ReportWire

Tag: economic conditions

  • Mortgage rates take a breather after rising for several weeks in a row | CNN Business

    Mortgage rates take a breather after rising for several weeks in a row | CNN Business

    [ad_1]

    After rising for six weeks in a row, mortgage rates retreated last week.

    The 30-year fixed-rate mortgage averaged 6.66% in the week ending October 5, down from 6.70% the week before, according to Freddie Mac.

    Mortgage rates have more than doubled since the start of this year as the Federal Reserve continues its unprecedented campaign of hiking interest rates in order to tame soaring inflation. But uncertainty about the possibility of a recession and the impact of rate hikes on the economy have made mortgage rates more volatile.

    “Mortgage rates decreased slightly this week due to ongoing economic uncertainty,” said Sam Khater, Freddie Mac’s chief economist. “However, rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers.”

    The average mortgage rate is based on a survey of conventional home purchase loans for borrowers who put 20% down and have excellent credit, according to Freddie Mac. But many buyers who put down less money upfront or have less than perfect credit will pay more.

    Investors and analysts have been scrutinizing each piece of economic data, searching for clues about the Fed’s next steps and the future of the US and global economies, said Danielle Hale, Realtor.com’s chief economist.

    The Fed does not set the interest rates borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds. As investors see or anticipate rate hikes, they often sell government bonds, which sends yields higher and mortgage rates rise.

    Over the past month, yields on 10-year Treasuries soared from 3.25% to nearly 4% before falling back around 3.75% this week.

    Hale likened investors’ actions to a driver navigating a road in dense fog, prone to over-correcting at each turn.

    “Signs that we are closer to the end of the tightening cycle – such as a surprisingly steep decline in job openings – tend to cause rates to slip, while rates bounce higher on signals like robust activity in the services sector,” Hale said.

    Even though rates dipped slightly this week, the average interest rate for a 30-year, fixed-rate loan is still more than double what it was at this time last year.

    A year ago, a buyer who put 20% down on a $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 2.99% had a monthly mortgage payment of $1,314, according to calculations from Freddie Mac.

    Today, a homeowner buying the same-priced house with an average rate of 6.66% would pay $2,005 a month in principal and interest. That’s $691 more each month.

    As rates have been rising over the last several weeks, fewer people have been applying for mortgages said Bob Broeksmit, president and CEO of the Mortgage Bankers Association.

    Ongoing economic uncertainty together with Hurricane Ian’s devastation in Florida resulted in a 14% decline in mortgage applications last week from the week before, he said.

    MBA also found that an increasing number of borrowers are applying for adjustable rate mortgages, or ARMs. Applications for ARMs climbed to nearly 12% of all applications last week.

    The average rate for the ARM tracked by Freddie Mac (a 5-year Treasury-indexed hybrid ARM) was 5.36%, more than a percentage point lower than the 30-year fixed rate.

    “While rate increases are needed to tame inflation and alleviate the burden it places on household budgets, higher borrowing costs have caused consumers to think twice about major purchases like homes and cars,” said Hale.

    With more prospective buyers sitting on the sidelines, those still looking to buy have a little more breathing room.

    Correction: “Today’s home shoppers have more choices, but for many, the increased cost of financing and higher home prices mean fewer affordable options,” Hale said. “As challenging as it may be to set and stick to a budget in this environment of rising prices and rates, it’s more important than ever to do so.”
    A previous version of this story misstated the number of weeks mortgage rates have been rising. Rates rose for six consecutive weeks before falling this week.

    [ad_2]

    Source link

  • The bond market is crumbling. That’s bad for Wall Street and Main Street | CNN Business

    The bond market is crumbling. That’s bad for Wall Street and Main Street | CNN Business

    [ad_1]

    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN Business
     — 

    The global bond market is having a historically awful year.

    The yield on the 10-year US Treasury bond, a proxy for borrowing costs, briefly moved above 4% on Wednesday for the first time in 12 years. That’s a bad omen for Wall Street and Main Street.

    What’s happening: This hasn’t been a pretty year for US stocks. All three major indexes are in a bear market, down more than 20% from recent highs, and analysts predict more pain ahead. When things are this bad, investors seek safety in Treasury bonds, which have low returns but are also considered low-risk (As loans to the US government, Treasury notes are seen as a safe bet since there is little risk they won’t be paid back).

    But in 2022’s topsy-turvy economy, even that safe haven has become somewhat treacherous.

    Bond returns, or yields, rise as their prices fall. Under normal market conditions, a rising yield should mean that there’s less demand for bonds because investors would rather put their money into higher-risk (and higher-reward) stocks.

    Instead markets are plummeting, and investors are flocking out of risky stocks, but yields are going up. What gives?

    Blame the Fed. Persistent inflation has led the Federal Reserve to fight back by aggressively hiking interest rates, and as a result the yields on US Treasury bonds have soared.

    Economic turmoil in the United Kingdom and European Union has also caused the value of both the British pound and the euro to fall dramatically when compared to the US dollar. Dollar strength typically coincides with higher bond rates as well.

    So while we’d normally see a rising 10-year yield as a signal that US investors have a rosy economic outlook, that isn’t the case this time. Gloomy investors are predicting more interest rate hikes and a higher chance of recession.

    What it means: Portfolios are aching. Vanguard’s $514.5 billion Total Bond Market Index, the largest US bond fund, is down more than 15% so far this year. That puts it on track for its worst year since it was created in 1986. The iShares 20+ Year Treasury bond fund

    (TLT)     (TLT) is down nearly 30% for the year.

    Stock investors are also nervously eyeing Treasuries. High yields make it more expensive for companies to borrow money, and that extra cost could lower earnings expectations. Companies with significant debt levels may not be able to afford higher financing costs at all.

    Main Street doesn’t get a break, either. An elevated 10-year Treasury return means more expensive loans on cars, credit cards and even student debt. It also means higher mortgage rates: The spike has already helped push the average rate for a 30-year mortgage above 6% for the first time since 2008.

    Going deeper: Still, investors are more nervous about the immediate future than the longer term. That’s spurred an inverted yield curve – when interest rates on short-term bonds move higher than those on long-term bonds. The inverted yield curve is a particularly ominous warning sign that has correctly predicted almost every recession over the past 60 years.

    The curve first inverted in April, and then again this summer. The two-year treasury yield has soared in the last week, and now hovers above 4.3%, deepening that gap.

    On Monday, a team at BNP Paribas predicted that the inverted gap between the two-year and 10-year Treasury yields could grow to its largest level since the early 1980s. Those years were marked by sticky inflation, interest rates near 20% and a very deep recession.

    What’s next: The bond market may face fresh volatility on Friday with the release of the Federal Reserve’s favored inflation measure, the Personal Consumption Expenditure Price Index for August. If the report comes in above expectations, expect bond yields to move even higher.

    The Bank of England held an emergency intervention to maintain economic stability in the UK on Wednesday. The central bank said it would buy long-dated UK government bonds “on whatever scale is necessary” to prevent a market crash.

    Investors around the globe have been dumping the British pound and UK bonds since the government on Friday unveiled a huge package of tax cuts, spending and increased borrowing aimed at getting the economy moving and protecting households and businesses from sky-high energy bills this winter, reports my colleague Mark Thompson.

    Markets fear the plan will drive up already persistent inflation, forcing the Bank of England to push interest rates as high as 6% next spring, from 2.25% at present. Mortgage markets have been in turmoil all week as lenders have struggled to price their loans. Hundreds of products have been withdrawn.

    “This repricing [of UK assets] has become more significant in the past day — and it is particularly affecting long-dated UK government debt,” the central bank said in its statement.

    “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

    Many final salary, or defined-benefit, pension funds were particularly exposed to the dramatic sell-off in longer dated UK government bonds.

    “They would have been wiped out,” said Kerrin Rosenberg, UK chief executive of Cardano Investment.

    The central bank said it would buy long-dated UK government bonds until October 14.

    Steep drops in bond prices may be signaling doom and gloom for the economy, but some analysts say short-term bonds are still looking more attractive than equities right now.

    “Record low yields have kept fixed income in the shadow of equities for decades,” said analysts at BNY Mellon Wealth Management in a research note. “But the aggressive shift in Fed policy is beginning to change this.”

