Time for a recap.

• The gold price has climbed to a fresh record high today, touching $2,365 per ounce for the first time.

  Demand for the safe-haven metal has been pushed up by geopolitical risks, and worries about inflation, while central banks have been adding to their bullion reserves.
  

• Rating agency Fitch has lowered its rating on Thames Water’s parent company, Kemble, to just C – one step above being in default. The downgrade came less than a week after Kemble missed a debt repayment.

• The King has been presented with the first banknotes bearing his portrait by the Governor of the Bank of England.
  

• HSBC is selling its business in Argentina, and taking a $1bn loss on the deal due to currency volatility and the plunge in the peso.
  

• The IMF has warned that domestic shocks in emerging economies in the G20 are increasingly impacting growth in the rich world

Shocks from emerging markets are having a more serious impact on growth among rich countries, the International Monetary Fund has warned.

In a new report, the IMF highlights that spillovers from shocks in G20 emerging markets—particularly China—have increased since 2000, and are now comparable in size to those from shocks in advanced economies.

Trade, notably through global value chains, is a key channel for shocks to propagate through the global economy, the IMF says, in Chapter 3 of its latest World Economic Outlook.

The IMF points out that a pick-up in emerging markets could benefit wealthier countries, but cautions that policymakers should protect themselves from the threat of disruption.

The report says:

Spillovers generate a reallocation of economic activity across firms and sectors in other countries. Looking ahead, a plausible growth acceleration in G20 emerging markets, even excluding China, could support global growth over the medium term and spill over to other countries.

Policymakers in recipient economies should maintain sufficient buffers and strengthen policy frameworks to manage the possibility of larger shocks from G20 emerging markets.

Credit rating agency Fitch has downgraded its rating on Thames Water’s parent company, Kemble, after it defaulted on its debts last week by missing an interest payment.

Fitch has cut Kemble Water Finance Limited’s rating to ‘C’ from ‘CC’, which is just one step above being in default.

Fitch explains:

The downgrade reflects Kemble’s missed payments of interest due last week and the consequent formal notice of default sent to its debtholders. Kemble has also sent formal notice of the cancellation of its undrawn £150m working capital facility to the relevant agent.

The company has appointed an advisor to support restructuring discussions with creditors.

Fitch adds that it would downgrade Kemble again to ‘Restricted Default’ (RD) once the grace period to make the missed payment has expired, or if the group is restructured.

As reported earlier, bonds issued by other water companies are suffering a knock-on impact from Thames (see 13.12pm)… while Australian investment bank Macquarie has emerged as a lender to Kemble.

The King has been presented with the first banknotes bearing his portrait by the Governor of the Bank of England.

Charles received a leather-bound booklet containing the historic legal tender from Andrew Bailey at Buckingham Palace on Tuesday.

PA Media reports:

Charles inspected the four £5, £10, £20 and £50 polymer notes – the first low-numbered note of each denomination with 01 000001 serial numbers – and pointed and smiled at the details as Mr Bailey turned the pages, showing the front and back.

They were joined by Sarah John, the Bank of England’s Chief Cashier, whose signature appears on the currency, and the King gave a broad grin as he greeted his guests in the 1844 Room.

The money will be issued gradually into circulation from June 5, to replace worn-out ones and to meet any overall increase in demand.

Businesses such as retailers, train and car park operators, financial institutions, and ATM operators should update their banknote machines before 5 June, the Bank advises.

The crisis at Thames Water appears to be hitting the price of bonds issued by fellow water companies.

Bloomberg has spotted that the risk premium on two recently-issued bonds from the sector has increased since they started trading. This risk premium measures the gap between the yield on these bonds, compared to lending to the government.

BBG says:

Southern Water Services Finance Ltd. bonds have widened 13 basis points since their March 19 pricing. Northumbrian Water Finance Plc’s notes widened four basis points since pricing on March 22.

That makes them underperformers among investment-grade peers whose spreads mostly narrowed in new-issue trading.

Last week, Thames’ parent company, Kemble, defaulted on its debt, raising fears it could face a significant restructure or even ultimately collapse.

Today, it emerged that Australian investment bank Macquarie, which has been criticised for its role in the privatisation of England’s water industry, is one of Kemble’s lenders, and could play an important role in determining its future.

Before today, gold had already set a new record price for seven days running in the London bullion market, according to data from online market BullionVault.

Today’s gains mean it is on track to beat the record stretch of new daily records set in March 2008.

Adrian Ash, director of research at BullionVault, says:

“While the size of gold’s price gain isn’t unprecedented, its strength is.

So too is what’s underpinning this bull run, with heavy profit-taking by Western investors offset by central banks led by China continuing to hoard bullion as Chinese households also keep buying amid the country’s real-estate slump and economic slowdown.”

Marks & Spencer is investing £1m in tackling the methane produced by cows by changing the diet of the herds that provide its milk.

The retailer is working with all 40 of the pasture-grazed dairy farmers in its supply base with the aim of cutting 11,000 tons of greenhouse gas emissions annually produced by cattle burps and manure. It said adding a new type of feed to the cows’ diet would reduce the carbon footprint of its main fresh milk by 8.4%.

The innovation comes as M&S said it was also setting up a £1m accelerator fund for its ethical project Plan A, working in partnership with longstanding and new suppliers to find new ways of achieving net zero carbon emissions.

