Finance, in brief

France's finance ministry told the country's budget watchdog on Saturday that government debt will reach 119.3% of everything France produces in a year. [1]

That is the highest level since 1978. In 2019 it was still below 100%. [2][1]

France's finance ministry expects it to keep climbing, to 121.7% in 2027, from 115.7% last year. [1][3]

It also admitted it will miss this year's target and end the year borrowing 5.4% of output, not the 5% written into law. [3]

Prime Minister Sebastien Lecornu wants 54 billion euros, about 62 billion dollars, of savings in the 2027 budget. [1][3]

He has no majority. The Socialists have ruled out backing the budget, and the National Rally, the biggest single party in the lower house, says it will vote against if pensions are frozen instead of rising with prices. [6]

Two prime ministers before Lecornu were removed from office over budgets. [6]

Lenders are charging for that. On Friday the extra France pays over Germany to borrow for ten years touched 1.04 percentage points, the first time above a full point since 2012. [4]

France's own ten-year rate ended Friday at 4.456%, against 3.49% for Germany. [4][8]

The ratings firm Scope cut France's credit score to A+ from AA- on Friday, matching Fitch and S&P, and Morningstar DBRS turned its outlook negative. [5]

France's three biggest banks fell with it: BNP Paribas down 3.6%, Credit Agricole and Societe Generale down 2.5% each. [4]

Fishermen blocked the port of Nice and other Mediterranean harbours for a third day on Thursday over fuel prices. [6]

Why it matters. The budget bill reaches parliament at the end of September, and the number to watch is whether the National Rally abstains rather than votes against. [3][6]

Admiral Brad Cooper, the head of US Central Command, said in a video message on Saturday that oil, gas and cargo moving through the Strait of Hormuz over the past two weeks was the highest in six months. [9][11] The strait is the sea lane between Iran and Oman. About a fifth of the world's traded oil passed through it before the war. [10] Cooper said the main lanes are clear of mines and that Gulf allies have shipped more than a billion barrels through in two months, while Iran has exported none. [9][10] Monitors say traffic is still well below prewar levels. [10]

Why it matters. Almost every fuel price in this edition sits on top of that number, from diesel in the United States to the subsidies France is paying its fishermen. [12][7]

Diesel passed 6 dollars a gallon in the United States for the first time last week and reached 6.45 dollars on Friday. [12] It is the workhorse fuel of industry, transport and farming, so its price feeds into nearly everything that moves. [12] Gulf states and Russia spent tens of billions over the past decade building refineries to win a bigger share of the world diesel trade, and war in both places has cut those exports sharply. [12] Shortages have appeared at filling stations in rural Brazil, in Libya and in African countries. [12]

Why it matters. Crude oil can be shipped around a blocked strait. A refinery cannot be moved, and jet fuel now costs twice what it did in February. [13]

President Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act on 18 September. [14][15] It lets the US put tariffs of up to 100% on goods from the five countries that bought the most Russian crude oil or gas over the previous twelve months, which points straight at China and India. [14][15][16] The law takes effect within 30 days, during which the US Trade Representative is expected to name the countries and recommend rates. [14] Countries would normally get 180 days to cut their Russian purchases or negotiate, although Trump can shorten that. [14]

Why it matters. China and India took about half and just over a third of Russia's crude exports since December 2022, so the law is aimed at the money Russia uses to fight in Ukraine. [15]

Volkswagen said on Friday it had written 6 billion euros, about 6.9 billion dollars, off the value of its stake in Porsche, the sports-car maker it controls. [18] A write-down means the company now says the stake is worth less than it had recorded, and the difference comes off its profit. [18] Volkswagen cut its forecast for this year's operating margin to no more than 1%, from a range of 4% to 5.5%, and expects about 10 billion euros of negative effects in all. [18] Another 4,100 Porsche jobs are at risk on top of 9,000 already planned. [18]

