has forced central banks to raise interest rates, risking the prospect of recession as higher borrowing costs hurt businesses and consumers.

– ‘Challenging winter ahead’ –

Inflation is also running at a 40-year peak of 9.1 percent in the United States, and a record high of 8.6 percent in the eurozone. 

The Fed in July delivered its second straight 0.75-percentage-point increase, in what economists have called the most aggressive Fed tightening cycle since the 1980s.

The European Central Bank then surprised markets last month with a bigger-than-expected 0.50-percentage-point hike, bringing an end to the era of negative interest rates in the eurozone.

Policymakers are anxious to quell inflation before it becomes dangerously entrenched — and sparks a prolonged economic downturn.

Added to the picture in Britain, energy regulator Ofgem is due to ramp up domestic electricity and gas prices again in October, ahead of the colder northern hemisphere winter.

That could take the average UK household energy bill well above £3,000 ($3,600) per year.

Ofgem warned Thursday that Britons face a “very challenging winter ahead”, adding its so-called energy price cap will now be reviewed every quarter instead of every six months.

Hong Kong billionaire Li Ka-shing’s firm is selling its stake in the parent company of fintech upstart      AMTD Digital, according to a statement released Thursday, after the company enjoyed a massive rally this week.

Hong Kong-based AMTD Digital was worth more than $203 billion when New York markets closed on Wednesday, making it the world’s fifth-biggest financial company on paper, Bloomberg reported.

AMTD Digital was listed just three weeks ago, and reported $25 million in revenue for the financial year that ended in April 2021. 

Li’s CK Group said in a statement that it holds less than four percent of AMTD Digital’s parent company, AMTD Group, and has entered negotiations to sell those shares.

CK added that it has no representatives on AMTD Group’s board and has no business dealings with or shareholdings in AMTD Digital directly.

The sale would put distance between CK and AMTD Digital’s founder Calvin Choi, a former investment banker who is appealing a ban by Hong Kong regulators for failing to disclose conflicts of interest.

Li’s CK said its current four percent stake was left over from a sale nearly a decade ago, where CK sold a majority of its AMTD Group shares.

AMTD Group was set up in 2003 and lists CK Asset Holdings as a co-founder, according to its website.

Analysts have partly attributed AMTD Digital’s current rally to the small portion of shares that were made available for trading.

“The low free float in the company’s shares means it will be easier for big shareholders to push up the stock price,” research analyst Thomas Nip at Valuable Capital in Hong Kong told Bloomberg, adding that the stock is highly overvalued.

Oktay Kavrak, director at Leverage Shares, told Bloomberg that AMTD Digital was heading for a “nosedive” given the speed of its ascent.

AMTD Digital’s swift rally had prompted questions of whether it was the next “meme stock” — shares that skyrocket due to retail trading mania — similar to video game chain GameStop.

In January 2021, small-time stock traders banded together and rocked Wall Street by driving up the prices of shares like GameStop and cinema chain AMC, reaping massive profits.

But there is no evidence yet of a clear link between AMTD Digital’s stock movements this week and trades driven by social media interest, with some users of Reddit forum WallStreetBets dismissing the connection.

On Tuesday, AMTD Digital said it knew of “no material circumstances, events nor other matters relating to our company’s business and operating activities since the IPO date”.