Investing.com — A strong dollar has often been described as a “wrecking ball” for the global economy, driving up the cost of worldwide trade, tightening financial conditions, and inflation for countries, particularly those in emerging markets, but while king dollar is expected to continue its surging run, Capital Economics believes worries about the impact of the “wrecking ball” impact are overblown. 

“The upshot is that while an appreciating dollar is a headwind for the world economy in the short run, it is usually not as harmful as often suggested,” economists at Capital Economics said in a recent note. 

The U.S. dollar has appreciated by 7% in trade-weighted terms compared to a year ago, reaching a fresh record high. In real terms, the dollar is the strongest since the Plaza Accord in 1985.

As most traded goods are priced in dominant currencies, chiefly the U.S. dollar, as the greenback strengthens, trade becomes more expensive globally.

While a “strong dollar poses a headwind to trade through this ‘invoice channel’, the share of trade that is negatively affected tends to be overstated,” the economists added.

Services trade, which accounts for a fifth of overall world trade, is much less affected by dollar strength. While falls in commodity prices, can mitigate increases in import prices, potentially dampening inflationary impacts.

Financial conditions tightening from dollar strength, meanwhile, pose a smaller threat to emerging markets than in the past, the economists said, with currency risks at their lowest levels in decades.

(Corrects headline, paragraphs 1, 2 and 6 to say 12 months through November not “12 months to November”, corrects paragraph 6 to add ended Oct/ 30 not “ended October”)

By Lucy Craymer

WELLINGTON (Reuters) -People leaving New Zealand hit record levels in the 12 months through November 2024, in another sign of the weakness in the country’s economy that moved to a technical recession in the third quarter.

Data released by Statistics New Zealand on Thursday showed that 127,800 people left the Pacific nation in the 12 months through November, up 28% on the prior 12-month period. This was provisionally the highest number of people leaving in an annual period ever, according to the statistics bureau.

Of those leaving, more than 50% were New Zealand citizens, according to the data.

New Zealand, which has a population of just 5.3 million, has seen its economy struggle over the last couple of years as the central bank increased the official cash rate to dampen historically high inflation.

Michael Gordon, senior economist at Westpac, said that a lot of people come to New Zealand for work opportunities and when these dry up people leave.

“It’s about work opportunities, especially here (New Zealand) versus Australia. Australia’s economy is still running reasonably strongly,” Gordon said. “There are more opportunities over there now so we are seeing quite high outflows of Kiwis.”

However, people leaving does continue to be offset by inward migration.

Statistics New Zealand said net migration – the number of people moving to New Zealand permanently minus those leaving New Zealand – was at 30,600 in the 12 months through November 2024. Net migration peaked in the 12 months ended Oct. 30, 2023 at 135,700.

Gordon added that net migration was now back at historic averages and that over the longer term net migration would support the country’s economy.

“It’s something to keep in mind, that for a big chunk of the world, New Zealand is an attractive place to live, but also for us (New Zealanders) there are also places that look more attractive like Australia, or going to the U.S. or the UK,” Gordon said.

By Helen Reid and James Davey

LONDON (Reuters) -Online fast-fashion retailer Shein requires its contract manufacturers to only source cotton from approved regions, which do not include China, for products it sells in the United States, its biggest market, the company said on Friday.

Approved cotton sources include Australia, Brazil, India, the United States and, “in limited cases”, certain countries in Europe, Middle East and Africa, and Southeast Asia, Shein’s general counsel for Europe, Middle East and Africa Yinan Zhu said in written evidence to a British parliamentary committee chair.

Zhu said that requirement is for Shein’s compliance with the Uyghur Forced Labor Prevention Act, legislation intended to ban products made by forced labour in China from entering the United States.

Shein has faced allegations that its products contain cotton from China’s Xinjiang province, where the U.S. and NGOs have accused the Chinese government of forced labour and human rights abuses targeting Uyghur people. Beijing denies any abuses.

