Finance

By Lewis Krauskopf and Lawrence White

NEW YORK/LONDON(Reuters) – World stock markets edged back on Tuesday while the U.S. dollar held relatively steady a day after heavy selling in equities, as investors assessed the level of contagion stemming from the distress of debt-saddled developer China Evergrande.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.35%, following Monday’s biggest percentage drop in two months. European indexes rose solidly while Wall Street’s main gauges were gaining in afternoon trade.

Price moves in bonds and currencies were relatively subdued. On Monday, safe-haven assets drew bids as investors became risk averse.

Investors were still focused on the situation at Evergrande, where persistent default fears eclipsed efforts by the debt-laden group’s chairman to lift confidence as Beijing showed no sign it would intervene to stem any domino effects across the global economy.

“There are still issues that the market is dealing with,” said David Joy, chief market strategist at Ameriprise Financial in Boston. “But stabilization is a good thing after the downdraft that we had yesterday.”

On Wall Street, the Dow Jones Industrial Average .DJI rose 128.56 points, or 0.38%, to 34,099.03, the S&P 500 .SPX gained 13.23 points, or 0.30%, to 4,370.96 and the Nasdaq Composite .IXIC added 66.90 points, or 0.45%, to 14,780.80.

The Cboe Volatility Index .VIX retreated after hitting a four-month high a day earlier, last down 2.25 points to 23.46.

The pan-European STOXX 600 index .STOXX rose 1%, with Germany’s DAX .GDAXI rising 1.4%.

Canada’s main stock index .GSPTSE gained as Prime Minister Justin Trudeau’s limited victory in the federal election raised hopes that his government would keep the stimulus taps open.

Central bank meetings in the United States and elsewhere in the world were soon to take center stage for markets, with a Federal Reserve meeting due to conclude on Wednesday as investors look for when it will ease its bond-buying program.

In currency trading, the dollar index =USD fell 0.053%, with the euro EUR= up 0.02% to $1.1727. The Japanese yen strengthened 0.12% versus the greenback at 109.25 per dollar

“There is just a lot of wait-and-see as far as what is going to happen with the Fed, what is going to happen with Evergrande, and right now if you are trying to make a dollar bet you really just want to wait until you get a better sense of what is going to happen with Evergrande and what the Chinese government is going to do,” said Edward Moya, senior market analyst at OANDA in New York.

Benchmark 10-year notes US10YT=RR last fell 3/32 in price to yield 1.318%, from 1.309% late on Monday.

Oil prices edged higher in a see-saw session, as concerns about the global consumption outlook counterbalanced the struggle by big OPEC producers to pump enough supply to meet growing demand.

U.S. crude CLc1 rose 0.23% to $70.45 per barrel and Brent LCOc1 was at $74.07, up 0.2% on the day.

Spot gold XAU= added 0.7% to $1,776.27 an ounce.

(Additional reporting by Chuck Mikolajczak in New York, Tom Westbrook in Singapore, Hideyuki Sano in Tokyo, Anushka Trivedi in Bengaluru, Paulina Duran in Sydney and Danilo Masoni in Milan; Editing by Dan Grebler and Steve Orlofsky)

By David Milliken

LONDON (Reuters) – The British public’s expectations for inflation over the coming year have shot up by a record amount this month, raising the risk that the Bank of England will send a hawkish message soon, Citi said on Tuesday.

The Citi/YouGov monthly inflation expectations survey showed that public inflation expectations for the next 12 months jumped to 4.1% in September from 3.1% in August, the biggest monthly increase since the survey began more than 15 years ago.

Longer-term inflation expectations for the next five to 10 years rose to 3.8% in September from 3.5% in August.

“Today’s data, especially the movement in long-term expectations, suggest growing risks inflation expectations could become de-anchored to the upside. The sharp increase risks a hawkish response from the (Monetary Policy Committee) this week,” Citi said.

