World

The pound hit a record low against the dollar Monday on surging fears about the UK economy after the government unveiled a huge tax-cutting budget.

The selloff came as equity markets across Asia and Europe fell again owing to a growing expectation that central bank interest rate hikes to fight runaway inflation would lead to deep and painful recessions. Oil also suffered more hefty selling.

Officials in several countries including the United States, Britain, Switzerland and Sweden announced more increases in the cost of borrowing.

The moves sent equity markets deep into the red again after officials reiterated their focus on fighting inflation, even if that means causing a recession.

But the biggest casualty of the week was the pound, which fell below $1.10 for the first time since 1985 as new finance minister Kwasi Kwarteng announced his controversial mini-budget.

It then extended the losses Monday to briefly touch an all-time low of $1.0350 in Asian trade after he said he intended to unveil further reductions, despite his budget causing ructions on London’s markets.

It also fell to a two-year low against the euro, though the single currency remains under pressure against the dollar, sitting at 2002 levels.

Now, observers are warning that the pound could fall even further.

“The pound’s crash is showing markets have a lack of confidence in the UK and that its financial strength is under siege,” said Jessica Amir, of Saxo Capital Markets. 

“The pound is a whisker away from parity and the situation is going to only worsen from here.”

Kwarteng, who was appointed by Liz Truss after she became prime minister earlier this month, said he planned to slash taxes to kickstart the British economy and provide cash to cushion families from rocketing energy costs.

But investors were spooked by the huge amount of borrowing likely needed for the multi-billion-pound package, which critics said would benefit the rich far more than the poorest during a cost-of-living crisis.

Sterling’s drop has led to speculation the Bank of England will have to step in with an emergency interest rate hike to give the currency a much-needed shot in the arm.

– ‘Macau casinos soar’ –

“Whether or not the UK government announcement of the biggest tax reduction since 1972… will in time yield a significant growth dividend is not something markets are yet willing to contemplate,” said National Australia Bank’s Ray Attrill.

“Instead, they were consumed by worries over the scale of near-term UK government financing needs, at a time when the current account deficit is running at more than eight percent of GDP.”

He added: “Chatter about a possible UK sovereign rating downgrade has already begun.”

And former US treasury secretary Lawrence Summers was scathing of Britain’s recent monetary policy decisions.

“It makes me very sorry to say, but I think the UK is behaving a bit like an emerging market turning itself into a submerging market,” he told Bloomberg Television’s Wall Street Week last week.

“Between Brexit, how far the Bank of England got behind the curve and now these fiscal policies, I think Britain will be remembered for having (pursued) the worst macroeconomic policies of any major country in a long time.”

The collapse in sterling came as markets across the world are sent into a spin by recession worries caused by a sharp tightening of monetary policy by central banks fighting decades-high inflation. 

New York’s three main indexes ended well down, with the Dow at a two-year low, and Asia followed suit.

Tokyo shed more than two percent as traders there returned from a long weekend break, while Seoul was off more than three percent, with Sydney, Shanghai, Mumbai, Singapore, Taipei and Jakarta also tanking.

Hong Kong was also down having reversed early gains that came after the city said it would relax strict hotel quarantine measures for international travellers.

Still, Macau casino stocks rallied as the city said it would accept Chinese tour groups again from November, having been blocked during the pandemic.

London edged up tentatively after Friday’s hammering, while Paris and Frankfurt were also higher.

Oil prices ticked lower, extending the big losses suffered Friday as expectations that a recession is looming hammer demand expectations.

The surging greenback added to the sell-off in crude, which is priced in dollars and therefore ore expensive for buyers using other currencies. 

Both main contracts are sitting at their lowest levels since January, having wiped out all the gains seen in the wake of Russia’s invasion of Ukraine.

Black Gold Investors’ Gary Ross described the strong dollar as “a wrecking ball for commodities”.

– Key figures at around 0810 GMT –

Pound/dollar: DOWN at $1.0700 from $1.0852 on Friday

Euro/pound: UP at 90.40 pence from 89.28 pence 

Euro/dollar: DOWN at $ 0.9673 from 0.9695

Dollar/yen: UP at 143.96 yen from 143.31 yen

London – FTSE 100: UP 0.3 percent at 7,039.64

Tokyo – Nikkei 225: DOWN 2.7 percent at 26,431.55 (close)

Hong Kong – Hang Seng Index: DOWN 0.4 percent at 17,855.14 (close)

Shanghai – Composite: DOWN 1.2 percent at 3,051.23 (close)

West Texas Intermediate: DOWN 0.2 percent at $78.58 per barrel

Brent North Sea crude: DOWN 0.4 percent at $85.84 per barrel

New York – Dow: DOWN 1.6 percent at 29,590.41 (close)

Nikita spent two days in traffic before he made it to Georgia, one of the thousands of Russian men seeking to evade the Ukraine war draft.

