Tag: Economic policy

The US-China chip war is spilling over to Europe | CNN Business

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Hong Kong
CNN Business
—

Two European chip deals have run into trouble over their links with China, a sign of concern spreading in the West over potential Chinese control of critical infrastructure.

Last week, the new owner of Britain’s biggest chipmaker was ordered to unwind its takeover, just days after another chip factory sale was blocked in Germany. Both transactions were hit by national security concerns, and had involved acquisitions by Chinese-owned companies.

In the United Kingdom, Nexperia, a Dutch subsidiary of Shanghai-listed semiconductor maker Wingtech, was told by the government to sell at least 86% of its stake in Newport Wafer Fab, more than a year after taking control of the factory. Staffers have since been protesting the decision, saying it puts nearly 600 jobs at risk.

In Germany, the economic ministry barred Elmos Semiconductor, an automotive chipmaker, from selling its factory in the city of Dortmund to Silex, a Swedish subsidiary of China’s Sai Microelectronics.

Chipmaking was already emerging as a new front in US-China tensions. Now the two troubled deals illustrate how the pressure is also rising in Europe, particularly as Western officials face calls for key sectors to be kept out of Chinese control.

“These decisions mark a shift towards tougher stances regarding Chinese investment in critical industries in Europe,” said Xiaomeng Lu, director of geo‑technology at Eurasia Group.

“US pressure definitely contributed to these decisions. [A] growing sense of technology sovereignty also likely prompted these moves — governments around the world are increasingly [viewing the] semiconductors industry as a strategic resource and seek to protect them from foreign takeovers.”

Legal experts said the two decisions were notable because each deal was initially thought to have been cleared.

The Newport Wafer case is “the first completed acquisition” that needs to be unwound under a UK national security and investment (NSI) act, which took full effect in January, according to Ian Giles, head of antitrust and competition for Europe, the Middle East and Asia for Norton Rose.

Nexperia said last week that it was “shocked” by the decision, and that “the UK government chose not to enter into a meaningful dialogue with Nexperia or even visit the Newport site.”

The company added that it had offered to avoid “activities of potential concern, and to provide the UK government with direct control and participation in the management of Newport,” a 28-acre site in south Wales.

The factory makes silicon wafers, the basis for making computer chips. Many of its products eventually power cars and medical equipment. Nexperia has indicated that workers at the facility now face an uncertain future.

In an open letter to the UK government last Thursday, the Nexperia Newport Staff Association said that it was “in disbelief” that employees’ livelihoods had been “put in jeopardy in the run-up to Christmas.”

“This is clearly a deeply political decision,” the group wrote, rejecting the idea that the deal would undermine British security. “You must see sense and protect our jobs by allowing Nexperia to keep their Newport factory.”

For Elmos, German authorities had initially indicated that they would issue a conditional approval, and even shared a draft approval after an intense review process lasting about 10 months, the company said in a statement following the injunction.

Tim Schaper, head of antitrust and competition for Germany at Norton Rose, said government intervention was also significant given that “Elmos’ technology is said to be quite old, state of the art in the 1990s, and allegedly not of great industrial importance.”

“The transaction became the plaything of a public debate about Chinese investors’ acquiring stakes in key German technologies,” he said.

It’s possible that regulators were concerned about an outflow of technical know how, according to Alexander Rinne, the Munich-based head of international law firm Milbank’s European antitrust practice.

“Elmos is known for making chips for the automotive sector, which is Germany’s core industry and the pride of the country,” he said in an interview.

Elmos and Nexperia both declined interview requests. A Nexperia spokesperson told CNN Business on Tuesday that it was “considering its options regarding the UK government’s decision.”

Chips are a growing source of tension between the United States and China. Washington has declared a shortage of the materials a national security issue, and highlighted the importance of remaining competitive in advanced technology capabilities.

This year, the United States ramped up its own restrictions and pressed allies to enact their own, according to Lu. In August, the US government ordered two top chipmakers, Nvidia

(NVDA) and AMD

(AMD), to halt exports of certain high-performance chips to China.

Two months later, the Biden administration unveiled sweeping export controls that banned Chinese companies from buying advanced chips and chip-making equipment without a license. The rules also restricted the ability of American citizens or US green card holders to provide support for the development or production of chips at certain manufacturing facilities in China.

The pressure is mounting. On Monday, NATO Secretary General Jens Stoltenberg urged the West to “be careful not to create new dependencies” on China. Speaking at a NATO parliamentary assembly in Madrid, Stoltenberg said he was seeing “growing Chinese efforts” to control Western critical infrastructure, supply chains, and key industrial sectors.

“We cannot give authoritarian regimes any chance to exploit our vulnerabilities and undermine us,” he said.

China has pushed back on the handling of the two European semiconductor cases.

“We firmly oppose the UK’s move, and call on the UK to respect the legitimate rights and interests of Chinese companies and provide a fair, just, and (a) non-discriminatory business environment,” Chinese Foreign Ministry Spokesperson Mao Ning told a press briefing last Friday when asked about the Newport Wafer order. “The UK has overstretched the concept of national security and abused state power.”

Zhao Lijian, another Chinese Foreign Ministry spokesperson, called on Germany and other countries to “refrain from politicizing normal economic and trade cooperation” at a press conference earlier this month, without addressing Elmos specifically.

Germany has shown greater scrutiny of Chinese buyers this year. Last month, a bid by Chinese state shipping giant Cosco for a stake in a Hamburg port terminal operator sparked similar controversy. Under pressure from some members of the government, the size of the investment was later limited.

Attorneys say if the chipmakers appeal, they could face an uncertain battle that may drag on for years.

In each case, they would need to file a challenge in court within roughly a month of regulators’ decisions, barring exceptional circumstances, according to Norton Rose.

Both Britain and Germany have recently added rules that expand government oversight over such decisions, making outcomes harder to predict. In Germany, a change to foreign direct investment rules in 2020 meant the government can intervene in prospective deals “if there is a ‘probable impairment of public order and security,’” said Schaper.

Previously, by contrast, it could only impose restrictions “if there was an ‘actual, sufficiently serious threat to public order and security,’” he told CNN Business.

In the UK, the ability of the government to retroactively review deals under the NSI Act “was really something that was considered surprising and far-reaching,” said Andrea Hamilton, a London-based partner at Milbank.

“If challenged, as Nexperia apparently intends, it will also become a test case as to [the] extent of the NSI Act’s limits,” she said.

Elsewhere, attention is shifting to the Netherlands. The Dutch government is currently facing pressure from the United States to limit exports to China, particularly from ASML

(ASML), a semiconductor equipment maker that holds a dominant position in the lithography machine market, according to Lu at Eurasia Group.

