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Xinhua adds:
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Fitch’s rating system has failed to effectively reflect the positive effects of China’s fiscal policies on boosting economic growth and stabilizing the macro leverage ratio in a forward-looking manner, the ministry said in a statement.
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Britain’s largest supermarket chain has declared that inflationary pressures have “lessened substantially”, as it reports a jump in profits.
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Tesco has posted a 12.8% rise in adjusted operating profit for the last financial year, up to £2.8bn, and a 7.4% rise in group sales.
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CEO Ken Murphy says the group is encouraged by signs that consumer sentiment is improving, and offers hope that the worst of the cost of living squeeze may be over.
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Murphy says:
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Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year.
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We have continued to invest in helping customers where it matters most, cutting prices on more than 4,000 products and doubling down on our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices.
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Recent data suggests Murphy is right – inflation in shop prices in the UK fell to a two-year low in March, amid a fall in food price inflation across major economies.
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Tesco is expecting to grow its profits this year; telling shareholder it expects retail adjusted operating profit of at least £2.8bn in 2024-25.
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On a statutory basis, Tesco’s pre-tax profits swelled to £2.3bn from £882m in 2022, up 159.5%.
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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
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Credit rating agency Fitch has fired a shot across Beijing’s bows, by cutting the outlook on China’s debt.
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Fitch has revised the outlook on China’s Long-Term Foreign-Currency Issuer Default Rating to Negative from Stable today, warning that risks to China’s public finance outlook are rising.
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China, Fitch points out, is facing “more uncertain economic prospects” as it transitions away from growth based on its property sector, where a construction boom has burst.
“,”elementId”:”51685589-a8a7-4582-93ec-a03a221773e9″},{“_type”:”model.dotcomrendering.pageElements.RichLinkBlockElement”,”prefix”:”Related: “,”text”:”China’s economic model is faltering – does it have the political will to fix it? | George Magnus”,”elementId”:”57588685-adcf-4fb1-8997-a956677d031f”,”role”:”thumbnail”,”url”:”https://www.theguardian.com/business/2023/aug/23/china-economic-model-property-crisis”},{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”
Fitch also kept China’s credit rating at A+, which is the fifth-highest investment grade rating, but the new negative outlook implies this rating could be cut in coming months.
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Fitch identifies several threats to China’s fiscal stability, including a rising deficit, increasing government debts, and risks posed by the “Local Government Financing Vehicles” used to fund property projects.
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It says:
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Wide fiscal deficits and rising government debt in recent years have eroded fiscal buffers from a ratings perspective.
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Fitch believes that fiscal policy is increasingly likely to play an important role in supporting growth in the coming years which could keep debt on a steady upward trend. Contingent liability risks may also be rising, as lower nominal growth exacerbates challenges to managing high economy-wide leverage.
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Fitch also warns that China faces “near-term growth headwinds”, predicting growth will slow to 4.5% in 2024, from 5.2% in 2023. It adds that deflation “remains a concern”.
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Also coming up today
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Investors around the world are poised for the latest US inflation report, due this afternoon. It is expected to show a small pick-up in the pace of price rises, lifting the US CPI rate to 3.4% from 3.2%.
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But core inflation could keep slowing, perhaps down to 3.7% from 3.8%.
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The US central bank, the Federal Reserve, wants to push inflation lower, so today’s data will influence how soon it can cut interest rates.
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Dan Coatsworth, investment analyst at AJ Bell, says:
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The central bank wants to see sustained evidence of inflation coming down and that doesn’t appear to be on the menu. The signs are clear for investors to see, but many have been choosing to ignore them.
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The Fed putting it into black and white could be a difficult pill for investors to swallow, so brace yourself for turbulence on the market this week.”
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The agenda
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7am BST: Sweden’s GDP report for February
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Noon BST: US weekly mortgage applications
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1.30pm BST: US inflation report for March
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2.45pm BST: Bank of Canada interest rate decision
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important events
British trade union Unite has accused Tesco of increasing profits amid the cost of living crisis.
unite general secretary Sharon graham say:
“Tesco is raking in mountains of cash while families struggle to put food on the table due to soaring prices.Many companies are taking advantage of the cost of living crisis to grab excess profits. .