Shein, which sells in 150 markets worldwide, said its supplier code of conduct prohibiting forced labour applies regardless of the country its products are sold in.

But it did not specify whether its restrictions on cotton sources applied to products sold in other markets, such as the UK, where it is planning a London initial public offering.

“We do not prohibit the use of Chinese cotton in our products specifically where such use would not contravene the laws and regulations of the jurisdictions in which we operate,” Zhu wrote.

That did not satisfy Labour lawmaker Liam Byrne, the chair of the cross party Business and Trade committee which is conducting an inquiry into the new government’s Employment Rights Bill.

He said he has written back to Shein for clarity on whether Xinjiang cotton is used in goods sold in the UK.

“I just want to know the truth and I think British consumers want to know the truth and if that (IPO) moment ever comes I can tell you British investors are going to want to know that truth,” he told Reuters in an interview.

He said the committee reserved the right to recall a Shein representative for a further oral hearing.

Shein, like many other apparel retailers, uses isotopic testing firm Oritain to verify the origin of cotton in its products and check for cotton from unapproved sources.

Testing during 2024 found 1.3% of Shein’s cotton was from unapproved regions, Zhu wrote, without specifying which regions.

Zhu represented Shein at a parliamentary hearing on Jan. 7 but declined to answer lawmakers’ repeated questions about Shein’s use of cotton from China, prompting criticism from Byrne who then raised concerns with the Financial Conduct Authority, which is in charge of approving Shein’s IPO, and the London Stock Exchange (LON:LSEG).

In a reply to Byrne published on Friday, the CEO of the London Stock Exchange said she cannot comment on specific companies, but said the scrutiny on companies wanting to access UK public markets brings a higher level of discipline and transparency than if those companies remained privately owned.

In a separate letter, FCA Chief Executive Nikhil Rathi said the regulator aims to ensure any IPO prospectus makes all required disclosures for potential investors to understand the legal risks, and its review process also involves background checks on the company, its senior managers and board members. Rathi did not specifically mention Shein.

Byrne was unhappy with both responses and has written back, seeking more information.

“What we want to know is whether you ask firms to prove that there are safeguards against the use of forced labour and we want to know whether you ask firms whether they’re using goods or products from Xinjiang in their supply chains,” he said.

Byrne wants the government’s employment legislation to incorporate greater safeguards against forced labour.

This would ensure that “if and when the day comes that Shein seeks to float on the LSE we have the right safeguards around forced labour in place on the statute book,” he said.

By Jody Godoy

(Reuters) – U.S. Federal Trade Commission Chair Andrew Ferguson gained broad authority to purge diversity, equity and inclusion (DEI) policies at the agency after Democrats, who still have the majority on the commission, stood down.

Ferguson, who has criticized social media companies for left-leaning content moderation policies, asked the commission on Thursday to grant him authority to strip all mention of DEI from FTC documents after President Donald Trump’s executive order banning such programs in the federal government.

The first vote under Ferguson’s leadership on Thursday ratcheted up tension between Republicans and Democrats at the five-member agency, and surfaced a larger disagreement over the agency’s independent status.

Democratic Commissioner Alvaro Bedoya cast the lone vote against the proposal, criticizing Ferguson for rushing the vote and for focusing on DEI instead of the high cost of living.

Conservatives including Ferguson have said the president should be able to remove officials who do not align with his agenda.

Under 90-year-old U.S. Supreme Court precedent, FTC commissioners and members of many other bipartisan independent agencies are only fireable for cause — unlike executive branch agencies whose heads the president can fire at will.

Ferguson said Bedoya acted out of disagreement with Trump over DEI.

“I do not think an officer of the United States can refuse to comply with the President’s lawful orders on the basis of such an objection,” Ferguson said in a statement on the vote Thursday night.