“It will become the next case study,” she told CNN Business.

The Netherlands has made clear it will form its own position.

Asked about the issue this month, Dutch Minister for Foreign Trade Liesje Schreinemacher said the country would “not copy the US export restrictions for China one-to-one.”

“We make our own assessment,” she said in an interview with Dutch newspaper NRC.

— CNN’s Zahid Mahmood, Rose Roobeek-Coppack and Laura He contributed to this report.

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November 25, 2022
Opinion: ‘Africa’s COP’ made some big promises. Here’s how to deliver | CNN

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Editor’s Note: Adjoa Adjei-Twum. She is the Founder & CEO of the Africa-focused and UK-based advisory firm Emerging Business Intelligence and Innovation (EBII) Group for global investors interested in Africa and emerging markets.
The opinions expressed in this article are solely hers.

CNN
—

The recently-concluded COP27 was dubbed the “African COP” – with the continent center stage in the global effort to fight the causes and effects of climate change.

As negotiations in the Egyptian resort of Sharm el-Sheikh spilled over into the weekend, there was a significant breakthrough on one of the most fractious elements – creating a fund to help the most vulnerable developing nations hit by climate disasters.

The backdrop for COP27 was a series of catastrophic global weather events including record-breaking floods in Pakistan and Nigeria, the worst droughts in four decades in the Horn of Africa, and severe European heatwaves and hurricanes in the US.

The loss and damage fund – to pay for the sudden impacts of climate change which are not avoided by mitigation and adaptation – has been a major obstacle in COP talks.

The richest, most polluting nations have been reluctant to agree to a deal, worried that it could put them on the hook for costly legal claims for climate disasters.

I welcome progress here, as African nations are bearing the brunt of climate change. The continent contributes around 3% of global greenhouse gas emissions, according to the UN Environment Programme and the International Energy Agency (IEA).

Climate change is estimated to cost the continent between $7bn and $15bn a year in lost economic output or GDP, rising to $50bn a year by 2030, according to the African Development Bank (AfDB).

But my joy is muted – the devil is in the detail, as ever. As an African diaspora entrepreneur whose work focuses significantly on the impact of climate change on the risk profile of African financial institutions and nations, I am concerned about the lack of detail about how the fund would work, when it will be implemented, and the timescale. I fear these could take years.

During a recent visit to the US, I discussed reparation money with US Democrat Congresswoman Rep. Ilhan Omar. She said it was important for the US and other countries to make heavy investments, which could come in the form of reparations.

She spoke about the importance of consulting impacted communities in Africa to avoid exploitation and the need for countries such as the US and China to end fossil fuel expansion and phase out existing oil, gas, and coal in a way that is “fair and equitable.”

Adaptation is Africa’s big challenge – the AFDB estimates that the continent needs between $1.3 to $1.6 trillion by 2030 to adapt to climate change.

The bank’s Africa Adaptation Acceleration Program, in partnership with the Global Center on Adaptation (GCA), aims to mobilize $25bn in finance for Africa, for projects such as weather forecasting apps for farmers and drought-resistant crops.

It is now time for African nations to levy a climate export tax on commodities, such as cocoa and rubber, to help pay for climate adaptation. But it still falls short of the money Africa needs.

Adaptation is all about building resilience and capacity, and I believe our governments, banks, and businesses must also adapt.

I am calling on our governments, institutions, and companies to boost efforts to attract green finance and make Africa more resilient by improving governance, tax systems, anti-corruption efforts, and legal compliance.

Sustainability is not a business tax, it is essential for business survival. Only companies focused on the changing world around us – from regulation to consumer and investor attitudes – will survive the climate crisis.

Businesses that ignore this can expect fines, boycotts, and limited access to funding. Banks will suffer too. So the financial sector must be better prepared and more agile.

This message will be reinforced when I meet CEOs, banking executives, and Nigeria’s central bank at the 13th Annual Bankers’ Committee Retreat, organized by the Nigerian Bankers Committee, in Lagos next month. The aim is to support the country’s biggest banks as they navigate new international sustainability rules.

Increasingly, investment funds must conform to green taxonomies – a system that highlights which investments are sustainable and which are not. In other words, banks will only support investments by institutions in G20 countries if they conform to national or supranational rules, such as the European Union’s Green Taxonomy.

This will not only help tackle greenwashing but also help companies and investors make more informed green choices. Additionally, G20 countries are asking their banks to forecast how risky their loans are due to climate change.

African nations must implement robust systems to mobilize private capital and foreign direct investment in key sectors. Governments must ensure they have an enabling environment for increased green investments.

Regulators must strengthen their capacity to develop and effectively enforce climate-related rules. Companies, especially banks, should strengthen climate risk management teams, regulatory compliance expertise, and preparation of bankable projects for international climate finance. This is the foundation for a successful transition to a low–carbon economy.

Looking ahead, there are other actions we can take. The African Continental Free Trade Area (AfCFTA) – the world’s largest free trade area and single market of almost 1.3bn people – could protect Africa from the adverse impacts of climate change, such as food insecurity, conflict, and economic vulnerability.

It could lead to the development of regional and continental value chains, inter-Africa trade deals, job creation, security, and peace. A single market could drive less energy-intensive economic growth while keeping emissions low, for example by developing regional energy markets and manufacturing hubs.

But we need much better pan-Africa coordination, like the European Union, to accelerate the AfCFTA. I urge our governments to work together and take swift and concrete actions to ensure the full and effective implementation of the AfCFTA. There is no time to waste.

This will not be popular with some African regimes because they will be forced to be more transparent and accountable with their public finances.

This year’s COP may have been marred by chaos, rows between rich and poorer nations, and broken multi-billion-dollar pledges by developed countries who created the climate crisis.

Many observers point out the final deal did not include commitments to phase down or reduce the use of fossil fuels.

But, the deal to create a pooled fund for countries most affected by climate change is significant, and as UN secretary general António Guterres warned, it was no time for finger-pointing.

It is also no time for the blame game. It is a wake-up call for African governments, banks, institutions, and companies to unite, step up, and adapt to a new climate reality.

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November 24, 2022
Turkish central bank cuts rates again despite high inflation

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ANKARA, Turkey — Turkey’s central bank delivered another outsized interest rate cut Thursday despite inflation running at more than 85% and other countries moving the opposite way to ease the pain of soaring prices.

The central bank said its Monetary Policy Committee decided to lower the benchmark policy rate by 1.5 percentage points to 9%, following a series of similar jumbo cuts.

The move is in line with President Recep Tayyip Erdogan’s unorthodox economic views that high borrowing costs cause high inflation, even though traditional economic thinking says raising interest rates help tame inflation.

