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Tag: Economic policy

  • Favoring continuity, China reappoints central bank governor

    Favoring continuity, China reappoints central bank governor

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    BEIJING — China on Sunday reappointed Yi Gang as head of the central bank in an effort to reassure entrepreneurs and financial markets by showing continuity at the top while other economic officials change during a period of uncertainty in the world’s second-largest economy.

    Yi, whose official title is governor of the People’s Bank of China, plays no role in making monetary policy, unlike his counterparts in other major economies. His official duties lie in “implementing monetary policy,” or carrying out decisions made by a policymaking body whose membership is a secret.

    But the central bank governor acts as spokesperson for monetary policy, is the most prominent Chinese figure in global finance and is in charge of reassuring bankers and investors at a time when China’s economy is emerging from drastically slower growth.

    At the March 5 opening of the annual session of China’s rubber-stamp parliament, the National People’s Congress, China announced plans for a consumer-led revival of the struggling economy, setting this year’s growth target at “around 5%.”

    Last year’s growth fell to 3%, the second-weakest level since at least the 1970s, putting president and head of the ruling Communist Party Xi Jinping under exceptional pressure to revitalize the economy.

    A longtime veteran of monetary policy departments, Yi was first appointed governor of the People’s Bank of China in March 2018, taking over from the highly regarded Zhou Xiaochuan.

    Before becoming governor, Yi spent 20 years at the central bank after getting his Ph.D. from the University of Illinois and working as a professor of economics at Indiana University from 1986 to 1994.

    He is also a co-founder and professor at Peking University’s China Center for Economic Research.

    The party made a similar decision to opt for continuity in 2013, when then-PBOC governor Zhou, who already had been in the job for a decade, stayed on as governor while all other economic regulators changed.

    Yi’s reappointment came on the congress’s penultimate day, which also saw Xi loyalists appointed as finance minister and head of the Cabinet planning agency to carry out a program to tighten control over entrepreneurs, reduce debt risks and promote state-led technology development. Incumbent Wang Wentao was reappointed minister of commerce.

    The congress also named four vice premiers, individuals who may be in line for higher office. They include sixth-ranking member of the party’s all-powerful Politburo Standing Committee Ding Xuexiang as vice premier overseeing administrative matters. Veteran bureaucrats He Lifeng, Zhang Guoqing and Liu Guozhong were also named to the post. Liu and Zhang were incumbents.

    Foreign Minister Qin Gang was also appointed to the position of state councilor, a position also held by Wang Yi, his predecessor and current superior as director of the party’s Office of the Central Foreign Affairs Commission.

    Defense Minister Li Shangfu, an aerospace engineer by training, was also named one of the five state councilors, along with Minister of Public Security Wang Xiaohong and Secretary General of China’s Cabinet, known as the State Council, Wu Zhenglong. Shen Yiqin was the only woman named to the position and is China’s highest-ranking female politician.

    No women sit on the 24-member Politburo or its standing Committee, and the party’s more-than-200-member Central Committee is 95% male.

    A priority for finance officials will be to manage corporate and household debt that Beijing worries has risen to dangerous levels. Tighter debt controls triggered a slump in China’s vast real estate industry in 2021, adding to the COVID-19 pandemic’s downward pressure on the economy.

    At the same time, the ruling party is trying to shift money into technology development and other strategic plans. That has prompted warnings too much political control over emerging industries could waste money and hamper growth.

    Xi has favored promoting officials who sometimes lack the experience of their predecessors and exposure to global industry and finance markets. That reflects Xi’s effort to purge the Chinese system of Western influence and promote homegrown strategies.

    ___

    AP writer Joe McDonald contributed to this report.

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  • Takeaways from the February jobs report | CNN Business

    Takeaways from the February jobs report | CNN Business

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    Minneapolis
    CNN
     — 

    February’s jobs report had a little something for everyone.

    For workers, there were jobs; for employers, there were workers filling shortfalls caused by the pandemic; for the Federal Reserve, there were indications that the labor market was loosening and wage pressures were easing.

    Then again, the total of 311,000 net jobs added was significantly higher than expectations of 205,000, and the unemployment rate surprisingly grew to 3.6%.

    The report was a “mixed bag” at a time when the Fed — which this week signaled a more hawkish approach after a strong batch of recent economic data — is weighing to go lighter or heavier on rate hikes.

    Here are some takeaways from Friday’s report:

    Economists were anticipating that January’s blockbuster 504,000 net job gain was an anomaly due to a combination of factors such as annual data adjustments, warm weather and employers hoarding workers.

    But the US labor market in February showed that, overall, it remained fairly resistant to the Fed’s yearlong barrage of interest rate hikes. The latest employment snapshot from the Bureau of Labor Statistics also showed only a slight downward revision to the January jobs total.

    “This report, it’s not about the Federal Reserve, it’s not about inflation, it’s about you; it’s about how workers are doing,” said Claudia Sahm, founder of Sahm Consulting and a former Fed economist. “And once again, we had a month in which we were adding jobs on net, and this is really good for workers.”

    There are also encouraging signs for employers, she said, noting some of the biggest gains were in industries that have been suffering from the deepest shortages since the pandemic.

    The leisure and hospitality industry added 105,000 jobs in February, accounting for 34% of the entire month’s total gains and putting the sector that much closer to matching its pre-pandemic levels. As of February, the leisure and hospitality industry was 410,000 jobs, or 2.42%, shy of February 2020 employment levels, a CNN analysis of BLS data shows.

    “Right now, we’re still in a phase of getting back to normal in terms of not having labor shortages, not having the costs of serving customers rise and rise,” Sahm said. “I would much rather see us get back to normal by workers coming back as opposed to customers going away.”

    Despite the Fed hammering out a succession of rate hikes during the past year, construction employment hasn’t yet faltered. In February, the construction industry added 24,000 jobs, marking 12 consecutive months of employment growth.

    “Contractors are continuing to work through existing backlogs that have grown over the past two years as new opportunities arose and supply chain issues extended construction timelines,” wrote Nick Grandy, construction and real estate senior analyst at RSM US.

    Notable sectors that recorded job losses during the month were in information, which was down another 25,000 jobs (-0.8%); transportation and warehousing, which was down 21,500 jobs (0.3%); and manufacturing, which was down 4,000 positions.

    While the headline job figure and relatively minimal losses show overall strength, there is an indication of a pullback across industries. The BLS’ employment diffusion index, which shows the percentage of 250 industries that added jobs, fell to 56, which is the lowest reading since April 2020.

    “That indicates that the impact of high interest rates is spilling over to more industries,” said Julia Pollak, chief economist at ZipRecruiter.

    The labor market has remained extremely tight and fairly out of whack for the past three years. Friday’s report showed that “a modicum of slack crept back into the jobs market,” wrote Wells Fargo economists Sarah House and Michael Pugliese.

    The unemployment rate moved to 3.6% from its 53-year-low of 3.4%. That increase was in part due to more people reentering the workforce and joining the ranks of the unemployed, which the BLS classifies as people without jobs actively searching for work.

    February’s employment report showed a 0.1 percentage point increase in the labor force participation rate to 62.5% — the highest it’s been since April 2020.

    The average workweek ticked down to 34.5 hours from a revised 34.6 hours, signaling a “significant overall drop” in labor demand, said Brad McMillan, chief investment officer for Commonwealth Financial Network.

    Still, with the prime-age employment to population ratio increasing to 80.5% — on par with early 2020 levels — there may be little space left for sustained labor supply gains, according to Matt Colyar, a Moody’s Analytics economist.

    “February’s figure, apart from early 2020 readings, is higher than any rate during the previous decade-long expansion,” Colyar noted. “Even in corners of the economy where demand has slumped, businesses have shown little appetite to lay off workers en masse. As other sectors continue to hire rapidly, an acceleration in wage growth will remain a looming threat.”

    A softening in average hourly earnings is helping fuel hopes for a soft landing.

    At 0.2% on the month, wage growth was below expectations and measured 4.6% year over year.

    “There were signs in today’s report that progress on inflation can be made without torpedoing employment,” the Wells Fargo economists noted.

    As of February, the annualized rate of wage growth during the past three months is slightly under 3.6%, a pace seen when inflation was below the Fed’s target, said economist Dean Baker, co-founder of the Center for Economic and Policy Research.

    “Perhaps most important from the Fed’s perspective is the slowdown in wage growth,” Baker wrote in a statement. “The 3.6% annual rate over the last three months can hardly be seen as posing a serious threat of inflation. This slowing in the average hourly wage, coupled with the 4% rate reported in the fourth quarter Employment Cost Index, should provide solid evidence that wage growth has slowed sharply.”

    A hot batch of January economic data helped to send the Fed into a more hawkish turn. Fed Chair Jerome Powell told members of Congress this week that the Fed is prepared to increase the pace of its rate hikes if warranted.

    “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell told lawmakers.

    There’s still more data to come before the Fed meets for its two-day policymaking meeting on March 21-22, notably the Consumer Price Index, Producer Price Index and the Commerce Department’s retail sales report. However, Friday’s jobs report likely won’t spur a more dovish turn from the Fed, said Sean Snaith, an economist and director of the University of Central Florida’s Institute for Economic Forecasting.

    “We didn’t go from a four-alarm fire to a five-alarm fire with this data report, but the inflation flames aren’t out either,” he wrote in a note Friday. “And nothing today indicates that the Fed needs to change its more aggressive approach to raising interest rates.”

    Still, economist Gregory Daco cautioned that the Fed shouldn’t fall into the trap of confirmation bias by letting the stronger-than-expected economic data influence the analysis of Friday’s jobs report and next week’s CPI report.

    The Fed may see the low unemployment rate and the robust job gains as fueling wage growth, said Daco, chief economist at EY Parthenon.

    “Our view, however, is slower job growth in the goods sector, easing hours worked and moderating sequential wage growth momentum and a rise in the labor force participation rate indicate a welcome easing of labor market tightness,” Daco noted. “While we acknowledge this report was by no means a weak one, we also observe that some of the job gains were in sectors where there has been a structural employment shortfall — health care and education in particular. Employment strength in those sectors may not be indicative of cyclical wage pressures, but rather easing structural constraints.”

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  • The US economy added 311,000 jobs in February, outpacing expectations | CNN Business

    The US economy added 311,000 jobs in February, outpacing expectations | CNN Business

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    Minneapolis
    CNN
     — 

    The US economy added 311,000 jobs in February, according to the latest monthly employment snapshot from the Bureau of Labor Statistics, released Friday.

    That’s a pullback from the blockbuster January jobs report, when a revised 504,000 positions were added, but shows the labor market is still emitting plenty of heat.

    The unemployment rate ticked up to 3.6% from 3.4%.

    February’s net job gains surpassed economists’ estimates for a more modest month, with only 205,000 to be added. Separately, downward revisions to December’s and January’s totals weren’t that drastic.

    While Friday’s report is a strong one, that’s actually bad news in the broader context of the Federal Reserve’s campaign to curb high inflation, said PNC Financial Services chief economist Gus Faucher.

    “It’s much hotter than the economy can run, and so this means the Fed is going to have to continue to hike interest rates,” he told CNN. “And that makes a recession more likely.”

    Barring a surprisingly low Consumer Price Index inflation report next week, Faucher said he expects the Fed to go forward with a half-point rate hike at its March 21-22 meeting, which would be a higher pace than the recent, more moderate quarter-point increase.

    The Fed has been battling for almost a year to slow the economy and crush the highest inflation in 40 years, but the labor market continues to defy those efforts.

    “Coming up on the one-year anniversary of the Fed’s first rate hike, we never thought we would see the economy churning out 311,000 more jobs this month,” said Chris Rupkey, chief economist of FwdBonds, in a statement. “The party is on and the labor market is having a blast. The economy clearly is not landing, it is soaring.”

    The monthly job gains remain well above pre-pandemic norms, when roughly 180,000 jobs were added per month between 2010 and 2019, BLS data shows. However, the labor market remains tight and imbalances continue to persist in the ongoing recovery efforts from the devastating pandemic.