The BoE’s Monetary Policy Committee is meeting ahead of its September policy statement on Thursday. Citi’s survey contrasts with a much smaller increase in inflation expectations in a poll for August which the BoE published last week.

Financial markets expect the BoE to start to raise interest rates early next year, possibly as soon as February, though most economists think a move will only come towards the end of 2022.

The BoE looks closely at inflation expectations for signs the public expect above-average inflation over the medium term, which could lead to greater pressure for pay rises and prompt businesses to raise prices in expectation of higher costs.

Inflation expectations tend to be pushed up by short-term rises in the current rate of inflation. Last month, consumer price inflation jumped to 3.2% from July’s 2.0%, and in recent days energy companies have warned of big rises in electricity and heating bills.

The Citi/YouGov survey was based on a poll of 2,005 adults on Sept. 20 and Sept. 21.

(Reporting by David Milliken; editing by Costas Pitas and Aurora Ellis)

By Chuck Mikolajczak

NEW YORK (Reuters) – The U.S. dollar eased slightly from a near one-month high as global markets firmed somewhat on Tuesday a day after a risk-off mood dominated by solvency uncertainty of China’s Evergrande, while investors awaited the results of the Federal Reserve’s two-day policy meeting.

After reaching its highest level since Aug. 23 on Monday, the dollar straddled around the unchanged mark on the day, briefly moving higher as early gains on Wall Street’s benchmark equity indexes faded.

Investors are looking toward the Fed’s policy announcement on Wednesday for any signs of when the central bank will begin to scale back its massive bond-buying program, in a week filled with policy statements expected from a host of central banks around the globe.

“The market was trying to get a sense of was this turnaround Tuesday going to last, and if we had that continued improvement of risk appetite the dollar was going to pull back even more here,” said Edward Moya, senior market analyst at OANDA in New York.

“But there is just a lot of wait-and-see as far as what is going to happen with the Fed, what is going to happen with Evergrande. And right now if you are trying to make a dollar bet you really just want to wait until you get a better sense of what is going to happen with Evergrande and what the Chinese government is going to do.”

The dollar index fell 0.019% after reaching a high of 93.455 on Monday, while the euro was down 0.01% to $1.1724.

The greenback strengthened on Monday, along with other safe-havens such as the yen and Swiss franc, as concerns about the fallout from the possible default of China Evergrande unnerved financial markets.

Those concerns overshadowed efforts by Evergrande’s chairman to lift confidence in the embattled firm on Tuesday, as Beijing showed no signs it would intervene to stem any domino effects across the global economy.

The offshore Chinese yuan weakened versus the greenback to 6.4817 per dollar.

Before Evergrande’s debt crisis rattled markets, the dollar had been supported ahead of the Fed meeting this week, with economists surveyed in a Reuters poll expecting policymakers to signal expectations of a tapering plan to be pushed back to November.

The Japanese yen strengthened 0.13% versus the greenback, to 109.23 per dollar, while Sterling was last trading at $1.3658, up 0.01% on the day.

The Canadian dollar was poised to halt three straight days of declines against the greenback, after Canadian Prime Minister Justin Trudeau was re-elected to a third term but failed to win a majority in the parliamentary elections.

The Canadian dollar rose 0.06% versus the greenback at 1.28 per dollar.

In cryptocurrencies, bitcoin last fell 2.01% to $42,172.11.

(Reporting by Chuck Mikolajczak; Editing by Andrea Ricci and Leslie Adler)

By David Milliken and Yoruk Bahceli

LONDON (Reuters) – Britain sold 10 billion pounds of its first ‘green’ government bond on Tuesday after attracting over 100 billion pounds ($137 billion) of demand from investors, a record high which shows the clamour for assets which can be marketed as good for the planet.

Proceeds from the sale will be ring-fenced for projects such as clean energy and transport, and will also help Britain’s government burnish its green credentials before it hosts the United Nations COP26 climate conference in Glasgow in November.

