Author: Consultant

UK government dishes out extensive tax cuts as country braces for recession

The new U.K. government announced a sweeping program of tax cuts and investment incentives Friday, as Prime Minister Liz Truss seeks to boost the country’s faltering economic growth.

Finance minister Kwasi Kwarteng confirmed previously-leaked plans to cancel a planned rise in corporation tax to 25%, keeping it at 19%, the lowest rate in the G20.

“We believe high taxes reduce incentives to work, deter investment and hinder enterprise,” Kwarteng said.

Kwarteng also outlined plans for a network of “investment zones” around the country that will have lower taxation rates for businesses and reduced regulations, a new bill to unpack planning restrictions and EU laws and a list of infrastructure projects across transport, energy and telecoms.

Speaking to the House of Commons, Kwarteng said the government wanted a “new approach for a new era focused on growth” and was targeting a medium-term trend rate of growth of 2.5%.

He said the government wanted to expand the supply side of the economy through tax incentives and reform to deliver higher wages, greater opportunities, fund public services and “compete with dynamic economies around the world.”

It comes a day after the Bank of England said the U.K. economy was likely to have entered an official recession in the third quarter, as it hiked interest rates by 50 basis points to combat decades-high inflation.

Despite containing extensive reforms, the package is not being described by the government as an official economic budget as it has not been accompanied by the usual economic forecasts from the Office for Budget Responsibility.

Critics of Truss’s proposals warn that the combination of extensive tax cuts and the government’s plan to shield households and businesses from soaring energy prices will see the U.K. take on high levels of debt at a time of rising rates. The energy support package is expected to cost more than £100 billion ($111 billion) over two years.

Data published Wednesday showed the U.K. government borrowed £11.8 billion in August, significantly above forecasts and £6.5 billion more than the same month in 2019, due to a rise in government spending.

Kwarteng said Friday the U.K. had the second-lowest debt to GDP ratio in the G-7 and would announce a plan to reduce debt as a percentage of GDP in the medium term.

On energy, he said price caps would reduce peak inflation by 5 percentage points and lower the wider cost-of-living pressures. He also announced an energy markets financing scheme, in conjunction with the Bank of England, that will offer a 100% guarantee to commercial banks who offer emergency liquidity to energy traders.

The Institute for Fiscal Studies, an economic research group, said the reversal in the income tax rise and canceling the planned rise in corporation tax would lead to a £30 billion reduction in taxation revenue. It added that “setting plans underpinned by the idea that headline tax cuts will deliver a sustained boost to growth is a gamble, at best.”

TUCKER CARLSON: Oakville Trafalgar High School is protecting a child abuser, has institutionalized child abuse

Last night we told you about a teacher at Oakville Trafalgar High School in Ontario, Canada. The teacher has recently started wearing giant prosthetic breasts in the classroom in front of children as a fetish. The teacher’s costume is intended to emulate a genre of Japanese pornography that translates roughly to “exploding milk porn.”

For several days, a number of media organizations  — including a Canadian media outlet that visited the school — reported the teacher’s identity as Stephen Hanna. Oakville Trafalgar High School made no attempt to correct those reports. They wanted to protect the fetishist and child abuser in their school.

But after our segment, the Halton District School Board in Ontario emailed us to say that, contrary to these multiple reports, which we cited, the teacher in question is not named Stephen Hanna. At the same time, the school board refused to tell us who the teacher is. The school said, “We cannot confirm the identity of the individual in the photos/videos/radio segments.”

https://www.foxnews.com/opinion/tucker-carlson-oakville-trafalgar-high-school-protecting-child-abuser-institutionalized-child-abuse?dicbo=v2-a177edfc43edf72072217260743e3c9f

Florida Democrat sues DeSantis for flying migrants to Martha’s Vineyard: ‘He can’t comply with the law’

A Florida state lawmaker is suing Gov. Ron DeSantis and other state officials for orchestrating the transportation of migrants from Texas to Martha’s Vineyard in Massachusetts.

State Sen. Jason Pizzo, a Democrat who represents the Miami-Dade area, claims in a new lawsuit that relocating migrants from another state using Florida funds is an illegitimate use of those funds and violates Florida laws. The lawsuit also requests a judge to stop such relocations.