Why it matters. Volkswagen's shares fell as much as 7.5%, the biggest one-day drop in a year, and pulled BMW and Mercedes-Benz down with them. [18]

China's big banks kept their benchmark lending rates unchanged on Sunday, at 3.0% for one-year loans and 3.5% for five-year ones. [19][20] Both have sat at those levels since May last year. [20] The rates are published each month by the People's Bank of China, the country's central bank, and they anchor what households and companies pay on new loans. [20] Governor Pan Gongsheng said slower loan growth is becoming normal, because borrowing by property firms and local governments is shrinking faster than new industries can replace it. [19]

Why it matters. The extra that ten-year US government bonds pay over Chinese ones is near the widest ever recorded. [19] BNP Paribas' chief China economist, Jacqueline Rong, expects the People's Bank of China to stay on hold for the rest of the year. [19]

The ten-year US government borrowing rate passed 5% last week, its highest since 2007. [22][37] In February the Congressional Budget Office, which does the official US budget arithmetic, had expected 4.1% this year and about 4.3% for the rest of the decade. [22] That rate sets what the US Treasury pays in interest on roughly 40 trillion dollars of debt. [22] The Committee for a Responsible Federal Budget, a US budget watchdog, has done the sum. [22] If rates stay more than 0.8 points above those forecasts, annual interest reaches 2.7 trillion dollars by the end of the decade, more than Medicare or retirement benefits. [22]

Why it matters. It is the same arithmetic as France's on a far larger balance, and the US is the borrower against which nearly every other dollar loan is priced. [22][37]

Japanese consumer prices rose 1.9% in the year to August, below the Bank of Japan's 2% target, but producer prices, what factories charge each other, rose 7.6%. [42] Government subsidies are holding down what households pay for energy, which may be hiding the pressure underneath. [42] Nominal wages have grown 3.5% on average this year. [42] ICICI Bank Research expects another quarter-point rise in 2026 and at least one more in 2027, taking the rate to 1.75%. [42]

Why it matters. Kazuo Ueda, who governs the Bank of Japan, says he wants to avoid the situation the US and Europe were in during 2022, when prices rose fast. [42]

Scott Bessent, the US treasury secretary, told an audience in New York in June that the bond market has taken out more governments than howitzers, a howitzer being a heavy field gun. [40] He was answering a question about whether Donald Trump's team was pressing Kevin Warsh, who chairs the US central bank, to cut rates. [40] Bessent said Trump understands the point, and that Warsh was told at his swearing-in that he should be independent. [40] Warsh raised rates on Wednesday anyway. [38]

Why it matters. France is this week's example: its 2027 budget has not yet reached parliament, and lenders are already charging it more. [3][4]

Donald Trump wrote on Saturday that the US Supreme Court's rulings on tariffs and on birthright citizenship had cost the country trillions of dollars, calling the decisions faulty, political and ridiculous. [23] In February the court struck down most of his import duties, ruling that the emergency-powers law he had used did not allow them. [23] That forced the US government to refund importers who had already paid. [23] About 100 billion dollars of refunds had been completed and passed to the US Treasury for payment by 31 July, out of roughly 128.68 billion dollars accepted for processing. [23]

Why it matters. Those refunds leave a budget that is already borrowing about 2 trillion dollars a year. [23][22]

Tata Sons is the private holding company at the top of India's biggest business group. [21] On 17 September its directors voted 4-1 to extend Natarajan Chandrasekaran's term as chairman by five years, and to move towards selling shares to the public. [21] Noel Tata, who chairs the charities that own 66% of Tata Sons, argued against a listing and lost. [21] Six days earlier the Reserve Bank of India, the country's central bank, had rejected the company's request to be exempted from listing. [21] Tata Sons says the matter is settled; Tata Trusts calls the vote illegal. [21]

Why it matters. The group owns Air India, Jaguar Land Rover, Taj Hotels and Tetley tea, and is building India's first chip factory, so a fight over who controls it reaches a long way. [21]