    Labor turnover data released earlier this week for January showed that there were 1.9 job openings for every person looking for one. Fed Chair Jerome Powell has frequently highlighted how the labor market remains short of pre-pandemic growth projections by more than 3 million people.

    The pandemic accelerated expected demographic trends (the aging out of the massive Baby Boom generation) with increased retirements; people also dropped out of the workforce for care-related needs and health concerns such as long Covid; and there were hundreds of thousands of workers who died from Covid.

    February’s employment report showed a 0.1 percentage point increase in the labor force participation rate to 62.5% — the highest its been since April 2020. However, it remains below pre-pandemic levels of 63.4%.

    Additionally, there was some upward movement in the jobless rate, which increased 0.2 percentage points to 3.6%.

    “Contributing to upward pressure here, there were more people looking for work,”said Mark Hamrick, senior economic analyst at Bankrate.

    Industries with notable job gains included leisure and hospitality, retail trade, government and health care. After being crushed during the pandemic, the leisure and hospitality has been steadily adding back employees and trying to meet increased demand from consumers shifting their spending from goods to services.

    Average hourly earnings — a closely watched metric as the Fed seeks to evaluate the impact of rising wages on inflation — grew 0.2% month-on-month and were up 4.6% over the year before.

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  • Former Ohio House speaker convicted in $60 million bribery scheme | CNN Politics

    Former Ohio House speaker convicted in $60 million bribery scheme | CNN Politics

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    CNN
     — 

    A former Republican speaker of Ohio’s House of Representatives was convicted by a federal jury Thursday on racketeering conspiracy charges in connection with a $60 million bribery scheme.

    Former Speaker Larry Householder and former Ohio Republican Party Chair Mathew Borges, who was also convicted Thursday, could face up to 20 years in prison for orchestrating the scheme to accept bribes in exchange for ensuring the passage of a billion-dollar bailout for a nuclear energy company.

    “As presented by the trial team, Larry Householder illegally sold the statehouse, and thus he ultimately betrayed the great people of Ohio he was elected to serve,” said US Attorney Kenneth Parker.

    Steven Bradley, an attorney for Householder, expressed disappointment with the verdict.

    “We will take some time to discuss and evaluate our legal options moving forward and will most certainly pursue an appeal,” he said. “Larry is looking forward to going home and spending time with his family after what has been an exhausting seven week trial.”

    CNN reached out to an attorney for Borges for comment.

    The release did not explicitly identify the nuclear energy company involved in the scheme but noted that utility company FirstEnergy Corp. previously agreed to pay a $230 million penalty for “conspiring to bribe public officials and others” as part of a deferred prosecution settlement.

    Jennifer Young, a manager for external communications at FirstEnergy Corp., told CNN that “while it would be inappropriate to comment on the verdict, FirstEnergy has taken decisive actions over the past several years to strengthen our leadership team and ensure a culture of strong ethics, integrity and accountability across the company.”

    Jeffrey Longstreth, Householder’s longtime campaign and political strategist, and Juan Cespedes, a lobbyist, previously pleaded guilty to their roles in the racketeering conspiracy.

    Beginning in March 2017, FirstEnergy began making quarterly $250,000 payments to Householder’s tax-exempt social welfare account named Generation Now, US attorneys in Ohio’s southern district laid out in their case.

    Householder’s team then used that money to support the passage of House Bill 6, a $1 billion bailout that saved two nuclear power plants operated by FirstEnergy Corp., and stop a ballot effort to overturn the law.

    Millions of those dollars went to Householder’s bid for speaker, to other state House candidates likely to support him and to his team’s own pockets.

    Householder spent over $500,000 of those funds to “pay off his credit card balances, repair his Florida home and settle a business lawsuit,” according to prosecutors.

    Borges used about $366,000 for his own benefit and used another $15,000 to bribe an Ohio Republican operative for information on the number of signatures collected on the ballot referendum opposing HB 6, the news release said.

    Householder and his associates were arrested and charged with racketeering conspiracy in July 2020.

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  • Buying bank stocks before a recession used to be madness. Not anymore | CNN Business

    Buying bank stocks before a recession used to be madness. Not anymore | CNN Business

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    London
    CNN
     — 

    Investors are bucking tradition this year by piling into big bank stocks just as major economies are expected to either slow down or fall into recession.

    The Stoxx Europe 600 Banks index, a group of 42 big European banks, climbed 21% between the start of the year and late February — when it hit a five-year high — outperforming its broader benchmark index, the Euro Stoxx 600

    (SXXL)    . The KBW Bank Index, which tracks 24 leading US banks, has risen by a more modest 4% so far this year, slightly outpacing the broader S&P 500

    (DVS)    .

    Both bank-specific indexes have surged since lows hit last fall.

    The economic picture is far less rosy. The United States and the biggest economies in the European Union are expected to grow at a much slower rate this year than last, while UK output is likely to contract. A sudden recession “at some stage” is also a risk for the United States, former Treasury Secretary Larry Summers told CNN Monday.

    But the widespread economic weakness has coincided with high inflation, forcing central banks to raise interest rates. That’s been a boon for banks, helping them make heftier returns on loans to households and businesses, and as savers deposit more of their money into savings accounts.

    Rate hikes have buoyed the stocks of big banks, but so too has a greater confidence in their ability to weather economic storms 15 years after the 2008 global financial crisis nearly toppled them, fund managers and analysts told CNN.

    “Banks are, generally speaking, much stronger, more resilient, more capable to [withstand a] recession,” than in the past, said Roberto Frazzitta, global head of banking at consultancy Bain & Company.

    Interest rates in major economies started climbing last year as policymakers launched their campaigns against soaring inflation.

    The steep rate hikes followed a prolonged period of ultra-low borrowing costs that started in 2008. As the financial crisis ravaged economies, central banks slashed interest rates to unprecedented lows to incentivize spending and investment. And, for more than a decade, they barely budged.

    Banks are a less attractive bet for investors in that environment as lower interest rates often feed into lower returns for lenders.

    “[The] post-crisis period of very low interest rates was seen as very bad for bank profitability, it squeezed their margins,” said Thomas Mathews, senior markets economist at Capital Economics.

    But the rate hiking cycle that got underway last year, and shows few signs of abating, has changed investors’ calculations. Fed Chair Jerome Powell said Tuesday that interest rates would rise more than people anticipated.

    Higher potential returns for shareholders are drawing investors back into the sector. For example, the average dividend yield for bank stocks in Europe — the amount of money a company pays its shareholders every year as a proportion of its share price — is now around 7%, said Ciaran Callaghan, head of European equity research at Amundi, a French asset management firm.

    By comparison, the dividend yield for the S&P 500 currently stands at 2.1%, and for the Euro Stoxx 600 at 3.3%, according to Refinitiv data.

    European bank stocks have risen particularly sharply in the past six months.

    Mathews at Capital Economics attributed their outperformance relative to US peers partly to the fact that interest rates in the countries that use the euro are still closer to zero than in the United States, meaning that investors have more to gain from rates rising.

    It can also be put down to Europe’s remarkable reversal of fortune, he said.

    Wholesale natural gas prices in the region, which hit a record high in August, have tumbled back to their levels seen before the Ukraine war, and a much-feared energy shortage has been avoided this winter.

    “Only a few months ago people were talking about a very deep recession in Europe compared to the US,” Mathews said. “As those worries have unwound, European banks have done particularly well.”

    But European economies are still fragile. When economic activity slows down, bank stocks are typically among those hit hardest. That’s because banks’ earnings are, to varying extents, tied to borrowers’ ability to repay their loans, as well as to consumers’ and businesses’ appetite for more credit.

    This time around, though — unlike in 2008 — banks are in a much better position to withstand defaults on loans.

    After the global financial crisis, regulators sprang into action, requiring lenders, among other measures, to have a large capital cushion against future losses. Capital is made up of a bank’s own funds, rather than borrowed money such as customer deposits.

    Lenders must also hold enough cash, or assets that can be quickly converted into cash, to repay depositors and other creditors.

    Luc Plouvier, a senior portfolio manager at Van Lanschot Kempen, a Dutch wealth management firm, noted that banks had undergone “structural change” in the past decade.

    “A lot of the regulation that’s been put in place [has] forced these banks to be more liquid, to have much more [of a] capital buffer, to take less risk,” he said.

    Joost de Graaf, co-head of European credit at Van Lanschot Kempen, agreed.

    “There are not any hidden skeletons in [banks’] balance sheets as far as we know.”

    — Julia Horowitz contributed reporting.

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  • What’s changed since Powell last headed to Capitol Hill | CNN Business

    What’s changed since Powell last headed to Capitol Hill | CNN Business

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    Minneapolis
    CNN
     — 

    Federal Reserve Chair Jerome Powell is set to appear before the Senate Banking Committee Tuesday to deliver the first part of his two-day semiannual monetary policy testimony before Congress.

    It’s his first appearance before the committee since June last year, when inflation was on its way to 9%.

    Powell is expected to speak to the progress the US central bank has made in its yearlong campaign to rein in high inflation by ratcheting up its benchmark interest rate from near zero to between 4.5% to 4.75%.

    Inflation has slowed in recent months, measuring 6.4% in January after hitting a 40-year high of 9.1% in June. However, the battle is not yet won, and Powell and other Fed officials have cautioned that disinflation will be bumpy and there’s a long “ways to go.”

    Fed policymakers have warned in recent weeks that interest rates will likely have to remain higher for longer in order for inflation to settle down to the central bank’s 2% target.

    This time last year, Powell’s congressional address came on the heels of Russia’s invasion of Ukraine, surging gas prices and a significant escalation in US inflation. The economy continuing to rebound and repair itself from the lingering effects of the pandemic — including the disruptions of the Omicron variant.

    Faced with a strong labor market, uncertain geopolitical developments and surging inflation, Powell told members of Congress then that he’d likely propose a quarter-point rate hike at the central bank’s forthcoming meeting.

    It’s now March 2023, and the central bank is faced with an “extraordinarily strong” labor market, ongoing geopolitical uncertainty and stubborn inflation. However, there are signals that some inflationary pressures have eased: China’s economic growth was recently downgraded; and supply chain disruptions are easing, the Federal Reserve Bank of New York reported Monday.

    The markets are currently expecting the Fed to make another quarter-point rate hike during its next meeting two weeks from now: The CME FedWatch Tool is showing a 69.4% probability of such a hike. However, the perceived chances of a half-point increase (at 30.6%) have grown considerably during the past few weeks. One month ago, the probability for a half-point increase was 3.3%, according to the CME FedWatch Tool.

    Still, several major pieces of economic data — including the latest labor turnover report, monthly jobs report, Consumer Price Index, Producer Price Index, and retail sales — are all due ahead of the Fed’s next policymaking meeting on March 21-22.

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  • Fact check: Trump delivers wildly dishonest speech at CPAC | CNN Politics

    Fact check: Trump delivers wildly dishonest speech at CPAC | CNN Politics

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    Washington
    CNN
     — 

    As president, Donald Trump made some of his most thoroughly dishonest speeches at the annual Conservative Political Action Conference.

    As he embarks on another campaign for the presidency, Trump delivered another CPAC doozy Saturday night.

    Trump’s lengthy address to the right-wing gathering in Maryland was filled with wildly inaccurate claims about his own presidency, Joe Biden’s presidency, foreign affairs, crime, elections and other subjects.

    Here is a fact check of 23 of the false claims Trump made. (And that’s far from the total.)

    Crime in Manhattan

    While Trump criticized Manhattan District Attorney Alvin Bragg, who has been investigating Trump’s company, he claimed that “killings are taking place at a number like nobody’s ever seen, right in Manhattan.”

    Facts First: It isn’t even close to true that Manhattan is experiencing a number of killings that nobody has ever seen. The region classified by the New York Police Department as Manhattan North had 43 reported murders in 2022; that region had 379 reported murders in 1990 and 306 murders in 1993. The Manhattan South region had 35 reported murders in 2022 versus 124 reported murders in 1990 and 86 murders in 1993. New York City as a whole is also nowhere near record homicide levels; the city had 438 reported murders in 2022 versus 2,262 in 1990 and 1,927 in 1993.