“Profiteering is rampant in our economy. The government’s lack of action has failed to curb it.”
Tesco will undoubtedly deny the charges of profiteering.
Today’s financial results show that the company achieved an operating margin of 4.2% in the UK and Ireland in the last financial year, which is 42 basis points higher than the previous year.
Tesco added that operating profit margins for the current financial year were roughly in line with pre-pandemic levels.
China says Fitch’s rating outlook downgrade is ‘regrettable’
According to Xinhua news agency, China’s Ministry of Finance said Fitch’s downgrade of the country’s sovereign credit rating outlook was “regrettable”.
Xinhua added:
The ministry said in a statement that Fitch’s rating system has failed to effectively reflect the positive effects of China’s fiscal policy on promoting economic growth and stabilizing the macro leverage ratio.
Tesco: Inflation pressures have significantly reduced
Britain’s biggest supermarket chain reported a jump in profits and declared inflationary pressures had “significantly eased”.
tesco adjusted operating profit rose by 12.8% to up to £2.8bn in the last financial year, with group sales up 7.4%.
CEO Ken murphy The group said it was encouraged by signs that consumer sentiment was improving and was hopeful that the worst of the cost-of-living squeeze may be over.
murphy say:
Although inflationary pressures have eased significantly, we recognize that the situation remains difficult for many of our customers, which is why we have worked hard to reduce our prices and now offer the cheapest full-line food products in over a year. It continues to be a goods store.
We continue to invest to support our most important customers, lowering prices on over 4,000 products and doubling down on the powerful combination of Aldi price match, low prices and Clubcard prices.
Recent data suggests Murphy is right. UK over-the-counter price inflation fell to a two-year low in March, as food price inflation fell across major economies.
Tesco expects profits to rise this year. It told shareholders it expects retail adjusted operating profit to be at least £2.8bn in 2024-25.
On a statutory basis, Tesco’s profit before tax is £2.3 billion This is an increase of 159.5% from £882m in 2022.
Introduction: Fitch downgrades China outlook to negative
good morning. Welcome to our regular coverage of business, financial markets and the global economy.
Credit rating agency Fitch has downgraded its outlook for China’s debt, unleashing an attack against Beijing’s wishes.
Fitch today revised its outlook on default ratings for China’s long-term foreign currency issuers from “stable” to “negative”, warning of heightened risks to China’s fiscal outlook.
Fitch said China faces a “more uncertain economic outlook” as a construction boom moves away from growth based on the real estate sector.
Fitch also maintained China’s credit rating at A+, the fifth-highest investment-grade rating, but the new negative outlook suggests the rating could be downgraded in the coming months.
Fitch identifies several threats to China’s financial stability, including rising deficits, rising government debt, and risks posed by “local government financing vehicles” used to finance real estate projects.
It is written like this.
The large budget deficit and increase in government debt in recent years have eroded the fiscal buffer from a rating perspective.
Fitch believes that fiscal policy is increasingly likely to play an important role in supporting growth in the coming years and could maintain a stable upward trend in debt. Contingent liability risks may also be increasing as lower nominal growth rates further exacerbate the challenge of managing high economy-wide leverage.
Fitch also warned that China faces “near-term growth headwinds”, forecasting growth to slow to 4.5% in 2024 from 5.2% in 2023. Deflation “remains a concern”, he added.
Will appear again today
Investors around the world are bracing for the latest US inflation report to be released this afternoon. The pace of price growth is expected to accelerate slightly, with the US CPI rate rising from 3.2% to 3.4%.
However, core inflation is likely to continue to slow, perhaps falling to 3.7% from 3.8%.
The US central bank, the Federal Reserve, wants to reduce inflation, and today’s data will influence when it cuts interest rates.
Dan Coatsworth investment analyst AJ Bellsays:
The central bank wants to see continued evidence that inflation is falling, but that doesn’t seem to be on the menu. The signs are obvious to investors, but many choose to ignore them.
The Fed’s clarification could be a tough pill for investors to swallow, so brace for market turmoil this week. ”
agenda
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7am (BST): Sweden’s February GDP report
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Noon BST: US Weekly Mortgage Applications
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1:30pm BST: March US inflation report
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2:45pm BST: Bank of Canada interest rate decision
