Key events
Thames Water has been teetering on the brink of collapse since being described as “uninvestible” in March when shareholders refused to pour in more cash.
The government has been on standby for nationalisation through a special administration regime.
The class A creditor group, which represents more than £12bn of debt, said:
This is a decisive vote of confidence in the first stage of our restructuring plan for Thames Water from a large group of its creditors, which include a significant number of long-term infrastructure investors. It shows that there is a genuine will to develop a market-based solution which saves UK taxpayers from shouldering the costs of special administration.
Our group is working intensively with the company and providing it with the resources and turnaround expertise it needs to ultimately attract strategic equity and rebuild so all parties can focus once again on delivering a better service for customers and the environment.
Introduction: Thames Water gets backing from three-quarter of creditors; markets eye US inflation
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Thames Water has obtained support from three-quarters of its creditors for an emergency funding deal, which would give it a £3bn lifeline.
Britain’s biggest water company said today that creditors holding more than 75% of its Class A debt – the least risky class of bonds in its debt pile – agreed to the deal.
The 75% threshold is the minimum needed for the plan to be approved by a UK court. Thames Water is aiming for a court date on 17 December.
The debt-laden utility hailed this as an “important milestone” and is hoping more bondholders will take part.
Under the plan, Thames Water would initially get £1.5bn of funding with an annual interest rate of 9.75%, which the company says will keep it going until next October.
Asian shares are down again, amid a strong dollar and concerns over the incoming Trump administration’s trade policies. Today, traders await key inflation data from the United States, which could be key to the Federal Reserve’s next interest rate decision.
Japan’s Nikkei is down by 1.6% while Hong Kong’s Hang Seng index has slipped by 0.1% and South Korea’s Kospi slid by 2.6%.
Over the past week, we’ve seen ‘Trump trades’ – traders betting on big government spending, lower taxes and higher tariffs once Donald Trump takes office. The dollar has jumped and Treasury yields rocketed since last week’s election.
Markets are now seeing a 62% chance of an interest rate cut at the Fed’s next meeting in December, down from 77% a week ago and 84% a month ago, according to CME Group.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explained:
US yields pushed higher and the dollar rally gained further momentum yesterday, as investors continued to surf on the idea that Donald Trump’s pro-growth policies and tariffs would boost inflation in the US and limit the Federal Reserve’s capacity to ease the monetary policy as much as previously anticipated. The US 2-year yield, for example, which best captures the rate expectations, is up by 85bp since the September dip, we could see a similar jump in the US 10-year yield.
The CPI [consumer price index] data has regained importance since Donald Trump was re-elected president of the US. Jobs data remains crucial for the Fed’s policy path, as the last thing the Fed wants is to panic and lose control of the situation, but the Fed’s victory over inflation looks more vulnerable today than it did a month ago. And that’s supportive of the US dollar.
Of course, October figures won’t tell much about the Trump effect on consumer prices. We must wait a few months before we start seeing the impact of Trump on numbers. But the higher the numbers, the lower the December cut expectations. And I sense that today’s numbers may not sooth the doves’ nerves: the US headline inflation is expected to have climbed from 2.4% to 2.6%, while core inflation is seen steady near 3.3% – still significantly above the Fed’s 2% policy target.
The Agenda
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Noon GMT: US MBA mortgage applications for last week
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1.30pm GMT: US inflation for October (forecast: 2.6%, previous: 2.4%)