    Central banks around the globe have responded to elevated inflation by hiking interest rates– and bond yields have increased alongside them. The two-year US Treasury bond is currently yielding nearly 4%. That’s still a relatively low return, but better than the S&P 500’s dividend yield of around 1.7%.

    “For the first time in several years, bonds are attractive investment options. In addition to providing diversification versus equities…you now get paid for owning them,” wrote Barry Ritholtz of Ritholtz Wealth Management on Wednesday.

    Consider the alternative: the S&P is down more than 20% year to date.

    The US Bureau of Economic Analysis releases its third estimate for Q2 GDP and US weekly jobless claims.

    [ad_2]

    Source link

  • The 10 Senate seats most likely to flip in 2022 | CNN Politics

    The 10 Senate seats most likely to flip in 2022 | CNN Politics

    [ad_1]



    CNN
     — 

    The race for the Senate is in the eye of the beholder less than six weeks from Election Day, with ads about abortion, crime and inflation dominating the airwaves in key states as campaigns test the theory of the 2022 election.

    The cycle started out as a referendum on President Joe Biden – an easy target for Republicans, who need a net gain of just one seat to flip the evenly divided chamber. Then the US Supreme Court’s late June decision overturning Roe v. Wade gave Democrats the opportunity to paint a contrast as Republicans struggled to explain their support for an abortion ruling that the majority of the country opposes. Former President Donald Trump’s omnipresence in the headlines gave Democrats another foil.

    But the optimism some Democrats felt toward the end of the summer, on the heels of Biden’s legislative wins and the galvanizing high court decision, has been tempered slightly by the much anticipated tightening of some key races as political advertising ramps up on TV and voters tune in after Labor Day.

    Republicans, who have midterm history on their side as the party out of the White House, have hammered Biden and Democrats for supporting policies they argue exacerbate inflation. Biden’s approval rating stands at 41% with 54% disapproving in the latest CNN Poll of Polls, which tracks the average of recent surveys. And with some prices inching back up after a brief hiatus, the economy and inflation – which Americans across the country identify as their top concern in multiple polls – are likely to play a crucial role in deciding voters’ preferences.

    But there’s been a steady increase in ads about crime too as the GOP returns to a familiar criticism, depicting Democrats as weak on public safety. Cops have been ubiquitous in TV ads this cycle – candidates from both sides of the aisle have found law enforcement officers to testify on camera to their pro-police credentials. Democratic ads also feature women talking about the threat of a national abortion ban should the Senate fall into GOP hands, while Republicans have spent comparatively less trying to portray Democrats as the extremists on the topic.

    While the issue sets have fluctuated, the Senate map hasn’t changed. Republicans’ top pickup opportunities have always been Nevada, Georgia, Arizona and New Hampshire – all states that Biden carried in 2020. In two of those states, however, the GOP has significant problems, although the states themselves keep the races competitive. Arizona nominee Blake Masters is now without the support of the party’s major super PAC, which thinks its money can be better spent elsewhere, including in New Hampshire, where retired Army Brig. Gen. Don Bolduc is far from the nominee the national GOP had wanted. But this is the time of year when poor fundraising can really become evident since TV ad rates favor candidates and a super PAC gets much less bang for its buck.

    The race for Senate control may come down to three states: Georgia, Nevada and Pennsylvania, all of which are rated as “Toss-up” races by Inside Elections with Nathan L. Gonzales. As Republicans look to flip the Senate, which Minority Leader Mitch McConnell has called a “50-50 proposition,” they’re trying to pick up the first two and hold on to the latter.

    Senate Democrats’ path to holding their majority lies with defending their incumbents. Picking off a GOP-held seat like Pennsylvania – still the most likely to flip in CNN’s ranking – would help mitigate any losses. Wisconsin, where GOP Sen. Ron Johnson is vying for a third term, looks like Democrats’ next best pickup opportunity, but that race drops in the rankings this month as Republican attacks take a toll on the Democratic nominee in the polls.

    These rankings are based on CNN’s reporting, fundraising and advertising data, and polling, as well as historical data about how states and candidates have performed. It will be updated one more time before Election Day.

    Incumbent: Republican Pat Toomey (retiring)

    Sarah Silbiger/Pool/Getty Images

    The most consistent thing about CNN’s rankings, dating back to 2021, has been Pennsylvania’s spot in first place. But the race to replace retiring GOP Sen. Pat Toomey has tightened since the primaries in May, when Republican Mehmet Oz emerged badly bruised from a nasty intraparty contest. In a CNN Poll of Polls average of recent surveys in the state, Democrat John Fetterman, the state lieutenant governor, had the support of 50% of likely voters to Oz’s 45%. (The Poll of Polls is an average of the four most recent nonpartisan surveys of likely voters that meet CNN’s standards.) Fetterman is still overperforming Biden, who narrowly carried Pennsylvania in 2020. Fetterman’s favorability ratings are also consistently higher than Oz’s.

    One potential trouble spot for the Democrat: More voters in a late September Franklin and Marshall College Poll viewed Oz has having policies that would improve voters’ economic circumstances, with the economy and inflation remaining the top concern for voters across a range of surveys. But nearly five months after the primary, the celebrity surgeon still seems to have residual issues with his base. A higher percentage of Democrats were backing Fetterman than Republicans were backing Oz in a recent Fox News survey, for example, with much of that attributable to lower support from GOP women than men. Fetterman supporters were also much more enthusiastic about their candidate than Oz supporters.

    Republicans have been hammering Fetterman on crime, specifically his tenure on the state Board of Pardons: An ad from the Senate Leadership Fund features a Bucks County sheriff saying, “Protect your family. Don’t vote Fetterman.” But the lieutenant governor is also using sheriffs on camera to defend his record. And with suburban voters being a crucial demographic, Democratic advertising is also leaning into abortion, like this Senate Majority PAC ad that features a female doctor as narrator and plays Oz’s comments from during the primary about abortion being “murder.” Oz’s campaign has said that he supports exceptions for “the life of the mother, rape and incest” and that “he’d want to make sure that the federal government is not involved in interfering with the state’s decisions on the topic.”

    Incumbent: Democrat Catherine Cortez Masto

    02 democrat immigration legislation 0717

    CNN

    Republicans have four main pickup opportunities – and right now, Democratic Sen. Catherine Cortez Masto’s seat looks like one of their best shots. Biden carried Nevada by a slightly larger margin than two of those other GOP-targeted states, but the Silver State’s large transient population adds a degree of uncertainty to this contest.

    Republicans have tried to tie the first-term senator to Washington spending and inflation, which may be particularly resonant in a place where average gas prices are now back up to over $5 a gallon. Democrats are zeroing in on abortion rights and raising the threat that a GOP-controlled Senate could pass a national abortion ban. Former state Attorney General Adam Laxalt – the rare GOP nominee to have united McConnell and Trump early on – called the 1973 Roe v. Wade ruling a “joke” before the Supreme Court overturned the decision in June. Democrats have been all too happy to use that comment against him, but Laxalt has tried to get around those attacks by saying he does not support a national ban and pointing out that the right to an abortion is settled law in Nevada.

    Incumbent: Democrat Raphael Warnock

    Sen Raphael Warnock 10 senate seats

    Megan Varner/Getty Images

    The closer we get to Election Day, the more we need to talk about the Georgia Senate race going over the wire. If neither candidate receives a majority of the vote in November, the contest will go to a December runoff. There was no clear leader in a recent Marist poll that had Democratic Sen. Raphael Warnock, who’s running for a full six-year term, and Republican challenger Herschel Walker both under 50% among those who say they definitely plan to vote.

    Warnock’s edge from earlier this cycle has narrowed, which bumps this seat up one spot on the rankings. The good news for Warnock is that he’s still overperforming Biden’s approval numbers in a state that the President flipped in 2020 by less than 12,000 votes. And so far, he seems to be keeping the Senate race closer than the gubernatorial contest, for which several polls have shown GOP Gov. Brian Kemp ahead. Warnock’s trying to project a bipartisan image that he thinks will help him hold on in what had until recently been a reliably red state. Standing waist-deep in peanuts in one recent ad, he touts his work with Alabama GOP Sen. Tommy Tuberville to “eliminate the regulations,” never mentioning his own party. But Republicans have continued to try to tie the senator to his party – specifically for voting for measures in Washington that they claim have exacerbated inflation.

