US shares risk ‘sharp correction’ but markets seem complacent, IMF warns
US stock markets which have rallied during the AI boom are at risk of a “sudden, sharp correction” while government bond markets are under mounting pressure, the International Monetary Fund has warned.In its Global Financial Stability Report, published as policymakers gather in Washington for the IMF’s annual meetings, the Fund said that markets appear “complacent”.It highlighted “increasing vulnerabilities in the financial system,” including in stock and bond markets, and among “non-bank financial intermediaries” (NBFIs) or “shadow banks”, which it warned are now closely bound to the banking sector.US stock markets have repeatedly roared to record highs in recent months.The IMF said stocks do not appear as overvalued as they did during the dotcom bubble at the turn of the millennium.
But it said the gains are worryingly concentrated among the “magnificent seven” tech firms, which include Apple, Nvidia and Meta.“Concentration risk within the S&P 500 is at a historic high, with a narrow group of stocks spanning mega-cap IT and AI-related firms driving the broader index,” it said, adding that the magnificent seven account for 33% of the index.It warned “the possibility of mega-cap stocks failing to generate expected returns to justify current lofty equity valuations could trigger deterioration in investor sentiment and make the stocks susceptible to sudden, sharp correction,” adding, “valuations would collapse as a result, making the broader benchmark index vulnerable to downturns.”The Fund also expressed concern about the stability of government bond markets, with many countries expanding borrowing significantly, and increasingly dependent on “price-sensitive investors”, rather than domestic pension funds, for example.Analysing recent trends in these markets, including shifts in yields, which move inversely to prices, the IMF suggested they may be “on shakier footing than they seem”.
The IMF said stress in the markets for leading governments’ bonds remains unlikely – a “tail risk” – but would have “broad and disruptive ramifications for financial markets, given bonds’ role as key benchmarks and collateral”,The Fund renewed its warnings about the burgeoning growth of NBFIs in the global economy,These lenders, which face less onerous capital requirements than traditional banks, have expanded rapidly in recent years,The IMF pointed to the fact that mainstream banks are increasingly lending to NBFIs, raising the risks of a systemic crisis if they began to struggle,“Banks’ growing exposures to NBFIs mean that adverse developments at these institutions – such as downgrades or falling collateral values – could significantly affect banks’ capital ratios,” the IMF said.
It added that the sector should be better regulated: “The growing importance of NBFIs in financial intermediation highlights the need for sound oversight of this segment.”Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionIt said these vulnerabilities made it all the more important to press ahead with implementing new bank capital rules meant to forestall a future crisis – the Basel III regime.The US has not done so, prompting the Bank of England to delay it, too.In a sideswipe at the Donald Trump, the IMF also urged governments to resist interfering with interest rate policy, saying “central bank operational independence remains critical for anchoring inflation expectations and enabling central banks to achieve their mandates.”Trump has sought to remove the Federal Reserve governor, Lisa Cook, and repeatedly attacked the Fed chair, Jay Powell, for failing to cut interest rates as rapidly as the White House would like.
In another comment, couched in terms of the “G4” leading bond issuers – the US, the UK, Japan and the eurozone – but apparently aimed at Washington, the IMF added, “sustained trust in the institutional foundations in G4 economies has underpinned their sovereign bonds’ safe-asset status for decades and needs to be preserved.”