The US and Chinese presidents meet on Thursday, with tariffs, controls on artificial-intelligence technology and China's export limits on rare earth minerals all on the agenda. [24] Their one-year trade truce is running out, and it is not settled whether it is extended by another year, as many expect, or for a shorter period to keep the pressure on. [24] A long-delayed US report on Chinese industrial overcapacity has been pushed back until after the meeting, and the US is expected to suspend many of its tariffs on China, leaving a 7.5% duty. [24]

Why it matters. The European Union holds its own talks with China in early October, and its trade commissioner Maros Sefcovic says those will need concrete results to head off countermeasures. [24]

Oil futures are back above 100 dollars a barrel, about 50% higher than before the war began. [13] Euro-area inflation rose to 3.3% in August from 2.9% in July, against the European Central Bank's 2% target; British inflation reached a five-month high of 3.1%, and US inflation held at 3.4%. [13] European gas is at its highest since 2022. [13] Users of Polymarket, a site where people bet money on events, put an 18% chance on the Strait of Hormuz reopening by December. [13]

Why it matters. Traders now expect almost a full percentage point of rate rises from the European Central Bank over the next year, and at least two more from the US central bank. [13]

airBaltic, Latvia's airline, filed for Chapter 11 protection in a New York court on Monday. [25] Chapter 11 is a US process that lets a company keep trading while it reorganises what it owes. [25] Jet fuel prices have doubled since the US war with Iran began, and the air travel sector is in its worst crisis since the pandemic. [25] It has lined up 350 million euros of new lending at about 12% interest from Barclays, Morgan Stanley, Oaktree and others. [25] It will cancel or delay a 3.5 billion dollar order for 40 Airbus planes, and is talking to unions about its 3,000 staff. [25]

Why it matters. Bondholders owning more than 70% of the airline's debt had voted for liquidation instead, and the Latvian government, which owns most of the airline, is still hunting for an investor. [25]

Japan's ten-year government borrowing rate rose above 3% on Tuesday, a three-decade high. [37] Australia's jumped more than 0.07 points to 5.41%, capping a rise of 0.4 points in three weeks. [37] Germany's sat near its highest since 2009 at 3.55%, and France's near an 18-year high. [37] South Korea's incoming finance minister told parliament he is watching the moves and will act to steady markets if he has to. [37]

Why it matters. When a government pays more interest, it has less left for social programmes, defence and everything else it does. [37]

Strategists say the danger of a 5% ten-year US rate is not the day it arrives but the years after. [36] Companies and property owners who borrowed at 2% to 3% during the pandemic have to refinance closer to 6% to 8% when those loans fall due. [36] Many pushed their repayment dates further out in 2020 and 2021, which delayed the problem rather than removing it. [36] Housing is expected to feel it first, then offices and blocks of flats bought with short-term floating-rate loans. [36]

Why it matters. Jack Ablin of Cresset Capital puts the lag at twelve to eighteen months, so most of the effect of this month's rates has not happened yet. [36]

The ten-year US borrowing rate fell back below 5% on Thursday, to 4.95%, after the US central bank's rate rise. [35] Bob Michele, who runs fixed income at JPMorgan Asset Management, said yields had reached maximum pain and that the bank is buying long-dated government bonds. [35] Bank of America strategists said the jump in long-term inflation expectations that followed July's meeting has now fully reversed. [35] Brent crude, the main global oil price, fell 3% on Thursday to 102 dollars a barrel. [35]

Why it matters. Those are investors' judgements rather than settled facts, and the ten-year rate has moved a full percentage point since February. [35][22]

Goldman Sachs' chief US equity strategist, David Kostin, has written that share prices usually rise alongside rising bond rates when those rates reflect stronger growth, and struggle when they rise because of worries about government debt. [41] Investing.com's analysts make the same argument the other way: nominal US growth is running near 7% a year while the ten-year rate is about 5%, which they say leaves room for company revenues to keep up. [43] Barclays warns that 5% has historically been the point beyond which rates become a more lasting drag on share prices. [41]