    Democrats are hoping that enough Georgians won’t see voting for Walker as an option – even if they do back Kemp. Democrats have amped up their attacks on domestic violence allegations against the former football star and unflattering headlines about his business record. And all eyes will be on the mid-October debate to see how Walker, who has a history of making controversial and illogical comments, handles himself onstage against the more polished incumbent.

    Incumbent: Republican Ron Johnson

    Sen Ron Johnson 10 senate seats

    Leigh VogelPool/Getty Images

    Sen. Ron Johnson is the only Republican running for reelection in a state Biden won in 2020 – in fact, he broke his own term limits pledge to run a third time, saying he believed America was “in peril.” And although Johnson has had low approval numbers for much of the cycle, Democrats have underestimated him before. This contest moves down one spot on the ranking as Johnson’s race against Democratic Lt. Gov. Mandela Barnes has tightened, putting the senator in a better position.

    Barnes skated through the August primary after his biggest opponents dropped out of the race, but as the nominee, he’s faced an onslaught of attacks, especially on crime, using against him his past words about ending cash bail and redirecting some funding from police budgets to social services. Barnes has attempted to answer those attacks in his ads, like this one featuring a retired police sergeant who says he knows “Mandela doesn’t want to defund the police.”

    A Marquette University Law School poll from early September showed no clear leader, with Johnson at 49% and Barnes at 48% among likely voters, which is a tightening from the 7-point edge Barnes enjoyed in the same poll’s August survey. Notably, independents were breaking slightly for Johnson after significantly favoring Barnes in the August survey. The effect of the GOP’s anti-Barnes advertising can likely be seen in the increasing percentage of registered voters in a late September Fox News survey who view the Democrat as “too extreme,” putting him on parity with Johnson on that question. Johnson supporters are also much more enthusiastic about their candidate.

    Incumbent: Democrat Mark Kelly

    Mark Kelly AZ 1103

    Courtney Pedroza/Getty Images

    Democratic Sen. Mark Kelly, who’s running for a full six-year term after winning a 2020 special election, is still one of the most vulnerable Senate incumbents in a state that has only recently grown competitive on the federal level. But Republican nominee Blake Masters is nowhere close to rivaling Kelly in fundraising, and major GOP outside firepower is now gone. After canceling its September TV reservations in Arizona to redirect money to Ohio, the Senate Leadership Fund has cut its October spending too.

    Other conservative groups are spending for Masters but still have work to do to hurt Kelly, a well-funded incumbent with a strong personal brand. Kelly led Masters 51% to 41% among registered voters in a September Marist poll, although that gap narrowed among those who said they definitely plan to vote. A Fox survey from a little later in the month similarly showed Kelly with a 5-point edge among those certain to vote, just within the margin of error.

    Masters has attempted to moderate his abortion position since winning his August primary, buoyed by a Trump endorsement, but Kelly has continued to attack him on the issue. And a recent court decision allowing the enforcement of a 1901 state ban on nearly all abortions has given Democrats extra fodder to paint Republicans as a threat to women’s reproductive rights.

    Incumbent: Republican Richard Burr (retiring)

    Sen Richard Burr 10 senate seats

    Demetrius Freeman/Pool/Getty Images

    North Carolina slides up one spot on the rankings, trading places with New Hampshire. The open-seat race to replace retiring GOP Sen. Richard Burr hasn’t generated as much national buzz as other states given that Democrats haven’t won a Senate seat in the state since 2008.

    But it has remained a tight contest with Democrat Cheri Beasley, who is bidding to become the state’s first Black senator, facing off against GOP Rep. Ted Budd, for whom Trump recently campaigned. Beasley lost reelection as state Supreme Court chief justice by only about 400 votes in 2020 when Trump narrowly carried the Tar Heel state. But Democrats hope that she’ll be able to boost turnout among rural Black voters who might not otherwise vote during a midterm election and that more moderate Republicans and independents will see Budd as too extreme. One of Beasley’s recent spots features a series of mostly White, gray-haired retired judges in suits endorsing her as “someone different” while attacking Budd as being a typical politician out for himself.

    Budd is leaning into current inflation woes, specifically going after Biden in some ads that feature half-empty shopping carts, without even mentioning Beasley. Senate Leadership Fund is doing the work of trying to tie the Democrat to Washington – one recent spot almost makes her look like the incumbent in the race, superimposing her photo over an image of the US Capitol and displaying her face next to Biden’s. Both SLF and Budd are also targeting Beasley over her support for Democrats’ recently enacted health care, tax and climate bill. “Liberal politician Cheri Beasley is coming for you – and your wallet,” the narrator from one SLF ad intones, before later adding, “Beasley’s gonna knock on your door with an army of new IRS agents.” (The new law increases funding for the IRS, including for audits. But Democrats and the Trump-appointed IRS commissioner have said the intention is to go after wealthy tax cheats, not the middle class.)

    Incumbent: Democrat Maggie Hassan

    Sen Maggie Hassan 10 senate seats

    Erin Scott/Getty Images

    A lot has been made of GOP candidate quality this cycle. But there are few states where the difference between the nominee Republicans have and the one they’d hoped to have has altered these rankings quite as much as New Hampshire.

    Retired Army Brig. Gen. Don Bolduc, who lost a 2020 GOP bid for the state’s other Senate seat, won last month’s Republican primary to take on first-term Democratic Sen. Maggie Hassan. The problem for him, though, is that he doesn’t have much money to wage that fight. Bolduc had raised a total of $579,000 through August 24 compared with Hassan’s $31.4 million. Senate Leadership Fund is on air in New Hampshire to boost the GOP nominee – attacking Hassan for voting with Biden and her support of her party’s health care, tax and climate package. But because super PACs get much less favorable TV advertising rates than candidates, those millions won’t go anywhere near as far as Hassan’s dollars will.

    A year ago, Republicans were still optimistic that Gov. Chris Sununu would run for Senate, giving them a popular abortion rights-supporting nominee in a state that’s trended blue in recent federal elections. Bolduc told WMUR after his primary win that he’d vote against a national abortion ban. But ads from Hassan and Senate Majority PAC have seized on his suggestion in the same interview that the senator should “get over” the abortion issue. Republicans recognize that abortion is a salient factor in a state Biden carried by 7 points, but they also argue that the election – as Bolduc said to WMUR – will be about the economy and that Hassan is an unpopular and out-of-touch incumbent.

    Hassan led Bolduc 49% to 41% among likely voters in a Granite State Poll conducted by the University of New Hampshire Survey Center. The incumbent has consolidated Democratic support, but only 83% of Republicans said they were with Bolduc, the survey found. Still, some of those Republicans, like those who said they were undecided, could come home to the GOP nominee as the general election gets closer, which means Bolduc has room to grow. He’ll need more than just Republicans to break his way, however, which is one reason he quickly pivoted on the key issue of whether the 2020 election was stolen days after he won the primary.

    Incumbent: Republican Rob Portman (retiring)

    Sen Rob Portman 10 senate seats

    TING SHEN/AFP/POOL/Getty Images

    Ohio – a state that twice voted for Trump by 8 points – isn’t supposed to be on this list at No. 8, above Florida, which backed the former President by much narrower margins. But it’s at No. 8 for the second month in a row. Republican nominee J.D. Vance’s poor fundraising has forced Senate Leadership Fund to redirect millions from other races to Ohio to shore him up and attack Rep. Tim Ryan, the Democratic nominee who had the airwaves to himself all summer. The 10-term congressman has been working to distance himself from his party in most of his ads, frequently mentioning that he “voted with Trump on trade” and criticizing the “defund the police” movement. Vance is finally on the air, trying to poke some holes in Ryan’s image.

    But polling still shows a tight race with no clear leader. Ryan had an edge with independents in a recent Siena College/Spectrum News poll, which also showed that Vance – Trump’s pick for the nomination – has more work to do to consolidate GOP support after an ugly May primary. Assuming he makes up that support and late undecided voters break his way, Vance will likely hold the advantage in the end given the Buckeye State’s solidifying red lean.