UK economy at risk of ‘bumpy landing’; JP Morgan’s Dimon warns of ‘more cockroaches’ after collapse of First Brands and Tricolor – as it happened
Bank of England policymaker Alan Taylor has warned that the UK economy is at a growing risk of “a bumpy landing”.Speaking at King’s College, Cambridge (Taylor’s alma mater) today, he sticks to his reputation as a dovish member of the Bank’s monetary policy committee. He predicts that wage settlements will be pushed down in “an economy with rising unemployment and weak demand”, meaning little risk of an upward spiral in wage-led domestic inflation.Taylor argues that there are now three plausible scenarios in 2026, of varying pain for consumers and businesses:The first scenario is the “soft landing”, which Taylor fears is receding in terms of probability.He says:By maintaining what I think is a too restrictive path of interest rates, we may have braked too hard, such that inflation cannot smoothly return to target with the economy close to potential, as my votes have indicated
US raised concerns about Chinese boss of chipmaker before Dutch takeover
US authorities had raised concerns about the boss of a China-owned chipmaker before it was taken over by the Dutch government this week, according to court papers.The documents show US officials warned the Netherlands in June that Nexperia may not be able to export to the US if its Chinese chief executive, Zhang Xuezheng, remained in post.Late on Sunday the Dutch government said it had invoked a cold war-era law to effectively take control of the company, citing “major shortcomings that could jeopardise security of supply” of chips to European factories.By that point Zhang had been suspended from Nexperia, which is controlled by the Chinese company Wingtech.It has now emerged that the US had raised concerns about Nexperia’s management as far back as June
The gospel according to Peter Thiel: why the tech svengali is obsessed with the antichrist
Hello, and welcome to TechScape. For the past week, my brain has been marinating in billionaire Peter Thiel’s byzantine musings about the antichrist and Armageddon. At this point, I’m pickled.Why, you might ask, does it matter what a billionaire thinks about the antichrist? Good question!To help us understand, my colleagues Johana Bhuiyan, Dara Kerr and Nick Robins-Early have reported on a series of talks given by billionaire political svengali and tech investor Thiel:Over the past month, Thiel has hosted four lectures on the downtown waterfront of San Francisco philosophizing about who the antichrist could be and warning that Armageddon is coming. Thiel, who describes himself as a “small-o Orthodox Christian”, believes the harbinger of the end of the world could already be in our midst and that things such as international agencies, environmentalism and guardrails on technology could quicken its rise
Instagram to bring in version of PG-13 system to protect children, says Meta
Instagram is to adopt a version of the PG-13 cinema rating system to give parents stronger controls over their teenagers’ use of the social media platform.Instagram, which is run by Meta, will start applying rules similar to the US “parental guidance” movie rating – first introduced 41 years ago – to all material on Instagram’s teen accounts. It means users aged under 18 will automatically be placed into the 13+ setting. They will be able to opt out only with their parents’ permission.While the teen accounts already hide or prohibit the recommendation of sexually suggestive content, graphic or disturbing images, and adult content such as tobacco or alcohol, the new PG-13 version will tighten restrictions further
MPs warned over ‘shameful’ lack of funding for GB athletes at Deaflympics
It is shameful and discriminatory that deaf people are the only disabled community that does not receive any government funding to help them compete in elite sport, MPs have been told.While UK Sport will invest £330m of government and national lottery funding into British Olympic and Paralympic sport over the Los Angeles 2028 cycle, the GB team for next month’s Deaflympics in Tokyo is having to raise the majority of the £450,000 costs themselves.That is despite the Deaflympics having been established in 1924 and been recognised by the International Olympic Committee in 1955, over three decades before the Paralympics, the culture, media and sport select committee was told.Chris Ratcliffe, the CEO of UK Deaf Sport, told MPs: “When it comes to elite sport, we are the only disabled elite sports group that have no access to funding whatsoever. I think that’s shameful, speaking forthrightly
RFL close to selling stake in expanded Super League to private equity
The Rugby Football League is in advanced talks with several private equity firms about selling a stake in Super League.The Guardian has learned that the RFL has had multiple offers from funds interested in buying into the competition after the collapse of a proposed investment in Super League from Australia’s National Rugby League.One of the approaches is understood to be from LionCap Global, a US-based investment firm that incorporated a UK company in May as a precursor to investing in this country. Talks have also taken place with Oakwell Sports Advisory, the London-based firm that brokered CVC Capital Partners’ investments in rugby union’s Six Nations Championship and Premiership Rugby.A spokesperson for Rugby League Commerical, an offshoot of the RFL in charge of their commercial, sponsorship and broadcast rights negotiations, told the Guardian: “One of the workstreams emanating from the Strategic Review held earlier this year has been to explore recapitalisation of the sport, including the Super League
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