Why it matters. France's rate is rising for the second reason, not the first: its own finance ministry expects the debt to keep climbing. [4][1]

The Indian rupee passed 96 to the US dollar on Thursday, trading around 96.03, after the US central bank raised its rate for the first time since 2023. [32] A higher US rate pulls money towards the dollar and away from countries like India, which pushes their currencies down and makes everything they import dearer. [32] Economists at Emkay now think India's Reserve Bank will raise its own rate by a quarter point in October. [32] HDFC Bank expects it to wait until December and see whether price rises spread. [32]

Why it matters. A weaker rupee raises the price of everything India imports, oil included, just as a new US law threatens its exports to America. [32][14]

Citi Research said the US central bank's quarter-point rise this week was a hawkish turn, meaning a clear shift towards fighting price rises rather than supporting growth. [33] Chairman Kevin Warsh described the move as removing a dose of accommodation and tied it directly to rising energy costs. [33] Citi expects higher mortgage rates to push housing further into decline and non-technology manufacturers to face squeezed margins, while spending on artificial intelligence carries on regardless. [33] Only a sharp fall in share prices would slow that spending, it said. [33]

Why it matters. If most of the growth comes from spending on artificial intelligence, anything that stops that spending stops most of the growth. [33]

Canada's international trade minister, Maninder Sidhu, said on Saturday during a visit to Mumbai that he is optimistic the two countries can conclude a comprehensive economic partnership agreement within months. [26] Prime Minister Mark Carney set the year-end target on a visit to India in March. [26] Indian negotiators are expected in Canada next month, and the two leaders are likely to meet at the G20 gathering in December. [26] Energy is the main subject: a Shell-led plant that chills gas for shipping opened in Canada last year, with five more in development. [26]

Why it matters. Sidhu said Indian firms including Reliance, Mahindra and JSW are looking at investing in Canadian critical-mineral projects because supply chains are being used as weapons. [26]

Pakistan raised 3 billion dollars from international investors on 14 September, its largest ever sale of government bonds abroad. [29] The country has for years leaned on loans from other governments, chiefly China, which come with diplomatic strings attached. [29] Borrowing from markets instead gives it more freedom over when and from whom it raises money, whatever its relations happen to be. [29] Experts warn the switch will raise what Pakistan pays to service its debts, because commercial lenders charge more than friendly governments do. [29]

Why it matters. The record size shows investors will still lend to Pakistan, and the price of that freedom is a bigger interest bill every year. [29]

Zambian President Hakainde Hichilema reappointed Situmbeko Musokotwane as finance minister on Monday, after last month's election. [30] Musokotwane has held the job since 2021 and ran the negotiations after Zambia became the first African country to default on its debts during the pandemic. [30] Those talks stretched well over a year. [30] Zambia, whose economy runs on copper, is aiming to agree a new programme with the International Monetary Fund before the end of the year. [30][31]

Why it matters. Musokotwane oversaw the last restructuring, and the next job on his desk is an IMF programme Zambia wants agreed within months. [30]

Ajay Banga, who runs the World Bank, said he wants the G20 process for reworking poor countries' debts to move faster for Senegal. [31] The process was set up in 2020 during the pandemic; Zambia's case took well over a year and Ghana's just over a year. [31] Senegal said this month it will use an enhanced version of it, leaving out debts owed in the regional CFA franc currency, after agreeing in principle a 2.2 billion dollar, three-year IMF loan. [31] Senegal's president is due to meet the US treasury secretary and the head of the IMF in Washington. [31]

Why it matters. After Zambia's case dragged on, the World Bank, the IMF and the G20 wrote a playbook for these reworks to make the steps clearer. [31]