Britain has lagged behind other European countries such as Germany, Italy and Spain in issuing this type of debt, partly because of concern that investors would want higher interest rates to compensate for a relative lack of liquidity.

But Tuesday’s launch of the new gilt maturing in July 2033 represents the largest single sale by a sovereign issuer, topping the previous 8.5 billion euro record set by Italy in March.

“It’s confirmation that the demand is there even in sterling, not just in euros,” said Antoine Bouvet, senior rates strategist at ING.

Based on the secondary market, he estimated the deal was pricing in a roughly 3 basis point “greenium” — the slightly lower yield green bonds offer versus conventional debt, reflecting a dedicated investor base chasing a limited supply of these assets.

Britain has said it aims to raise around 15 billion pounds in total from two green gilt launches this year – Tuesday’s sale and a new 20- to 30-year maturity green gilt next month.

This issuance will be only a small fraction of the total 253 billion pounds of gilt sales planned for this financial year.

The new 2033 gilt will pay a coupon of 0.875% and has been priced to give a yield of 0.8721%, 7.5 basis points more than the conventional June 2032 gilt, a yield premium which reflects the longer maturity rather than a lack of liquidity for the new issue.

Matthew Amis, an investment director at Aberdeen Standard Investments, said the gilt had been priced more cheaply than some other green issues and offered fair value compared with conventional gilts.

“The lack of a significant ‘greenium’ has certainly added to the huge demand,” he said. “We expect this gilt to perform well in the coming days and months.”

The Bank of England has said it will buy green bonds as part of its asset purchase programme and treat them like similar conventional ones.

($1 = 0.7305 pounds)

(Editing by Andy Bruce, Giles Elgood and Emelia Sithole-Matarise)

(Adds details, updates prices; changes byline, dateline; previous LONDON)

By Chuck Mikolajczak

NEW YORK (Reuters) – The offshore Chinese yuan weakened versus the greenback to its lowest level in nearly a month on Monday, as worries about the fallout from property developer Evergrande’s solvency issues spooked financial markets and lifted safe-haven currencies.

Market sentiment has been rattled by the potential contagion from Evergrande, which is trying to raise funds to pay a host of lenders, suppliers and investors. A deadline for an $83.5 million interest payment on one of its bonds is due on Thursday, and the company has $305 billion in liabilities.

On Thursday, the yuan hit its highest level in three months at 6.4226 per dollar before starting to reverse as Evergrande’s woes worsened. The move sharpened on Monday after warnings from Chinese regulators that the company’s insolvency could fuel broader risks in the country’s financial system if not stabilized.

“We are seeing a classic flight to safety in the dollar until we get some sense of clarity on whether or not it is going to be an orderly or disorderly resolution to Evergrande,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

“We were likely to see a continuation of the decline we’ve seen in risk assets going into this week and you throw in Evergrande and it has really unsettled the markets.”

The dollar and other safe-haven currencies strengthened with the risk-off sentiment, which saw Wall Street’s S&P 500 index on pace for its biggest one-day percentage drop in more than four months.

The dollar index rose 0.03%, with the euro up 0.02% to $1.1727.

The dollar has also been gaining ground on expectations the Federal Reserve will begin reducing its monthly bond purchases this year, with the central bank’s policy announcement due on Wednesday.

Aside from the Fed, multiple central banks around the globe will hold policy meetings this week, including those of Sweden, England, and Norway.

The Japanese yen strengthened 0.46% versus the greenback at 109.47 per dollar, while sterling was last trading at $1.3659, down 0.60% on the day.

The Canadian dollar, also a commodity currency that correlates with risk sentiment, weakened to as low as C$1.2985 per dollar, its lowest level in four weeks.

Polling for Monday’s national election in Canada points to an advantage for incumbent Prime Minister Justin Trudeau but a likelihood that he remains leader of a minority government.