Could Shell deal a major blow to the City of London by moving its stock market listing to New York instead?

The oil giant’s CEO, Wael Sawan, has told Bloomberg that Shell would have to consider a shift if the gap between valuations in the UK and US doesn’t narrow.

Sawan told Bloomberg’s Javier Blas last month that he is trying to fix Shell’s problems by cutting costs, cutting underperforming units, and buying back shares with free cash.

Sawan added:

“If we work through the sprint, and we are doing what we are doing, and we still don’t see that the gap is closing, we have to look at all options.”

This morning, Sawan’s predecessor Ben van Beurden has fanned the flames, saying that the gap in valuations across the Atlantic is a “major issue” which makes it more likely that companies will consider moving their listings to New York.

Van Beurden told the FT Global Commodities summit that Shell was “massively undervalued”, while deeper capital pools and more favourable attitudes towards conventional energy companies make the US more attractive than Europe.

Shell is currently valued at £180bn, with a price/earnings ratio of 12.6.

New York-listed rival Exxon is worth $478bn (£376bn), with a p/e ratio of 13.59, meaning Exxon is more highly valued than Shell compared to its earnings.

Gold has hit a new all-time high this morning.

The spot price of gold has risen to $2,365.39 per ounce, above Monday’s record high, meaning gold has now risen by 14% since the start of 2024.

Gold is traditionally seen as a safe-haven in difficult times, and as a hedge against inflation.

Analysts say gold has been lifted by geopolitical tensions, with war in Ukraine and the Middle East encouraging some traders to put money into bullion.

Some central banks have also been adding to their gold reserves. with China’s central bank purchased gold for its reserves for a 17th straight month in March.

The price of other precious metals, such as silver, have also been rising, as Fawad Razaqzada, market analyst at City Index and FOREX.com, explains:

Both metals have been in demand, particularly gold, essentially because of years of high inflation chipping away at the value of fiat currencies, which is the same reason why Bitcoin has also been hitting record levels.

Up until a couple of weeks ago, silver wasn’t finding much love. But stronger industrial data from China earlier in the week pointed to stronger demand for industrial materials like copper and silver.

An early Easter boosted consumer spending in March and gave Britain’s retailers their best month in more than two years.

Prompting hopes that the retail sector might be emerging from a protracted soft patch, the latest snapshot of spending in shops and online showed the value of sales above the current inflation rate for the first time since the early days of the cost of living crisis.

The monthly sales monitor from the British Retail Consortium and the accountancy firm KPMG said the value of sales was up by 3.5% in March on a year earlier. Inflation as measured by the consumer prices index stood at 3.4% in February and is expected to have fallen to about 3% in March.

Linda Ellett, the KPMG UK head of consumer markets, leisure and retail, said the Easter pickup in spending pointed to the possibility of “green shoots of recovery” for retailers.

Investors are losing faith that central banks will make hefty cuts to interest rates this year.

Futures traders have reduced bets on how much the US Federal Reserve will cut rates this year to the lowest level since October, LSEG data shows.

Traders now expect fewer than three quarter-point cuts to US interest rates this year, down from up to six cuts expected in January.

Reuters explains:

Fed funds futures contracts for December on Monday reflected expectations of around 60 basis points in rate cuts this year, compared to some 150 basis points that had been priced at the start of 2024.

The prospect of a first 25 basis point cut in June stood at 49%, down from 57% a week ago, CME Group data showed on Monday.

This repricing follows stronger than expected US economic data, such as last Friday’s forecast-beating US employment report showing 303,000 new jobs were created in March.

Yesterday, JP Morgan CEO Jamie Dimon warned that inflation coud be stickier than forecast, leading to higher interest rates than markets expect.

For the UK, traders expect the Bank of England to cut rates to 4.5% by the end of this year, from 5.25% at present.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Argentina’s currency crisis has come back to bite HSBC, as it announces the sale of its operations in the South American country.

HSBC is selling its business in Argentina – which covers banking, asset management and insurance and $100 million in subordinated debt - to Grupo Financiero Galicia for $550m.

But, HSBC will record a $1bn pre-tax loss on the sale, as it will crystallise losses it has been running on the Argentinian peso-denominated book value of HSBC Argentina when converted into US dollars.

HSBC will also recognise $4.9bn in historical currency translation reserve losses when the deal closes. Those losses swelled by $1.8bn last year because of the devaluation of Argentina’s peso.

Last December, Argentina’s libertarian government led by Javier Milei devalued the peso by about half, as part of their economic shock treatment.

The sale will help fund HSBC’s pivot strategy of shifting capital to India and China.

Noel Quinn, HSBC’s chief executive, says the bank is pleased to have agreed the sale of HSBC Argentina.

This transaction is another important step in the execution of our strategy and enables us to focus our resources on higher value opportunities across our international network. HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network. Furthermore, given its size, it also generates substantial earnings volatility for the Group when its results are translated into US dollars. Galicia is better placed to invest in and grow the business.

“We remain committed to Mexico and the US, and to serving our international clients throughout our global network with our leading transaction banking capabilities.”

The agenda

• 7.45am BST: French trade balance for February

• 1pm BST: Mexico’s inflation rate for March

• 3pm BST: RealClearMarkets/TIPP index of US economic optimism

• 6.30pm BST: IMF to publish chapter 3 of its Global Financial Stability Report