    Incumbent: Republican Marco Rubio

    Sen Marco Rubio 10 senate seats

    DREW ANGERER/AFP/POOL/Getty Images

    Democrats face an uphill battle against GOP Sen. Marco Rubio in an increasingly red-trending state, which Trump carried by about 3 points in 2020 – nearly tripling his margin from four years earlier.

    Democratic Rep. Val Demings, who easily won the party’s nomination in August, is a strong candidate who has even outraised the GOP incumbent, but not by enough to seriously jeopardize his advantage. She’s leaning into her background as the former Orlando police chief – it features prominently in her advertising, in which she repeatedly rejects the idea of defunding the police. Still, Rubio has tried to tie her to the “radical left” in Washington to undercut her own law enforcement background.

    Incumbent: Democrat Michael Bennet

    Sen Michael Bennett 10 senate seats

    DEMETRIUS FREEMAN/AFP/POOL/Getty Images

    Democratic Sen. Michael Bennet is no stranger to tough races. In 2016, he only won reelection by 6 points against an underfunded GOP challenger whom the national party had abandoned. Given GOP fundraising challenges in some of their top races, the party hasn’t had the resources to seriously invest in the Centennial State this year.

    But in his bid for a third full term, Bennet is up against a stronger challenger in businessman Joe O’Dea, who told CNN he disagreed with the Supreme Court’s decision to overturn Roe v. Wade. His wife and daughter star in his ads as he tries to cut a more moderate profile and vows not to vote the party line in Washington.

    Bennet, however, is attacking O’Dea for voting for a failed 2020 state ballot measure to ban abortion after 22 weeks of pregnancy and arguing that whatever O’Dea says about supporting abortion rights, he’d give McConnell “the majority he needs” to pass a national abortion ban.

    [ad_2]

    Source link

  • Wages are the most important number to watch in the jobs report | CNN Business

    Wages are the most important number to watch in the jobs report | CNN Business

    [ad_1]

    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN Business
     — 

    Investors, economists and members of the Federal Reserve will be poring over the September jobs report on Friday morning for clues about the health of the economy. But one figure may matter more than most…and it’s not the number of jobs added or the unemployment rate. It’s wage growth.

    Inflation is not just a function of the price of oil and other commodities and production costs like manufacturing and shipping. How much workers take home in their paychecks is also a big part of the inflation picture.

    When people have more money in their wallets (virtual or good old-fashioned leather ones), they tend to be more willing to spend it. That gives companies additional flexibility to raise prices.

    Average hourly wages rose 5.2% over the past 12 months according to the August jobs report. That’s down from a 2022 peak growth rate of 5.6% in March.

    So how aggressively will the Fed need to raise rates going forward? A lot will depend on whether wage growth continues to slow.

    Companies can’t raise prices as much if workers are making less or they risk big destruction in demand.

    The problem is that wage growth above 5% is still historically high. Before the pandemic, wages typically rose just 3% year-over-year. But labor shortages, due to Covid-19 and people dropping out of the workforce, shifted power from employers to employees when it came to worker pay.

    That’s another reason why companies have continued to raise prices: To offset rising costs.

    The government reported Friday that its preferred inflation metric, personal consumption expenditures (PCE), rose 6.2% from a year ago in August. That was lower than July’s reading.

    But the so-called core PCE figure, which excludes food and energy prices, rose 4.9% through August, up from a 4.7% increase in July.

    What’s more, the Fed typically is looking for just a 2% growth rate in the headline PCE number as a sign of price stability. That’s not going to happen anytime soon. In fact, the Fed’s latest forecasts suggest that the central bank thinks PCE will rise 5.4% this year, up from projections of 5.2% in June.

    “I don’t see anything in the near-term to give the Fed tons of comfort that inflation is on the trajectory to 2%,” said David Petrosinelli, senior trader with InspireX. “Wages will remain elevated and that will keep the Fed in a pickle.”

    But there’s another concern. Wages, while still rising, are not actually keeping pace with the increase in consumer prices. You don’t need to be a math genius to realize that 5.2% is less than 6.2%.

    “Wages are a real pain point. People are paying more but not making more,” said Marta Norton, chief investment officer of the Americas with Morningstar Investment Management. With that in mind, Norton said there is a “higher probability of stagflation.”

    Stagflation is the nasty economic combination of stagnant growth and persistent inflation.

    Retail sales have held up relatively well despite inflation pressures, but Norton warns that can’t last forever. American shoppers would eventually reach their breaking point and just start buying essentials. A slowdown in consumption will inevitably lead to lower prices…but also slower economic growth.

    “Inflation is its own cure. Consumers have the power to spend or not spend,” she said.

    The third quarter is mercifully over. It’s been another doozy for the market. September in particular was bleak. It was the worst month for the Dow since the start of the pandemic in March 2020.

    But even though we’re seemingly in a bear market for everything as bonds, gold and bitcoin have all tumbled this year as well, there are some hopeful signs for the next few months.

    The fourth quarter is typically a festive time on Wall Street. Investors tend to buy stocks in anticipation of robust consumer shopping during the holidays. Businesses typically spend more as well to flush out those yearly budgets. And major companies also often give rosy guidance in October about earnings expectations for the coming year.

    “October has been a turnaround month—a ‘bear killer’ if you will,” said Jeff Hirsch, editor-in-chief of the Stock Trader’s Almanac, in a recent blog post.

    Hirsch added that a dozen bear markets since World War II have ended in the month of October. And of those twelve, seven market bottoms happened during midterm election years.

    Traders will definitely be keeping close tabs on Washington this fall to see if Republicans gain control of the House. That could lead to more gridlock in DC, which investors tend to like.

    Whether or not Corporate America and investors are going to be so bullish this October is up for debate given the concerns about inflation, interest rates and the global economy. After all, October is also famous for huge crashes, most recently in 2008 but also in 1987 and, of course, 1929.

    So stocks definitely could take another turn for the worse. But experts are hopeful that the end of the bear market is in sight.

    “We’re nearer to a bottom,” said Christopher Wolfe, chief investment officer of First Republic Private Wealth Management. “A lot of quality companies are on sale. It’s a time to be patient and reposition.”

    Monday: US ISM manufacturing; China stock markets closed all week

    Tuesday: US job openings and labor turnover (JOLTS); Japan inflation; Australia interest rate decision

    Wednesday: US ADP private sector jobs; US ISM services; OPEC+ meeting

    Thursday: US weekly jobless claims; earnings from ConAgra

    (CAG)    , Constellation Brands

    (STZ)    , McCormick

    (MKC)     and Levi Strauss

    (LEVI)

    Friday: US jobs report; Germany industrial production; earnings from Tilray

    (TLRY)

    [ad_2]

    Source link

  • UK PM Liz Truss admits mistakes on controversial tax cuts plan, but doubles down on it anyway | CNN

    UK PM Liz Truss admits mistakes on controversial tax cuts plan, but doubles down on it anyway | CNN

    [ad_1]


    London
    CNN
     — 

    British Prime Minister Liz Truss admitted mistakes had been made with her government’s controversial “mini-budget” announced last week – which sent the pound to historic lows and sparked market chaos – but stood by her policies.

    Speaking to the BBC’s Laura Kuenssberg on Sunday morning Truss said: “I do accept we should have laid the ground better and I’ve learned from that, and I’ll make sure I’ll do a better job of laying the ground in the future.”

    She said that she wanted “to tell people I understand their worries about what happened this week and I stand by the package we announced and I stand by the fact we announced it quickly.”

    Last week, Truss’ government announced that they would cut taxes by £45 billion ($48 billion) in a bid to get the UK economy moving again, with a package that includes scrapping the highest rate of income tax for top earners from 45% to 40% and a big increase in government borrowing to slash energy prices for millions of households and businesses this winter.

    Many leading economists described the unorthodox measures as a reckless gamble, noting that the measures came a day after the Bank of England warned that the country was already likely in a recession.

    Truss said the reforms were not agreed by her cabinet, but were a decision made by Chancellor Kwasi Kwarteng. “It was a decision the chancellor made,” she told the BBC.

    She doubled down on that decision however, saying that her government made the “right decision to borrow more this winter to face the extraordinary consequences we face,” referring to the energy crisis caused by the war in Ukraine. She claimed that the alternative would be for people to pay up to £6,000 in energy bills, and that inflation would be 5% higher.