Democrat Lina Khan, whom Trump replaced as the agency’s chair but who remains a commissioner, and fellow Democratic Commissioner Rebecca Slaughter declined to participate in the vote. Slaughter said in a statement that she believed Ferguson already had the authority to carry out Trump’s mandate.

“As Senate-confirmed Commissioners of an independent agency, my colleagues and I swear an oath to uphold the laws and the Constitution of the United States of America, not to serve any individual or ideology,” Slaughter said.

By Humeyra Pamuk

WASHINGTON (Reuters) – U.S. President Donald Trump’s 90-day foreign aid pause applies to new and existing assistance, according to a State Department memo seen by Reuters on Friday, which also states that waivers have been issued for military financing for Israel and Egypt.

Just hours after taking office on Monday, Trump ordered the pause in foreign development assistance pending assessments of efficiencies and consistency with his foreign policy.

But the scope of the order was not immediately known and it was unclear what funding could be cut given that the U.S. Congress sets the federal U.S. government budget.

The State Department memo, signed by the new Secretary of State Marco Rubio and dated Friday, said effective immediately, senior officials “shall ensure that, to the maximum extent permitted by law, no new obligations shall be made for foreign assistance” until Rubio has made a decision after a review.

It says that for existing foreign assistance awards stop-work orders shall be issued immediately until reviewed by Rubio.

Across the board, “decisions whether to continue, modify, or terminate programs will be made” by Rubio following a review over the next 85 days. Until then Rubio can approve waivers.

The State Department memo said waivers have so far been approved by Rubio for “foreign military financing for Israel and Egypt and administrative expenses, including salaries, necessary to administer foreign military financing.”

Rubio has also issued a waiver for emergency food assistance. This comes amid a surge of humanitarian aid into the Gaza Strip after a ceasefire between Israel and Palestinian militants Hamas began on Sunday and several other hunger crises around the world, including Sudan.

Investing.com — As the U.S. economy and equity markets thrive halfway through the decade, UBS analysts suggest 2025 will be pivotal in determining whether the “Roaring ‘20s” economic regime can continue through the decade. 

In their latest macroeconomic assessment, UBS highlights that while the economy is currently roaring, the sustainability of this momentum hinges on key factors.

Defining the “Roaring ‘20s” as a period of steady GDP growth (2.5% or higher), moderate inflation (2–3%), and policy-driven investment, UBS notes that current conditions meet these criteria. 

However, interest rates—currently above 4% for the 10-year Treasury yield and 3–4% for the fed funds rate—remain higher than UBS’s ideal “roaring” range.

The analysts attribute much of the economic strength to earlier fiscal stimulus, policy-driven private investment, and immigration, but they caution that tailwinds are weakening. For the economic boom to persist, productivity growth must accelerate. 

“Productivity gains need to be at or above 2% for growth, inflation, and rates to meet the regime criteria,” UBS writes, while noting that recent productivity gains have yet to reflect the full impact of AI and emerging technologies.

UBS remains cautiously optimistic about 2025, citing the growing adoption of AI and rising “animal spirits” in the economy as reasons to believe in sustained productivity gains. 

However, risks loom. “The regime will likely ‘break’ if inflation re-accelerates and rates stay higher for longer,” the analysts warn, adding that a potential equity bubble could undermine the long-term outlook.

Ultimately, UBS emphasizes that supportive policy and productivity growth are critical to extending the Roaring ‘20s. 

“2025 is more likely to be a ‘make’ than a ‘break’ year,” they conclude, though uncertainty surrounding policy, inflation, and rates keeps the range of outcomes wide.

By Nell Mackenzie

LONDON (Reuters) – Half of the global investors surveyed by Bank of America’s prime brokerage department plan to allocate more money to hedge funds this year, while 37% wanted no change.

The results represented a 2% uptick in those wanting to spend more on hedge funds from the start of 2024, a report by the bank to clients showed on Friday.

