The UK is accelerating efforts to secure free trade agreements (FTAs) with India and the Gulf Cooperation Council (GCC) as part of its post-Brexit strategy to expand global trade ties.

UK Business and Trade Minister Jonathan Reynolds highlighted the importance of these negotiations, which are crucial for bolstering Britain’s economic and diplomatic relationships in key markets outside Europe.

Talks with the six-member GCC, including Saudi Arabia, Qatar, and the UAE, could resume as early as next week, while negotiations with India remain a top priority.

Gulf trade talks set to restart

Discussions with the Gulf Cooperation Council are expected to resume next week, with the UK seeking a comprehensive FTA that covers goods and services.

Trade between the UK and the GCC reached £43 billion in 2022, underscoring the economic significance of the region.

A successful agreement would provide preferential access for British businesses in sectors such as energy, investment, and finance.

At the International Investment Summit in London, Reynolds emphasized the urgency of these talks: “There are clear economic and commercial reasons why the Gulf and India are our top priorities.”

His remarks reaffirm the UK government’s commitment to expanding trade beyond Europe following Brexit.

UK-India trade deal progress

India, with its rapidly growing economy and increasing global influence, remains a key partner for the UK.

The two nations are entering their 15th round of negotiations aimed at securing a mutually beneficial trade deal.

Trade between the UK and India was valued at £34 billion in 2022, and both governments are eager to boost this figure further.

However, securing a trade agreement with India has proven challenging, as both sides seek to protect sensitive sectors.

India’s Commerce Minister, Piyush Goyal, recently stressed the importance of a “systematic” approach to the talks, ensuring that the deal is fair and beneficial for both countries.

India’s booming technology and pharmaceutical industries offer significant opportunities for British businesses, but concerns around market access and regulatory hurdles remain key sticking points.

Post-Brexit trade strategy

Since leaving the European Union, the UK has focused on forging trade agreements worldwide.

While deals with smaller markets like Australia, New Zealand, and Singapore have been successfully concluded, negotiations with larger economies such as India and the GCC have been more complex.

Former Prime Minister Boris Johnson had promised a trade agreement with India by Diwali 2022, but the timeline has since slipped.

Similarly, talks with the GCC have moved slowly due to differing priorities and challenges in aligning trade standards.

Reynolds emphasized the importance of these negotiations not only for trade but also for enhancing the UK’s diplomatic influence.

“While trade agreements are not primarily about foreign policy, they offer an opportunity for Britain to foster positive relationships with countries, even those with different political systems,” he explained.

Challenges and geopolitical considerations

Despite the UK government’s push for swift progress, Reynolds acknowledged that finalizing these deals will take time.

“When people say a deal is half done, obviously the easy bits are done first,” he said, warning that the remaining issues are more complex and could delay progress.

Negotiating with diverse economies like India and the Gulf states adds layers of complexity, given their distinct regulatory frameworks and political landscapes.

Geopolitical factors could also influence the talks. The GCC nations are key energy suppliers, and any disruptions in the region could affect the UK’s energy security.

Additionally, India’s growing role in global supply chains, particularly in technology and pharmaceuticals, makes it a critical partner, but also increases the pressure to ensure the agreement is balanced and future-proof.

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According to Morningstar analyst Brian Colello, investors should switch their focus to the conventional semiconductor makers as the AI chips stocks now look significantly overvalued.

Two names in particular, Infineon Technologies AG (ETR: IFX) and STMicroelectronics NV (EPA: STMPA) could return as much as 70% over the next twelve months, he told clients in a note on Monday.

Let’s dive deeper and examine what each of these has in store for investors.

The bull case for Infineon stock

Infineon Technologies is the largest semiconductor manufacturer based out of Germany.

Brian Colello recommends loading up on its shares at current levels as they could benefit from a continued global shift to electric vehicles.

“Infineon should be well-positioned to aid in automotive powertrain development over the next decade, including the adoption of silicon carbide-based semis,” he said in a research note today.

Morningstar sees an upside in Infineon stock that is also listed in the United States to €50 ($55), which indicates a 70% potential upside from here even though the Neubiberg-headquartered firm reported a rather huge 52% year-on-year decline in its third-quarter profit to €403 million in August.

The semiconductor maker also took a 9.0% hit to its revenue in its latest reported quarter.

However, the investment firm is perhaps focusing more on the reiterated full-year guidance and a 1.13% dividend yield, which makes up another good reason to have it in your portfolio.

Infineon also recently announced plans to lower its global headcount by about 1,400 to cut costs.

The bull case for STMicroelectronics stock

Morningstar recommends investing in STMicroelectronics stock as well for similar reasons.