    “We’re not living in a perfect world, we are living in a very difficult world, where governments around the world are taking tough decisions,” Truss said.

    Regarding the rising cost of living in the UK, namely the rise of mortgage rates, Truss said that is mostly driven by interest rates and is “a matter for the independent Bank of England.”

    The Bank of England said Wednesday it would buy UK government debt “on whatever scale is necessary” in an emergency intervention to halt a bond market crash that it warned could threaten financial stability.

    Meanwhile, Credit Suisse said that UK house prices could “easily” fall between 10% and 15% over the next 18 months if the Bank of England aggressively hikes interest rates to keep inflation in check.

    The fallout could make it harder for people to get approved for mortgages, and encourage prospective buyers to delay their purchases. A drop in demand would lead to falling prices.

    Truss defended her government’s policies to the BBC as the Conservative party’s annual conference kicked off in in Birmingham.

    The party is bitterly divided, with its poll ratings sinking lower than they were even under the disgraced leadership of Boris Johnson.

    On Sunday, that chill was evident, as Nadine Dorries, the former culture secretary who backed Truss to be prime minister, accused Truss of throwing Chancellor Kwasi Kwarteng “under a bus” in her BBC interview, when she said the tax cut decision were made by him and not the Cabinet.

    “One of @BorisJohnson faults was that he could sometimes be too loyal and he got that. However, there is a balance and throwing your Chancellor under a bus on the first day of conference really isn’t it. [Hope] things improve and settle down from now,” Dorries said on Twitter.

    Conservative members of parliament fear the combination of tax cuts along with huge public spending to help people cope with energy bills, rising inflation, rising interest rates and a falling pound are going to make winning the next general election impossible.

    [ad_2]

    Source link

  • Why the ghost of 2008 still haunts us in 2022 | CNN Business

    Why the ghost of 2008 still haunts us in 2022 | CNN Business

    [ad_1]

    This story is part of CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.


    New York
    CNN Business
     — 

    All week, there have events in the news that have come in under of the banner of “this hasn’t happened since 2007/2008.”

    Yields on the 10-year Treasury briefly surpassed 4%, a level not seen since 2008. That movement helped push mortgage rates to their highest level, 6.7%, since — wait for it — July 2007. Across the pond, where the UK bond market crashed earlier this week, one seemingly frazzled London banker told the Financial Times: “At some point this morning I was worried this was the beginning of the end. It was not quite a Lehman moment. But it got close.”

    The timing of all these events is indeed a bit spooky: Today, September 29, marks 14 years to the day that stock markets around the world cratered, ushering in the worst global financial crisis since the Great Depression.

    With all that gloom, it’s natural to wonder whether history is about to repeat itself.

    To be clear: The market ended up recovering completely — though it took years. And in so many ways, the economic and financial angst playing out around the world is absolutely not a repeat of the run-up to the Great Recession. It’s a whole different beast now.

    But it is precisely because of those 2008 scars, still potent memories for many, that economists and analysts become nervous when things go as haywire as they have in recent weeks.

    Right now, the prevailing mood is fear. Economies hobbled by inflation and soaring borrowing costs are vulnerable to economic shocks — whether those shocks come from a catastrophic hurricane, or a superpower declaring war on a neighbor, or a radical unfunded tax scheme. Or, heaven forbid, a resurgent pandemic.

    All of that means there aren’t many good places for investors to put their money right now. Stocks and bonds are both in bear territory, and many analysts say the market could remain volatile until inflation gets under control (which, if we crash into a recession, could happen pretty soon… not a great silver lining, I know.)

    If there’s a lesson to hold onto from the Great Recession, it’s not to panic. Per my colleague Jeanne Sahadi:

    Let’s say you’d invested $10,000 at the start of 1981 in the S&P 500. That money would have grown to nearly $1.1 million by the end of March 2021. But had you missed just the five best trading days during those 40 years, it would only have grown to roughly $676,000.

    In other words: Hold on tight, friends, and try to avoid looking at your 401(k) balance for the foreseeable future.

    Stocks fell Thursday, giving up Wednesday’s big gains and plunging the Dow back into a bear market.

    The S&P 500, one of the broadest measures of the health of Corporate America, fell 2.1%, hitting a new low for the year. The Dow and S&P 500 are once again not far from their lowest levels since November 2020.

    Heckuva way to wrap up the third quarter, eh? The stock market actually had a promising start to the quarter in July. But fears about inflation, rate hikes, rising bond yields and recession returned with a vengeance in August and September.

    Continuing a grand tradition of Corporate Rebranding Nonsense, Johnson & Johnson is putting all of its consumer health products under a newly formed parent company.

    Soon, Band-Aid, Tylenol, Benadryl and Johnson’s baby powder will all be sold under the umbrella brand identity “Kenvue.”

    That’s pronounced “Ken,” like the doll, “view.”

    Here’s the deal: Johnson & Johnson, the owner of these labels, is in the process of splitting into two companies — one focused on medical devices and medications, the other on consumer health products, my colleague Nathaniel Meyersohn reports.

    J&J is keeping its recognizable name for its larger pharmaceutical business, but it needed something new for the smaller consumer arm.

    The company said Wednesday that it landed on Kenvue, a combination of “Ken,” an English word for knowledge primarily used in Scotland, and “vue,” a reference to sight.

    “Kenvue” is the winning moniker that a small team from J&J, working with a naming agency, landed on. The goal was to be memorable. And, crucially, to clear trademarks in more than 100 markets and “pass linguistic and cultural screenings in 89 languages and dialects.”

    The company also released Kenvue’s new logo — white letters against a green background, the limbs of the letter “K” resembling a sideways heart.

    What does it mean? Absolutely nothing, and that is the point.

    Corporations gravitate to names that are squeaky clean. There’s no possibility for a negative connotation, because it’s a made-up word. It doesn’t, as far as I can tell, sound like it might resemble a swear word in some other language. Kenvue is inoffensive. Bloodless. It is the tofu of corporate branding.

    “It’s really just a holding company behind all these other brands,” one expert told Nathaniel. “They want a name that will disappear in the background and the brands will stick out.”

    (Mission accomplished. I’ve already forgotten the new name and I just typed it 40 seconds ago.)

    MY TWO CENTS

    The best review I can give of the new brand is that it’s forgettable. Other companies have famously (infamously?) failed to stick the landing with new names.

    Netflix, back in 2011, quickly backtracked after trying to rechristen its DVD mailing service as “Qwikster.” More recently, Fiat Chrysler and PSA Group merged in 2020 under the collective name “Stellantis,” which is still the company’s name, but I still think it sounds like something you should ask your doctor about if you have signs of seasonal depression.

    Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)

    [ad_2]

    Source link

  • US officials troubled by controversial UK tax cut plan | CNN Business

    US officials troubled by controversial UK tax cut plan | CNN Business

    [ad_1]


    New York
    CNN
     — 

    US officials are increasingly troubled by the United Kingdom’s proposal to slash taxes at a time of crushing inflation, a plan that has ignited turbulence in financial markets.

    UK Prime Minister Liz Truss’s tax-cut plan has drawn criticism from economists and investors and prompted the Bank of England to calm panicked markets with an emergency intervention on Wednesday.

    The Biden administration, including the Treasury Department, is concerned by the UK’s tax-cut plan, an administration official familiar with the matter told CNN Thursday.

    The risk for the United States is that any trouble on the other side of the Atlantic could spill over to the global financial system and world economy.

    US Commerce Secretary Gina Raimondo criticized Truss’s plan Wednesday, pointing out that the British pound has “plummeted” since the proposal was unveiled.

    “The policy of cutting taxes, and simultaneously increasing spending, isn’t one that is going to fight inflation in the short term or put you in good stead for long-term economic growth,” Raimondo said in response to a question at an event held by The Hamilton Project at the Brookings Institution.

    Raimondo sought to contrast the UK’s approach with that of the Biden administration.

    “We’re pursuing a different strategy … We’re taking inflation seriously, letting the Federal Reserve do its job, watching deficit spending,” she said. “Investors, businesspeople want to see world leaders taking inflation very seriously. And it’s hard to see that out of this new government.”

    Biden officials have conveyed their worries about the UK plan through the International Monetary Fund, according to Bloomberg News, which previously reported on the concerns of US officials.