Erdogan had called for a single-digit interest rate by the end of the year. He is counting on lower borrowing costs to propel the economy as Turkey gears up for presidential and parliamentary elections next June.

The bank had similarly cut borrowing costs by 1.5 points last month and by 1 point each in August and September. The Monetary Policy Committee announced, however, that the easing cycle would now come to a halt.

“Considering the increasing risks regarding global demand, the Committee evaluated that the current policy rate is adequate and decided to end the rate cut cycle that started in August,” it said in a statement.

Inflation hit a raging 85.51% in October, according to official statistics, making even basic necessities unaffordable for many. Independent researchers estimated, however, that actual price increases are much higher than the official figures.

The European Central Bank, U.S. Federal Reserve and other central banks around the world have taken the reverse course of Turkey, rapidly raising interest rates to clamp down on soaring consumer prices. Sweden raised its key rate by three-quarters of a percentage point on Thursday.

Their inflation rates are far below Turkey’s, running at 10.6% in the 19 countries using the euro currency, 9.3% in Sweden and 7.7% in the U.S. last month.

The Turkish lira has lost some 28% of its value against the U.S. dollar since the beginning of the year — on top of taking an even worse battering in 2021.

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November 24, 2022
Sweden’s big interest rate hike follows other central banks

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STOCKHOLM — Sweden’s central bank followed other central banks in undertaking a big increase to its key interest rate to combat inflation, saying Thursday that high prices are undermining people’s purchasing power and making it tough for households and companies to plan their finances.

Riksbanken said the hike of three-quarters of a percentage point pushes the key rate to 2.5% — the highest in 14 years, according to Swedish news agency TT — and is meant “to bring down inflation and safeguard the inflation target.”

Consumer prices rose 9.3% in October from a year earlier in the European Union country, lower than the 9.7% seen in September.

The big rate increase in Sweden, which does not use the euro currency so it is not part of the European Central Bank’s decision-making, builds on the jumbo full percentage point hike made in September.

It comes as the ECB, U.S. Federal Reserve and other central banks also have made large rate increases to fight inflation that has been squeezing people around the world.

In Sweden, the forecast “shows that the policy rate will probably be raised further at the beginning of next year and then be just below 3%,” the bank said.

“It is still difficult to assess how inflation will develop and the Riksbank will adapt monetary policy as necessary to ensure that inflation is brought back to the target within a reasonable time,” the bank said in a statement.

The decision on the policy rate will apply with effect from Nov. 30.

———

This story has been corrected to show that the rate of 2.5%, not the rate increase, is the highest in 14 years.

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November 24, 2022
The Fed offers more clues about rate hikes | CNN Business

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New York
CNN Business
—

Americans are getting ready for food, family and football on Thursday, but investors were still holding off until Wednesday afternoon before starting to give thanks.

That’s because the Federal Reserve released the minutes from its latest meeting at 2pm ET Wednesday, which provided more clues about the central bank’s thinking on inflation and interest rate hikes.

At its November 2 meeting the Fed raised rates by three-quarters of a percentage point — its fourth straight hike of such a large magnitude. But Fed chair Jerome Powell suggested at a press conference that the Fed may soon begin to slow the pace of hikes.

The minutes from that meeting showed that several other Fed policymakers agreed with Powell’s assessment.

“A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee’s goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate,” the Fed said in the minutes.

The Fed added that “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.”

Stocks, which were relatively flat and meandering before the minutes came out, popped after their release. The Dow ended the day up more than 95 points, or 0.3%. The S&P 500 jumped 0.6% and the Nasdaq rose 1%.

Other Fed members, most notably vice chair Lael Brainard, had also hinted n recent speeches at a slower pace of hikes. Yet there have been confusing signals from other Fed officials, who have continued to stress that inflation isn’t going away and must be brought under control.

To that end, the Fed said in the minutes that inflation remains “stubbornly high” and “more persistent than anticipated.”

With that in mind, traders are now pricing in a more than 75% chance that the Fed will raise rates by only a half-point at its December 14 meeting, according to futures contracts on the CME. That’s up from odds of 52% for a half-point hike a month ago, but lower than an 85% likelihood of a half-point increase that was priced in just last week.

A recent batch of inflation reports seem to suggest that the pace of runaway price increases is finally starting to slow to more manageable levels. The job market remains relatively healthy as well, although the most recent jobless claims figures ticked up from a week ago.

But as long as the labor market remains firm and inflation pressures continue to ebb, the Fed will likely pull back on the magnitude of its rate hikes.

Some experts are growing concerned that if the Fed goes too far with rates, the increases could eventually slow the economy too much and potentially lead to much higher unemployment, job losses and even a recession.

The Fed’s rate hikes have had a clear impact on the housing market, with surging mortgage rates helping to put a dent into home sales.

Still, Wall Street is growing more confident that the Fed might be able to pull off a so-called soft landing. The Dow soared 14% in October, its best month since January 1976. The Dow is up another 4.5% in November and is now only down 6% this year.

The S&P 500 and Nasdaq also have rebounded significantly since October, but both of those broader market indexes remain down more sharply for the year than the Dow.

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November 23, 2022
New Zealand hikes interest rate to 4.25% to fight inflation

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WELLINGTON, New Zealand — New Zealand’s central bank hiked interest rates Wednesday by a record amount as it tries to get inflation under control.

The Reserve Bank of New Zealand increased its benchmark rate by three-quarters of a point to 4.25%.

It’s the first time the bank has raised rates by more than a half-point since introducing the Official Cash Rate in 1999. The new rate is the highest in New Zealand since early 2009.

New Zealand’s inflation rate is currently 7.2%, well above the bank’s target of 1% to 3%. The nation’s unemployment rate is 3.3%.

The bank also sharply revised upwards its projected peak for its benchmark rate, which it now expects it to reach 5.5% next year before it decreases. It predicted a sharp rise in unemployment next year and for the economy to dip briefly into a shallow recession.

The New Zealand dollar rose on the news and was trading at around 62 U.S. cents.

The U.S. Federal Reserve and other central banks around the world have been aggressively hiking interest rates to battle inflation. The Fed’s key short-term rate is now set at 3.75% to 4%, up from near zero as recently as last March.

New Zealand Reserve Bank Governor Adrian Orr had a message for consumers.

“Think harder about your spending. Think about saving rather than consuming, I know that’s a strange concept,” he said. “Just cool the jets.”

Orr said the bank’s monetary policy committee had agreed that interest rates needed to go higher, and sooner than previously indicated, to ensure inflation returned to its target level.

“Core consumer price inflation remains too high, employment is beyond its maximum sustainable level, and near-term inflation expectations have risen. So this is quite a heightened inflation environment,” Orr told reporters.