The survey was sourced from responses from 256 firms that oversaw a combined amount of over $1 trillion invested in hedge funds.

Investors who would ditch their hedge fund holdings and take their money back thinned to 7% from 12% in 2023, BofA’s 2025 hedge fund outlook report said.

Dissatisfied investors thought returns should have been better, said the bank. Of those that were unhappy, 73%, cited underperformance as their reason for wanting to redeem money.

Other reasons investors were unhappy included when hedge funds changed their investment strategy and when hedge funds simplified, or consolidated their portfolio, the survey said.

Allocators have also been worried that their hedge funds are piling into crowded trade positions where everyone has the same idea, said the report. Crowded positions can grow costly if speculators rush for the exit at the same time.

Hedge funds growing too large to nimbly invest without their trades moving the market was also a top concern which had increased from last year, the report said.

Roughly the same investors as last year harboured concerns that hedge funds which said they specialised in one kind of investing actually made money by doing something else, or so-called style drift, it said.

Talent was named as an ongoing concern, as well.

Smaller hedge funds running under $500 million in assets were a fifth less likely to see their investors leave.

Family offices, pension plans and endowment and foundations were the most likely to take all of their money off the table, rather than partially, said the report.

In 2025, investors are most interested in stock and bond trades and less in trend followers and systematic funds that play on macroeconomic events.

These hedge fund clients were more successful in bargaining down on fees compared to this time last year.

Around 60% of investors won fee discounts compared to roughly half last year, and there was a slight uptick to 22% from 17% who got more favourable liquidity terms, allowing them to buy and sell out of their hedge fund investments with less of a delay.

By Niket Nishant and Manya Saini

(Reuters) – The tepid reception to Venture Global’s ambitious valuation target shows companies need to set realistic expectations when going public, Wall Street analysts said, and could be a signal that the recovery in new offerings may be a cautious one.

Touted as the first blockbuster listing of 2025, the LNG exporter was initially aiming for a price tag as high as $110 billion, only to settle for 45% lower when it eventually sold shares in the IPO on Thursday.

“Even with the improved market sentiment we’ve seen, investors are going to continue scrutinizing deals carefully,” said IPOX CEO Josef Schuster.

“They aren’t broadly willing to pay over-valued companies when there are readily available market comparisons.”

Venture Global’s IPO price of $25, the mid-point of the $23 to $27 range, was 7.67 times its adjusted tangible book value, according to a Reuters calculation.

Rival Cheniere trades at 10.55 times its book value in 2024, according to LSEG data, and has a market value of $52.6 billion.

The pushback against Venture Global’s initial target came as sort of surprise, as it seemed to have a few factors going for it: demand for natural gas worldwide and a desire for more fossil-fuel production from new U.S. President Donald Trump.

The LNG firm’s contract dispute with some of its customers may also have prompted it to temper expectations after meeting resistance from investors.

“Venture Global was proposing a high absolute market cap than the closest peer. It’s also possible that the legal issues turned off some investors or made them comfortable pushing back on valuation,” said Nicholas Einhorn, vice president of research at Renaissance Capital.

The investor skepticism also points to the challenges of pushing for maximal valuations when the markets are already staring at several risks, such as fewer interest-rate cuts than expected and the potential fallout of tariffs proposed by President Trump.

“There are layers and layers of uncertainty,” said Michael Bayer (OTC:BAYRY), CFO at Wasabi Technologies and adjunct lecturer at Babson College.

While an underwhelming performance from Venture Global could be a hiccup, it is unlikely to halt the IPO plans of major technology companies lining up to go public, such as Swedish payments firm Klarna and fintech giant Chime.

“I expect Venture Global’s IPO to have little bearing on the prospects for this year’s robust pipeline of tech and venture capital IPOs,” said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

A renewed risk-on sentiment and progress in bringing inflation down to the Federal Reserve’s 2% target may also be tailwinds.