The multinational based out of Geneva, Switzerland has teamed up with several key players in the auto industry, including the US-based electric vehicles giant Tesla Inc.  

Brian Colello is convinced that the fears of competition from Chinese manufacturers and oversupply of silicon carbide semiconductors are overblown.

A 40% year-to-date decline in the company’s NYSE listed shares, therefore, is not justified, as per his research note.   

“We like STMicroelectronics’ exposure to the secular tailwinds around rising chip content per vehicle,” the analyst added. He sees upside in STM to $52 which actually translates to a whopping 90% upside from here.  

And it’s not like STMicroelectronics fails to offer any exposure to the artificial intelligence frenzy. Earlier this month, it partnered with Qualcomm Technologies on the next-gen IoT solutions developed by edge AI.

STMicroelectronics stock does not, however, pay a dividend in writing.

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Netflix Inc. (NASDAQ: NFLX) is confronting significant challenges ahead of its third-quarter earnings report, scheduled for October 17, according to Matt Belloni, a founding partner at the digital media company Puck.

The streaming giant’s strategy of bypassing theatrical releases is becoming a substantial obstacle, as many top filmmakers still prefer their movies to be shown in theaters.

Belloni highlighted the adaptation of Wuthering Heights, starring Margot Robbie, as a case in point.

Despite Netflix’s willingness to pay up to $150 million for the film adaptation of Emily Brontë’s 1847 novel, filmmakers have yet to decide whether to prioritize online streaming over traditional theater releases.

NFL could boost subscriber growth for Netflix

In a potential boost for Netflix, the company plans to stream NFL games on its platform this Christmas.

According to Belloni, this move into live events could help the entertainment giant reduce subscriber churn and attract new viewers.

“There’s a cadre of people that’ll follow the NFL wherever it goes, and they may not currently be subscribed to Netflix,” he explained during a CNBC interview.

Belloni anticipates that investors will closely monitor subscriber growth and engagement metrics in the upcoming earnings report, asserting that the NFL’s presence could positively impact both areas, as discussed on Squawk Box.

Analysts expect Netflix to report $9.77 billion in revenue for the third quarter, marking a 14.3% increase, along with earnings per share of $5.07, representing a 35.9% rise.

The streaming service has exceeded earnings estimates in three of the last four quarters.

Analyst predicts Netflix stock could reach $795

On Monday, Macquarie analyst Tim Nollen maintained an “outperform” rating on Netflix, predicting that the stock could climb to $795 over the next twelve months.

His price target suggests approximately a 12% upside from its current levels. Nollen recommends investing in NFLX due to its strong pricing power and ongoing monetization efforts in advertising.

He noted, “Ad tech integrations and the construction of an in-house data stack and audience graph should yield substantial advertising growth over the next two years, if not sooner,” in a research note to clients.

The last price increase for Netflix occurred in January 2022, leading analysts to speculate that the company may soon announce another hike, which could act as a significant catalyst for its stock price.

Nollen also expects the commitment to live events to enhance Netflix’s outlook soon.

However, it is important to note that Netflix shares may not appeal to income investors, as the company currently does not pay dividends.

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The US dollar on Tuesday reached a peak not seen in over two months against several major currencies, driven by increasing speculation that the Federal Reserve will implement moderate rate cuts soon.

Concurrently, the yen inched closer to the critical threshold of 150 per dollar.

In early Asian trading, the euro remained stable but lingered near its lowest point since August 8, which it hit on Monday.

This comes just ahead of the European Central Bank’s policy meeting scheduled for Thursday, where expectations lean toward another interest rate reduction.

Recent US economic indicators suggest resilience, with a modest slowdown observed.

Additionally, inflation for September exceeded predictions slightly, prompting traders to reduce their forecasts for significant rate cuts by the Fed.

The Federal Reserve initiated its easing cycle with an aggressive 50 basis points reduction during its September meeting.

Currently, market expectations suggest an 89% likelihood of a 25 basis points cut in November, with 45 basis points of total easing anticipated for the remainder of the year.

The dollar index, which gauges the currency’s performance against six others, was last recorded at 103.18, just below the 103.36 peak reached on Monday—its highest since August 8.

The index has gained 2.5% and appears poised to end a three-month decline.

A boost for the dollar came after remarks from Fed Governor Christopher Waller on Monday, who urged a cautious approach to future interest rate cuts, referencing the latest economic data.

Waller stated, “Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year.”

Waller also noted that recent hurricanes and a strike at Boeing could complicate job market data, potentially lowering October’s monthly job gains by more than 100,000.

The next non-farm payrolls (NFP) report is scheduled for early November.