He said the committee had considered raising rates even more on Wednesday, by a full 1%, before settling on the 0.75% hike.

He said inflation was “no-one’s friend” and that a small recession might be needed to get it down.

“In order to rid the country of inflation we need to reduce spending levels. That means that we will have a period of negative GDP growth, we think to the tune of around 1 percent of GDP,” Orr said. “So in that sense it’s a shallow period and at the moment, we’re saying that’s around the second half of next year.”

Orr said he expects house prices to decrease by a total of 20% by the middle of next year from their peak last November. House prices are currently down by about 11% from their peak.

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November 22, 2022
China anti-virus curbs spur fears of global economic impact

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BEIJING — More than 253,000 coronavirus cases have been found in China in the past three weeks and the daily average is rising, the government said Tuesday, adding to pressure on officials who are trying to reduce economic damage by easing controls that confine millions of people to their homes.

The ruling Communist Party promised earlier this month to reduce disruptions from its “zero- COVID” strategy by making controls more flexible. But the latest wave of outbreaks is challenging that, prompting major cities including Beijing to close off populous districts, shut stores and offices and ordered factories to isolate their workforces from outside contact.

That has fueled fears a downturn in Chinese business activity might hurt already weak global trade.

The past week’s average of 22,200 daily cases is double the previous week’s rate, the official China News Service reported, citing the National Bureau of Disease Prevention and Control.

“Some provinces are facing the most severe and complex situation in the past three years,” a bureau spokesman, Hu Xiang, said at a news conference, according to CNS.

China’s infection numbers are lower than those of the United States and other major countries. But the ruling party is sticking to “zero COVID,” which calls for isolating every case, while other governments are relaxing travel and other controls and trying to live with the virus.

On Tuesday, the government reported 28,127 cases found over the past 24 hours, including 25,902 with no symptoms. Almost one-third, or 9,022, were in Guangdong province, the heartland of export-oriented manufacturing adjacent to Hong Kong.

Global stock markets fell Monday as anxiety about China’s controls added to unease about a Federal Reserve official’s comment last week that already elevated U.S. interest rates might have to rise further than expected to cool surging inflation. Shares were mixed on Tuesday.

Investors are “worried about falling demand as a result of a less mobile Chinese economy amid fears there will be more COVID-related lockdowns,” said Fawad Razaqzada of StoneX in a report.

China is the world’s biggest trader and the top market for its Asian neighbors. Weakness in consumer or factory demand can hurt global producers of oil and other raw materials, computer chips and other industrial components, food and consumer goods. Restrictions that hamper activity at Chinese ports can disrupt global trade.

Hu, the government spokesman, said officials were traveling around China and holding video meetings to ensure compliance with a list of 20 changes to anti-virus controls announced on Nov. 11. They include shortening quarantines for people arriving in China to five days from seven and narrowing the definition of who counts as a close contact of an infected person.

Despite that, the Guangdong provincial capital, Guangzhou, suspended access Monday to its Baiyun district of 3.7 million residents. Residents of some areas of Shijiazhuang, a city of 11 million people southwest of Beijing, were told to stay home while mass testing is carried out.

Economic growth rebounded to 3.9% over a year earlier in the three months ending in September, up from the first half’s 2.2%. But activity already was starting to fall back.

Retail spending shrank by 0.5% from a year earlier in October, retreating from the previous month’s 2.5% growth as cities re-imposed anti-virus controls. Imports fell 0.3% in a sign of anemic consumer demand, a reverse from September’s 6.7% rise.

Chinese exports shrank by 0.7% in October after American and European consumer demand was depressed by unusually large interest rate increases by the Fed and other central banks to cool inflation that is at multi-decade highs.

Businesspeople and economists see the changes in anti-virus controls as a step toward lifting controls that isolate China from the rest of the world. But they say “zero COVID” might stay in place until as late as the second half of next year.

Guangzhou announced plans last week to build quarantine facilities for nearly 250,000 people. It said 95,300 people from another district, Haizhu, were being moved to hospitals or quarantine.

Factories in Shijiazhuang were told to operate under “closed-loop management,” a term for employees living at their workplaces. That adds costs for food and living space.

Entrepreneurs are pessimistic about the current quarter, according to a survey by Peking University researchers and a financial company, Ant Group Ltd. It said a “confidence index” based on responses from 20,180 business owners fell to its lowest level since early 2021.

The ruling party needs to vaccinate millions of elderly people before it can lift controls that keep out most foreign visitors, economists and health experts say.

“We do not think the country is ready yet to open up,” said Louis Loo of Oxford Economics in a report. “We expect the Chinese authorities will continue to fine-tune COVID controls over the coming months, moving toward a broader and more comprehensive reopening later.”

———

AP news assistant Caroline Chen contributed.

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November 22, 2022
Asian stocks down after Wall St weekly loss on rate fears

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BEIJING — Asian stock markets sank Monday after Wall Street ended with a loss for the week amid anxiety about Federal Reserve plans for more interest rate hikes to cool inflation.

Hong Kong’s benchmark fell more than than 2%. Shanghai, Seoul and Sydney also retreated, while Tokyo was little-changed. Oil prices declined.

U.S. stock indexes ended with a weekly loss after a Fed official, James Bullard, rattled investors by suggesting the central bank’s base lending rate might have to be raised to as much as almost double its already elevated level.

“Bullard dimmed the light on rallies,” said Tan Boon Heng of Mizuho Bank in a report.

The Hang Seng in Hong Kong was off 2.1% at 17,616.06 after the territory’s leader, John Lee, tested positive for the coronavirus after returning from an Asia-Pacific meeting in Bangkok.

The Shanghai Composite Index lost 0.8% to 2,072.08 and the Nikkei 225 in Tokyo lost less than 0.1% to 27,904.69.

The Kospi in South Korea fell 1.2% to 2,414.20 and Sydney’s S&P-ASX 200 lost 0.1% to 7,141.50.

India’s Sensex opened down 0.7% at 61.212.75. New Zealand gained while Southeast Asian markets declined.

On Friday, Wall Street’s benchmark S&P 500 index rose 0.5% to 3,965.34. The Dow Jones Industrial Average added 0.6% to 33,745.69. The Nasdaq composite lost less than 0.1% to 11,146.06.

All the major U.S. indexes ended with a loss for the week after Bullard, president of the St. Louis Federal Reserve Bank, gave a presentation that indicated the Fed’s benchmark rate might have to rise to between 5% and 7%. That would be up from its current level of 3.75% to 4% following four hikes of 0.75 percentage points, three times the Fed’s usual margin.

