FirstFT: UBS fund uncovered to First Manufacturers chapter

Good morning and welcome again. In at this time’s e-newsletter:

• First Manufacturers fallout hits Swiss banking

• Gold breaches $4,000 mark

• World traders return to China tech

• Musk’s mission to Mars

A UBS fund has 30 per cent of its portfolio tied to the failed First Manufacturers Group, leaving Switzerland’s largest financial institution grappling with a chapter that has convulsed world finance.

What to know: Purchasers are braced for giant losses after UBS O’Connor, a non-public credit score and commodities specialist owned by the Swiss financial institution, revealed that 30 per cent of the publicity in one in all its funds is tied to the auto elements group.

O’Connor lately advised traders in its “Opportunistic” working capital finance technique that the fund has 9.1 per cent of “direct” publicity and 21.4 per cent of “indirect” publicity. Total, UBS has greater than $500mn of publicity to First Manufacturers’ debt and invoice-linked financing, in accordance with chapter filings.

UBS is within the technique of promoting O’Connor to Cantor Fitzgerald, the Wall Avenue brokerage whose chief, Howard Lutnick, stepped down as chair and chief government in February.

Non-public credit score issues: UBS is one in all many traders damage by the implosion of the Ohio-based industrial enterprise, which has raised questions concerning the risks within the booming non-public credit score market. The fallout over First Manufacturers threatens to engulf the best echelons of Swiss banking in a disaster regarding bill finance, almost 5 years after the collapse of Greensill Capital rocked Credit score Suisse. Learn the complete story.

Right here’s what else we’re conserving tabs on at this time:

• Nobel Prize: The award for Chemistry will likely be introduced by the Royal Swedish Academy of Sciences in Stockholm.

• Central banks: Federal Open Market Committee’s September assembly minutes are revealed.

• UK: Prime Minister Keir Starmer begins a two-day journey to India. He’ll meet Narendra Modi tomorrow. Labour occasion deputy chief poll opens following the resignation of Angela Rayner final month.

• World financial system: IMF managing director Kristalina Georgieva offers a speech for the upcoming 2025 annual conferences in Washington.

Can the worldwide financial system face up to new shocks? Participate in a reside Ask an Knowledgeable Q&A with the FT’s Tej Parikh and Martin Sandbu tomorrow at 1pm BST. Submit your questions right here.

5 extra high tales

1. Gold has climbed above $4,000 a troy ounce for the primary time. The value of bullion has surged greater than 50 per cent this yr, and has now doubled in lower than two years. Learn what’s firing up the yellow metallic’s features.

2. Unique: Worldwide traders are returning to China’s start-up scene, with a collection of small enterprise capital fundraisings marking the primary indicators of a thaw for a sector hit by geopolitical tensions and a tech crackdown. Learn the complete report.

3. Unique: OpenAI and Anthropic are contemplating utilizing investor funds to settle potential claims from multibillion-dollar lawsuits, as insurers balk at offering complete protection for the dangers related to synthetic intelligence. Insurance coverage professionals say AI mannequin suppliers will battle to safe safety for the complete scale of damages.

• Market melt-up warning: Some say this can be a “good” bubble, however traders ought to do not forget that all bubbles burst ultimately, writes Katie Martin.

4. Belgium is underneath strain from the EU to permit the usage of frozen Russian property for a “reparations loan” to Ukraine after Berlin and different western capitals shifted their stance. Right here is why the Belgian authorities has not come on board.

5. Two of the world’s largest bond traders have urged UK chancellor Rachel Reeves to construct a bigger buffer into public funds in her November Funds to keep away from years of uncertainty over tax-and-spend selections. Learn extra on the feedback from Pimco and BlackRock.

• Conservative convention: Occasion chief Kemi Badenoch will attempt to revive Tory fortunes with a speech centered on the financial system and a promise to drive down Britain’s deficit.

• Tax bonanza: Eire has boosted total spending by greater than 7 per cent in subsequent yr’s price range in contrast with this yr, regardless of central financial institution warnings over extreme outlays.

The Massive Learn

Central banks are trying to unwind purchases of bonds and different property at a time of political criticism of financial authorities over the size of losses. Will the controversy over quantitative easing restrict their choices for future crises?

We’re additionally studying and listening to . . . 

• USAID cuts: Zambia’s president has stated reductions to worldwide help had been “long overdue” and supplied African nations an alternative to “take care of our own affairs”.

• Cross-channel rail: Eurostar’s monopoly ought to finish, argues John Gapper. Competitors is required, and one of the best ways to realize it’s to incentivise new entrants to speculate.

• Low-cost funds: St James’s Place, the UK’s largest wealth supervisor, is rolling out cheaper investments after a shake-up of its charging construction.

• Tech Tonic 🎧: Elon Musk needs people to decide on Mars. The FT’s area business editor Peggy Hollinger speaks to specialists concerning the pull of the purple planet.

Chart of the day

Cocoa costs have tumbled to a 20-month low, bringing to an finish a two-year rally that had pushed the market to file highs and squeezed chocolate producers worldwide. However ought to customers begin celebrating?

Take a break from the information . . . 

London’s British Museum will stage a £2,000-a-head ball subsequent week, and its director Nicholas Cullinan guarantees a fundraiser like no different. However in powerful financial instances, is it a great search for a nationwide museum to court docket the rich of their finery, Melanie Gerlis asks.