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UK short-term borrowing costs set for biggest weekly jump since 2009

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UK short-term borrowing costs set for biggest weekly jump since 2009

UK short-term borrowing prices are on observe to submit the largest rise this week in additional than a decade as traders braced themselves for the Financial institution of England to take extra aggressive motion to chill inflation.

Two-year UK authorities bond yields climbed 0.11 share factors on Friday to 2.56 per cent, bringing the rise because the finish of final week to about half a share level — reflecting the strongest fall in value since 2009. Such large strikes are uncommon within the gilt market, which is usually coveted as a haven throughout occasions of broader market tumult.

The surge in two-year yields highlights the shift in market expectations in the direction of a extra aggressive tightening in financial coverage by the BoE. Buyers have ramped up their outlook for fee rises after hotter than anticipated inflation information on Wednesday and a report on Friday that pointed to sturdy British shopper spending.

“That is the place excellent news is dangerous information,” stated Kiran Ganesh, a multi-asset strategist at UBS World Wealth Administration, pointing to how a powerful studying on retail gross sales on Friday added gas to a sell-off in short-term gilts.

Ganesh stated information that open the door to large fee rises additionally darken the outlook for future financial progress on the premise that sharper will increase in borrowing prices will knock the UK economic system right into a deeper recession.

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“Of all the key economies, the UK is closest to falling into the stagflation bucket,” stated Ganesh.

The retail gross sales information confirmed a month-on-month rise of 0.3 per cent in July, significantly better than expectations in a Reuters ballot for a fall of 0.2 per cent. The information have been skewed by a powerful rise in on-line gross sales resulting from Amazon’s Prime Day sale, however confirmed how shoppers are nonetheless spending at the same time as the price of residing disaster bites.

“We doubt the latest resilience in shopper spending will final for for much longer,” stated Ruth Gregory, senior UK economist at Capital Economics. “Even so, July’s rise in retail gross sales supplies another excuse to assume that the Financial institution of England will elevate rates of interest by 50 foundation factors [0.5 percentage points] relatively than 25bp at its subsequent coverage assembly in September.”

Cash markets at the moment are pointing to expectations that the BoE will elevate its foremost rate of interest by about 2.2 share factors by the top of Might 2023, up from about 1.6 share factors on the finish of final week.

The promoting this week in gilts might have been exacerbated by low buying and selling volumes on the top of the summer season vacation season. Nonetheless, the motion has rippled into different regional authorities bond markets, including to upward strain on short-term yields in Germany.

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Merchants are additionally trying in the direction of subsequent week, when central bankers will meet at Jackson Gap, Wyoming, for the Kansas Metropolis Federal Reserve’s annual financial symposium at which they may focus on the steps they should take to rein in rampant inflation. The Jackson Gap summit is commonly used as a platform for the Fed, the world’s most influential central financial institution, to make main bulletins on its coverage stance.

“The narrative over latest weeks has been the concept of the Fed pivoting and inflation coming beneath management,” stated Ganesh. “However Fed members have pushed again in opposition to that and maybe some traders are placing on bets that they’ll sound a extra hawkish message at Jackson Gap.”

Elsewhere, European shares dipped in morning buying and selling on Friday, with the regional Stoxx 600 down 0.7 per cent and the FTSE 100 off by 0.4 per cent. Futures contracts monitoring Wall Avenue’s S&P 500 slid 0.8 per cent, with these following the tech-heavy Nasdaq 100 down 1 per cent.

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Rishi Sunak tells Benjamin Netanyahu ‘calm heads’ needed after Iran attack

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Rishi Sunak tells Benjamin Netanyahu ‘calm heads’ needed after Iran attack

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Israeli Prime Minister Benjamin Netanyahu spoke to UK Prime Minister Rishi Sunak on Tuesday, three days after Royal Air Force warplanes helped to protect the Jewish state from an Iranian aerial assault.

UK officials said the two leaders spoke on Tuesday afternoon, more than 24 hours after Sunak had told the Commons that he would be speaking to Netanyahu “shortly”.

A Downing Street spokesperson said Sunak had “reiterated the UK’s steadfast support for Israel’s security and for wider regional stability”, but added that “significant escalation was in no one’s interest and would only deepen insecurity in the Middle East”.

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“This was a moment for calm heads to prevail,” he said.

Sunak also told Netanyahu that the UK “remained gravely concerned” about the deepening humanitarian crisis in Gaza, telling him that Israel “should open up new aid routes as quickly as possible”.

During the call, the Israeli leader thanked the UK for its “rapid and robust” support during Iran’s “reckless and dangerous” attack on Saturday.

Netanyahu is facing considerable domestic pressure to rebuff calls by the UK, the US and the EU to show restraint after Iran’s attack.

His far-right coalition allies are demanding massive retaliation against Iran even as Israel’s western allies are counselling caution and restraint in order to prevent a regional war.