Investors worry repeated rate hikes by the Fed and central banks in Asia and Europe this year to cool surging inflation might tip the global economy into recession.

Traders hope signs economic activity is slowing and inflation pressures are easing might prompt the Fed to ease off its plans. Fed officials including chair Jerome Powell have warned rates might need to stay high for an extended period to extinguish inflation.

Traders expect the Fed to raise its key rate again at its December meeting but by a smaller margin of 0.5 percentage points.

Big U.S. retailers gained after they reported strong quarterly results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 9.9% for the biggest gain among S&P 500 stocks. Shoe seller Foot Locker climbed 8.7% after raising its profit and revenue forecast for the year.

U.S. retail sales rose 1.3% in October in a sign of consumer confidence ahead of Christmas shopping. Still, with inflation high, major retailers say Americans are holding out for sales and refusing to pay full price.

Health care and financial stocks also gained. UnitedHealth Group rose 2.9% and Charles Schwab added 2.5%.

Energy and communications companies declined. Marathon Oil fell 1.6% amid a broad pullback in energy prices. U.S. crude oil settled 1.9% lower. Live Nation, an entertainment promoter and venue operator, slumped 7.8%.

In energy markets, benchmark U.S. crude lost 61 cents to $79.50 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.56 to $80.08 on Friday. Brent crude, the price basis for international oil trading, sank 79 cents to $86.83 per barrel in London. It slumped $2.16 to $87.62 the previous session.

The dollar rose to 140.41 yen from Friday’s 140.36 yen. The euro fell to $1.0283 from $1.0331.

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November 20, 2022
Asian stocks down after Wall St weekly loss on rate fears

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BEIJING — Asian stock markets sank Monday after Wall Street ended with a loss for the week amid anxiety about Federal Reserve plans for more interest rate hikes to cool inflation.

Hong Kong’s benchmark fell more than than 3%. Shanghai, Tokyo and Sydney also retreated. Oil prices declined.

All the major U.S. stock indexes ended with a weekly loss after a Fed official, James Bullard, rattled investors by suggesting the U.S. central bank’s base lending rate might have to be raised to as much as almost double its already elevated level.

“Bullard dimmed the light on rallies,” said Tan Boon Heng of Mizuho Bank in a report.

The Hang Seng in Hong Kong dropped 3.02% to 17,448.64 after the territory’s leader, John Lee, tested positive for the coronavirus after returning from an Asia-Pacific meeting in Bangkok.

The Shanghai Composite Index lost 0.7% to 3,074.26 and the Nikkei 225 in Tokyo shed 0.1% to 27,873.19.

The Kospi in South Korea fell 1.3% to 2,413.36 and Sydney’s S&P-ASX 200 lost 0.1% to 7,143.50.

New Zealand, Bangkok and Indonesia gained while Singapore retreated.

On Friday, Wall Street’s benchmark S&P 500 index rose 0.5% to 3,965.34. The Dow Jones Industrial Average added 0.6% to 33,745.69. The Nasdaq composite lost less than 0.1% to 11,146.06.

All the major U.S. indexes ended with a loss for the week after Bullard, president of the St. Louis Federal Reserve Bank, gave a presentation that indicated the Fed’s benchmark rate might have to rise to between 5% and 7%. That would be up from its current level of 3.75% to 4% following four hikes of 0.75 percentage points, three times the Fed’s usual margin.

Investors worry repeated rate hikes by the Fed and central banks in Asia and Europe this year to cool surging inflation might tip the global economy into recession.

Traders hope signs economic activity is slowing and inflation pressures easing might prompt the Fed to ease off its plans. Fed officials including chair Jerome Powell have warned rates might need to stay high for an extended period to extinguish inflation.

Traders expect the Fed to raise its key rate again at its December meeting but by a smaller margin of 0.5 percentage points.

Big U.S. retailers gained after they reported strong quarterly results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 9.9% for the biggest gain among S&P 500 stocks. Shoe seller Foot Locker climbed 8.7% after raising its profit and revenue forecast for the year.

U.S. retail sales rose 1.3% in October in a sign of consumer confidence ahead of Christmas shopping. Still, with inflation high, major retailers say Americans are holding out for sales and refusing to pay full price.

Health care and financial stocks also gained. UnitedHealth Group rose 2.9% and Charles Schwab added 2.5%.

Energy and communications companies declined. Marathon Oil fell 1.6% amid a broad pullback in energy prices. U.S. crude oil settled 1.9% lower. Live Nation, an entertainment promoter and venue operator, slumped 7.8%.

In energy markets, benchmark U.S. crude lost 74 cents to $79.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.56 to $80.08 on Friday. Brent crude, the price basis for international oil trading, sank 90 cents to $86.72 per barrel in London. It slumped $2.16 to $87.62 the previous session.

The dollar rose to 140.42 yen from Friday’s 140.36 yen. The euro fell to $1.0295 from $1.0331.

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November 20, 2022
As British voters cool on Brexit, UK softens tone towards EU

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LONDON — The British government on Sunday denied a report that it is seeking a “Swiss-style” relationship with the European Union that would remove many of the economic barriers erected by Brexit — even as it tries to improve ties with the bloc after years of acrimony.

Health Secretary Steve Barclay told Sky News “I don’t recognize” the Sunday Times report, insisting the U.K. was still determined to “use the Brexit freedoms we have” by diverging from the EU’s rules in key areas.

Switzerland has a close economic relationship with the 27-nation EU in return for accepting the bloc’s rules and paying into its coffers.

The U.K. government said “Brexit means we will never again have to accept a relationship with Europe that would see a return to freedom of movement, unnecessary payments to the European Union or jeopardize the full benefit of trade deals we are now able to strike around the world.”

But despite the denials, the new Conservative government led by Prime Minister Rishi Sunak wants to restore relations with the EU, acknowledging that Brexit has brought an economic cost for Britain. Treasury chief Jeremy Hunt last week expressed optimism that trade barriers between the U.K. and the EU would be removed in the coming years.

The shift comes as public opposition grows to the hard form of Brexit pursued by successive Conservative governments since British voters opted by a 52%-48% margin to leave the bloc in a 2016 referendum.

Now, according to polling expert John Curtice, 57% of people would vote to rejoin the bloc and 43% to stay out.

When the U.K. was negotiating its divorce from the EU, Conservative governments under Prime Ministers Theresa May and her successor Boris Johnson ruled out remaining inside the EU’s borderless single market or its tariff-free customs union. Politicians who wanted closer ties were ignored or pushed aside.

The divorce deal struck by the two sides in 2020 has brought customs checks and other border hurdles for goods, and passport checks and other annoyances for travelers. Britons can no longer live and work freely across Europe, and EU citizens can’t move to the U.K. at will.