    Manhattan North had just eight reported murders this year through February 19, while Manhattan South had one. The city as a whole had 49 reported murders.

    The National Guard and Minnesota

    Talking about rioting amid racial justice protests after the police murder of George Floyd in Minneapolis in 2020, Trump claimed he had been ready to send in the National Guard in Seattle, then added, “We saved Minneapolis. The thing is, we’re not supposed to do that. Because it’s up to the governor, the Democrat governor. They never want any help. They don’t mind – it’s almost like they don’t mind to have their cities and states destroyed. There’s something wrong with these people.”

    Facts First: This is a reversal of reality. Minnesota’s Democratic governor, Tim Walz, not Trump, was the one who deployed the Minnesota National Guard during the 2020 unrest; Walz first activated the Guard more than seven hours before Trump publicly threatened to deploy the Guard himself. Walz’s office told CNN in 2020 that the governor activated the Guard in response to requests from officials in Minneapolis and St. Paul – cities also run by Democrats.

    Trump has repeatedly made the false claim that he was the one who sent the Guard to Minneapolis. You can read a longer fact check, from 2020, here.

    Trump’s executive order on monuments

    Trump boasted that he had taken effective action as president to stop the destruction of statues and memorials. He claimed: “I passed and signed an executive order. Anybody that does that gets 10 years in jail, with no negotiation – it’s not ’10’ but it turns into three months.” He added: “But we passed it. It was a very old law, and we found it – one of my very good legal people along with [adviser] Stephen Miller, they found it. They said, ‘Sir, I don’t know if you want to try and bring this back.’ I said. ‘I do.’”

    Facts First: Trump’s claim is false. He did not create a mandatory 10-year sentence for people who damage monuments. In fact, his 2020 executive order did not mandate any increase in sentences.

    Rather, the executive order simply directed the attorney general to “prioritize” investigations and prosecutions of monument-destruction cases and declared that it is federal policy to prosecute such cases to the fullest extent permitted under existing law, including an existing law that allowed a sentence of up to 10 years in prison for willfully damaging federal property. The executive order did nothing to force judges to impose a 10-year sentence.

    Vandalism in Portland

    Trump claimed, “How’s Portland doing? They don’t even have storefronts anymore. Everything’s two-by-four’s because they get burned down every week.”

    Facts First: This is a major exaggeration. Portland obviously still has hundreds of active storefronts, though it has struggled with downtown commercial vacancies for various reasons, and some businesses are sometimes vandalized by protesters. Trump has for years exaggerated the extent of property damage from protest vandalism in Portland.

    Russian expansionism

    Boasting of his foreign policy record, Trump claimed, “I was also the only president where Russia didn’t take over a country during my term.”

    Facts First: While it’s true that Russia didn’t take over a country during Trump’s term, it’s not true that he was the only US president under whom Russia didn’t take over a country. “Totally false,” Michael Khodarkovsky, a Loyola University Chicago history professor who is an expert on Russian imperialism, said in an email. “If by Russia he means the current Russian Federation that existed since 1991, then the best example is Clinton, 1992-98. During this time Russia fought a war in Chechnya, but Chechnya was not a country but one of Russia’s regions.”

    Khodarkovsky added, “If by Russia he means the USSR, as people often do, then from 1945, when the USSR occupied much of Eastern Europe until 1979, when USSR invaded Afghanistan, Moscow did not take over any new country. It only sent forces into countries it had taken over in 1945 (Hungary 1956, Czechoslovakia 1968).”

    NATO funding

    Trump said while talking about NATO funding: “And I told delinquent foreign nations – they were delinquent, they weren’t paying their bills – that if they wanted our protection, they had to pay up, and they had to pay up now.”

    Facts First: It’s not true that NATO countries weren’t paying “bills” until Trump came along or that they were “delinquent” in the sense of failing to pay bills – as numerous fact-checkers pointed out when Trump repeatedly used such language during his presidency. NATO members haven’t been failing to pay their share of the organization’s common budget to run the organization. And while it’s true that most NATO countries were not (and still are not) meeting NATO’s target of each country spending a minimum of 2% of gross domestic product on defense, that 2% figure is what NATO calls a “guideline”; it is not some sort of binding contract, and it does not create liabilities. An official NATO recommitment to the 2% guideline in 2014 merely said that members not currently at that level would “aim to move towards the 2% guideline within a decade.”

    NATO Secretary General Jens Stoltenberg did credit Trump for securing increases in European NATO members’ defense spending, but it’s worth noting that those countries’ spending had also increased in the last two years of the Obama administration following Russia’s 2014 annexation of Ukraine’s Crimea and the recommitment that year to the 2% guideline. NATO notes on its website that 2022 was “the eighth consecutive year of rising defence spending across European Allies and Canada.”

    NATO’s existence

    Boasting of how he had secured additional funding for NATO from countries, Trump claimed, “Actually, NATO wouldn’t even exist if I didn’t get them to pay up.”

    Facts First: This is nonsense.

    There was never any indication that NATO, created in 1949, would have ceased to exist in the early 2020s without additional funding from some members. The alliance was stable even with many members not meeting the alliance’s guideline of having members spend 2% of their gross domestic product on defense.

    We don’t often fact-check claims about what might have happened in an alternative scenario, but this Trump claim has no basis in reality. “The quote doesn’t make sense, obviously,” said Erwan Lagadec, research professor at George Washington University’s Elliott School of International Affairs and an expert on NATO.

    Lagadec noted that NATO has had no trouble getting allies to cover the roughly $3 billion in annual “direct” funding for the organization, which is “peanuts” to this group of countries. And he said that the only NATO member that had given “any sign” in recent years that it was thinking about leaving the alliance “was … the US, under Trump.” Lagadec added that the US leaving the alliance is one scenario that could realistically kill it, but that clearly wasn’t what Trump was talking about in his remarks on spending levels.

    James Goldgeier, an American University professor of international relations and Brookings Institution visiting fellow, said in an email: “NATO was founded in 1949, so it seems very clear that Donald Trump had nothing to do with its existence. In fact, the worry was that he would pull the US out of NATO, as his national security adviser warned he would do if he had been reelected.”

    The cost of NATO’s headquarters

    Trump mocked NATO’s headquarters, saying, “They spent – an office building that cost $3 billion. It’s like a skyscraper in Manhattan laid on its side. It’s one of the longest buildings I’ve ever seen. And I said, ‘You should have – instead of spending $3 billion, you should have spent $500 million building the greatest bunker you’ve ever seen. Because Russia didn’t – wouldn’t even need an airplane attack. One tank one shot through that beautiful glass building and it’s gone.’”

    Facts First: NATO did spend a lot of money on its headquarters in Belgium, but Trump’s “$3 billion” figure is a major exaggeration. When Trump used the same inaccurate figure in early 2020, NATO told CNN that the headquarters was actually constructed for a sum under the approved budget of about $1.18 billion euro, which is about $1.3 billion at exchange rates as of Sunday morning.

    The Pulitzer Prize

    Trump made his usual argument that The Washington Post and The New York Times should not have won a prestigious journalism award, a 2018 Pulitzer Prize, for their reporting on Russian interference in the 2016 election and its connections to Trump’s team. He then said, “And they were exactly wrong. And now they’ve even admitted that it was a hoax. It was a total hoax, and they got the prize.”

    Facts First: The Times and Post have not made any sort of “hoax” admission. “The claim is completely false,” Times spokesperson Charlie Stadtlander said in an email on Sunday.

    Stadtlander continued: “When our Pulitzer Prize shared with The Washington Post was challenged by the former President, the award was upheld by the Pulitzer Prize Board after an independent review. The board stated that ‘no passages or headlines, contentions or assertions in any of the winning submissions were discredited by facts that emerged subsequent to the conferral of the prizes.’ The Times’s reporting was also substantiated by the Mueller investigation and Republican-led Senate Intelligence Committee investigation into the matter.”

    The Post referred CNN to that same July statement from the Pulitzer Prize Board.

    Awareness of the Nord Stream 2 pipeline

    Trump claimed of his opposition to Russia’s Nord Stream 2 gas pipeline to Germany: “Nord Stream 2 – Nobody ever heard of it … right? Nobody ever heard of Nord Stream 2 until I came along. I started talking about Nord Stream 2. I had to go call it ‘the pipeline’ because nobody knew what I was talking about.”

    Facts First: This is standard Trump hyperbole; it’s just not true that “nobody” had heard of Nord Stream 2 before he began discussing it. Nord Stream 2 was a regular subject of media, government and diplomatic discussion before Trump took office. In fact, Biden publicly criticized it as vice president in 2016. Trump may well have generated increased US awareness to the controversial project, but “nobody ever heard of Nord Stream 2 until I came along” isn’t true.

    Trump and Nord Stream 2

    Trump claimed, “I got along very well with Putin even though I’m the one that ended his pipeline. Remember they said, ‘Trump is giving a lot to Russia.’ Really? Putin actually said to me, ‘If you’re my friend, I’d hate like hell to see you as my enemy.’ Because I ended the pipeline, right? Do you remember? Nord Stream 2.” He continued, “I ended it. It was dead.”

    Facts First: Trump did not kill Nord Stream 2. While he did approve sanctions on companies working on the project, that move came nearly three years into his presidency, when the pipeline was already around an estimated 90% complete – and the state-owned Russian gas company behind the project said shortly after the sanctions that it would complete the pipeline itself. The company announced in December 2020 that construction was resuming. And with days left in Trump’s term in January 2021, Germany announced that it had renewed permission for construction in its waters.

    The pipeline never began operations; Germany ended up halting the project as Russia was about to invade Ukraine early last year. The pipeline was damaged later in the year in what has been described as an act of sabotage.

    The Obama administration and Ukraine

    Trump claimed that while he provided lethal assistance to Ukraine, the Obama administration “didn’t want to get involved” and merely “supplied the bedsheets.” He said, “Do you remember? They supplied the bedsheets. And maybe even some pillows from [pillow businessman] Mike [Lindell], who’s sitting right over here. … But they supplied the bedsheets.”

    Facts First: This is inaccurate. While it’s true that the Obama administration declined to provide weapons to Ukraine, it provided more than $600 million in security assistance to Ukraine between 2014 and 2016 that involved far more than bedsheets. The aid included counter-artillery and counter-mortar radars, armored Humvees, tactical drones, night vision devices and medical supplies.

    Biden and a Ukrainian prosecutor

    Trump claimed that Biden, as vice president, held back a billion dollars from Ukraine until the country fired a prosecutor who was “after Hunter” and a company that was paying him. Trump was referring to Hunter Biden, Joe Biden’s son, who sat on the board of Ukrainian energy company Burisma Holdings.

    Facts First: This is baseless. There has never been any evidence that Hunter Biden was under investigation by the prosecutor, Viktor Shokin, who had been widely faulted by Ukrainian anti-corruption activists and European countries for failing to investigate corruption. A former Ukrainian deputy prosecutor and a top anti-corruption activist have both said the Burisma-related investigation was dormant at the time Joe Biden pressured Ukraine to fire Shokin.

    Daria Kaleniuk, executive director of Ukraine’s Anti-Corruption Action Center, told The Washington Post in 2019: “Shokin was not investigating. He didn’t want to investigate Burisma. And Shokin was fired not because he wanted to do that investigation, but quite to the contrary, because he failed that investigation.” In addition, Shokin’s successor as prosecutor general, Yuriy Lutsenko, told Bloomberg in 2019: “Hunter Biden did not violate any Ukrainian laws – at least as of now, we do not see any wrongdoing.”

    Biden, as vice president, was carrying out the policy of the US and its allies, not pursuing his own agenda, in threatening to withhold a billion-dollar US loan guarantee if the Ukrainian government did not sack Shokin. CNN fact-checked Trump’s claims on this subject at length in 2019.