“This is very clear and straightforward,” Pizzo said during an interview, the Miami Herald reported. “The governor had legislators carry and pass bills that were designed to suit his agenda and that he subsequently signed into law. And even with that completely privileged position, he still can’t comply with the law. He set the rules for the game and then he can’t follow them.”

https://www.foxnews.com/politics/florida-democrat-sues-desantis-flying-migrants-marthas-vineyard-cant-comply-with-law

Canadians are bracing for what could be the strongest storm to ever hit their country’s coast.

“Every Nova Scotian should be preparing today and bracing for impact,” John Lohr, the minister responsible for the provincial Emergency Management Office, said in a Thursday news conference.

Hurricane Fiona has lashed the Caribbean, is forecast to brush by Bermuda as a dangerous Category 3 storm and shows no signs of slowing before it slams into Canada on Saturday morning.

“This could be Canada’s version of (Hurricane) Sandy,” said Chris Fogarty, a meteorologist for Canada’s hurricane center, pointing to the size and intensity of Fiona and its combination of hurricane and winter-storm characteristics. Hurricane Sandy affected 24 states and all of the eastern seaboard, causing an estimated $78.7 billion in damage.

https://www.cnn.com/2022/09/22/weather/hurricane-fiona-forecast-canada-thursday/index.html

Bank of England raises rates by 50 basis points, in seventh consecutive hike

• U.K. inflation was 9.9% in August, well ahead of the BoE’s 2% target.
• Higher rates come as the U.K. faces a falling pound, recession forecasts and a set of economic reforms under new Prime Minister Liz Truss.

https://www.cnbc.com/2022/09/22/bank-of-england-raises-rates-by-50-basis-points-in-seventh-consecutive-hike.html

6.8 magnitude earthquake shakes Mexico, 1 dead

MEXICO CITY (AP) — A powerful earthquake with a preliminary magnitude of 6.8 struck Mexico early Thursday, causing buildings to sway and leaving at least one person dead in the nation’s capital.

The earthquake struck shortly after 1 a.m., just three days after a 7.6-magnitude earthquake shook western and central Mexico, killing two.

The U.S. Geological Survey said Thursday’s earthquake, like Monday’s, was centered in the western state of Michoacan near the Pacific coast. The epicenter was about 29 miles (46 kilometers) south-southwest of Aguililla, Michoacan, at a depth of about 15 miles (24.1 kilometers).

Michoacan’s state government said the quake was felt throughout the state. It reported damage to a building in the city of Uruapan and some landslides on the highway that connects Michoacan and Guerrero with the coast.

President Andrés Manuel López Obrador said via Twitter that it was an aftershock from Monday’s quake and was also felt in the states of Colima, Jalisco and Guerrero.

Mexico City Mayor Claudia Sheinbaum said via Twitter that one woman died in a central neighborhood when she fell down the stairs of her home. Residents were huddled in streets as seismic alarms blared.

https://www.cnn.com/2022/09/21/weather/hermine-forecast-gulf-of-mexico/index.html

Oil rises nearly 3% after Putin’s speech; Asia markets lower ahead of the Fed’s rate hike

Shares in the Asia-Pacific traded lower Wednesday, following Wall Street’s negative lead ahead of the Federal Reserve’s expected rate hike.

Oil prices rallied in Asia’s afternoon after Russian president, Vladimir Putin, announced a partial military mobilization.

The Nikkei 225 in Japan dropped 1.36% to 27,313.13, while the Topix index also fell 1.36% to 1,920.80. In Australia, the S&P/ASX 200 slipped 1.56% to 6,700.20.

Hong Kong’s Hang Seng index fell 1.6% in the final hour of trade, and the Hang Seng Tech index dropped 2.7%. In mainland China, the Shanghai Composite lost 0.17% to 3,117.18 and the Shenzhen Component was 0.668% lower at 11,208.51.

South Korea’s Kospi declined 0.87% to 2,347.21. MCSI’s broadest index of Asia-Pacific shares outside Japan shed 1.4%.

https://www.cnbc.com/2022/09/21/asia-markets-fed-interest-rates-wall-street-currencies-yields.html

Before the Bell: Sept 21

Equities

Wall Street futures were steady early Wednesday as traders await this afternoon’s rate decision from the Federal Reserve. Major European markets were mixed. TSX futures were little changed with crude prices higher.