The British government’s fiscal watchdog, the Office for Budget Responsibility, said last week that leaving the EU has had “a significant adverse effect on U.K. trade.”

Yet only recently have members of the government begun acknowledging Brexit’s downsides. Hunt, who last week announced a 55 billion-pound ($65 billion) package of tax increases and spending cuts to shore up an economy battered by soaring inflation, acknowledged Brexit had caused “trade barriers” with the U.K.’s nearest neighbors.

“Unfettered trade with our neighbors is very beneficial to growth,” he told the BBC, and predicted that the “vast majority” of barriers would be removed – although it would take years.

Any move to rebuild ties with the EU will face opposition from the powerful euroskeptic wing of the Conservative Party. Even the opposition Labour Party — reluctant to reopen a debate that split the country in half and poisoned politics — says it won’t seek to rejoin the bloc, or even the EU’s single market, if it takes power after the next election.

Sunak, who took office last month, is a long-time Brexit supporter, but also a pragmatist who has made repairing the economy his top priority. Russia’s invasion of Ukraine, which has rocked European security and sent energy prices soaring, has put Brexit squabbles into perspective for politicians on both sides of the English Channel.

Sunak wants to solve a festering feud with the EU over trade rules that have caused a political crisis in Northern Ireland, the only part of the U.K. that shares a border with an EU member nation. When Britain left the bloc, the two sides agreed to keep the Irish border free of customs posts and other checks because an open border is a key pillar of the peace process that ended 30 years of violence in Northern Ireland.

Instead, there are checks on some goods entering Northern Ireland from the rest of the U.K. That angered pro-British unionist politicians, who say the new checks undermine Northern Ireland’s place in the United Kingdom. They are boycotting Belfast’s power-sharing government, leaving Northern Ireland without a functioning administration.

The U.K. government is pinning its hopes on striking a deal with the EU that would ease the checks and coax Northern Ireland’s unionists back into the government.

Months of talks when Johnson was in office proved fruitless, but the mood has improved since Sunak took over, though as yet there has been no breakthrough. ———

Follow AP’s coverage of Brexit at https://apnews.com/hub/brexit and of British politics at https://apnews.com/hub/british-politics

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November 20, 2022
VP Harris to visit, support Philippine island amid sea feud

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MANILA, Philippines — Vice President Kamala Harris would underscore America’s commitment to defending treaty ally the Philippines with a visit that starts Sunday and involves flying to an island province facing the disputed South China Sea, where Washington has accused China of bullying smaller claimant nations.

After attending the Asia-Pacific Economic Cooperation summit in Thailand, Harris will fly to Manila Sunday night to meet President Ferdinand Marcos Jr. the next day for talks aimed at reinforcing Washington’s oldest treaty alliance in Asia and strengthening economic ties, a senior U.S. administration official said in an online briefing ahead of the visit.

On Tuesday she’ll fly to Palawan province, which lies along the South China Sea, to meet local fishermen, villagers, officials and the coast guard. She is the highest-ranking U.S. leader so far to visit the frontier island at the forefront of the long-seething territorial disputes involving China, the Philippines, Vietnam, Malaysia, Brunei and Taiwan.

The Philippine coast guard is expected to welcome Harris onboard one of its biggest patrol ships, the BRP Teresa Magbanua, in Palawan, where she would deliver a speech before coast guard, police, military and government officials, according to coast guard spokesperson Commodore Armand Balilo.

Harris will underscore “the importance of international law, unimpeded commerce and freedom of navigation in the South China Sea,” the U.S. official said and added, in response to a question, that Washington was not concerned how Beijing would perceive the visit.

“China can take the message it wants,” the U.S. official said. “The message to the region is that the United States is a member of the Indo-Pacific, we are engaged, we’re committed to the security of our allies in the region.”

Philippine Ambassador to Washington Jose Manuel Romualdez said Harris’s trip to Palawan shows the level of America’s support to an ally and concern over China’s actions in the disputed sea.

“That’s as obvious as you can get, that the message they’re trying to impart to the Chinese is that ‘we support our allies like the Philippines on these disputed islands,’” Romualdez told The Associated Press. “This visit is a significant step in showing how serious the United States views this situation now.”

Washington and Beijing have long been on a collision course in the contested waters. While the U.S. lays no claims to the strategic waterway, where an estimated $5 trillion in global trade transits each year, it has said that freedom of navigation and overflight in the South China Sea is in America’s national interest.

China opposes U.S. Navy and Air Force patrols in the busy waterway, which Beijing claims virtually in its entirety. It has warned Washington not to meddle in what it says is a purely Asian territorial conflict — which has become a delicate frontline in the U.S.-China rivalry in the region and has long been feared as a potential Asian flashpoint.

In July, U.S. Secretary of State Antony Blinken called on China to comply with a 2016 arbitration ruling that invalidated Beijing’s vast territorial claims in the South China Sea and warned that Washington is obligated to defend treaty ally Philippines if its forces, vessels or aircraft come under attack in the disputed waters.

China has rejected the 2016 decision by an arbitration tribunal set up in The Hague under the United Nations Convention on the Law of the Sea after the Philippine government complained in 2013 about China’s increasingly aggressive actions in the disputed waters. Beijing did not participate in the arbitration, rejected its ruling as a sham and continues to defy it.

Harris’ visit is the latest sign of the growing rapport between Washington and Manila under Marcos Jr., who took office in June after a landslide electoral victory.

America’s relations with the Philippines entered a difficult period under Marcos’ predecessor, Rodrigo Duterte, who threatened to sever ties with Washington and expel visiting American forces, and once attempted to abrogate a major defense pact with the U.S. while nurturing cozy ties with China and Russia.

When President Joe Biden met Marcos Jr. for the first time in September in New York on the sidelines of the U.N. General Assembly, he stressed the depth by which the U.S. regards its relations with the Philippines despite some headwinds.

“We’ve had some rocky times, but the fact is it’s a critical, critical relationship, from our perspective. I hope you feel the same way,” Biden said.

“We continue to look to the United States for that continuing partnership and the maintenance of peace in our region,” Marcos Jr. told Biden. “We are your partners. We are your allies. We are your friends.”

The rapprochement came at a crucial time when the U.S. needed to build a deterrent presence amid growing security threats in the region, Romualdez said.

Philippine military chief of staff Lt. Gen. Bartolome Bacarro said last week that the U.S. wanted to construct military facilities in five more areas in the northern Philippines under a 2014 defense cooperation pact, which allows American forces to build warehouses and temporary living quarters within Philippine military camps. The Philippines Constitution prohibits foreign military bases but at least two defense pacts allow temporary visits by American forces with their aircraft and Navy ships for joint military exercises and training.