In cryptocurrencies, bitcoin last fell 7.52% to $43,693.24.

========================================================

Currency bid prices at 11:52AM (1552 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

93.2390 93.2230 +0.03% 3.621% +93.4550 +93.1850

Euro/Dollar

$1.1729 $1.1726 +0.03% -4.01% +$1.1737 +$1.1700

Dollar/Yen

109.4650 109.9800 -0.46% +5.95% +110.0350 +109.4400

Euro/Yen

128.38 128.94 -0.43% +1.15% +129.0300 +128.1500

Dollar/Swiss

0.9282 0.9325 -0.45% +4.93% +0.9333 +0.9273

Sterling/Dollar

$1.3659 $1.3727 -0.49% -0.02% +$1.3740 +$1.3648

Dollar/Canadian

1.2820 1.2768 +0.41% +0.68% +1.2895 +1.2762

Aussie/Dollar

$0.7248 $0.7263 -0.21% -5.78% +$0.7268 +$0.7221

Euro/Swiss

1.0887 1.0927 -0.37% +0.74% +1.0935 +1.0876

Euro/Sterling

0.8585 0.8535 +0.59% -3.94% +0.8587 +0.8533

NZ

Dollar/Dollar $0.7023 $0.7035 -0.13% -2.16% +$0.7042 +$0.7006

Dollar/Norway

8.7220 8.7120 +0.14% +1.60% +8.7805 +8.7105

Euro/Norway

10.2307 10.2008 +0.29% -2.26% +10.2815 +10.1995

Dollar/Sweden

8.6934 8.6787 +0.15% +6.05% +8.7459 +8.6644

Euro/Sweden

10.1952 10.1804 +0.15% +1.18% +10.2336 +10.1755

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum)

With so many of us choosing to retire to sunnier climes, the inevitable result is many of us then ending up inheriting a property abroad. Christopher Nye, editor at Property Guides runs through your options.

Buying a property abroad is something that most are only in a position to do when they’ve paid off their own mortgage, have received a pension lump sum, or perhaps are downsizing. (Indeed, what better way to soften the blow of selling the family home when the kids leave home, than buying somewhere abroad where they can all visit?)

Either way, it tends to be done later in life, with the inevitable consequences a decade or four down the line.

So what should you do when the tragic news of a loved one’s passing is followed up by the pleasure of being left a property?

The conversation should, of course, have started long before that sad day. The onus is on the one more likely to die first to start the conversation about the property. Although your kids may not want to hear it, broach the subject in a matter-of-fact way with something like “Will you want to keep the Spanish home when I’m not around?” and the conversation needn’t be too painful. 

Above all, it’s essential to get good legal and financial advice well in advance. Procedures across other nation’s inheritance and tax regimes may be very different, but everything will be easier and less painful if planned for while the owner of the property is alive, not least to disclose their wishes. For example, one can easily see the potential risks of family conflict if siblings who may not get along at the best of times suddenly own a property together.

[sub-head] Death and taxes

Consider such matters as where loved ones are domiciled, and which jurisdiction will have precedence. Or even better, get a lawyer to explain it all and give advice. For example, many popular overseas locations have a system of “forced heirship”, whereby your children, even if grown up, have a financial claim even if not in the will.

A person is considered to be domiciled in the UK if they have lived in the UK for 15 of the past 20 years or has had a permanent home in the UK at any time in the past three years. If the person who dies is domiciled abroad, while inheritance tax is not paid on UK assets it may well be on overseas assets.

If you have paid inheritance tax abroad you generally will not have to pay it when you receive the money in the UK. However if you receive an income from, for example, maintaining the property. abroad for rental income, you will be liable to income tax. 

Those who believed that the EU controlled everything may have a shock if they inherit abroad. Procedures for buying and selling property, inheritance and probate procedures and much else do not just vary from country to country but even within countries, as in between England and Scotland. In France, for example, inheritance tax is paid (or not paid) by the individual who receives the inheritance, not by the estate. 