    Trump and job creation

    Promising to save Americans’ jobs if he is elected again, Trump claimed, “We had the greatest job history of any president ever.”

    Facts First: This is false. The US lost about 2.7 million jobs during Trump’s presidency, the worst overall jobs record for any president. The net loss was largely because of the Covid-19 pandemic, but even Trump’s pre-pandemic jobs record – about 6.7 million jobs added – was far from the greatest of any president ever. The economy added more than 11.5 million jobs in the first term of Democratic President Bill Clinton in the 1990s.

    Tariffs on China

    Trump repeated a trade claim he made frequently during his presidency. Speaking of China, he said he “charged them” with tariffs that had the effect of “bringing in hundreds of billions of dollars pouring into our Treasury from China. Thank you very much, China.” He claimed that he did this even though “no other president had gotten even 10 cents – not one president got anything from them.”

    Facts First: As we have written repeatedly, it’s not true that no president before Trump had generated any revenue through tariffs on goods from China. In reality, the US has had tariffs on China for more than two centuries, and FactCheck.org reported in 2019 that the US generated an “average of $12.3 billion in custom duties a year from 2007 to 2016, according to the U.S. International Trade Commission DataWeb.” Also, American importers, not Chinese exporters, make the actual tariff payments – and study after study during Trump’s presidency found that Americans were bearing most of the cost of the tariffs.

    The trade deficit with China

    Trump went on to repeat a false claim he made more than 100 times as president – that the US used to have a trade deficit with China of more than $500 billion. He claimed it was “five-, six-, seven-hundred billion dollars a year.”

    Facts First: The US has never had a $500 billion, $600 billion or $700 billion trade deficit with China even if you only count trade in goods and ignore the services trade in which the US runs a surplus with China. The pre-Trump record for a goods deficit with China was about $367 billion in 2015. The goods deficit hit a new record of about $418 billion under Trump in 2018 before falling back under $400 billion in subsequent years.

    Trump and the 2020 election

    Trump said people claim they want to run against him even though, he claimed, he won the 2020 election. He said, “I won the second election, OK, won it by a lot. You know, when they say, when they say Biden won, the smart people know that didn’t [happen].”

    Facts First: This is Trump’s regular lie. He lost the 2020 election to Biden fair and square, 306 to 232 in the Electoral College. Biden earned more than 7 million more votes than Trump did.

    Democrats and elections

    Trump said Democrats are only good at “disinformation” and “cheating on elections.”

    Facts First: This is nonsense. There is just no basis for a broad claim that Democrats are election cheaters. Election fraud and voter fraud are exceedingly rare in US elections, though such crimes are occasionally committed by officials and supporters of both parties. (We’ll ignore Trump’s subjective claim about “disinformation.”)

    The liberation of the ISIS caliphate

    Trump repeated his familiar story about how he had supposedly liberated the “caliphate” of terror group ISIS in “three weeks.” This time, he said, “In fact, with the ISIS caliphate, a certain general said it could only be done in three years, ‘and probably it can’t be done at all, sir.’ And I did it in three weeks. I went over to Iraq, met a great general. ‘Sir, I can do it in three weeks.’ You’ve heard that story. ‘I can do it in three weeks, sir.’ ‘How are you going to do that?’ They explained it. I did it in three weeks. I was told it couldn’t be done at all, that it would take at least three years. Did it in three weeks. Knocked out 100% of the ISIS caliphate.”

    Facts First: Trump’s claim of eliminating the ISIS caliphate in “three weeks” isn’t true; the ISIS “caliphate” was declared fully liberated more than two years into Trump’s presidency, in 2019. Even if Trump was starting the clock at the time of his visit to Iraq, in late December 2018, the liberation was proclaimed more than two and a half months later. In addition, Trump gave himself far too much credit for the defeat of the caliphate, as he has in the past, when he said “I did it”: Kurdish forces did much of the ground fighting, and there was major progress against the caliphate under President Barack Obama in 2015 and 2016.

    IHS Markit, an information company that studied the changing size of the caliphate, reported two days before Trump’s 2017 inauguration that the caliphate shrunk by 23% in 2016 after shrinking by 14% in 2015. “The Islamic State suffered unprecedented territorial losses in 2016, including key areas vital for the group’s governance project,” an analyst there said in a statement at the time.

    Military equipment left in Afghanistan

    Trump claimed, as he has before, that the US left behind $85 billion worth of military equipment when it withdrew from Afghanistan in 2021. He said of the leader of the Taliban: “Now he’s got $85 billion worth of our equipment that I bought – $85 billion.” He added later: “The thing that nobody ever talks about, we lost 13 [soldiers], we lost $85 billion worth of the greatest military equipment in the world.”

    Facts First: Trump’s $85 billion figure is false. While a significant quantity of military equipment that had been provided by the US to Afghan government forces was indeed abandoned to the Taliban upon the US withdrawal, the Defense Department has estimated that this equipment had been worth about $7.1 billion – a chunk of about $18.6 billion worth of equipment provided to Afghan forces between 2005 and 2021. And some of the equipment left behind was rendered inoperable before US forces withdrew.

    As other fact-checkers have previously explained, the “$85 billion” is a rounded-up figure (it’s closer to $83 billion) for the total amount of money Congress has appropriated during the war to a fund supporting the Afghan security forces. A minority of this funding was for equipment.

    The Afghanistan withdrawal and the F-16

    Trump claimed that the Taliban acquired F-16 fighter planes because of the US withdrawal, saying: “They feared the F-16s. And now they own them. Think of it.”

    Facts First: This is false. F-16s were not among the equipment abandoned upon the US withdrawal and the collapse of the Afghan armed forces, since the Afghan armed forces did not fly F-16s.

    The border wall

    Trump claimed that he had kept his promise to complete a wall on the border with Mexico: “As you know, I built hundreds of miles of wall and completed that task as promised. And then I began to add even more in areas that seemed to be allowing a lot of people to come in.”

    Facts First: It’s not true that Trump “completed” the border wall. According to an official “Border Wall Status” report written by US Customs and Border Protection two days after Trump left office, about 458 miles of wall had been completed under Trump – but about 280 more miles that had been identified for wall construction had not been completed.

    The report, provided to CNN’s Priscilla Alvarez, said that, of those 280 miles left to go, about 74 miles were “in the pre-construction phase and have not yet been awarded, in locations where no barriers currently exist,” and that 206 miles were “currently under contract, in place of dilapidated and outdated designs and in locations where no barriers previously existed.”

    Latin America and deportations

    Trump told his familiar story about how, until he was president, the US was unable to deport MS-13 gang members to other countries, “especially” Guatemala, El Salvador and Honduras because those countries “didn’t want them.”

    Facts First: It’s not true that, as a rule, Guatemala and Honduras wouldn’t take back migrants being deported from the US during Obama’s administration, though there were some individual exceptions.

    In 2016, just prior to Trump’s presidency, neither Guatemala nor Honduras was on the list of countries that Immigration and Customs Enforcement (ICE) considered “recalcitrant,” or uncooperative, in accepting the return of their nationals.

    For the 2016 fiscal year, Obama’s last full fiscal year in office, ICE reported that Guatemala and Honduras ranked second and third, behind only Mexico, in terms of the country of citizenship of people being removed from the US. You can read a longer fact check, from 2019, here.

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  • Trump proposes building 10 ‘freedom cities’ and flying cars | CNN Politics

    Trump proposes building 10 ‘freedom cities’ and flying cars | CNN Politics

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    CNN
     — 

    Former President Donald Trump on Friday proposed building up to 10 futuristic “freedom cities” on federal land, part of a plan that the 2024 presidential contender said would “create a new American future” in a country that has “lost its boldness.”

    Commuters, meanwhile, could get around in flying cars, Trump said – an echo of “The Jetsons,” the classic cartoon about a family in a high-tech future society. Work to develop vertical takeoff and landing vehicles is already underway by major airlines, auto manufacturers and other companies, though widely seen as years away from reaching the market.

    “I want to ensure that America, not China, leads this revolution in air mobility,” Trump, who announced his third bid for the presidency in November, said in a four-minute video detailing his plan.

    He said he would launch a contest to charter up to 10 “freedom cities” roughly the size of Washington, DC, on undeveloped federal land.

    “We’ll actually build new cities in our country again,” Trump said in the video. “These freedom cities will reopen the frontier, reignite American imagination, and give hundreds of thousands of young people and other people, all hardworking families, a new shot at home ownership and in fact, the American dream.”

    Trump’s pitch comes the day before he is set to address the Conservative Political Action Conference in the Washington, DC, area, and as the 2024 Republican presidential field begins to take shape.

    The proposal is the latest in a series of early policy offerings from Trump, who in recent weeks has also said he would seek to ramp up domestic energy production, adopt a more isolationist foreign policy stance and purge the government and military of “warmongers and globalists,” and undo a Biden executive order that would require government agencies to submit annual public plans aimed at promoting equity.

    In December, the former president unveiled plans as part of his “free speech platform” that included vows to ban federal money from being used to label speech as misinformation or disinformation and to punish universities engaging in “censorship activities” with cuts to federal funding.

    Trump did not elaborate Friday on how he would pay for his latest proposal – leaving unanswered what could be the biggest question as Republicans in Washington seek to curb federal spending. He also did not explain how some elements of his proposal differ from similar Democratic plans.

    His plan, which was light on details, includes three additional planks: increasing tariffs on goods imported into the United States; providing families with “baby bonuses” that he said would “help launch a new baby boom”; and launching a beautification effort aimed at removing “ugly” buildings and revitalizing parks and public spaces.

    Trump did not explain what “baby bonuses” would amount to or who would qualify. It’s not clear how his proposal differs from the enhanced child tax credit, which wasn’t extended beyond 2021. A group of Democratic lawmakers and progressive advocates tried – but failed – to have it included in the $1.7 trillion spending measure in December. That proposal was blocked by Republicans.

    Trump on Friday also called for universal tariffs and imposing higher taxes on imported goods. He said he would escalate a trade battle with China, which he began during his four years in the White House. Doing so, he said, would jump-start American manufacturing.

    President Joe Biden has left tariffs in place on $350 billion of Chinese goods – nearly two-thirds of what the US imports from China – which were imposed by Trump.

    However, the costs of those tariffs are being passed on to American consumers, and contributing to inflation, experts say.

    Treasury Secretary Janet Yellen said last year that those tariffs on Chinese goods have “imposed more harm on consumers and businesses” than on China.

    Chris Rupkey, chief economist at markets research firm FwdBonds, said Trump’s proposed economic plan is reflective of the onetime real estate developer’s efforts before taking office.

    “Builders build and make dreams a reality, but this plan looks like a stretch because the country cannot afford to undertake massive new projects when the national debt is over $31 trillion,” Rupkey said in an email. “There are some interesting ideas here, but this is not the right time for bold plans that dream big. There’s no money left in Uncle Sam’s till to pay for big dreams and daring projects.”

    The nation is in the midst of a “cost-of-living crisis” that makes this too expensive of a proposition, Rupkey added.

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  • What you need to know about this earnings season | CNN Business

    What you need to know about this earnings season | CNN Business

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    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
     — 

    About 99% of all S&P 500 companies have reported fourth quarter earnings and the results aren’t great.

    Companies listed in the S&P 500 index beat analysts’ earnings estimates by an average of just 1.3% last quarter. For context, that’s way down on the index’s 5-year average of 8.6%, according to FactSet data.

    What’s happening: There have been some steep and disappointing profit misses as corporate America feels the sting of sticky inflation and the Federal Reserve’s interest rate hikes.

    Tech companies fared poorly this season: Apple

    (AAPL)     recorded a rare earnings miss while Intel

    (INTC)     and Google-parent company Alphabet also fell short of expectations.

    But it wasn’t all doom-and-gloom. Energy companies brought in yet another quarter of record profits, with Big Oil companies — such as Chevron, ConocoPhillips, Exxon and Shell — notching their most profitable years in history. Elsewhere, Tesla

    (TSLA)     reported record revenue gains and beat earnings expectations. Big box retailers Target

    (TGT)     and Walmart

    (WMT)     also surpassed estimates as US consumers kept on spending.