    The United States is the largest shareholder in the IMF, which issued a rare criticism of the UK plan this week and urged the country’s officials to “reevaluate” the tax cuts.

    “Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” an IMF spokesperson said earlier this week.

    Truss defended her tax plan, telling CNN’s Jake Tapper last week that her government is incentivizing businesses to invest and helping ordinary people with their taxes.

    Some US officials have been careful not to directly criticize their UK counterparts.

    US Treasury Secretary Janet Yellen on Tuesday declined to comment directly on the UK economic plan, though she noted the UK is dealing with “significant inflation problems” — just like the United States.

    Asked if she is concerned about disorderly markets, Yellen said “markets are functioning well” and she hasn’t seen liquidity problems emerge.

    Yet the large swings in bond and currency markets raise questions about just how well markets are functioning.

    A day after Yellen’s comments, the Bank of England announced an emergency intervention. The central bank promised to buy UK government debt “on whatever scale is necessary” to prevent a bond market crash and ease “dysfunction” in financial markets.

    [ad_2]

    Source link

  • The UK is gripped by an economic crisis of its own making | CNN Business

    The UK is gripped by an economic crisis of its own making | CNN Business

    [ad_1]


    London
    CNN Business
     — 

    A week ago, the Bank of England took a stab in the dark. It raised interest rates by a relatively modest half a percentage point to tackle inflation. It couldn’t know the scale of the storm that was about to break.

    Less than 24 hours later, the government of new UK Prime Minister Liz Truss unveiled its plan for the biggest tax cuts in 50 years, going all out for economic growth but blowing a huge hole in the nation’s finances and its credibility with investors.

    The pound crashed to a record low against the US dollar on Monday after UK finance minister Kwasi Kwarteng doubled-down on his bet by hinting at more tax cuts to come without explaining how to pay for them. Bond prices collapsed, sending borrowing costs soaring, sparking mayhem in the mortgage market and pushing pension funds to the brink of insolvency.

    Financial markets were already in a febrile state because of the rising risk of a global recession and the gyrations caused by three outsized rate increases from a US central bank on the warpath against inflation. Into that “pressure cooker” stumbled the new UK government.

    “You need to have strong, credible policies, and any policy missteps are punished,” said Chris Turner, global head of markets at ING.

    After verbal assurances by the UK Treasury and Bank of England failed to calm the panic — and the International Monetary Fund delivered a rare rebuke — the UK central bank pulled out its bazooka, saying Wednesday it would print £65 billion ($70 billion) to buy government bonds between now and October 14 — essentially protecting the economy from the fallout of the Truss’ growth plan.

    “While this is welcome, the fact that it needed to be done in the first place shows that the UK markets are in a perilous position,” said Paul Dales, chief UK economist at Capital Economics, commenting on the bank’s intervention.

    The emergency first aid stopped the bleeding. Bond prices recovered sharply and the pound steadied Wednesday against the dollar. But the wound hasn’t healed.

    The pound tumbled 1%, falling back below $1.08 early Thursday. UK government bonds were under pressure again, with the yield on 10-year debt climbing to 4.16%. UK stocks fell 2%.

    “It wouldn’t be a huge surprise if another problem in the financial markets popped up before long,” Dales added.

    The next few weeks will be critical. Mohamed El-Erian, who once helped run the world’s biggest bond fund and now advises Allianz

    (ALIZF)    , said that the central bank had bought some time but would need to act again quickly to restore stability.

    “The Band-Aid may stop the bleeding, but the infection and the bleeding will get worse if they do not do more,” he told CNN’s Julia Chatterley.

    The Bank of England should announce an emergency rate hike of a full percentage point before its next scheduled meeting on November 3. The UK government should also postpone its tax cuts, El-Erian said.

    “It is doable, the window is there, but if they wait too long, that window is going to close,” he added.

    The UK government has previewed rolling announcements in the coming weeks about how it plans to change immigration policy and make it easier to build big infrastructure and energy projects to boost growth, culminating in a budget on November 23 at which it has promised to publish a detailed plan for reducing debt over the medium term.

    But it shows no sign of backing away from the fundamental policy choice of borrowing heavily to fund tax cuts that will mainly benefit the rich at a time of high inflation. And the UK Treasury says it won’t bring forward the November announcement.

    Truss, speaking publicly for the first time since the crisis erupted, blamed global market turmoil and the energy price shock from Russia’s invasion of Ukraine for this week’s chaos.

    “This is the right plan that we’ve set out,” she told local radio on Thursday.

    One big problem identified by investors, former central bankers and many leading economists is that her government only set out half a plan at best. It went ahead without an independent assessment from the country’s budget watchdog of the assumptions underlying the £45 billion ($48 billion) annual tax cuts, and their longer term impact on the economy. It fired the top Treasury civil servant earlier this month.

    Charlie Bean, former deputy governor at the Bank of England, told CNN Business that the government was guilty of “really stupid” decisions. His former boss at the bank, Mark Carney, accused the government of “undercutting” UK economic institutions, saying that had contributed to the “big knock” suffered by the country’s financial system this week.

    “This is an economic crisis. It is a crisis… that can be addressed by policymakers if they choose to address it,” he told the BBC.

    British newspapers have started to speculate that Truss will have to fire Kwarteng, her close friend and political soulmate, if she wants to regain the political initiative and prevent her government’s dire poll ratings from plunging even further.

    “Every single problem we have now is self-inflicted. We look like reckless gamblers who only care about the people who can afford to lose the gamble,” one former Conservative minister told CNN.

    But for now she’s trying to tough it out, and cling onto the Reaganite experiment.

    “Raising, postponing, or abandoning tax cuts will be avoided by Truss at all costs as such a reversal would be humiliating and could leave her looking like a lame duck prime minister,” wrote Mujtaba Rahman and Jens Larson at political risk consultancy Eurasia Group.

    The only alternative left to balance the books would be to slash government spending, and that would prove equally politically difficult as the country enters a recession with its public services under enormous strain and a restive workforce that has shown it’s ready to strike in large numbers over pay.

    “Truss and Kwarteng are now facing a severe economic crisis as the world’s financial markets wait for them to make policy changes that they and the Conservative party will find unpalatable,” the Eurasia analysts wrote.

    The foreign investors who keep the British economy solvent are left scratching their heads for another eight weeks, leaving plenty of time for doubts to surface again about the UK government’s commitment to responsible fiscal policymaking.

    “The message of financial markets is that there is a limit to unfunded spending and unfunded tax cuts in this environment and the price of those is much higher borrowing costs,” Carney said.

    That leaves the Bank of England in a tight spot. A week ago it was pressing the brakes on the economy to take the heat out of price increases, even as the government tried to juice growth. The task got even harder this week when it was forced to dust off its crisis playbook and bail out the government.

    It may not be long before it has to intervene again, this time with an emergency rate hike.

    “[Wednesday’s] intervention is designed to stabilize UK government bond prices, keep the bond market liquid and prevent financial instability but that won’t necessarily stop sterling falling further, with its attendant inflationary consequences,” Bean, the former central banker, told CNN Business.

    “I think there is still a good chance they will need to act ahead of the November meeting,” he added.

    — Julia Horowitz, Luke McGee, Anna Cooban, Rob North, Livvy Doherty and Morgan Povey contributed to this article.

    [ad_2]

    Source link

  • There’s a 98% chance of a global recession, research firm warns | CNN Business

    There’s a 98% chance of a global recession, research firm warns | CNN Business

    [ad_1]


    New York
    CNN Business
     — 

    Warning lights are flashing in the global economy as high inflation, drastic rate hikes and the war in Ukraine take their toll.

    There is currently a 98.1% chance of a global recession, according to a probability model run by Ned Davis Research.

    The only other times that recession model was this high has been during severe economic downturns, most recently in 2020 and during the global financial crisis of 2008 and 2009.

    “This indicates that the risk of a severe global recession is rising for some time in 2023,” economists at Ned Davis Research wrote in a report last Friday.

    As central banks ramp up their efforts to get inflation under control, economists and investors are growing gloomier.

    Seven out of 10 economists surveyed by the World Economic Forum consider a global recession at least somewhat likely, according to a report published Wednesday. Economists dialed back their forecasts for growth and expect inflation-adjusted wages to keep falling the rest of this year and next.