For those worried about the probate procedures, having had to follow a complicated system in the UK, the good news is that much of this will be organised by a notary. 

[sub-head] Keeping your property

Whether matters were easy to settle when inheriting the property or not, you will understand why it is so important to ensure ownership is well organised, clearly agreed and legal. 

Perhaps the first decision, if you opt to keep the property, is whether to keep it entirely for yourself or rent it out. Many choose a combination of the two. Don’t feel you have to keep a rental property like a hotel, removing all the personal knick-knacks or possessions that you’ve come to love there. It is perfectly acceptable to leave your own things in the property, whether locked up in a separate cupboard or even a separate room, or to be used by guests. You might occasionally lose an item but the vast majority of renters will treat it with great respect.

You can choose how “hands on” you wish your involvement in rentals to be. There is always a commercial operator willing to organise your rental, including marketing the property, meeting and greeting and sorting out any problems that arise. Equally, it is rarely hard to find a local, especially in the expat community, to be keyholder and cleaner for a much smaller fee.

Don’t forget that tax will be payable on the income and you may well need to apply for a licence. Local authorities have been clamping down on Airbnb and other informal operators. 

[sub-head] Selling

If you decide to sell, bear in mind that estate agent fees may be considerably higher than in the UK, such as up to 5% in France.

Most of the processes are the same as in the UK, but do ensure you definitely wish to sell. If you pull out of the sale late on you not only have to repay the buyer’s deposit, but possibly even double it. 

When returning funds to the UK, it’s important to be proactive and in control, rather than simply accepting what the agent or notary “does usually”. Take exchange rates, for example. If you transferred the proceeds of an average priced expat property abroad – around €175,000 – to the UK, over the past year you would have received anywhere between £148,000 and £162,000. That difference is entirely down to exchange rate changes.  

So what should you do? Firstly, register with a currency company that specialises in property transfers as you will generally get a much better deal than from your high street or overseas bank. When your sale is confirmed, discuss with your currency company the best way to bring the funds back. For example, if the exchange rate is abnormally bad for you at that moment, such as after a severe economic shock (like Brexit or the pandemic) you have the option of waiting for it to improve. On the other hand, if your exchange rate is looking exceptionally good but that may not last, you can lock it in with a forward contract rather than rushing the sale. We recommend Smart Currency Exchange for these kinds of large scale property transaction. Instruct the notary where you wish your funds to be transferred or you could easily be stung for a poor exchange rate and high costs.

Whether you opt to sell or keep your inheritance abroad, you will find much more help, information and an introduction to useful contacts at Property Guides. 

By Raviteja Dodda, co-founder and CEO,  MoEngage

Raviteja Dodda, co-founder and CEO,  MoEngage

Financial service apps witnessed a significant surge in adoption and usage during the pandemic. The research report titled “The State of Mobile Finance 2021” backs this claim. The report suggests that the industry saw a 15.2% year-on-year growth in downloads and a 63% increase in the time spent on such apps. The report also states, “Users across all generations increased the time spent on finance and trading apps, with Gen Z spending nearly 127% more time in-app to track investments.”

Understand their motivations: What drives Millennials and Gen Z to use financial services apps?

Millennials and Gen Z  form a massive part of the demographic for any industry. Retail, food delivery apps, and OTT streaming platforms have extensively engaged with them and reaped significant benefits due to their acceptance of digital channels. Financial Services players, however, haven’t optimally engaged with them, to their own detriment. 

In an industry now functioning in a digital-as-default environment, tech native millennials and Gen Z are crucial to unlocking exponential growth in the finance sector. With job security taking a hit during the pandemic, most Millennial and Gen Z populations turned to investing and saving more. The Gen Z population grew up during a recession, making them more financially aware. As such, they’re a very marketable sweet spot for financial services companies. But engaging with them requires a more strategic, data-driven approach than prior generations.