    Here’s what else traders need to know about the final few months of last year and beyond.

    Corporate profits could drop for the first time since 2020

    S&P 500 companies are on track to report a 4.6% drop in earnings year-over-year, according to FactSet data. That would mark their first earnings decline since the third quarter of 2020, when Covid shut down large swaths of the economy.

    Gloomy forecasts abound

    About 81 S&P 500 companies have issued negative earnings-per-share guidance for the first quarter of 2023, according to FactSet. That’s a lot higher than the 23 companies reporting positive guidance.

    There was no shortage of foreboding forecasts from top execs on earnings calls this season.

    Walmart beat estimates last quarter, but they also lowered expectations for future earnings.

    Home Depot

    (HD)     CEO Ted Decker said he was concerned that consumers were becoming less resilient to the economy. “We noted some deceleration in certain products and categories, which was more pronounced in the fourth quarter,” he said on an analyst call.

    Lowe’s executives, meanwhile, warned that they were preparing for a “more cautious consumer” this year.

    Investors feel like celebrating

    Wall Street traders appear to be taking this dour earnings season in their stride. The market is “rewarding positive earnings surprises more than average and punishing negative earnings surprises much less than average for the fourth quarter,” reports FactSet.

    Inflation is (still) a big deal

    More than 325 S&P 500 companies have cited the term “inflation” during their earnings calls for the fourth quarter. That’s well above the 10-year average of 157, according to FactSet document searches.

    But the worries over price hikes appear to be waning, at least a little bit. This marks the lowest number of S&P 500 companies using the “I”-word on their calls since the third quarter of 2021. Since last quarter, the number of inflation mentions has fallen by about 20%.

    ▸ ISM Services PMI — a report that measures the strength of the US service sector — is due out at 10 a.m. ET. The data is expected to show a slight slowdown in growth between January and February (54.5 in February vs. 56.5 in January. For context, a reading above 50 means the services economy is expanding).

    That deceleration would be a big deal. It would signal that the economy is beginning to cool and that the Fed’s efforts to fight inflation by raising interest rates are working. If services sector growth accelerates, however, it could signal that more aggressive rate hikes are ahead and send markets lower.

    ▸ Wall Street is anticipating (or dreading, depending on who you ask) next Friday’s unemployment report. The February data is expected to shed some light on a shockingly resilient labor market.

    Another unexpected surge in non-farm payrolls, like the 517,000 new jobs added in January, could indicate more Fed rate hikes are ahead. That could roil markets in this “good news is bad news” environment.

    Analysts expect that the economy added 200,000 new jobs last month, according to Refinitiv data.

    ▸ The Chinese economy surprised investors this week by quickly bouncing back from its zero-Covid shutdowns. China’s first consumer price index, producer price index and trade figures of 2023 are set to be released next week, which will show the full extent of the country’s rebound.

    “These numbers will offer the first official indications of mainland China’s reopening effect following the rebound seen in PMI numbers,” wrote analysts at S&P Global.

    Global manufacturing rose in February for the first time in seven months, according to the latest PMI surveys compiled by S&P Global. That growth was largely spurred on by China’s reopening.

    Shares of Silvergate Capital, a large lender to cryptocurrency firms, plunged nearly 60% — a record drop — on Thursday after the company told the Securities and Exchange Commission that it won’t be able to file its annual report on time and cited concerns about its ability to remain in business.

    The majority of Silvergate’s crypto clients, including Coinbase, Paxos, Galaxy Digital and Crypto.com, quickly cut ties with the bank amid the chaos.

    So what does it all mean?

    My colleague Allison Morrow explains: The California-based lender reported a $1 billion loss for the fourth quarter as investors panicked over the collapse of FTX, the exchange founded by Sam Bankman-Fried that is now at the center of a massive federal fraud investigation.

    FTX’s collapse in November rippled through the digital asset sector, forcing several firms to halt operations and even declare bankruptcy as liquidity dried up and investors fled.

    But unlike FTX, BlockFi, Celsius, Voyager and other crypto companies that folded last year, Silvergate is a traditional, federally insured lender that has positioned itself as a gateway to the crypto sector.

    It’s among the first major instances of crypto’s volatility spilling into the mainstream banking system — a scenario regulators and crypto skeptics have long feared.

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  • US is reviewing Huawei export license policy amid rising congressional scrutiny of China | CNN Business

    US is reviewing Huawei export license policy amid rising congressional scrutiny of China | CNN Business

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    Washington
    CNN
     — 

    The US government is reviewing a policy that permits certain US exports to continue to Huawei, despite an overall push by the Trump and Biden administrations to block the Chinese telecommunications giant from receiving American technology.

    Alan Estevez, a Commerce Department official, told lawmakers Tuesday that the policy is “under assessment” as the agency conducts a “top-to-bottom review of our export control policies related to the [People’s Republic of China].”

    Estevez testified before the House Foreign Affairs Committee, which was holding a hearing to scrutinize China’s impact on US national security.

    In 2019, Huawei was one of a number of Chinese companies placed on the Commerce Department’s Entity List, which prohibits US companies from trading specified items with entities named on the list unless they obtain a license to do so.

    US officials have expressed concerns that Huawei’s 5G wireless networking gear could allow the Chinese government to spy on American communications. Huawei has denied that it poses a security risk, and its founder has said the company would resist any Chinese government effort to obtain its data.

    According to Foreign Affairs Committee chairman Michael McCaul, between January and March of 2022 the Commerce Department approved more than $23 billion in license applications to trade with Chinese-affiliated companies on the Entity List. Confronting Estevez at Tuesday’s hearing, McCaul asked the Commerce Department to square the license approvals with the US government’s wider effort to sideline Huawei and similar companies.

    “A licensing rule of the previous administration that still stands for Huawei allows things below 5G, below cloud-level to go,” Estevez said, “and I will say that all those things are under assessment.”

    Entity List restrictions do not provide for a “blanket embargo” on exports generally, Estevez added, but rather reflect specific rules about particular exports.

    Separately, in 2020 the Commerce Department moved to prevent Huawei’s suppliers from selling the company semiconductor chips made by US-built software and equipment, unless those suppliers also obtained a license.

    Other parts of the US government have also moved against Huawei. The Federal Communications Commission has prohibited US wireless carriers from using federal funding to purchase Huawei networking gear, and last year also banned future approvals of Huawei equipment for sale in the United States, in the first use of the FCC’s equipment authorization authority for a national security purpose.

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  • The US dollar is at a crossroads | CNN Business

    The US dollar is at a crossroads | CNN Business

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    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
     — 

    Wall Street investors are reaching for their neck braces in preparation for yet another volatile swing in stock markets: A surging US dollar.

    The greenback — which is not just the dominant global currency but also “the key variable affecting global economic conditions,” according to the New York Federal Reserve — reached a 20-year high last year after the Fed turned hawkish with its aggressive rate hikes.

    Since then, inflation seemed to have softened, pushing the dollar down. But in recent weeks, as a slew of economic data has shown the Fed’s inflation battle is far from over, the currency soared by about 4% from its recent lows, and now sits near a seven-week high.

    Investors are stressing about this sudden rebound, since a stronger dollar means American-made products become more expensive for foreign buyers, overseas revenue decreases in value and global trade weakens.

    Multinational companies, naturally, aren’t thrilled about any of this. And around 30% of all S&P 500 companies’ revenue is earned in markets outside the US, said Quincy Krosby, chief global strategist for LPL Financial.

    What’s happening: The US dollar “finds itself at a significant crossroads yet again,” said Krosby. “While the Fed remains steadfastly data dependent, the dollar’s course as well remains focused on inflation and the Fed’s monetary response.”

    “The strong US dollar has been a headwind for international earnings and stock performance (for US investors),” wrote Wells Fargo analysts in a recent note.

    February was a rough month for markets: The Dow ended February down 4.19%, the S&P 500 fell 2.6% and the Nasdaq lost just over 1%.

    What’s next: Investors are clearly focused on the next Fed policy meeting, which is still three weeks away, for signals about the direction of rates. But until then, investors may gain some insight Tuesday when Fed Chairman Jerome Powell speaks before the Senate Banking Committee.

    They’ll also be watching next Friday’s jobs report for any softening in the labor market that could temper the Fed’s hawkish mood.

    Don’t forget the debt ceiling: Another significant threat to the dollar is looming in Congress — the ongoing debt ceiling fight. The United States could start to default on its financial obligations over the summer or in the early fall if lawmakers don’t agree to raise the debt limit — its self-imposed borrowing limit — before then, according to a new analysis by the Bipartisan Policy Center.

    That could potentially lead to a disastrous downgrade to America’s credit rating and could send the dollar spiraling as investors start to sell off their US assets and move their money to safer currencies.

    “It would certainly undermine the role of the dollar as a reserve currency that is used in transactions all over the world. And Americans — many people — would lose their jobs and certainly their borrowing costs would rise,” Treasury Secretary Janet Yellen told CNN in January.

    ▸ A lot has changed in the last twenty years. The gender pay gap hasn’t.

    In 2022, US women on average earned about 82 cents for every dollar a man earned, according to a new Pew Research Center analysis of median hourly earnings of both full- and part-time workers.

    That’s a big leap from the 65 cents that women were earning in 1982. But it has barely moved from the 80 cents they were earning in 2002.

    “Higher education, a shift to higher-paying occupations and more labor market experience have helped women narrow the gender pay gap since 1982,” the Pew analysis noted. “But even as women have continued to outpace men in educational attainment, the pay gap has been stuck in a holding pattern since 2002, ranging from 80 to 85 cents to the dollar.”

    ▸ Initial jobless claims, which measures the number of people who filed for unemployment insurance for the first time last week, are due out at 8:30 a.m. ET on Thursday.

    This will be the last official jobs data investors see before February’s heavily anticipated unemployment report next Friday.

    Economists are expecting 195,000 Americans to have filed for unemployment, which is higher than the seasonally adjusted 192,000 who applied two weeks ago.

    Initial claims have come in lower than expected in recent weeks and remain well below their pre-pandemic levels.

    The white-hot labor market in the US added more than 500,000 jobs in January, blowing analysts’ expectations out of the water and bringing the unemployment rate to its lowest level since May of 1969.

    That’s bad news for the Federal Reserve where policymakers have been attempting to tame inflation by cooling the economy through painful interest rate hikes.

    ▸ It’s a big day for groceries. Kroger (KR), Costco (COST) and Anheuser-Busch (BUD) all report earnings on Thursday.

    Investors will be watching closely for clues about consumer sentiment during an uncertain retail earnings season. On Tuesday, Kohl’s reported that it had a rough holiday season and executives at the company put the blame on inflation. The company said higher prices squeezed sales and forced it to mark down some products to entice shoppers — which hurt its profit margin.

    Those comments echoed those of other big box retailers like Walmart (WMT) and Target (TGT), who have said consumers are feeling the pinch of inflation.

    Still, Target and Walmart’s bottom lines were bolstered by food sales even as consumers pulled back on discretionary purchases.

    The US Senate voted on Wednesday to overturn a Biden administration retirement investment rule that allows managers of retirement funds to consider the impact of climate change and other ESG factors when picking investments.

    As my CNN colleagues Ali Zaslav, Clare Foran and Ted Barrett write: The rule is not mandated – it allows, but does not require, the consideration of environmental, social and governance factors in investment selection.

    Republicans complained that the rule is a “woke” policy that pushes a liberal agenda on Americans and will hurt retirees’ bottom lines.

    “This rule isn’t about saying the left or the right take on a given environmental, social, or governance issue is ‘correct,’” countered Senator Patty Murray (D-WA) on the Senate floor Wednesday. “It’s about acknowledging these factors are reasonable for asset managers to consider.”

    The measure will next go to President Joe Biden’s desk as it was passed by the House on Tuesday. The administration, however, has issued a veto threat. As a result, passage of the resolution could pave the way for Biden to issue the first veto of his presidency.