Chris Weston, head of research at Pepperstone, remarked:

Most knew that recent disruptions would result in the NFP print being a messy affair, but Waller’s comment goes some way in quantifying the sort of disruption we can expect. Essentially, with the next NFP so distorted, the market won’t have the same level of control in pricing risk into the November FOMC meeting.

The dollar’s recent ascent has negatively impacted the yen, especially following a dovish pivot from Bank of Japan Governor Kazuo Ueda and unexpected resistance to further rate hikes from new Prime Minister Shigeru Ishiba.

These developments have raised questions about the timing of future policy tightening by Japan’s central bank.

In early trading, the yen was valued at 149.55 per dollar, having reached a 2.5-month high of 149.98 on Monday, a day when Japan was closed for a holiday.

The last instance of the yen hitting the 150 level was on August 1.

The Australian dollar remained steady at $0.67275, while the New Zealand dollar dipped 0.13% to $0.6089. The euro was last quoted at $1.090825.

Meanwhile, the offshore yuan in China showed little movement at 7.0935 per dollar, following a report by Caixin Global indicating that China might issue an additional 6 trillion yuan (approximately $850 billion) in Treasury bonds over the next three years to stimulate its sluggish economy.

Tony Sycamore, a market analyst at IG, noted that market sentiment is shifting toward the expectation of fresh stimulus measures, potentially to be discussed at the China National People’s Congress standing committee meeting later this month.

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The International Monetary Fund (IMF) announced on Tuesday that global public debt is expected to surpass the $100 trillion mark this year for the first time.

This increase may be more rapid than previously anticipated, driven by a political climate favoring increased spending and the pressures of slow economic growth that heighten borrowing needs and costs.

According to the IMF’s latest Fiscal Monitor report, global public debt is projected to reach 93% of the world’s gross domestic product (GDP) by the end of 2024, with estimates suggesting it could approach 100% by 2030.

This figure would exceed the 99% peak observed during the Covid-19 pandemic and marks a 10 percentage point increase since 2019, prior to the surge in government spending caused by the health crisis.

As the IMF prepares for its annual meetings with the World Bank in Washington next week, the Fiscal Monitor report highlights significant factors that could drive debt levels even higher than current forecasts.

Notably, there is a growing appetite for spending in the United States, the world’s largest economy.

The report states:

Fiscal policy uncertainty has increased, and political red lines on taxation have become more entrenched. Spending pressures to address green transitions, population aging, security concerns, and long-standing development challenges are mounting.

Impending US election and spending promises

Concerns regarding rising debt levels coincide with the upcoming US presidential election, where candidates from both major parties have proposed new tax cuts and spending initiatives that could substantially increase federal deficits.

Republican candidate Donald Trump’s proposed tax cuts are estimated to add approximately $7.5 trillion in new debt over the next decade, significantly more than the $3.5 trillion anticipated from the plans of Democratic nominee Vice President Kamala Harris, according to estimates from the Committee for a Responsible Federal Budget (CRFB), a budget-focused think tank.

The IMF report also notes a trend where debt projections frequently underestimate actual outcomes, with realized debt-to-GDP ratios five years out averaging 10% higher than initial forecasts.

Additionally, weak economic growth, tighter financial conditions, and heightened fiscal and monetary policy uncertainty in critical economies like the US and China could further exacerbate debt levels.

A “severely adverse scenario” included in the report suggests global public debt could reach 115% within just three years, significantly above current estimates.

The IMF reiterated its call for enhanced fiscal consolidation, indicating that the current favorable economic environment, characterized by solid growth and low unemployment, presents an opportune moment to implement such measures.

However, it warned that current efforts—averaging 1% of GDP from 2023 to 2029—are insufficient to stabilize or reduce debt levels effectively.

To achieve this stabilization, a cumulative tightening of 3.8% would be necessary, particularly in the U.S., China, and other nations where debt levels are expected to keep rising.

The Congressional Budget Office anticipates that the U.S. will report a fiscal deficit of about $1.8 trillion for 2024, representing over 6.5% of GDP.

Countries such as the U.S., Brazil, the United Kingdom, France, Italy, and South Africa, which are projected to experience ongoing debt growth, may face severe repercussions if corrective actions are delayed.

“Postponing adjustment will only mean that a larger correction is needed eventually,” stated Era Dabla-Norris, the IMF’s deputy director for fiscal affairs.

Waiting can also be risky, because past experience shows that high debt and lack of credible fiscal plans can trigger adverse market reactions and limit countries’ ability to respond to future shocks.

Dabla-Norris emphasized that cuts to public investment or social spending tend to have a more detrimental impact on growth than poorly targeted subsidies, such as those for fuel.

Some nations have the capacity to broaden their tax bases and enhance tax collection efficiency, while others can make their tax systems more progressive by improving taxation on capital gains and income.

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