According to Goldman Sachs, more than 90M millennials will soon be in their “prime spending years,” making them an influential and fertile segment for financial services apps.

During the pandemic, personal finance apps were among the most used apps, after e-commerce, entertainment, and music apps. This indicates that financial services companies have customers from these segments and have achieved mass adoption; however, sustained customer retention efforts often pose a challenge. 

Creating meaningful experiences

We’ve established that both Gen Z and Millennials are interested in the innovation and convenience that the financial service apps now provide. How, then, do marketers ensure that these customers engage consistently and eventually become brand advocates?

Here are a few strategies that will facilitate the acquisition and retention of your millennial and Gen Z customers.

• The personalisation payoff: Personalisation needs to be a holistic and channel-agnostic approach. Marketers must strive to collect data from all sources, offline and online, to build a unified customer profile. This profile needs to take into account their preferences, interaction history with you, and behaviour. For example, marketing personal finance apps to baby boomers who, before the pandemic, wouldn’t have preferred using a digital channel would have a different approach to marketing for Gen Z. Baby boomers had to learn to use these apps on their own. In this case, sharing educational content, how-to videos, etc., would be an effective strategy.

The same approach wouldn’t fit Gen Z and millennial customers. They have an interest and an appetite for learning about new digital offerings and are open to using them. Marketers should share content about new offerings, features, and personalised assets based on their interests.

To understand the personalization approach at Kredivo, we spoke to Alethia Tan, Head of Growth at Kredivo. Explaining her practice, she said, “Being a buy/now pay later platform, the kind of media, content, and channels that Kredivo uses to engage different age groups varies. There are differences even within the same age demographic. Data analytics-backed insights play a crucial role in determining how to engage customers. For example, while targeting baby boomers, it is imperative to understand their financial preference and incentivize purchase intent by ensuring the right information is being conveyed.” 

• Value-based purchases: Gen Z and millennials are very mindful of what the brand stands for before buying from them or engaging with them. A recent customer culture report stated 83% of millennials want brands to align with their values. 65% of them boycotted brands they previously purchased from because of their negative or no stance on the values they believed in.

According to the “The State of Mobile Finance 2021” report, community and challenger banks are adding real value by offering differentiated services like paying account holders a day or two earlier, which is of immense importance to those living paycheck-to-paycheck. Community banks such as CapWay, First Boulevard, OneUnited Bank, and Urban One focus on the Black and African American community. The surge in popularity of digital banking platforms like Daylight focussed on serving the LGBTQ community, and Oxygen, focussed on helping freelancers, further underlines the demand for these online-only banks, catering to a particular demographic or population with the potential to become a full-service bank.

• Prelaunch buzz: Gen Z and millennials may have been quick to move away from traditional finance channels and accept digital ones. However, this doesn’t change the underlying expectations from platforms that handle their money: Trust and credibility.

In the industry that deals primarily with sensitive personal financial information, building trust and credibility is vital. Building trust cannot be a rushed effort; it must be thorough, well planned, and consistent. 

The first and arguably the most crucial step that will build a base for you is your launch. Strategies to start building a trustworthy brand image start there. However, this target segment will drop you like a bad habit if they get bored, and finance is a dry subject. You have to offer them something more memorable than a trust-inspiring, pastel-coloured website to connect with them. A great example of a financial services player creating content to connect with millennials and Gen Z is Wealthsimple. The online investment platform produced content to refute the general notion that investments are boring. They came up with brilliant content pieces that combined knowledge sharing with wit. Their campaigns like “A Totally-Not-Boring Guide to Life Insurance” and “Ask Lizzie: Can I Personal Finance My Way Out of a Career of Discrimination?” give valuable information with a good dash of humour.

• Referral and loyalty programs. Referral Campaigns are a great way of getting loyal customers to pull more into your business. It helps your brand acquire new customers and strengthens your relationship with those who bring you the reference. Millennials and Gen Z buy more with brands that have good peer reviews. A friend or family member asking them to sign up is likely to work better than you emailing them to do so.

