Key Takeaway: Moody's downgraded Southern Water to junk status , citing financial and operational underperformance, compounding the broader issues facing the UK water sector. Southern Water Ltd’s credit rating was downgraded to junk by Moody’s , with a warning of potential further cuts due to its weak performance history and financial challenges. This downgrade impacts the company’s ability to raise the £4 billion in new debt and £650 million in equity required for its capital plans. The UK water industry is facing heightened scrutiny due to concerns over chronic leaks, sewage spills, and high-interest rates. Southern Water, which supplies over two million people in England, could face severe penalties from the regulator Ofwat , which may limit funds for essential upgrades. Following the downgrade, Southern Water’s 2026 bonds dropped 2.7 pence to around 85 pence on the pound. Despite the rating cut, Southern Water assured customers that services would continue unaffected, hig
Key Takeaway: Trump's proposed tariffs may dampen global economic growth and elevate US inflation, creating a challenging environment for the Federal Reserve.
David Kelly, chief global market strategist at JPMorgan Asset Management, cautioned that President-elect Donald Trump’s aggressive tariff policies could hinder economic growth and raise inflation, an unusual mix that could lead to stagflation. Trump’s campaign suggested tariffs as high as 60% on Chinese products and 10% to 20% on goods from other countries, aiming to boost domestic industry.
Kelly described tariffs as a “stagflation elixir,” noting that increased costs from tariffs could prompt multinational companies to rethink supply chains and pass on costs to consumers, contributing to inflation. While these concerns contrast with the recent stock market rally driven by optimism over potential tax cuts, the bond market has responded with rising yields, as investors anticipate that Trump’s policies could clash with the Fed’s rate-cut trajectory.
Key Points:
- Trade Tensions: With Trump’s protectionist stance, Kelly expects “tariff wars” that could lead to global economic strain.
- Fed Response: Analysts at TD Securities and JPMorgan anticipate that the Fed may pause rate cuts in 2025 to assess the impact of Trump’s policies.
Kelly predicts an eventual clash between Trump’s policy goals and the Fed’s efforts to control inflation, even though Fed Chair Jerome Powell has refrained from commenting on Trump’s plans. The balance between fiscal and monetary policy will be critical as the economy faces both inflationary and recessionary pressures from tariffs.
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