The northern Philippines is strategically located across a strait from Taiwan and could serve as a crucial outpost in case tensions worsen between China and the self-governed island.

While aiming to deepen ties, the Biden administration has to contend with concerns by human rights groups over Marcos Jr. The Philippine leader has steadfastly defended the legacy of his father, a dictator who was ousted in a 1986 pro-democracy uprising amid human rights atrocities and plunder.

Harris also plans to meet Vice President Sara Duterte, daughter of Marcos’ predecessor, who oversaw a deadly anti-drugs crackdown that left thousands of mostly poor suspects dead and sparked an International Criminal Court investigation as a possible crime against humanity. The vice president has defended her father’s presidency.

Given the Biden administration’s high-profile advocacy for democracy and human rights, its officials have said human rights were at the top of the agenda in each of their engagements with Marcos Jr. and his officials.

After her meeting Monday with Marcos Jr., Harris plans to meet civil society activists to demonstrate “our commitment and continued support for human rights and democratic resilience,” the U.S. official said.

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November 19, 2022
VP Harris has brief encounter with China’s leader Xi

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BANGKOK — U.S. Vice President Kamala Harris spoke briefly with Chinese leader Xi Jinping on Saturday in another step toward keeping lines of communication open between the two biggest economies.

A White House official said Harris and Xi exchanged remarks Saturday while heading into a closed-door meeting at the Asia-Pacific Economic Cooperation forum’s summit in Bangkok.

The official said Harris echoed President Joe Biden’s comment to Xi at an meeting between the two leaders earlier in the week that China and the U.S. must keep lines of communication open to “responsibly manage the competition between our countries.”

The official spoke on condition of anonymity in order to be able to speak to the media.

Relations between Washington and Beijing have suffered frictions over trade and technology, China’s claims to the separately governed island of Taiwan, the pandemic and China’s handling of Hong Kong, human rights and other issues.

On Friday, Harris pitched the U.S. as a reliable economic partner, telling a business conference on APEC’s sidelines, “The United States is here to stay.”

Harris told leaders at the APEC summit that the U.S. is a “proud Pacific power” and has a “vital interest in promoting a region that is open, interconnected, prosperous, secure and resilient.”

After receiving news that North Korea had fired an intercontinental ballistic missile that landed near Japanese waters, Harris convened an emergency meeting of the leaders of Japan, South Korea, Australia, New Zealand and Canada in which she slammed the missile test as a “brazen violation of multiple U.N. Security resolutions.”

“It destabilizes security in the region and unnecessarily raises tensions,” she said.

“We strongly condemn these actions and again call on North Korea to stop further unlawful, destabilizing acts,” Harris said. “On behalf of the United States I reaffirmed our ironclad commitment to our Indo-Pacific alliances.”

Her remarks at the broader APEC forum capped a week of high-level outreach from the U.S. to Asia as Washington seeks to counter growing Chinese influence in the region, with President Joe Biden pushing the message of American commitment to the region at the Association of Southeast Asian Nations summit in Cambodia and the Group of 20 summit in Indonesia.

Many Asian countries began questioning the American commitment to Asia after former President Donald Trump pulled the U.S. out of the Trans-Pacific Partnership trade deal, which had been the centerpiece of former President Barack Obama’s “pivot” to Asia.

The Biden administration has been seeking to regain trust and take advantage of growing questions over strings attached to Chinese regional infrastructure investments that critics have dubbed Beijing’s “debt trap” diplomacy.

Biden and Harris have also highlighted Washington’s Indo-Pacific Economic Framework, launched earlier this year.

—————

David Rising contributed to this story.

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November 18, 2022
US stocks waver, remain on track to end week with losses

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NEW YORK — Stocks wavered in afternoon trading on Wall Street Friday and are heading for losses for the week after several days of bumpy trading.

The S&P 500 fell 0.2% as of 12:26 p.m. Eastern. The benchmark index had traded as high as 0.8% earlier in the day. The Dow Jones Industrial Average rose 42 points, or 0.1%, to 33,593 and the Nasdaq fell 0.6%.

Small company stocks did better than the the rest of the market. The Russell 2000 rose 0.2%.

Major indexes are all on track for weekly losses.

Health care and financial companies were among the biggest gainers. UnitedHealth Group rose 2.9% and Charles Schwab rose 2%.

Energy stocks fell along with sliding energy prices. U.S. crude oil fell 2.8% and Exxon Mobil fell 1.4%.

Retailers made solid gains after several companies reported strong financial results and gave investors encouraging financial forecasts. Discount retailer Ross Stores surged 10.3% and clothing retailer Gap rose 7.8% after beating analysts’ expectations. Foot Locker rose 2.9% after raising its profit and revenue forecast for the year.

The solid earnings from retailers cap off a shaky week for Wall Street as investors try to get a better sense of inflation’s path and its impact on consumers and businesses. Investors have been particularly anxious about the Federal Reserve’s fight against inflation and have been looking for signs that might allow the central bank to shift to less aggressive interest rate increases. That anxiety was heightened on Thursday after a Fed official suggested U.S. interest rates might have to be raised higher than expected to cool inflation.

“It’s all been the same story for a year,” said Keith Buchanan, portfolio manager at Globalt Investments. “It’s about what inflation is doing, how the Fed responds, and from there how does the consumer respond.”

The central bank has already warned that the main lending rate may have to rise to a more painful level than anybody had anticipated, possibly between 5% and 7%. The Fed’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March.

The Fed is trying to tame the hottest inflation in decades by making borrowing more difficult and curtailing spending. Several big measures of inflation have shown that prices are easing a bit, but other economic indicators show that consumers remain resilient, as does the jobs market.

The Fed’s strategy risks sending the economy into a recession if it hits the brakes too hard on economic growth. The latest mix of inflation and economic data has Wall Street trying to gauge whether the Fed needs to keep pushing along with interest rate increases and whether it can achieve its goal without severely crimping consumer spending or employment.

The U.S. reported this week that retail sales rose 1.3% in October as Americans increase their spending at stores, restaurants, and auto dealers, a sign of consumer resilience as the holiday shopping season begins. That’s not to say consumer behavior hasn’t been affected by inflation. Major retailers say Americans are holding out for sales, refusing to pay full price, with the cost of gasoline, rent, food and almost everything else much higher than it was last year.

European markets were higher and Asian markets closed mixed overnight.

Bond yields rose. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.82% from 3.77%.

———

Joe McDonald and Matt Ott contributed to this report.