Boasting more than 13 million active users, with 3 million onboarded in just the first four months of 2020, the scale of investment and trading app Robinhood grew is commendable. So, how did they do it?

The free trading app played to the customer’s hard-wired need to get ahead in a queue through their well-thought-out referral program. The concept was simple; if someone had signed up for the app, they’d be put on a waitlist and shown what number they hold in the list. You could get ahead in the list if you refer or invite consumers to join. The more consumers you invite, the further you get. Brilliant, isn’t it!

• Use social media and influencer marketing: Since this segment is highly active on social media, most of the content they consume is “Influencer” generated. Using influencer marketing and social media are great ways to engage with your customer where they are present. The “Smoooth Payment” campaign (extra emphasis on the o) was a great example of quirky influencer marketing. To rebrand the payment and shopping service pulled in the rapper Snoop Dogg as a brand ambassador endorsing “Smooth Payments” while being crowned “Smooth Dogg.” The campaign helped Klarna become the top trending shopping app on Google Play and added 16 million “cool kids.”

Revolut, a banking service and a prepaid credit card provider targeting millennials, used Instagram since most customers on the social media platform are millennials. They used Insta stories by tagging Revolut card customers. They activate your FOMO by showing a large number of consumers using the card and you missing out.

• Gamification: Building on the “make fintech apps fun theme,” gamification is a great way to engage and retain millennials and Gen Z customers. Cryptocurrency brands like BlockFi have aced their gamification strategy. BlockFi offers customers bitcoin packs for every dollar they spend on credit cards, keeping them engaged and getting them to return to the app. Companies like Fold and PrizePool, which gamify spending, are doing great, with PrizePool observing a 75% growth in monthly active usage in Q4 of 2020 going into 2021. Fold observed a 310% growth in daily active users, 53% growth in monthly active users, and a 220% increase in downloads. The aim here is to retain customers through gamification and incentives, especially since saving can be a monotonous pursuit.

Brands have to employ a customer-first approach to engagement to capitalize on this pandemic accelerated adoption of financial services apps and draw endless benefits from it. Brands that use data to understand customer behaviour trends and preferences will sustain this success and retain more customers. 

About the author

Raviteja “Ravi” Dodda is the co-founder and CEO of MoEngage, an insights-driven customer engagement platform. Ravi has more than ten years of experience in leading global teams and managing successful technology products. Prior to MoEngage, he co-founded and built DelightCircle, a local offers mobile app. Ravi has been recognized in the BW Disrupt 40 Under 40 and Forbes 30 under 30 lists.

By Jonnelle Marte

(Reuters) – U.S. consumers’ expectations for how much inflation will change over the next year and the coming three years rose last month to the highest levels since 2013, according to a survey released on Monday by the New York Federal Reserve.

Year-ahead inflation expectations increased for the 10th straight month to a median of 5.2% in August, according to the monthly survey of consumer expectations. Inflation expectations over the next three years increased to a median of 4.0%. Both metrics are at the highest they’ve ever been for the survey, which was launched in 2013.

U.S. central bank officials are keeping a close watch on inflation expectations as they try to evaluate whether the pricing pressures triggered by the coronavirus pandemic will pass or have more lasting effects on the economy.

Some policymakers say ending the massive asset purchases the Fed launched last year to support markets and the economy sooner rather than later will give officials more options for responding down the road if inflation lasts longer than anticipated.

Several policymakers said they expect the Fed to begin winding those asset purchases down later this year despite a weakening in jobs growth in August.

The New York Fed survey showed that consumers are raising their expectations for how much more they may have to spend on housing, food and other essentials over the next year.

Expectations for how much home prices will increase over the next year dropped again in August for the third straight month, but were still elevated at a median of 5.9%, the survey found.