The latest wave of Russian exiles since the war began in February has seen military-aged men pour into the Caucasus country — by cars in a column stretching for some 20 kilometres, by bicycles and some walking kilometres by foot to the border crossing. 

“I have no choice but to flee Russia,” Nikita told AFP standing outside the Georgian side of the Kazbegi border crossing in a narrow rocky ravine. 

“Why on earth would I need to go to that crazy war?” the 23-year-old added “I am no cannon fodder. I am not a murderer,” he said as a vulture circled overhead, high in the clear sky. 

Like the majority of men who talked to AFP, he declined to give his last name fearing retribution.

Denis, 38, said: “Our president wants to drag all of us in the fratricidal war, which he declared on totally illegitimate grounds.”

“I want to escape,” he said with a sad smile. “To me, this is not a nice Georgia holiday, this is an emigration.”

Alexander Sudakov, a 32-year-old production manager, said “The mobilisation was the final straw” to him after twenty years of living under President Vladimir Putin’s increasingly authoritarian rule.

“Ukrainians are our brothers, I don’t understand, how could I go there to kill them, or to be killed.”

He said Georgia was the top choice for those fleeing the draft because Russians can enter and stay up to a year without a visa.

He said he would mull seeking asylum in a European Union country once his wife and baby son, whom he left behind in his native Saint Petersburg, join him.

The influx of Russian immigrants has sparked mixed feelings in a country where  painful memories of Russia’s 2008 invasion are still fresh.

The five-day war left Georgia partitioned, with Russian troops stationed in its two separatist regions which the Kremlin recognised as independent after the EU brokered a ceasefire.

– ‘Wild corruption’ –

Nearly 50,000 Russians have fled to Georgia over the first four months of the war, the tiny Black Sea nation’s statistics office said in June.

Some 40,000 more fled over the same period to Armenia, another top destination that also has no visa requirement for Russians.

On Saturday, Russian authorities acknowledged for the first time that there was a significant outflow of travellers from the country.

The local interior ministry in a Russian region that borders Georgia said there was a congestion of around 2,300 cars waiting to reach the border.

The ministry urged people “to refrain from travelling” in the direction of Georgia, saying the movement towards the checkpoint was “difficult” and that additional traffic officers had been deployed.

But Nikita said “wild corruption” was to blame for the traffic jam.

He said police periodically closed traffic and artificially created congestion “to extort money from desperate people.”

“It takes currently up to three days to drive 20 kilometres to the Georgian border, but if you pay the police a bribe, then it’s a matter of just several hours, they would escort you to the border,” he said, adding that he knew cases where people paid hundreds of dollars. 

Alexander said he paid police $1,200 and it still took him some 30 hours to reach the Georgian border.

– ‘I’ll live until March’ –

Nikita said the wave of Russian emigration seen so far was just a beginning of a mass exodus.

“Millions will follow, nobody wants to go to this war — even those Russians who are poisoned by government propaganda and like the idea of Russia again becoming the dominatrix on the post-Soviet space.”

Igor, 32, is one of such people.

“I am a patriot, I support Putin and the special military operation in Ukraine,” the 32-year-old IT specialist said.

“But personally, I can’t go to the war because I am the sole breadwinner in the family and I’ve got that bloody mortgage.”

He said he plans to work remotely for a Russian IT company from Georgia, but will be forced to return to Russia when his passport expires in six months.

“I’ll be alive for another six months, until March, that’s all I know for sure.”

The strongest typhoon to hit the Philippines this year left at least six people dead, authorities said Monday, after heavy rain and fierce winds battered the country’s most populous island.

Typhoon Noru toppled trees, knocked out power and flooded low-lying communities as it swept across Luzon on Sunday and Monday.

There have so far been no reports of widespread severe damage from the storm, which hit the country as a super typhoon. 

“We were ready for all of this,” President Ferdinand Marcos Jr told a briefing with disaster agencies.

“You might think that we overdid it. There is no such thing as overkill when it comes to disasters.”

Five rescuers were killed after they were sent to help flooded residents in San Miguel municipality in Bulacan province, near the capital Manila.

“They were deployed by the provincial government to a flooded area,” said Lieutenant-Colonel Romualdo Andres, chief of police in San Miguel.

Andres said the rescuers were wading through floodwaters when a wall beside them collapsed, sending them into the fast current.

An elderly man died after he was hit by a landslide in Burdeos municipality on the Polillo islands, part of Quezon province, where the storm made landfall, said Garner Jimenez from the local civil defence office.

The Philippines is regularly ravaged by storms, with scientists warning they are becoming more powerful as the world gets warmer because of climate change.

Noru smashed into the archipelago nation on Sunday after an unprecedented “explosive intensification” in wind speeds, the state weather forecaster said earlier.

It made landfall about 100 kilometres (62 miles) northeast of the densely populated capital Manila, before weakening to a typhoon as it crossed a mountain range, coconut plantations and rice fields.