    Given surging food and energy prices, there are concerns that the high cost of living could lead to pockets of unrest. Seventy-nine percent of the economists surveyed by the World Economic Forum expect rising prices to trigger social unrest in low-income countries, compared to a 20% expectation in high-income economies.

    Investors are also getting more concerned, with the Dow Jones Industrial Average sinking into a bear market Monday for the first time since March 2020.

    “Our central case is a hard landing by the end of ’23,” billionaire investor Stanley Druckenmiller said at the CNBC Delivering Alpha Investor Summit Wednesday. “I will be stunned if we don’t have a recession in ’23.”

    Even Federal Reserve officials have conceded there is a growing risk of a downturn.

    Still, there are clearly bright spots, especially in the United States, the world’s largest economy.

    The US jobs market remains historically strong, with the unemployment rate sitting near the lowest levels since 1969. Consumers continue to spend money and corporate profits are sturdy.

    There are also hopes that the worst US inflation in 40 years will cool off in the coming months as supply catches up with demand.

    The Ned Davis researchers said that although recession risks are rising, its US recession probability model is “still at rock-bottom levels.”

    “We do not have conclusive evidence that the US is currently in recession,” the researchers wrote in the report.

    [ad_2]

    Source link

  • Putin’s ruthless power play may not preclude a revival of Ukraine grain deal | CNN Politics

    Putin’s ruthless power play may not preclude a revival of Ukraine grain deal | CNN Politics

    [ad_1]



    CNN
     — 

    Russian President Vladimir Putin just reminded the world that he has the capacity to apply pain far beyond the excruciating torment he’s inflicting on Ukraine.

    Russia’s suspension of a deal allowing the export of Ukrainian grain from a region fabled as the world’s bread basket threatens to cause severe food shortages in Africa and send prices spiraling in supermarkets in the developed world. In the United States, it represents a political risk for President Joe Biden, who is embarking on a reelection campaign and can hardly afford a rebound of the high inflation that hounded US consumers at its peak last year.

    Russia’s decision looked at first sight like a face-saving reprisal for an attack claimed by Ukraine on a bridge linking the annexed Crimean peninsula to the Russian mainland. The bridge was a vanity project for Putin and the apparent assault represented another humiliation for the Russian leader in a war that has gone badly wrong.

    The Black Sea grain deal, agreed last year and brokered by Turkey and the United Nations, was a rare diplomatic ray of light during a war that has shattered Russia’s relations with the US and its allies and has had global reverberations.

    By refusing to renew it, Putin appears again to be seeking to impose a cost on the West, in return for the sanctions strangling the Russian economy. He may reason that a food inflation crisis might help splinter political support in NATO nations for the prolonged and expensive effort to save Ukraine. And grain shortages afflicting innocent people in the developing world could exacerbate international pressure for a negotiated end to a war that has turned into a disaster for Russia.

    The United States and other Western powers reacted to Russia’s announcement that the deal had been “terminated” with outrage, mirroring Ukrainian President Volodymyr Zelensky’s warning that Putin was trying to “weaponize hunger.”

    Secretary of State Antony Blinken warned that Russia was trying to use food as a tool in its war on Ukraine, adding that the tactic would make “food harder to come by in places that desperately need it and have prices rise … The bottom line is, it’s unconscionable. It should not happen.”

    Singling Russia out as a moral transgressor might be understandable given the horror it has visited on Ukraine and may rally fury over Putin’s move in the West and the developing world. But humanitarian arguments won’t sway a Russian president who launched an unprovoked onslaught on a sovereign neighbor and is accused of presiding over brutal war crimes.

    Still, Russia’s rhetoric after canceling the deal and the reactions from key players elsewhere in Eurasia suggest that the agreement may not be quite as terminated as the Kremlin claims. There’s a chance Putin sees a grain showdown as a way to improve his dire position.

    In a clear sign of diplomatic maneuvering, Russia justified its cancellation of the agreement by saying that it was not getting its share of the benefits. noting that it had faced obstacles with its own food exports. Kremlin spokesman Dmitry Peskov hinted, however, that Moscow might allow the return of exports from Ukraine’s Black Sea ports once its objectives were achieved.

    But UN Secretary General António Guterres underscored how difficult it might be to return to the deal with a categorical repudiation of Russia’s points in a letter to Putin, arguing that under the agreement, the Russian grain trade had reached high export volumes and fertilizer markets were nearing full recovery with the return of Russian produce. Guterres said that he’d sent Russia proposals to keep the grain deal alive but that he was “deeply disappointed” that his efforts went unheeded.

    The UN chief’s comments reinforced a view that, for now, Russia sees a point of leverage in refusing to renew the Black Sea grain deal. The decision comes against a complicated geopolitical backdrop following last week’s NATO summit at which G7, nations pledged to offer Ukraine the means of its self-defense for years to come.

    It may also represent the latest chess move in a shady double game of great power geopolitics being waged by a pair of Machiavellian autocrats — Putin and Turkish President Recep Tayyip Erdogan, who are due to meet in August.

    Erdogan won prestige and the gratitude of his fellow NATO leaders and developing nations for brokering the original grain deal. But he has angered Russia in recent days, despite keeping open channels with Putin during the war. It’s conceivable the Russian leader could be sending a shot across the bows of his Turkish partner by canceling out his achievement.

    Russia was infuriated last week when Turkey sent a group of captured Ukrainian military commanders back to Zelensky despite a previous agreement they would not go home until after the war. Erdogan also risked his relationship with Putin by dropping opposition to Sweden’s entry into NATO, a move that significantly weakened Russia’s strategic position in Europe.

    But it was noticeable that Erdogan, who has a reputation for cannily playing his cards to enhance his own and Turkey’s influence, referred to Putin as his “friend” on Monday and suggested that the Russian leader might want to keep the “humanitarian bridge” of grain exports open.

    If he could somehow engineer a return to the deal, Erdogan could again bolster his place at the hinge of Eurasian great power politics. He’d also boost his goal of emerging as a leader among developing world nations and do a favor for Western leaders fearing an inflationary spike.

    Michael Kimmage, who served on the policy planning staff at the State Department between 2014 and 2016 and is now a professor at Catholic University of America in Washington, argues that Turkey is in a unique position, since it possesses considerable leverage inside NATO but also has robust relationships with both Ukraine and Russia.

    “I think it’s very possible that even before the Putin-Erdogan meeting there could be a resumption of the grain deal because that keeps Russia to a degree in the good graces of the international community,” Kimmage said.

    Reviving the grain deal would show that Russia, in its isolation, retains some Turkish support, Kimmage added, but the episode also demonstrates to the rest of the world that “when Russia wants, it can turn off the grain deal and be an enormous pain in the neck in the Black Sea.”

    First video of damage to Crimean bridge surfaces after reported strike

    While the war in Ukraine has consumed Russia’s foreign policy, Moscow has also made intense efforts to carve out its own influence in Africa and elsewhere in opposition to the United States. So it may risk damaging its own priorities by triggering widespread food shortages, especially since much of Ukraine’s grain is used in World Food Programs to alleviate famine in Africa.

    While the White House is fueling a sense of moral outrage over Russia’s move, it quickly dismissed another potential response – an attempt to bust a Russian blockade in the Black Sea.

    “That’s not an option that’s being actively pursued,” John Kirby, the coordinator for strategic communications at the National Security Council, said Monday in a comment that was in line with Biden’s goal of avoiding any direct NATO clash with Russia, a nuclear superpower.

    While the end of the grain deal would cause significant global hardship, its worst effects may be weeks away – so there could be time for diplomacy to work.

    Nicolay Gorbachov, the President of the Ukrainian Grain Association, told Isa Soares on CNN International on Monday that exports by road, rail and river could mitigate the most damaging effects of the collapse of the deal for two or three weeks, even if such transportation methods lacked the volume of shipborne cargoes.

    But he also warned that ultimately, if Ukraine could not export its grain – “all of us, in developed countries, in developing countries, will face food inflation.”

    “In my opinion, the international community, the developed countries have to find the leverage to move grain from Ukraine to the world market,” he said.