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  • Inflation is doing a crab walk and Fed officials fear its pinch | CNN Business

    Inflation is doing a crab walk and Fed officials fear its pinch | CNN Business

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    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
     — 

    The possibility of a 2023 market rally ground to a halt last week amid an onslaught of unfortunate inflation and economic data that spooked investors and increased the likelihood that the Federal Reserve will continue its economically painful rate hikes campaign for longer than Wall Street hoped.

    All major indexes notched their largest weekly losses of 2023 on Friday. The S&P 500 fell by 2.7%. The Dow Jones Industrial Average sank 3%, and the tech-heavy Nasdaq fell 3.3%.

    What’s happening: It appears that after months of steady decline, the pace of inflation is going sideways. January’s Personal Consumption Expenditures price index – the Fed’s favored inflation gauge – came in hotter than expected on Friday.

    Prices rose a whopping 5.4% in January from a year earlier, the Commerce Department’s Bureau of Economic Analysis reported. In December, prices rose 5.3% annually.

    In January alone, prices were up 0.6% from the prior month, a higher monthly gain from December’s increase of 0.2%.

    This inflationary crab walk is almost certainly causing Fed officials to rethink their policy.

    A paper presented Friday at the Booth School of Business Monetary Policy Forum in New York argued that disinflation will likely be slower and more painful than markets anticipate.

    “Significant disinflations induced by monetary policy tightening are associated with recessions,” said the paper. “An ‘immaculate disinflation’ would be unprecedented.” (Immaculate, in this instance, refers to the possibility of inflation falling quickly to the Fed’s 2% goal without any serious economic damage).

    Several Fed presidents, governors and top economists were on hand at the Booth School forum to discuss the paper and monetary policy on Friday. The majority of those speaking expressed deep concern about the stubbornness of inflation and general market reaction.

    Inflation won’t quit: Cleveland Fed President Loretta Mester said that while price growth has moderated from its recent high, the overall pace of inflation remains too high and could be more persistent than her colleagues currently anticipate.

    “I anticipate further rate increases to reach a sufficiently restrictive level, then holding there for some, perhaps extended, time,” echoed Boston Fed President Susan Collins at the conference.

    Collins referred to inflation as “recalcitrant,” a loaded million-dollar word that means uncooperative, or defiant to authority.

    Fed Governor Philip Jefferson struck a more befuddled stance on Friday, observing that inflation continues to baffle economists. “The inflationary forces impinging on the US economy at present represent a complex mixture of temporary and more long-lasting elements that defy simple, parsimonious explanation,” he said. Parsimonious being another million-dollar word for frugal.

    Economists stressed that more pain lies ahead. “It’s important that markets understand that ‘no landing’ is not an option,” said Peter Hooper, vice chair of research at Deutsche Bank, an author of the report.

    While recent data has signaled that the US economy remains strong, “by the time we get to the middle of this year we expect to see some bad news coming and the sooner the markets get that message the more helpful it will be to the Fed,” he said.

    The final word: Former Bank of England Governor Lord Mervyn King summed up what many were thinking on Friday: Given the complexity of the current monetary situation, he said, “I wouldn’t want to give advice to any central banks about what we should do.”

    Researchers at the Federal Reserve Bank of New York have issued a dire warning: If President Joe Biden’s student loan forgiveness plan doesn’t come to fruition, the US could face another credit crisis.

    Some background: The Covid-19 crisis triggered a sudden shift in student loan policy and a new openness to forgiveness. In March 2020, Congress passed the CARES Act, which automatically paused required payments on all federally held student loans.

    That forbearance has since been extended eight times and is set to end as late as August, 40 months after it began.

    The Biden Administration had announced an unprecedented debt cancellation proposal which would provide relief to more than 40 million borrowers. An analysis by the New York Fed found that roughly $441 billion of federal student loans are eligible for forgiveness under the proposal, canceling about 30% of all outstanding federal student loan debt.

    That forgiveness proposal is now on hold after an injunction by the 8th US Circuit Court of Appeals. On Tuesday, The Supreme Court of the United States will hear the case with its decision expected by June 2023.

    What’s on the line: If the Biden Administration’s forgiveness plan survives the court challenge, it will mark the largest mass discharge of consumer debt in modern history, according to the New York Fed. About 40% of those with federal student loan debt would have a zero balance; even more would have a much smaller monthly payment.

    But, “if payments resume without debt relief, we expect both student loan default and delinquencies to rise and potentially surpass pre-pandemic levels,” warned Fed researchers.

    “We note a stark increase in new credit card and auto loan delinquency for borrowers with eligible student loans over the past few quarters, growing at a faster pace than those without student loans and those with ineligible loans,” they wrote.

    Those missed payments suggest that some federal student loan borrowers are having trouble meeting their monthly debt obligations. “We expect these delinquency patterns to worsen if federal student loan payments resume without relief,” said the report.

    The data “may be suggestive of problems to come, a sign of economic distress that may appear particularly concerning when the burden of student loan payments resumes.”

    Future concerns: If student loan borrowers expect future debt cancellation, they may borrow even more, said researchers, which would increase debt balances even more sharply. “Absent direct policies to address this growing burden, taxpayers may be again called to for relief in the future,” they concluded.

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  • BOJ chief-to-be answers to lawmakers as Japan prices soar

    BOJ chief-to-be answers to lawmakers as Japan prices soar

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    TOKYO — Consumer prices in Japan jumped in January by the most in more than 41 years, the government reported Friday, adding to pressure on the central bank to adjust its longstanding ultra-lax monetary policy.

    The key price indicator, which excludes volatile fresh foods, rose 4.2% last month, though some analysts expected it to be slightly higher. Excluding energy prices, inflation rose at a 3.2% annual rate.

    That news came as the nominee to become governor of the Bank of Japan, Kazuo Ueda, told lawmakers the central bank’s current strategy was “appropriate” and that its near-zero benchmark interest rate should continue “to solidly support the economy.”

    Ueda is expected to succeed BOJ Gov. Haruhiko Kuroda, the chief engineer of the current policy, when his second 5-year term ends in April. The nomination requires parliamentary approval.

    The BOJ’s monetary policy was designed to fight off deflation, and Japan’s inflation rate has stayed relatively low compared with the U.S. and Europe.

    “Time is needed before the effects of monetary policy kick in,” Ueda told Parliament, noting the price rises are peaking.

    The change of leadership at the central bank has drawn global attention, with speculation Ueda may unwind the monetary easing that Kuroda installed nearly a decade ago.

    But he countered such expectations, saying that the current policy stance is needed to achieve stable consumer prices and rising wages. He also stressed the Bank of Japan was cooperating closely with central banks around the world and international monetary officials.

    Ueda has been a BOJ policy board member in the past but has a mostly academic background. He will need to maneuver through challenging times. While overall inflation in Japan remains subdued, surging prices for oil, gas and other commodities have fed into prices for many consumer goods, utility rates and other costs.

    The last time the core consumer price index rose as much as in January was in September 1981, according to the Statistics Bureau of Japan. At the time, oil prices had soared starting in the late 1970s in what was dubbed the “oil shock.”

    Under Kuroda, the Bank of Japan set a target price rise of 2%, but prices have risen at a faster pace in recent months. Manufacturers and food outlets have been announcing price rises, one after the other.

    Ueda said more time is needed to see that price increases are stable.

    The change of BOJ leadership may signal a shift from the “Abenomics” economic policies of the late Prime Minister Shinzo Abe, said Haruhiko Sato, an economics analyst.

    “The markets are feeling a trifle unsettled in anticipation of a shift in policy, even if it were to come gradually,” he said in a recent report.

    Wage increases generally have not kept pace with inflation, adding to hardships for some households at a time when the Japanese yen has weakened against the U.S. dollar and other currencies. That boosts the purchasing prices of imports, including energy and food.

    Japan avoided slipping into recession late last year, eking out a 0.6% percent annual pace of growth in October-December following a contraction in the previous quarter. The easing of COVID-19 restrictions, both abroad and in Japan, have brought a recovery in tourism and other economic activity.

    ___

    Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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  • DOJ seeks court sanctions against Google over ‘intentional destruction’ of chat logs | CNN Business

    DOJ seeks court sanctions against Google over ‘intentional destruction’ of chat logs | CNN Business

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    Washington
    CNN
     — 

    Google should face court sanctions over “intentional and repeated destruction” of company chat logs that the US government expected to use in its antitrust case targeting Google’s search business, the Justice Department said Thursday.

    Despite Google’s promises to preserve internal communications relevant to the suit, for years the company maintained a policy of deleting certain employee chats automatically after 24 hours, DOJ said in a filing in District of Columbia federal court.

    The practice has harmed the US government’s case against the tech giant, DOJ alleged.

    “Google’s daily destruction of written records prejudiced the United States by depriving it of a rich source of candid discussions between Google’s executives, including likely trial witnesses,” the filing said.

    “We strongly refute the DOJ’s claims,” Google

    (GOOGL)     said in a statement. “Our teams have conscientiously worked for years to respond to inquiries and litigation. In fact, we have produced over 4 million documents in this case alone, and millions more to regulators around the world.”

    The federal government’s call for sanctions adds to the pressure Google faces as it battles antitrust suits on multiple fronts, and highlights a rare move by prosecutors.

    Through a setting in its chat software, Google employees can save chat history for up to 18 months — but only if the setting is manually enabled, the US government said in its filing, adding that Google routinely trained and encouraged employees to discuss sensitive topics over chat messages they knew would be auto-deleted the next day.

    The filing cites several attached exhibits in which Google employees, sensing that a conversation was about to stray into sensitive territory, suggested that the discussion continue on the chat platform, with history turned off.

    The government’s filing follows a similar sanctions motion against Google by Epic Games, maker of the hit video game “Fortnite,” in a separate antitrust case related to Google’s app store. The two sides faced off in an evidentiary hearing last month; on Feb. 15, the judge in the case ordered Google to produce more chat messages.

    Thursday’s DOJ filing also cites the Epic evidentiary hearing, saying that it proved Google destroyed records of at least nine individuals who were each considered potential trial witnesses, and that the federal judge overseeing that case agreed the chats could have contained relevant evidence but that Google “did not systematically preserve those chats.”

    “Google admitted that — for litigations spanning the past five years — it has never preserved all chats for relevant individuals by turning chat history on,” the DOJ filing said.

    It was not until earlier this month that Google agreed to preserve the chats, the filing alleged, after failing to disclose to prosecutors its practice of deleting history-off chats after 24 hours.

    It is not the first time DOJ has tussled with Google over evidence. Last year, in the same case, the agency asked the court to sanction Google for a program known as “Communicate with Care,” in which the company allegedly trained employees to copy lawyers on emails as a way to claim attorney-client privilege on communications that were business sensitive but did not seek legal advice and did not merit confidentiality.

    While Judge Amit Mehta declined to issue sanctions at the time, he ordered that all of the emails in question be re-reviewed.

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  • Russia’s economy is hurting despite Putin’s bluster | CNN Business

    Russia’s economy is hurting despite Putin’s bluster | CNN Business

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    London
    CNN
     — 

    When Russia launched its full-scale invasion of Ukraine one year ago, Western countries hit back with unprecedented sanctions to punish Moscow and pile pressure on President Vladimir Putin. The aim: to deal an economic blow so severe that Putin would reconsider his brutal war.

    Russia’s economy did weaken as a result. But it also showed surprising resilience. As demand for Russian oil fell in Europe, Moscow redirected its barrels to Asia. The country’s central bank staved off a currency crisis with aggressive capital controls and interest rate hikes. Military expenditure supported the industrial sector, while the scramble to replace Western equipment and technology lifted investment.

    “The Russian economy and system of government have turned out to be much stronger than the West believed,” Putin said in a speech to Russia’s parliament Tuesday.

    Yet cracks are starting to show and they will widen over the next 12 months. The European Union — which spent more than $100 billion on Russian fossil fuels in 2021 — has made huge strides in phasing out purchases. The bloc, which dramatically reduced its dependence on Russian natural gas last year, officially banned most imports of Russian crude oil by sea in December. It enacted a similar block on refined oil products this month.