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Like Sunak, foreign secretary Lord David Cameron, who is expected to travel to Israel on Tuesday evening to meet his Israeli counterparts, has made clear that Britain opposes further action. “We’re saying very strongly that we don’t support a retaliatory strike,” he said on Monday.

Netanyahu spoke to US President Joe Biden on the night of attack, in which a US-led coalition of warplanes, including a number from the UK, knocked out dozens of drones and missiles heading towards Israel.

The Israeli prime minister has also spoken to the Republican House Majority leader, Congressman Steve Scalise, who offered full-throated support to Netanyahu, according to the prime minister’s office.

Scalise made changes to the US legislative calendar in order to “consider legislation that supports our ally Israel”, a reference to a $14bn military aid package that is stalled in Congress.

In contrast with the position of the UK and other allies of Israel, the congressman had also “expressed support for any decision that Israel makes in light of the Iranian attack”, Netanyahu’s office said.

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Iran’s attack, the first directly launched from its territory against Israel, came in response to a suspected Israeli strike this month on its consulate in Damascus that killed several senior Iranian commanders.

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Coal miners are getting new protections from silica dust linked to black lung disease

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Coal miners are getting new protections from silica dust linked to black lung disease

WASHINGTON — Coal miners will be better protected from poisonous silica dust that has contributed to the premature deaths of thousands of mine workers from a respiratory ailment commonly known as black lung disease, the Labor Department said Tuesday as it issued a new federal rule on miners’ safety.

The final rule, announced by Acting Labor Secretary Julie Su, cuts by half the permissible exposure limit for crystalline silica for an eight-hour shift.

Mine workers, community advocates and elected officials from Appalachian states have pushed for the stricter rule, noting that health problems have grown in recent years as miners dig through more layers of rock to gain access to coal seams when deposits closer to the surface have long been tapped. The increased drilling generates deadly silica dust and has caused severe forms of pneumoconiosis, better known as black lung disease, even among younger miners, some in their 30s and 40s.

“It is unconscionable that our nation’s miners have worked without adequate protection from silica dust despite it being a known health hazard for decades,” Su said Tuesday. “Today, we’re making it clear that no job should be a death sentence, and every worker has the right to come home healthy and safe at the end of the day.”

In Central Appalachia, an estimated one in five tenured coal miners has black lung disease. The condition reduces life expectancy by an average of 12 years and makes it a “struggle to get through a phone call or play with their grandkids without losing their breath,” Su said in a speech in Uniontown, Pennsylvania, where she appeared with Cecil Roberts, president of the United Mine Workers of America, and other union leaders.

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“For too long, we accepted this as just the way things are for people who work in mines,” Su said. “They’ve had to work without the same protections from silica dust that people in other industries have, even though we’ve known about the harms of silica dust since Frances Perkins,” who was labor secretary in the 1930s and 1940s.

The election-year rule shows “what it looks like to have the most pro-worker, pro-union president in history,” Su said, a political comment referring to Democratic President Joe Biden.

Rebecca Shelton, director of policy at the Appalachian Citizens Law Center, which pressed for stricter rules to protect miners, said the group was reviewing the rule to ensure regulators from the Mine Safety and Health Administration accounted for comments by health professionals, attorneys and miners who have worked on the rule for years.

“There are too many lives at stake to get this wrong, and we’ll do whatever we can to ensure that this rule provides the protection that miners deserve,” Shelton said.

Democratic senators from Ohio, West Virginia, Pennsylvania and Virginia hailed the new rule, saying it will be essential in safeguarding miners.

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A spokesman for the National Mining Association said the group was reviewing the rule but supports the lower limits. The mining lobby has pushed to allow use of administrative controls and personal protective equipment to meet safety standards. “Unfortunately, those recommendations were not included in the final rule,″ said spokesman Conor Bernstein.

Vonda Robinson, whose husband, John, was diagnosed with black lung a decade ago at age 47, said she’s felt hopeful as officials considered the rule changes. But she was skeptical how the rule will be enforced.

Robinson, who lives in rural Nickelsville, Virginia, near the Tennessee line, said the mine safety office does not have enough staff or resources to adequately protect workers and their families.

“You can have rules, but until you back it up with enforcement, it’s not going to mean anything,” she said in an interview. “If they’re going to put out these rulings, you need to hire more people.”

The White House requested a $50 million increase to the mine safety office’s budget for the current year, most of which would have been for more inspectors and enforcement. Congress rejected it, keeping the budget at the 2023 level of $388 million.

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Vonda Robinson said her husband struggles every day. John Robinson worked in the mines for almost three decades. Two years ago, the couple met with a physician about a lung transplant.

“Until you see it and live with it, you don’t understand,” Vonda Robinson said. “And knowing what we’re looking at now — miners being diagnosed at 32 – they’ll probably never see their children graduate or have grandchildren.”

