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US STRIPPED OF “TRIPLE A” RATING ON ITS DEBT AS TRUMP’S “TRIPLE B” PLAN PASSES FIRST HURDLE
Data Sourced from FE Analytics, and Bloomberg Finance LP
US STRIPPED OF “TRIPLE A” RATING ON ITS DEBT AS TRUMP’S “TRIPLE B” PLAN PASSES FIRST HURDLE
This week the House of Representatives passed President Donald Trump’s “One Big Beautiful Bill Act” by a hairbreadth. The “Triple B” plan houses cuts to taxes and entitlements and is forecast to add an extra $3 trillion to the US budget deficit over 10 years, almost one UK economy. Any possible positive impacts to growth from the Triple B plan went unnoticed as Moody’s took away the US government debt’s triple A rating, seeing as interest payments, which already ballooned past defence spending last year, will climb further. Investors sold US government debt, and foreign investor demand at US Treasury auctions is weakening. This may be ominous for a government that must sell $9 trillion of debt next year.
Britain is no stranger to a spooked bond market but does not share Americas privileges. UK government borrowing unexpectedly climbed to £20.2bn in April, up almost 6% from last year. This adds to speculation that the treasury may have to hike taxes and cut spending to keep within its means, with chatter about reforming benefits seeping out of Whitehall. Meanwhile, rising consumer confidence has boosted April’s retail sales.
US: BOND MARKETS UNSETTLED BY PLANS FOR TAX CUTS
US bond and stock markets have been sliding as investors consider President Donald Trump’s plans to cut taxes. US government bonds started falling after rating’s agency Moody’s downgraded the US government’s credit rating due to concerns about the sustainability of the government deficit. Trump’s tax bill was voted through the House of Representatives by a single vote this week and the potential to add another $3 trillion to the US deficit over the next 10 years unsettled bond investors. Bond yields rise as bond values fall, and the passage of the tax bill has seen the yield on long-dated 30-year treasury rise to its highest since 2007 as it hit 5.11%.
A decline in US stocks was extended into Asia and Europe as markets weighed the impact of the proposed income and corporation tax cuts against the expected jump in the government deficit. Meanwhile, the latest survey of US business activity shows the American economy expanding, as manufacturing and services output increased during May.
PROPERTY: LANDLORDS ADAPT TO LONDON OFFICE MARKET RECOVERY
London’s commercial office market has been staging a comeback, driven by rising rents and evolving preferences. Landsec reported steady rental growth across its £6.7bn central London portfolio, thanks to increased office occupancy and limited new supply. Facing liquidity challenges for properties over £100mn due to hybrid working and higher interest rates, Landsec is charting a £2bn pivot into residential real estate, with asset sales set to start in 2026. Meanwhile, the landlord continues to see opportunities in prime shopping centres, buoyed by strong demand and rising valuations.
British Land highlighted that high rents have shifted demand from top-tier office spaces to well-located second-hand properties. Office vacancy rates in the City and West End are declining, with emerging locations like Battersea and Canada Water gaining traction among cost-conscious businesses. British Land expects rental income to increase by 3% to 5% this year as demand exceeds supply. But its shares slipped as it forecast flat profits next year.
AIRLINES: RESILIENT DEMAND MEANS BUMPER PROFITS
Easyjet says it is on track to exceed £1bn in pre-tax profits for the first time this year as demand for air travel remains strong. It has already sold 80% of seats for the summer period, slightly ahead of last year, and its packaged holiday business posted stong growth. Delayed new aircraft deliveries have even held back sales growth, it said. Ryanair also expects strong summer sales and rising airfares after its fares fell around 7% on average last year. It expects to increase passenger numbers by 3% this year, but said this is behind its initial target for growth due to Boeing delivery delays.
This follows a positive update from International Consolidated Airlines. The owner of BA reported stronger winter sales and robust long-haul travel bookings, particularly for its transatlantic routes, as it announced orders for 53 new planes from Boeing and Airbus. Resilient travel demand and robust growth has helped airline stocks outperform the wider market over the last 12-months with lower oil prices dampening operating costs.
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