    Those measures are already straining Russia’s finances as it struggles to find replacement customers. The government reported a budget deficit of about 1,761 billion rubles ($23.5 billion) for January. Expenditure jumped 59% year-over-year, while revenue plunged 35%. Deputy Prime Minister Alexander Novak announced that Russia would cut oil production by about 5% starting in March.

    “The era of windfall profits from the oil and gas market for Russia is over,” Janis Kluge, an expert on Russia’s economy at the German Institute for International and Security Affairs, told CNN.

    Meanwhile, the ruble has slumped to its weakest level against the US dollar since last April. The currency’s weakness has contributed to high inflation. And most businesses say they can’t conceive of growing right now given high levels of economic uncertainty, according to a recent survey by a Russian think tank.

    These dynamics place the country’s economy on a trajectory of decline. And they will force Putin to choose between ramping up military spending and investing in social goods like housing and education — a decision that could have consequences both for the war and the Russian public’s support of it.

    “This year could really be the key test,” said Timothy Ash, an associate fellow in the Russia and Eurasia program at Chatham House, a think tank.

    In a bid to bring Russia to heel for its aggression, Western countries have used their sway over the global financial system, unveiling more than 11,300 sanctions since the invasion and freezing some $300 billion of the country’s foreign reserves. At the same time, more than 1,000 companies, ranging from BP

    (BP)     to McDonald’s

    (MCD)     and Starbucks

    (SBUX)    , have exited or curtailed operations in the country, citing opposition to the war and new logistical challenges.

    Russia’s economic output duly contracted by 2.1% last year, according to a preliminary estimate from the government. But the hit was more limited than forecasters initially expected. When sanctions were first imposed, some economists predicted a contraction of 10% or 15%.

    One reason for Russia’s unexpected pluck was its push toward self-sufficiency following Putin’s annexation of Crimea from Ukraine in 2014. Through a policy known as “Fortress Russia,” the government boosted domestic food production and policymakers forced banks to build up their reserves. That created a degree of “durability,” said Ash at Chatham House.

    The swift intervention of Russia’s central bank, which jacked up interest rates to 20% after the invasion and implemented currency controls to buttress the ruble, was also a stabilizing force. So was the need for factories to increase production of military goods and replace items that had been imported from the West.

    But the greatest support came from high energy prices and the world’s continued thirst for oil and other commodities.

    Russia, the world’s second-largest exporter of crude, was able to send barrels that would have gone to Europe to countries like China and India. The European Union, which imported an average of 3.3 million barrels of Russian crude and oil products per day in 2021, was also still buying 2.3 million barrels per day as of November, according to the International Energy Agency (IEA).

    “It’s a question of natural resources,” Sergey Aleksashenko, Russia’s former deputy minister of finance, said at an event last month hosted by the Center for Strategic and International Studies, a think tank. That meant the economy experienced a decline, but “not a collapse,” he added.

    In fact, Russia’s average monthly oil export revenues rose by 24% last year to $18.1 billion, according to the IEA. Yet a repeat performance is unlikely, presaging increasingly tough decisions for Putin.

    The price of a barrel of Urals crude, Russia’s main blend, fell to an average of $49.50 in January after Europe’s oil embargo — as well as a Group of Seven price cap — took effect. By comparison, the global benchmark stood around $82. That suggests that customers like India and China, seeing a smaller pool of interested buyers, are negotiating greater discounts. Russia’s 2023 budget is based on a Urals price of more than $70 per barrel.

    Finding new buyers for processed oil products, which are also subject to new embargoes and price caps, won’t be easy either. China and India have their own network of refineries and prefer to buy crude, noted Ben McWilliams, an energy consultant at Bruegel.

    Meanwhile, gas exports to Europe have plunged since Russia shut its Nord Stream 1 pipeline.

    A motorcyclist rides past an oil depot in New Delhi, India, on Sunday, June 12, 2022.

    Russia’s government relied on the oil and gas sector for 45% of its budget in 2021. As it plans to maximize defense spending, lower revenues inevitably mean trade-offs. Spending plans for 2023 finalized in December involved a decrease in expenditure on housing and health care, as well as a category that includes public infrastructure.

    “Whatever energy resources are obtained, they’ll be spent on military needs,” said Gulnaz Sharafutdinova, acting director of the Russia Institute at King’s College London.

    The International Monetary Fund still expects Russia’s economy to expand by 0.3% this year and 2.1% the next. Yet any outlook is contingent on what happens in Ukraine.

    “Whether the economy shrinks or expands in 2023 will be determined by developments in the war,” Tatiana Orlova, an economist at Oxford Economics, wrote in a note to clients on Tuesday. Shortages of workers tied to military conscription and emigration pose a key risk, she noted.

    The impact of Western sanctions is poised to develop into a crisis over time. Bloomberg Economics estimates that Putin’s war in Ukraine will slash $190 billion off Russia’s gross domestic product by 2026 compared with the country’s prewar path.

    Sectors that rely on imports have been particularly vulnerable. Domestic car makers such as Avtovaz, which manufactures the iconic Ladas, have struggled with shortages of key components and materials.

    A man talks on his phone near a closed H&M store on December 15, 2022 in Moscow, Russia.

    Russia’s auto industry was already weakened after companies such as Volkswagen

    (VLKAF)    , Renault

    (RNLSY)    , Ford

    (F)     and Nissan

    (NSANF)     halted production and began to sell their local assets last year. Chinese firms have stepped up their presence, part of a broader trend. Even so, sales of new cars dropped 63% year-over-year in January, according to the Association of European Businesses.

    Across sectors, firms are struggling to plan for the future. A survey of more than 1,000 Russian businesses by the Stolypin Institute of Economic Growth in November found that almost half plan to maintain production over the next one to two years and aren’t thinking about growth. The group said this contributed to a high risk of “long-term stagnation of the Russian economy.”

    Given Putin’s ideological commitment to subsuming Ukraine, he’s unlikely to back down, according to Sharafutdinova at King’s College London. But his war chest “is likely, inevitably, to diminish,” she added.

    Prioritizing military spending will also come at a social cost, with a “slow and creeping” erosion of living standards, she added.

    “In normal times, we might have said that the population would protest against that,” Sharafutdinova said. “But of course, these are not normal times.”

    — Clare Sebastian and Olesya Dmitracova contributed reporting.

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  • Inflation pushes up mortgage rates for second week in a row | CNN Business

    Inflation pushes up mortgage rates for second week in a row | CNN Business

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    Washington, DC
    CNN
     — 

    Mortgage rates climbed higher for the second consecutive week, following four weeks of declines. Inflation is running hotter, making rates more volatile, with the expectation that they will move in the 6% to 7% range over the next few weeks.

    The 30-year fixed-rate mortgage averaged 6.32% in the week ending February 16, up from 6.12% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 3.92%.

    After climbing for most of 2022, mortgage rates had been trending downward since November, as various economic indicators indicated inflation may have peaked. But a stronger-than-expected jobs report and a Consumer Price Index report that showed inflation is only moderately easing suggest the Federal Reserve could continue hiking its benchmark lending rate in its battle against inflation.

    Inflation is keeping mortgage rates volatile, said Sam Khater, Freddie Mac’s chief economist.

    “The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing,” said Khater. “Overall housing costs are also increasing and therefore impacting inflation, which continues to persist.”

    The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit. Many buyers who put down less money upfront or have less than ideal credit will pay more than the average rate.

    Investors are digesting the latest economic data, said George Ratiu, Realtor.com manager of economic research.

    The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

    “While the Fed signaled that it will continue to raise rates this year, the moves are expected to come in 25 basis point increments, a less aggressive tightening than what we saw in 2022,” said Ratiu. “The central bank is acknowledging that it sees its monetary actions having a tangible effect on inflation. The CPI data out this week seems to confirm the bank’s views.”

    At the same time, he said, many companies expect the economy will enter a recession as a result of the Fed’s rate hikes, even in the face of data pointing to continued resilience.

    “This expectation is becoming more visible in the growing number of companies resorting to layoffs as a hedge against a potential economic slowdown,” he said. “People who are laid off pull back on spending, and even those who are still employed may begin to do the same due to worries about losing their job, thus potentially sending consumer spending into a downward spiral.”

    For home buyers, the cost of financing a home is expected to go up.

    Already, rates have been climbing in recent weeks, leading to a drop in mortgage applications. Last week, applications fell 7.7% from one week earlier, according to the Mortgage Bankers Association.

    Buyers are proving to be interest rate sensitive, according to MBA.

    “Purchase applications dropped to their lowest level since the beginning of this year and were more than 40% lower than a year ago,” said Joel Kan, MBA’s vice president and deputy chief economist. “Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than two percentage points above last year’s levels and have significantly reduced buyers’ purchasing power.”

    Mortgage rates are expected to move in the 6% to 7% range over the next few weeks, said Ratiu.

    For housing markets, he said, “the rebound in rates translates into higher mortgage payments, adding pressure on homebuyers.”

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  • Japan nominates new central bank leader in possible move away from ultra-easy policy | CNN Business

    Japan nominates new central bank leader in possible move away from ultra-easy policy | CNN Business

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    Hong Kong
    CNN
     — 

    The Japanese government has nominated Kazuo Ueda to lead its central bank, in a surprise move that could pave the way for the country to wind down its ultra-loose monetary policy.

    If appointed, Ueda — a 71-year-old university professor and a former Bank of Japan (BOJ) board member — would succeed Haruhiko Kuroda, the country’s longest serving central bank chief and the architect of its current yield curve control policy (YCC). His term ends on April 8.

    Ueda’s nomination must be approved by both houses of parliament, each is currently controlled by the ruling coalition, before the government of Prime Minister Fumio Kishida can formally appoint him for a five-year term.

    Analysts believe Ueda’s appointment could increase the odds that the BOJ will exit its prolonged ultra-easy monetary policy, which is increasingly difficult to maintain at a time when inflationary pressure is rising and other central banks are hiking rates aggressively.

    “Investors reckoned that the pick of Ueda-san is a signal to pave the way [for BOJ] to exit the ultra-loose policy,” said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank.

    “[The] chance for ending the yield curve control policy and negative interest rate[s] has been increasing,” he said, but adding that the BOJ’s monetary policy will likely stay “accommodative.”

    The yield curve control policy is a pillar of the central bank’s effort to keep interest rates low and stimulate the economy.

    Accommodative is a term used to describe monetary policy that adjusts to adverse market conditions and usually involves keeping interest rates low to spur growth and employment.

    The BOJ has implemented an ultra-easy policy since Kuroda took the reins in 2013. In 2016, after years of aggressive bond buying failed to push up prices, it introduced the yield curve control program, where it bought targeted amounts of bonds to push down yields, in order to stoke inflation and stimulate growth.

    As part of that program, the central bank targeted some short-term interest rates at an ultra-dovish minus 0.1% and aimed for 10-year government bond yields around 0%.

    But as prices rose and interest rates elsewhere went up, pressure has grown on the BOJ to wind down YCC.

    In December, the BOJ shocked global markets by allowing the 10-year government bond yield to move 50 basis points on either side of its 0% target, in a move that stoked speculation the central bank may follow the same direction as other major economies by allowing rates to rise further.

    The unexpectedly hawkish decision caused stocks to tumble, while sending the yen and bond yields soaring.

    But Kuroda later dismissed a near-term exit from his ultra-loose monetary policy.

    When local media first reported Friday that Ueda would be nominated as the next BOJ governor, the yen jumped against both the US dollar and the euro.

    “Investors interpreted the news as signaling a hawkish turn,” said Stefan Angrick, senior economist at Moody’s Analytics.

    “But it will take time for the implications to become clear,” he said. “With demand-driven price pressure still preciously scarce and stronger wage gains yet to materialize, it’s hard to see the BOJ rush towards tightening under a new governor.”

    On Friday, Ueda told reporters that he thinks “the current BOJ policy is appropriate” and “monetary easing must carry on given the current state.”