In the early premarket period, futures tied to the key U.S. indexes all hovered near breakeven. On Tuesday, all three saw losses with the S&P 500 falling 1.13 per cent while the Dow slid 1.01 per cent. The Nasdaq finished down 0.95 per cent. The S&P/TSX Composite Index closed the session off 0.99 per cent.

For traders, the day’s key event will be the Fed’s rate decision, due at 2 p.m. Markets have priced in another 75-basis-point hike but investors will also be watching closely for hints about how aggressive the central bank expects to be in the months ahead as it battles inflation.

“Activity on Fed funds futures still assesses less than 20-per-cent probability for a 100-basis-point hike from the Fed today,” Swissquote senior analyst Ipek Ozkardeskaya said. “And more importantly, the FOMC doesn’t have a modern history of making abrupt moves, except for dovish moves which have a sudden positive impact on the markets, like the ones we saw during the pandemic.”

“So, the expectation is that the Fed will deliver a 75-basis-point hike today,” she said. “We could see a relief rally in equity and bond markets, if, of course, the dot plot doesn’t show projections going above market expectations.”

Wednesday’s small-cap stocks to watch

Earlier, world markets were rattled by new comments from Russian President Vladimir Putin. The Globe’s Mark MacKinnon reports Mr. Putin has doubled down on his war against Ukraine, ordering a partial mobilization of reservists and warning that his country was willing to use its nuclear arsenal if Russian territory was attacked.

In this country, Aurora Cannabis Inc. says its net loss widened to $618.8-million in its most recent quarter from $134-million last year as it recorded $505.1-million in impairment charges. Aurora reported net revenue for the quarter ended June 30 of $50.2-million, down 8 per cent from $54.8-million the year before. The results were released after Tuesday’s closing bell.

Overseas, the pan-European STOXX 600 edged up 0.32 per cent. Germany’s DAX and France’s CAC 40 slid 0.19 per cent and 0.13 per cent, respectively. Britain’s FTSE 100 rose 0.53 per cent.

In Asia, Japan’s Nikkei closed down 1.36 per cent. Hong Kong’s Hang Seng lost 1.79 per cent.

Commodities

Crude prices jumped after Russian president Vladimir Putin’s announcement of a partial mobilization of reservists heightened concerns over global oil and gas supply.

The day range on Brent was US$90.16 to US$93.50 early Wednesday morning. The range on West Texas Intermediate was US$83.48 to US$86.68.

Putin said he had signed a decree on partial mobilization beginning on Wednesday.

“The move could possibly lead to calls for more aggressive action against Russia in terms of sanctions from the west,” Warren Patterson, head of commodities research at ING, said.

Elsewhere, the American Petroleum Institute reported that U.S. crude inventories rose by about 1 million barrels last week. A Reuters poll of analysts had forecast an increase of more than 2 million barrels. More official U.S. government figures are due later Wednesday morning.

Gold prices, meanwhile, were higher as tensions in Europe sparked renewed interest in safe-haven holdings.

Spot gold was up 0.5 per cent at US$1,670.57 per ounce. U.S. gold futures rose 0.6 per cent to US$1,680.40.

Currencies

The Canadian dollar was modestly lower, trading under 75 US cents, while its U.S. counterpart hit a two-decade high against a group of world currencies ahead of the Fed’s policy decision.

The day range on the loonie is 74.66 US cents to 74.86 US cents.

On world markets, the U.S. dollar index, which measures the greenback against other major currencies, more than 0.5 per cent higher to 110.87 after Vladimir Putin’s announcement of a partial military mobilization of reservists triggered safe-haven buying. That was its highest level since 2002, according to Reuters.

The euro, meanwhile, fell to a two-week low of US$0.9885, near two-decade lows hit earlier this month. It was last down 0.6 per cent at US$0.9912, according to figures from Reuters.

Britain’s pound fell to a fresh 37-year low of US$1.1304.

In bonds, the yield on the U.S. 10-year note was down slightly at 3.54 per cent.