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UK inflation leaps to 10-year high, bolstering rate hike bets

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November 17, 2021

By Andy Bruce and William Schomberg

LONDON (Reuters) -British inflation surged to a 10-year high last month as household energy bills rocketed, according to data on Wednesday that will bolster expectations that the Bank of England will raise interest rates next month.

Consumer prices rose by 4.2% in annual terms in October, leaping from a 3.1% increase in September. Both the BoE and a Reuters poll of economists – none of whom had predicted such a big increase – had pointed to a reading of 3.9%.

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“Today’s inflation data will reinforce the Bank of England’s resolve to act,” Yael  Selfin, chief economist at KPMG UK, said.

The pound climbed to a one-week high versus the U.S. dollar and a 21-month high against the euro after the data. [GBP/]

Finance minister Rishi Sunak said rising inflation was not just a British problem and the government was taking action to offset the hit to spending power, even as it scales back most of its coronavirus emergency support.

Britain’s inflation rate puts it in the middle of the pack among G7 countries, with annual U.S. consumer price inflation now running north of 6%.

The Office for National Statistics said household energy bills were the biggest driver of inflation following the lifting of a regulatory cap on bills last month, with gas prices paid by consumers up 28.1% in the year to October.

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British energy suppliers are grappling with soaring wholesale gas prices that have led to the collapse of a number of energy companies, forcing more than 2 million customers so far to switch providers – often on higher tariffs.

The BoE – which has a target of 2% inflation – has said higher borrowing costs can do nothing to influence energy prices. But it is concerned that high rates of inflation could harm its credibility in the eyes of the public.

Forecasts published by the BoE this month showed it expected inflation to hit around 5% in the coming months.

The BoE is expected to become the first of the world’s major central banks to raise rates since the coronavirus pandemic swept the global economy, with investors and economists increasingly predicting that will happen on Dec. 16.

On Monday BoE Governor Andrew Bailey said he was “very uneasy” about the inflation outlook and that his vote to keep rates on hold earlier this month, which shocked financial markets, had been a very close.

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On Tuesday, data suggested Britain’s labour market was withstanding the end of the government’s job-protecting furlough scheme, a key factor for the BoE and its decision on rates.

Robert Alster, chief investment officer at wealth manager Close Brothers Asset Management, cautioned against assuming a BoE rate hike next month was a done deal.

“Ultimately, the impact of rising inflation on consumer spending and confidence will be a critical measure of stability, and determine how hawkish the Bank needs to be,” he said. “We may well see the rate rise kicked into 2022.”

There were signs in Wednesday’s data of further inflation pressure in the pipeline. Prices charged by factories rose by more than expected, up 8% compared with October 2020, the sharpest increase since 2011.

Manufacturers’ input costs jumped by 13%, the most since 2008, the ONS said.

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(Reporting by Andy BruceEditing by William Schomberg and Andrew Heavens)

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Buying the Omicron dip

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November 29, 2021

A look at the day ahead from Danilo Masoni.

Sell first, get answers later. With stocks near lifetime peaks, the Black Friday reaction to the new fast-spreading virus strain Omicron was hardly surprising.

But a weekend later, investors look heavily engaged in buying the dip, as markets take a more balanced view of risks attached to what the WHO called a “variant of concern”.

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After their ninth biggest drop ever on Friday, gains in crude prices topped 5% earlier in Asia and stock futures point to a solid bounce across Europe and America.

A South African doctor said patients with Omicron have “very mild” symptoms and investment houses don’t look to have budged that much. Credit Suisse, for example, made no portfolio changes, staying slight overweight on equities.

Perhaps more telling is that retail traders poured north of $2 billion into U.S. stocks on Friday, setting the second biggest daily inflow on record, per Vanda Research data.

Of course there are uncertainties and that will likely make for volatile days heading into the Christmas shopping season.

Understanding the level of severity of the variant “will take days to several weeks”, said WHO. And vaccine maker BioNTech needs up to two weeks to figure out whether the shot it makes with Pfizer needs to be reworked.

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So while Omicron has spread from Australia to the Netherlands and governments ban travel and mull lockdowns, markets may also gamble on central bankers turning more patient in their path towards rates normalisation.

Lots of speakers from the Federal Reserve and the European Central Bank are lined up for today. On Sunday, speaking about risks to the recovery, ECB’s Lagarde said: “We now know our enemy and what measures to take.”

Key developments that should provide more direction to markets on Monday:

* ECB speakers: Governor Lagarde, ECB board members AndreaEnria, Isabel Schnabel, Pentti Hakkarainen; ECB Vice PresidentLuis de Guindos * Euro zone consumer sentiment/inflation expectations * German preliminary CPI/HICP * Fed speakers: Chairman Jerome Powell, New York PresidentJohn Williams, Governor Bowman * Emerging markets: Kenya central bank meets; Turkey tradebalance and bank NPL ratios (This story refiles to fix chart)

(Reporting by Danilo Masoni; Editing by Saikat Chatterjee)

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UK regulator set to block Meta’s Giphy deal – FT

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November 29, 2021

(Reuters) -The UK competition regulator is expected to block Meta Platforms’ acquisition of online GIF platform Giphy in the coming days, the Financial Times reported https://www.ft.com/content/662c8e3f-4909-4bec-9131-c0237bb4897d on Monday.

The Competition and Markets Authority is set to reverse the deal in what would be the first time the watchdog has reversed a Big Tech acquisition, the report said, citing individuals close to the matter.

Meta Platforms and the regulator did not respond to requests for comment from Reuters sent outside working hours.

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The regulator had in October fined the U.S. social media giant Facebook, now Meta, 50.5 million pound ($67.35 million) for breaching an order that was imposed during an investigation into its purchase of the GIF platform, Giphy.

Facebook bought Giphy, a website for making and sharing animated images, or GIFs, in May last year to integrate it with its photo-sharing app, Instagram. The deal was then pegged at $400 million by Axios.

($1 = 0.7499 pounds)

(Reporting by Sneha Bhowmik in Bengaluru; Editing by Uttaresh.V)

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Evergrande shares fall after chairman cuts stake; Fantasia suspends trading

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November 29, 2021

HONG KONG (Reuters) – Shares in China Evergrande Group fell as much as 4.8% on Monday morning, after its chairman trimmed his stake in the cash-strapped property developer to raise about $344 million.

The group’s electric vehicle unit, China Evergrande New Energy Vehicle Group Ltd, also dropped more than 5% after it said the company was still exploring ways to pump capital into the unit with different investors.

Evergrande has been scrambling to raise capital as it grapples with more than $300 billion in liabilities and Chinese authorities have told its chairman, Hui Ka Yan, to use some of his personal wealth to help pay bondholders, sources have said.

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Evergrande failed to pay coupons totalling $82.5 million due on Nov. 6 and investors are on tenterhooks to see if it can meet its obligations before a 30-day grace period ends on Dec 6.

The developer disclosed late on Friday that Hui had sold 1.2 billion shares in the company at an average price of HK$2.23 each, lowering his stake in the Shenzhen-based real estate developer to 67.9% from 77%.

Once China’s top-selling developer, Evergrand’e troubles have hit the broader Chinese property sector with a string of debt defaults and credit rating downgrades of its peers in the last couple of months.

Fantasia Holdings suspended trading in company shares on Monday pending release of information. On Thursday, the developer said a winding-up petition was filed against a unit related to an outstanding loan.

(Reporting by Sumeet Chatterjee; Editing by Stephen Coates)

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