    [ad_2]

    Source link

  • LinkedIn to cut 716 jobs and shut its China app amid ‘challenging’ economic climate | CNN Business

    LinkedIn to cut 716 jobs and shut its China app amid ‘challenging’ economic climate | CNN Business

    [ad_1]


    Hong Kong
    CNN
     — 

    LinkedIn, the world’s largest social media platform for professionals, is cutting 716 positions and shutting down its jobs app in mainland China, the California-based company announced.

    The decision was made amid shifts in customer behavior and slower revenue growth, CEO Ryan Roslansky said Monday in a letter to employees.

    “As we guide LinkedIn through this rapidly changing landscape, we are making changes to our Global Business Organization and our China strategy that will result in a reduction of roles for 716 employees,” he said.

    LinkedIn, owned by Microsoft

    (MSFT)    , has joined a slew of US tech companies that have made significant job cuts this year. Meta announced in March an additional 10,000 layoffs on top of mass layoffs announced in 2022. Amazon also said during the same month it would eliminate 9,000 positions, on the heels of the 18,000 roles the company announced it was cutting in January.

    “As we plan for [the fiscal year of 2024], we’re expecting the macro environment to remain challenging,” Roslansky said. “We will continue to manage our expenses as we invest in strategic growth areas.”

    As part of the move, LinkedIn will phase out InCareer, its app for mainland China, by August 9.

    Roslansky cited “fierce competition” and “a challenging macroeconomic climate” as the reason for the shutdown.

    LinkedIn will retain some presence in China, including providing services for companies operating there to hire and train employees outside the country, according to a company spokesperson.

    LinkedIn is the last major Western social media app still operating in mainland China. Twitter, Facebook and Youtube have been banned in the country for more than a decade. Google left in early 2010.

    LinkedIn first entered China in 2014 by launching a localized version of its main app. But its moves to censor posts in the country, in accordance with Chinese laws, came under criticism.

    In March 2021, LinkedIn had to suspend signups in China to ensure it was “in compliance with local law.” A few months later, it replaced that app with InCareer, which was focused solely on job postings, with no social networking features such as sharing or commenting.

    The US social media site has faced tough competition in China. By 2021, it had more than 50 million members in the country, making it the company’s third biggest market after the United States and India. But it lagged behind local competitors such as Maimai.

    Maimai was launched in 2013 and dubbed the Chinese version of LinkedIn. In a few years it surpassed LinkedIn to become the most popular professional networking platform in the country, with 110 million verified members. A major feature that powered its success was that it allowed users to post anonymously in a chat forum.

    The operating environment in China has also become more challenging. Since Xi Jinping took power in 2012, he has tightened control over what can be said online and launched a series of crackdowns on the internet.

    “While we’ve found success in helping Chinese members find jobs and economic opportunity, we have not found that same level of success in the more social aspects of sharing and staying informed,” LinkedIn wrote in an October 2021 blog post. “We’re also facing a significantly more challenging operating environment and greater compliance requirements in China.”

    [ad_2]

    Source link

  • Britain’s ‘profound economic crisis’ gives Rishi Sunak only unpleasant choices | CNN Business

    Britain’s ‘profound economic crisis’ gives Rishi Sunak only unpleasant choices | CNN Business

    [ad_1]


    London
    CNN Business
     — 

    Rishi Sunak, Britain’s third prime minister in seven weeks, took office on Tuesday with a pledge to fix the “mistakes” of predecessor Liz Truss and tackle a “profound economic crisis.”

    The task won’t be an easy one, he acknowledged.

    “This will mean difficult decisions to come,” Sunak said in his first speech from No. 10 Downing Street.

    The United Kingdom was already sliding towards a recession when Truss took office in September, as soaring energy bills ate into spending. Now, Sunak has another headache: He must restore the government’s credibility with investors after Truss’ unfunded tax cuts sparked a bond market revolt, forcing the Bank of England to intervene to prevent a financial meltdown. Borrowing costs, including mortgage rates, shot higher.

    Accomplishing this goal will require delivering a detailed plan to put public finances on a more sustainable path. (A government watchdog warned in July that without major action, debt could reach 320% of the UK’s gross domestic product in 50 years.)

    The problem? There’s little appetite for government spending cuts after years of austerity in the wake of the 2008 global financial crisis. Plus, failing to help households deal with surging living costs could prove politically devastating and further weigh on the economy.

    “It’s not a particularly pleasant economic hand to be dealt [as] a new prime minister,” said Ben Zaranko, a senior research economist at the Institute for Fiscal Studies.

    Finance minister Jeremy Hunt got the ball rolling last week when he reversed £32 billion ($37 billion) in tax cuts that formed the bedrock of Truss’ plan to boost growth.

    Yet Sunak and Hunt — who will stay in his job — still need to find between £30 billion and £40 billion in savings to bring down public debt as a share of the economy in the next five years, according to calculations by IFS, an influential think tank.

    “It is going to be tough,” Hunt said in a tweet. “But protecting the vulnerable — and people’s jobs, mortgages and bills — will be at the front of our minds as we work to restore stability, confidence and long-term growth.”

    Sunak and Hunt won’t have the option of going light on the details. If investors don’t buy into their plan and borrowing costs shoot up again, getting the situation under control would only become trickier, as interest payments on government debt rise.

    “If markets don’t [see] the plans as credible, then filling the fiscal hole could become even harder,” said Ruth Gregory, senior UK economist at Capital Economics.

    One area Sunak may be tempted to tap is the social welfare budget. Questions have swirled about whether the Conservative government may try to avoid boosting state benefits in line with inflation, as is customary. (American recipients of Social Security will receive the biggest cost-of-living adjustment in more than four decades next year.)

    Most UK working-age benefits would typically go up by 10.1% next April based on inflation data. But there’s speculation the increase could be linked instead to average earnings, which are growing at a much slower rate than inflation. That could save £7 billion ($8 billion) in 2023-24, according to IFS.

    Such a move would prove controversial, however — especially since benefits have not kept up with rampant inflation in 2022.

    “I would like to see if we could find a way to increase benefits by inflation, but what I will say is that trade-offs are involved,” former Conservative cabinet minister Sajid Javid told ITV this week.

    A more palatable option, at least for households, would be extracting more taxes from corporations.

    Hunt has already said that corporate taxes will rise from 19% to 25% next spring. The Financial Times has reported that Hunt could also target earnings from oil and gas companies by extending a windfall tax on profits.

    In an interview with the BBC earlier this month, Hunt said he was “not against the principle” of windfall taxes and that “nothing is off the table.” Higher taxes on the financial sector are also under consideration, according to the Financial Times.

    Industry groups are already circling the wagons. Banking trade association UK Finance said its members already pay “a higher rate of taxation overall than any other sector,” and urged the government not to “risk the competitiveness of the UK’s banking and finance industry.”

    Sunak could also walk back Truss’ commitment to boosting defense spending to 3% of the economy by 2030, though that carries its own political risks given Russia’s war in Ukraine. Other countries in the region, such as Germany, have said they will ramp up military investments, and the United Kingdom may be loath to fall behind, Zaranko said.

    Investors and economists expect that the government will announce a mixture of tax increases and spending cuts shortly. Hunt is due to reveal his plans in greater depth on October 31.g

    “Despite the fiscal U-turns, the government will still need to show a fiscally credible path next week in the budget to balance the books,” Sonali Punhani, an economist at Credit Suisse, said in a note to clients this week.

    That could exacerbate the country’s downturn. The Bank of England has projected that the United Kingdom is already in a recession, and a gauge of business activity in October slumped to its lowest level in 21 months.

    “We are seeing quite a dramatic shift in the fiscal outlook from being much looser than we expected just a few weeks ago to being much tighter than we expected,” Gregory of Capital Economics said. “I think the risk is that the recession is deeper or longer than we expect.”

    A weaker economy would present its own complications.

    No one wants to repeat the errors of the brief Truss era, when her gamble that unfunded tax cuts would jumpstart growth backfired spectacularly.

    But business groups are warning that completely abandoning the objective of boosting Britain’s anemic economic growth would create problems, too.

    The austerity of the 2010s produced “very low growth, zero productivity and low investment,” Tony Danker, head of the Confederation of British Industry, told the BBC on Tuesday.

    “The country could end up in a similar doom loop where all you have to do is keep coming back every year to find more tax rises and more spending cuts, because you’ve got no growth.”

    [ad_2]

    Source link