Nearly 75,000 people were evacuated from their homes before the storm hit, as the meteorology agency warned heavy rain could cause “serious flooding” in vulnerable areas, trigger landslides and destroy crops.

But on Monday there was no sign of the widespread devastation many had feared, as the storm moved over the South China Sea towards Vietnam.

Aerial footage taken during Marcos’s inspection flight over central Luzon showed rivers that were swollen or had burst their banks, and patches of farmland under water.

– ‘The wind was whistling’ – 

Burdeos municipality on the Polillo islands bore the brunt of Noru.

Ferocious winds ripped off some roofs and brought down large trees while heavy rain flooded riverside houses, said Ervin Calleja, a 49-year-old teacher.

“It was really worrisome,” Calleja told AFP by phone. 

“The wind was whistling and it had heavy rains. That’s the more dangerous part.”

Flimsy houses along the coast were damaged and some crops were wiped out.

“Here at the town centre all banana trees were flattened, 100 percent,” said Liezel Calusin, a member of the civil defence team in Polillo municipality. 

“We still have no electricity, but the phones are working.”

In Banaba village near Manila, Terrence Reyes fled his riverside home with his family and neighbours as floodwaters rose during the storm. 

They returned home Monday to find their belongings sodden and caked in mud.

“We just have to throw them away and start over again,” Reyes, 25, said. 

“It happens each time there is a storm here.”

The Philippines — ranked among the most vulnerable nations to the impacts of climate change — is hit by an average of 20 storms every year.

A 90-year-old Hong Kong cardinal went on trial alongside five fellow democracy supporters on Monday over their role in running a fund to help defend people arrested in anti-government protests.

Cardinal Joseph Zen, one of Asia’s highest-ranking Catholic clerics, was originally detained earlier this year under a national security law that Beijing imposed on Hong Kong to quell dissent.

His arrest for “colluding with foreign forces” shocked the city’s Catholic community and renewed criticism of the Vatican’s warming ties with Beijing, including from fellow senior clerics.

Police have not yet charged Zen with a national security offence, which can carry a sentence of up to life in jail.

Instead, he and his fellow defendants, including activist and singer Denise Ho and veteran human rights barrister Margaret Ng, are being prosecuted for the less serious offence of failing to properly register their defence fund as a society.

If convicted they face a fine of up to HK$10,000 ($1,274) but no jail time. All have pleaded not guilty.

Zen, a retired former Bishop of Hong Kong, arrived for court on Monday morning with the help of a walking stick.

The Vatican has been muted on his arrest, previously saying it was concerned and “following the development of the situation very closely”.

Pope Francis declined to comment on Zen’s prosecution when asked about it earlier this month but said he was determined to continue pursuing a dialogue with Beijing.

The trial comes at a sensitive time for the Vatican, which is working to renew its controversial agreement with Beijing later this year over the appointment of bishops in China.

Shanghai-born Zen was critical, calling the deal a “sellout” of China’s underground Catholics who have faced persecution for remaining loyal to Rome and refusing to recognise the Communist Party-sanctioned Catholic Patriotic Association.

– ‘We abandoned him’ –

One of the most senior Catholic clerics to criticise the Vatican’s response to Zen’s arrest is German Cardinal Gerhard Mueller.

“We abandoned him,” Mueller told the Italian newspaper Il Messaggero earlier this month, saying he was disappointed that a recent consistory — a gathering of cardinals in Rome — did not speak in support of Zen.

“This cardinal will be sacrificed on the altar of reason, to defend and implement the diplomatic agreement with Beijing,” he added. 

Zen’s group acted as trustees of a now-defunct fund that helped pay legal and medical costs for those arrested during huge and sometimes violent democracy protests three years ago.

The “612 Humanitarian Relief Fund” is charged with not properly registering under the Societies Ordinance, a colonial-era law from 1911. 

The fund disbanded after national security police demanded it hand over operational details, including information about its donors and beneficiaries.

In an illustration of the democracy movement’s widespread support, prosecutors on Monday revealed the fund had raised as much as HK$270 million ($34 million) from 103,000 donations by the time it closed.

The prosecution said “part of the fund was used for political activities and non-charity events”, including donations to protest groups and activists overseas. 

The defence argued the fund’s political views were irrelevant to the charge of whether it had registered correctly. 

China responded to the 2019 protests with a sweeping crackdown on dissent. 

A majority of the city’s most prominent democracy activists are now in jail or have fled overseas, while dozens of civil society groups have shuttered.

Some groups have been prosecuted for funding and registration irregularities, even though several had functioned without incident for years. 

Hong Kong’s government says prosecutors are simply following the law. 

Critics contend a form of “lawfare” has been used to silence critical groups and bog them down in expensive legal fights.

The court is not sitting on consecutive days and the trial is expected to conclude in early November. 

The initial national security investigation was triggered when one of the defendants, cultural studies scholar Hui Po-keung, was intercepted at Hong Kong’s airport on May 10 as he tried to leave to take up an academic post in Europe.