The Labor Department rule lowers the permissible exposure limit of respirable crystalline silica to 50 micrograms per cubic meter of air for a full-shift exposure, calculated as an 8-hour average. If a miner’s exposure exceeds the limit, mine operators must take immediate corrective actions.

The rule is in line with exposure levels imposed by the Occupational Safety and Health Administration on construction and other non-mining industries. And it’s the standard the Centers for Disease Control and Prevention was recommending as far back as 1974.

The Labor Department began studying silica and its impact on workers’ health nearly a century ago, but the focus on stopping exposure in the workplace largely bypassed coal miners. Instead, regulations centered on coal dust, a separate hazard created by crushing or pulverizing coal rock that also contributes to black lung.

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In the decades since, silica dust has become a major problem as Appalachian miners cut through layers of sandstone to reach less accessible coal seams in mountaintop mines where coal closer to the surface has long been tapped. Silica dust is 20 times more toxic than coal dust and causes severe forms of black lung disease after even a few years of exposure.

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Willingham reported from Charleston, West Virginia.

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US to grow at double the rate of G7 peers this year, says IMF

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US to grow at double the rate of G7 peers this year, says IMF

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The US is on track to grow at double the rate of any other G7 country this year, according to IMF forecasts, as the strength of the world’s biggest economy rocks global markets.

Strong household spending and investment will help propel US growth to 2.7 per cent this year according to the fund’s latest World Economic Outlook.

The figure is higher than the 2.5 per cent estimated for 2023 and represents a 0.6 percentage point upgrade on the previous forecast.

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The projections highlight the US economy’s role as the driver of global growth, as investors across the world scale back their expectations for Federal Reserve interest rate cuts.

The IMF said the next best performer in the G7 this year would be Canada, with growth of 1.2 per cent.

It added that Germany’s expansion would be the weakest among the G7 at 0.2 per cent. Japan is forecast to experience growth of 0.9 per cent, while the UK is set to expand by just 0.5 per cent after flatlining in 2023.

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Global stock markets sank and Asian currencies were hit by a rising dollar on Tuesday, following a Wall Street sell-off prompted by strong US retail sales figures suggesting the Fed may cut rates this year by less than previously thought.

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Pierre-Olivier Gourinchas, IMF chief economist, told the Financial Times that, while the “baseline” was still three quarter-point cuts this year, the Fed could be thrown off course by the surging US economy.

“If the inflation pressures persist beyond what we have right now, in the US in particular, then we would expect that they would have later cuts and maybe fewer cuts,” he said.

Gourinchas added that Fed rate cuts could be delayed from this summer to the fourth quarter — potentially after November’s presidential election — if inflation overshot IMF expectations.

At present, investors expect the Fed to cut rates by September and possibly more than once by the end of the year.

The recent bumper US growth has helped the global economy avoid a long-feared hard landing following interest rate rises.

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But strong demand has also pushed up price pressures, in contrast with the UK and eurozone.

The IMF said US inflation would continue to recede but lifted its forecast for this year to 2.9 per cent, above the 2.4 per cent predicted for the eurozone and 2.5 per cent in the UK.

Gourinchas said the European Central Bank and the Bank of England could cut rates sooner because they did not face such a “strong demand-driven component of inflation”. 

Laying out its projections as central bank governors and finance ministers attend joint IMF/World Bank spring meetings in Washington, the fund found that global economic activity had proven “surprisingly resilient” even after central banks boosted rates to bear down on inflation.

But it also warned of risks to the global recovery, notably the possibility of fresh increases in commodity prices resulting from the conflict in the Middle East. 

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The broader picture is still one of tepid expansion by historical standards, with world growth projected to remain at 3.2 per cent this year and next, in line with 2023’s estimate. 

The IMF said the long-term consequences of the coronavirus pandemic, Russia’s full-scale invasion of Ukraine, weak productivity growth and increasing “geoeconomic fragmentation” were hampering expansion.  

The cause of disinflation in advanced economies was being aided by a stronger than forecast rise in employment, in part because of inflows of migrants, the IMF said. There had been faster growth in foreign-born rather than domestic workforces since 2021 in economies including Canada, the eurozone, the UK and the US, it found.

Among other leading economies, the IMF predicted China’s growth would slow this year to 4.6 per cent from 5.2 per cent in 2023, while forecasts for India, one of the world’s fastest-growing economies, have been upgraded to 6.8 per cent for this year.

Russia received one of the biggest upgrades, with growth now projected to be 3.2 per cent this year, 0.6 percentage points higher than previously expected, followed by growth of 1.8 per cent in 2025. The IMF’s doubling of its forecast for Russian growth in its January outlook fed concerns among G7 countries that sanctions were failing to damage Vladimir Putin’s war economy. 

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Gourinchas said Russian expansion was being partly driven by strong oil export revenues, coupled with firm private investment.

“Domestic demand is very strong,” he said. “The sanctions are still degrading and having an impact gradually on the Russian economy, but the economy itself is quite resilient.”

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