Food prices are expected to grow by 7.9% over the next year, up from 7.1% in July. Rent is expected to increase by 10% over the next 12 months and the price of medical care is expected to rise by 9.7% over the next year – both up 0.2 percentage point from July.

The report is based on a rotating panel of 1,300 households.

(Reporting by Jonnelle Marte; Editing by Paul Simao)

Regulators and stock exchange CEOs in Europe and Asia have been watching the US SPAC market, but at home have seen little SPAC activity to date. That is about to change. Cliff Pearce, Global Head of Capital Markets at Intertrust Group, looks into the future of SPACs and how, despite  the current backlog, the end result could be beneficial for institutional and retail investors alike.

Against this backdrop, we see untapped opportunities in Europe and Asia and have identified a number of regulatory changes that could create a cascade effect in the sector.

For example, the SPACs mania has seen greater scrutiny in the US, mainly on the back of accounting disclosures by the Securities and Exchange Commission (SEC) as the US accounting and corporate legal community fears that warrants may need to be reclassified from equity to liability.

Typically, SPACs are pre-revenue, high-growth companies, so that would mean a movement in the fair value of warrants. If SPACs and their targets are required to file restatements to reflect changes in the terms of warrants to reduce liabilities, it could spook investors. Warrants are often the sweetener.

While this scrutiny has created a bottleneck in the US listing process, that may not be a bad thing. The delays may last for a couple of months given the latest accounting considerations; however, in the scheme of things, that will not materially impact the SPAC market and a market pause could improve structures to protect institutional and retail investors alike. Upcoming SPAC regimes in Asia are likely to address these concerns, because the SEC statement on accounting treatment for warrants was released while the SPAC consultation process was already underway in Singapore.

Just how much SPAC activity can we expect from Europe and Asia?

According to Swiss lender UBS, there could be between 30 and 60 SPAC listings in Europe this year, just one-tenth of the level of US SPAC activity last year.

European regulators are anticipating this and are looking to require SPAC teams or sponsors to honour exclusivity agreements banning them from talking to other potential targets to pursue a merger agreement.

One regulator already showing signs of caution over SPACs and listings is the AFM, the Dutch financial regulator. It will limit as it sees fit the number of new issuances due to record-breaking trading activity over the past year.

AFM chair Laura van Geest said in the regulator’s 2020 report that exchange activity is seemingly disconnected from the real economy. This could divert Amsterdam’s listing activity to Luxembourg and London.

The UK’s Financial Conduct Authority (FCA) has been quick to adapt and has set out a list of rules including lowering the minimum amount a SPAC must raise at initial listing from £200m to £100m. A new option was also introduced to extend the proposed two-year operating period limit (three years if shareholders approved an extension) by six months, without shareholder approval.

For the most part, the FCA has shown itself willing to give the emerging SPAC market a fighting chance of success by eliminating problem areas witnessed in other markets, such as celebrity-endorsed SPACs in the US.  London has a clear motive – to sustain its long-term viability – for making sure institutional investors are more likely to become involved in the SPAC market. It will be interesting to see which sectors are preferred and show the most promise.

Singapore and Hong Kong are among the bourses also expected to experience a surge in SPACs. We believe Singapore activity will pick up after London. This could be as early as this summer, given the number of tech unicorns in the region and the level of capital ready to be deployed by institutional and retail investors.

Hong Kong regulators, on the other hand, are still partial to traditional IPOs and already have flexible listing criteria enabling pre-revenue companies in certain sectors – such as life sciences and biotech – to list on the main market, they may see SPACs as an unnecessary risk.

With that in mind, they may opt to put investor protections at a level that is on par if not higher than those in place in, say, Singapore. That could especially be the case on the retail side, to curb concerns arising from unrestricted public access to high-risk pre-revenue investments. But at the same time, this could provide the exchange and SPAC targets with a much-needed boost – not just in initial listings, but also in terms of liquidity and diversity.