Good morning and welcome to First FT. In today's newsletter: Top economies heading for biggest budget deficits since Covid, IMF warns. Investors brave US Treasury rout to lock in highest yields in decades.
Houthi assault on Saudi airports strikes at MBS's economic vision. The election supercycle set to drag Europe to the right. The world's leading economies need to take "urgent" action to rebuild their public finances, the IMF has warned, as it published forecasts showing they are heading for their biggest budget deficits since the Covid-19 collapse.
In its World Economic Outlook, the IMF predicted that government net borrowing by advanced economies would reach 5.2 per cent of GDP this year, the highest since the world was in the grip of pandemic lockdowns in 2021. Deficits in both China and the US will hit or exceed 8 per cent of GDP in 2026, according to IMF forecasts, which cover a wider range of borrowing than some national gauges. The forecasts represent a deterioration in the IMF's outlook since its report in April and follow months of heightened turmoil in global debt markets.
Yields have pushed higher as markets grapple with concerns over mounting public debt, inflation and the increasingly aggressive-looking funding requirements of AI. The outlook finds that while the global economy has proven resilient in the face of the oil shock, partly thanks to the AI-driven investment boom, sovereign debt risks are rising as global public debt heads towards 100 per cent of GDP later this decade. Tech boom winner: AI is driving a growth spurt in the UK, according to IMF forecasts that show Britain's outlook has improved more than almost any other major economy over the past six months.
Corporate debt: Asia has become the world's largest producer of zombie companies, the IMF has warned. Five more top stories: Big investors are snapping up US Treasuries, seeking to lock in the highest yields in decades as they bet borrowing costs can only climb so much further before a months-long sell-off abates. The Houthis' deadly assault on Riyadh airport threatens Crown Prince Mohammed bin Salman's plans to transform Saudi Arabia into a regional finance and events hub.
The British state's chances of keeping much of a £3.8bn criminal bitcoin haul have strengthened after a judge in London ruled that thousands of Chinese fraud victims are unable to rely on English law to claim the crypto fortune. The number of biotech companies going public through reverse mergers has risen almost sixfold this year, as promising start-ups take advantage of struggling groups on the Nasdaq to fast-track their stock market debuts. Mark Zuckerberg says Meta has caught up with rivals at the "frontier" of AI, committing to further vast spending to challenge Anthropic and Open AI and playing down the risks of the technology running out of control.
Source: Financial Times Companies · Summarized by HeadlinesBriefing