“Companies with strong fundamentals, a compelling growth narrative and transparency in their financial and operational performance can still find success in the public markets,” said Mike Bellin, IPO services leader at PwC U.S.

By Carolina Mandl

NEW YORK (Reuters) – The hedge fund industry ended 2024 with $4.51 trillion in assets under management, a 9.75% increase from the previous year, research firm HFR said on Friday.

Total (EPA:TTEF) assets increased by $401.4 billion last year, the highest amount since 2021, mainly driven by a strong performance across different strategies.

WHY IT’S IMPORTANT

The growth in hedge fund assets underscores how influential this less regulated and leveraged industry, which uses a vast array of trading strategies and assets, is in markets.

It also shows that hedge funds regained a bit of traction among investors. Hedge funds’ net inflows last year totaled $10.47 billion, the first calendar year in which more money came in than out of the industry since 2021. In the last quarter, however, outflows amounted to $12.57 billion.

CONTEXT

Hedge funds’ assets have grown by almost 56% since 2015, although the industry has struggled to lure new money from investors. Over the last decade, outflows surpassed inflows by $166.8 billion, showing that funds’ performance has driven the industry growth, not new money.

BY THE NUMBERS

On average, hedge funds posted a 9.83% gain to investors in 2024, according to HFRI Fund Weighted Composite index, with positive results in equity, macro, event-driven and relative value strategies. That compares with a 23.3% return of the S&P 500.

KEY QUOTE

Kenneth J. Heinz, president of HFR, said portfolio managers are “preparing for a wide range of market cycles, with the possibility for volatility and dislocations as investors adapt to new policies regarding interest rates/inflation, legislation and tariffs” in 2025.

“Total global hedge fund industry capital rose to a fifth consecutive quarterly record as managers, institutions and investors positioned for sweeping policy changes which are likely to have significant and far-reaching implications for U.S. and global financial market structure, regulation and capital,” he added.

(Reuters) -Diageo, the world’s top spirits maker, is exploring a potential spin-off or sale of beer brand Guinness and is reviewing its stake in LVMH’s drinks unit, Moet Hennessy, Bloomberg News reported on Friday, citing people familiar with the matter.

News about a potential sale of the beer label, a star performer in Diageo (LON:DGE)’s portfolio, helped lift Diageo’s shares almost 4% higher, becoming the top percentage gainer on the blue-chip index. However, some analysts and one source familiar with the situation said a Guinness sale right now did not make sense.

Diageo declined to comment on market speculation; LVMH declined to comment.

Guinness is an outlier in Diageo’s business, which consists mostly of spirits rather than beer, but its performance recently has outshone that of key liquor labels like Johnnie Walker whisky.

Spirits sales have struggled as a post-pandemic boom in demand for pricey bottles of liquor went into reverse. Meanwhile, Guinness sales have grown by double digits every year since 2021, with its zero-alcohol version also surging.

Its recent success could make Guinness an attractive asset. It would likely be valued at above $10 billion, Bloomberg reported, citing the sources.

Diageo’s liquor brands also offer a higher margin and generally, drinkers in developed markets are shifting away from beer and towards spirits-based drinks like cocktails.

But at the same time, Guinness’ success also left analysts like Laurence Whyatt at Barclays (LON:BARC) wondering why Diageo would want to sell it.

“I would be very surprised if Diageo wanted to sell Guinness,” he said, adding it was unusual for companies to want to sell their best-performing assets.

A source familiar with the situation agreed that it makes no sense for Diageo to sell Guinness in the near term given its performance, adding Diageo does not need the money and CEO Debra Crew had said publicly how much she likes the label.

Bloomberg also reported that Diageo could look to deepen its ownership in the Moet Hennessy venture, or exit altogether.

In a note earlier on Friday, Bernstein analyst Trevor Stirling said Diageo taking full control of the LVMH wine and spirits division would likely necessitate “a very reluctant disposal of beer/Guinness”.