    In an opinion piece published last July in the Nikkei, Ueda warned against prematurely raising rates.

    However, in the same piece, he also noted the BOJ should prepare an exit strategy, saying that a “serious” examination is needed at some point on the unprecedented monetary easing framework, which has continued far longer than most would expect.

    “We don’t think he is expected to immediately change the BOJ’s policy stance based on his previous remarks,” said Min Joo Kang, senior economist at ING Group, in a recent research report.

    “He [Ueda] is likely to shift monetary policy only gradually and the BOJ’s data dependency – inflation and wage growth – will become more important.”

    Japan’s economy remains weak, highlighting the tough task ahead for Ueda.

    According to the latest data from Tuesday, Japan’s economy grew by an annualized 0.6% in the fourth quarter of 2022, reversing a 0.8% contraction in the third quarter. But it was much weaker than the consensus forecast of 2% expansion.

    “We believe that the modest recovery will continue this year, but today’s data support[s] the Bank of Japan’s argument that the recovery is still fragile and that easy monetary policy is needed,” said ING analysts. “The incoming new governor will find it difficult to start any normalization.”

    – CNN’s Junko Ogura contributed reporting

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  • Here’s what keeps Jerome Powell up at night and interest rates high | CNN Business

    Here’s what keeps Jerome Powell up at night and interest rates high | CNN Business

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    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
     — 

    Federal Reserve Chairman Jerome Powell threw markets into a tizzy on Tuesday as he spoke about the economy alongside his former boss, Carlyle Group co-founder David Rubenstein, at the Economic Club of Washington.

    Stocks struggled for direction as investors tried to get a read on Powell’s economic outlook, attitude towards inflation and on future interest rate hikes. Wall Street cheered as the Fed chair said the disinflationary process has begun, then soured when he said the road to reaching 2% inflation will be “bumpy” and “long” with more rate hikes ahead.

    Markets soared to new highs, before quickly falling to session lows and then recovering to close the day in the green.

    “Powell doesn’t want to play games with financial markets,” said EY Parthenon chief economist Gregory Daco after the conversation. But at the same time, he said Powell wanted to communicate that the Fed’s “base case was not for inflation to come down as quickly and painlessly as some market participants appear to expect.”

    Here’s why Powell thinks bringing down prices will be more difficult than investors anticipate.

    Structural changes in the labor market: The US economy added an astonishing 517,000 jobs in January, blowing economists’ expectations out of the water. The unemployment rate fell to 3.4% from 3.5%, hitting a level not seen since May 1969.

    The current labor market imbalance is a reflection of the pandemic’s lasting effect on the US economy and on labor supply, said Powell on Tuesday in answer to a question about the report. “The labor market is extraordinarily strong,” he said. Demand exceeds supply by 5 million people, and the labor force participation rate has declined. “It feels almost more structural than cyclical.”

    “If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more,” he said.

    Core services inflation: Powell noted that he’s seeing disinflation in the goods sector and expects to soon see declining inflation in housing. But prices remain stubborn for services. Service-sector inflation, which is more sensitive to a strong labor market, is up 7.5% from the year prior through the end of 2022, and has not abated, he said.

    “That sector is not showing any disinflation yet,” Powell said. “There has been an expectation that [higher prices] will go away quickly and painlessly and I don’t think that’s at all guaranteed.”

    Geopolitical uncertainties: Powell also cited concerns that the reopening of China’s economy after the sudden end of Covid-Zero restrictions, plus uncertainty about Russia’s war on Ukraine could also affect the inflation path in ways that remain unclear.

    ▸ The labor market is strong, but tech layoffs keep coming. There were around  50,000 tech jobs cut in January, and the trend has continued into February.

    Video conferencing service Zoom is one of the latest to announce layoffs. The company said Tuesday that it’s cutting 1,300 jobs or 15% of its workforce. 

    Zoom CEO Eric Yuan said in a blog post on Tuesday that Zoom ramped up employment  quickly due to increased demand during the pandemic. The company grew three times in size within 24 months, he said and now it must  adapt to changing demand for its services.

    “The uncertainty of the global economy, and its effect on our customers, means we need to take a hard — yet important — look inward to reset ourselves so we can weather the economic environment, deliver for our customers and achieve Zoom’s long-term vision,” he wrote.

    Yuan added that he plans to lower his own salary by 98% and forgo his 2023 bonus. Shares of Zoom closed nearly 10% higher on Tuesday. 

    The announcement comes just one day after Dell said it would lay off more than 6,500 employees.

    Amazon

    (AMZN)    , Microsoft

    (MSFT)    , Google and other tech giants have also recently announced plans to cut thousands of workers as the companies adapt to shifting pandemic demand and fears of a looming recession.

    ▸ Neel Kashkari, president of the Federal Reserve Bank of Minneapolis told CNN that he is starting to think that the US economy could avoid a recession and achieve a so-called soft landing.

    It’s hard to have a recession when the job market is still so robust, he told CNN’s Poppy Harlow on Tuesday on CNN This Morning.

    Still, “we have more work to do,” Kashkari told Harlow, adding that the labor market is “too hot” and that is a key reason why it is “harder to bring inflation back down.”

    Although many investors are starting to think the Fed may pause after just two more similarly small hikes, to a level of around 5%, Kashkari said he believes the Fed may have to raise rates further. Kashkari has a vote this year on the Federal Open Market Committee, the Fed’s interest-rate setting group.

    ▸ It’s a good time to be in the oil business. BP’s annual profit more than doubled last year to an all-time high of nearly $28 billion.

    The British energy company said in a statement that underlying replacement cost profit rose to $27.7 billion in 2022 from $12.8 billion the previous year. The metric is a key indicator of oil companies’ profitability.

    BP

    (BP)     also unveiled a further $2.75 billion in share buybacks and hiked its dividend for the fourth quarter by around 10% to 6.61 cents per share.

    BP’s shares rose 6% in Tuesday trading following the news. Over the past 12 months, its shares have soared 24%.

    The earnings are the latest in a string of record-setting results by the world’s biggest energy companies, which have enjoyed bumper profits off the back of skyrocketing oil and gas prices.

    Last week, another energy major Shell reported a record profit of almost $40 billion for 2022, more than double what it raked in the previous year after oil and gas prices jumped following Russia’s invasion of Ukraine.

    On Wednesday it was TotalEnergie

    (TTFNF)    s turn. The French company posted annual profit of $36.2 billion for 2022, double the previous year’s earnings.

    Disney has found itself in the middle of a culture war battle that could end up transferring Disney World’s governance to a board appointed by Florida Gov. Ron DeSantis. And that may be the least of Disney’s problems, writes my colleague Chris Isidore.

    The company faces a media industry in turmoil, plunging cable subscriptions, a still-recovering box office, massive streaming losses, activist shareholders, possible reorganization and layoffs and growing labor disputes with employees. That’s a lot for CEO Bob Iger to handle.

    Iger, who retired as CEO in 2020 only to be brought back in November, has been mostly quiet about his plans for the company since his return. That ends at 4:30 p.m. ET Wednesday when he is set to begin an earnings call with Wall Street investors.

    Click here to read more about what to look for on what is certain to be a closely-followed call.

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  • Protests over cash shortage as Nigeria banknote switch looms

    Protests over cash shortage as Nigeria banknote switch looms

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    ABUJA, Nigeria — New clashes Tuesday between protesters and security forces in southern Nigeria left at least one person injured, amid demonstrations against a cash shortage caused by the West African nation’s push to rapidly phase out its old currency notes.

    Protesters targeted facilities of some banks accused of withholding the new banknotes ahead of the Feb. 10 deadline for people to deposit their old paper currency and use the redesigned version instead. The exchange program started in late November.

    Nigeria’s antigraft agency, meanwhile, arrested a bank manager that it said refused to dispense the new banknotes despite having 29 million naira ($63,000) in the vaults.

    Other bank officials have been arrested in similar circumstances this week. The situation “indicates sabotage of the government’s monetary policy by some banks,” Nigeria’s Economic and Financial Crimes Commission said in a statement.

    The Central Bank of Nigeria introduced the redesigned notes and new limits on large cash withdrawals to help recover about 85% of the total currency in circulation outside the banking system. It said this would also help curb money laundering and make digital payments the norm in Africa’s biggest economy, that’s currently largely driven by cash transactions.

    But the push to replace the old banknotes with new ones has left very limited cash in circulation, causing frustration and anger for many people who spend hours at the banks attempting to withdraw their money.

    The cash shortage, financial analysts say, has affected some critical sectors of Nigeria’s economy, has caused “significant hardship in both rural and urban areas” and has led to many business closures.

    Small protests over the limited cash in circulation started during the weekend but escalated on Tuesday as people attacked bank facilities and workers while also blocking some roads. One of the protesters was shot as demonstrators clashed with police in southwestern Ogun state. The injured person’s condition was not immediately known.

    “Some people were attacking banks. In the process, somebody was shot and we are yet to know whether the shot is from the police,” Abimbola Oyeyemi, the police spokesman in Ogun, told The Associated Press. Officers have been deployed to restore peace in volatile areas, he said.

    The economic crisis in Africa’s most populous country comes less than a month before a key election that would see an unprecedented 93 million voters choose a successor for incumbent President Muhammadu Buhari.

    At a meeting with the central bank authorities on Tuesday, Mahmood Yakubu, Nigeria’s election chief, expressed concerns the recent monetary policy could affect preparations for the election but authorities promised to ensure there is enough cash for the election commission’s use.

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  • Fed Chair Powell: Inflation fight will take ‘a significant period of time’ | CNN Business

    Fed Chair Powell: Inflation fight will take ‘a significant period of time’ | CNN Business

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    Minneapolis
    CNN
     — 

    The US labor market remains “extraordinarily strong” and Friday’s monster jobs report underscored that the central bank has more work to do to bring down inflation, Federal Reserve Chairman Jerome Powell said Tuesday.

    “We didn’t expect it to be this strong,” Powell said of the January jobs report, which showed the US economy added 517,000 jobs. “It kind of shows you why we think that this will be a process that takes a significant period of time.”

    Powell was speaking during a question-and-answer session with David Rubenstein of the Economic Club of Washington.

    “The disinflationary process has begun,” Powell said, noting progress especially in goods prices. However, price gains within the services sector remain high, he added.

    The Fed expects “significant” declines in inflation to occur this year. It will take “not just this year but next year to get down to 2%,” the central bank’s inflation target, Powell said. And rates will have to remain at a restrictive level “for a period of time” before that happens, he noted.

    Powell expects housing inflation to come down by the middle of this year but is keeping the closest watch on a metric within the Personal Consumption Expenditures report: Core services excluding housing.

    “There has been an expectation that [inflation] will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case,” Powell said. “It will take some time.”

    The major US stock indexes rallied during Powell’s discussion but then fell in early afternoon trading, with the Dow down by around 200 points or 0.6%, the S&P lower by 0.3% and the tech-heavy Nasdaq down by 0.2%.

    While economists said the January job total was heavily influenced by seasonal factors and will probably be adjusted downward, it was probably too hot for the Fed’s liking. The robustness of the labor market has stood somewhat at odds with the Fed’s efforts to lower inflation.

    “The labor market is strong because the economy is strong,” Powell said.

    The current labor market is also a reflection of the pandemic’s lasting effect on the US economy and labor supply, he noted. The demand exceeds the supply by 5 million people, and the labor force participation rate has declined, he said.

    “It feels almost more structural than cyclical,” he said.

    A key reason Chair Powell wants more slack in the labor market is out of concern that a tight employment situation will continue to push up wages, which could then keep inflation elevated. As the unemployment rate rises, workers lose bargaining power for higher wages and households pull back on spending.

    Fed officials also want to keep inflation expectations anchored.

    “We had a labor market with 3.5% unemployment in 2018 and ’19, and we had inflation just barely getting to 2%, and wages moving up for most of the people at the lower end of the spectrum,” he said. “We all want to get back to that place.”

    And the Fed will react accordingly with the data to ensure it does, he said.

    “If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more,” he said.

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