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November 18, 2022
Fed officials crushed investors’ hopes this week | CNN Business

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New York
CNN Business
—

Investors sleuthing for clues about what the Federal Reserve will decide during its December policy meeting got quite a few this week. But those hints about the future of monetary policy point to an outcome they won’t be very happy about.

What’s happening: Federal Reserve officials made a series of speeches this week indicating that aggressive interest rate hikes to fight inflation would continue, souring investors’ hopes for a forthcoming central bank policy shift. On Thursday, St. Louis Federal Reserve President James Bullard said the central bank still has a lot of work to do before it brings inflation under control, sending the S&P 500 down more than 1% in early trading. It later pared losses.

Bullard, a voting member on the rate-setting Federal Open Market Committee (FOMC), said that the moves the Fed has made so far to fight inflation haven’t been sufficient. “To attain a sufficiently restrictive level, the policy rate will need to be increased further,” he said.

Those comments come a day after Kansas City Fed President Esther George, a voting member of the FOMC, said to The Wall Street Journal that she’s “looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there.”

San Francisco Fed President Mary Daly added on Wednesday that a pause in rate hikes was “off the table.”

A numbers game: Fed officials should increase interest rates to somewhere between 5% and 7% to tamp inflation, Bullard said Thursday. Those numbers shocked investors, as they would require a series of significant and economically painful hikes which increase the chance of a hard landing.

The current interest rate sits between 3.75% and 4% and the median FOMC participant projected a peak funds rate of 4.5-4.75% in September. If those numbers hold steady, Fed members would only raise rates by another three-quarters of a percentage point.

But Fed Chair Powell said at the November meeting that the projections are likely to rise in December and if Bullard is correct, that means investors can expect another one to three percentage points in rate hikes.

Dreams of a pivot: October’s softer-than-expected CPI and producer price reading bolstered investors’ hopes that the Fed might ease its aggressive rate hikes and sent markets soaring to their best day since 2020 last week.

But messaging from Fed officials this week has brought Wall Street back down to earth.

That’s because market rallies help to expand the economy, said Liz Ann Sonders, Managing Director and Chief Investment Strategist at Charles Schwab, which is the opposite of what the Fed is trying to do with its tightening policy. Fed officials could be attempting to do some “jawboning” via excessively hawkish speeches in order to bring markets down, she said.

The bottom line: Investors listen closely to Bullard’s comments because he’s known for having looser lips than other Fed officials, Peter Boockvar, chief investment officer of Bleakley Financial Group, wrote in a note Thursday. But his hawkish predictions may have been “overboard,” especially since he won’t be a voting member of the FOMC next year.

Still, Wall Street analysts are listening. Goldman Sachs raised its peak fed funds rate forecast on Thursday to 5-5.25%, up from 4.75-5%.

A series of high-profile layoffs have rattled Big Tech this month.

Amazon confirmed that layoffs had begun at the company and would continue into next year, just days after multiple outlets reported the e-commerce giant planned to cut around 10,000 employees. Facebook-parent Meta recently announced 11,000 job cuts, the largest in the company’s history. Twitter also announced widespread job cuts after Elon Musk bought the company for $44 billion.

The series of high-profile layoff announcements prompted fears that the labor market was weakening and that a recession could be around the corner.

Those fears aren’t unwarranted: The Federal Reserve is actively working to slow economic growth and tighten financial conditions to rebalance the white-hot labor market. Further layoffs in both tech and other industries are likely inevitable as the Fed continues to raise interest rates.

But this wave of layoffs isn’t as significant as headlines might lead Americans to believe. Thursday’s weekly jobless claims actually fell by 4,000 to 222,000 in spite of the surge in tech job cuts.

In a note on Thursday Goldman Sachs analysts outlined three reasons why the layoffs may not point to a looming recession in the US.

First off, the tech industry accounts for a small share of aggregate employment in the US. While information technology companies account for 26% of the S&P 500 market cap, it accounts for less than 0.3% of total employment.

Second, tech job openings remain well above their pre-pandemic level, so laid-off tech workers should have good chances of finding new jobs.

Finally, tech worker layoffs have frequently spiked in the past without a corresponding increase in total layoffs and have not historically been a leading indicator of broader labor market deterioration, Goldman analysts found.

“The main problem in the labor market is still that labor demand is too strong, not too weak,” they concluded.

Mortgage rates dropped sharply last week following a series of economic reports that indicated inflation may finally be easing, reports my colleague Anna Bahney

The 30-year fixed-rate mortgage averaged 6.61% in the week ending November 17, down from 7.08% the week before, according to Freddie Mac, the largest weekly drop since 1981.

But that’s still significantly higher than a year ago when the 30-year fixed rate stood at 3.10%.

“While the decline in mortgage rates is welcome news, there is still a long road ahead for the housing market,” said Sam Khater, Freddie Mac’s chief economist. “Inflation remains elevated, the Federal Reserve is likely to keep interest rates high and consumers will continue to feel the impact.”

Affording a home remains a challenge for many home buyers. Mortgage rates are expected to remain volatile for the rest of the year. And prices remain elevated in many areas, especially where there is a very limited inventory of available homes for sale.

Meanwhile, inflation and rising interest rates mean many would-be buyers are also facing tightened budgets.

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November 18, 2022
Taylor Swift ticket snafu caused by Ticketmaster abusing its market power, Senate antitrust chair says | CNN Business

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New York
CNN Business
—

Senator Amy Klobuchar criticized Ticketmaster in an open letter to its CEO, saying she has “serious concerns” about the company’s operations following a service meltdown Tuesday that left Taylor Swift fans irate.

In the letter to CEO Michael Rapino, the Democrat from Minnesota and chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, wrote that complaints from Swift fans unable to buy tickets for her upcoming tour, in addition to criticism about high fees, suggests that the company “continues to abuse its market positions.”

“Ticketmaster’s power in the primary ticket market insulates it from the competitive pressures that typically push companies to innovate and improve their services. That can result in the types of dramatic service failures we saw this week, where consumers are the ones that pay the price,” Klobuchar wrote.

Ticketmaster and Live Nation, the country’s largest concert promoter, merged about a decade ago. Klobuchar noted that the company at the time pledged to “develop an easy-access, one-stop platform” for ticket delivery. On Thursday, the senator told Rapino that it “appears that your confidence was misplaced.”

“When Ticketmaster merged with Live Nation in 2010, it was subject to an antitrust consent decree that prohibited it from abusing its market position,” Klobuchar wrote. “Nonetheless, there have been numerous complaints about your company’s compliance with that decree.”

The letter includes a list of questions for Rapino to answer by next week. Ticketmaster did not immediately respond to a request for comment from CNN Business.

On Tuesday, the company said “there has been historically unprecedented demand with millions showing up” to buy tickets for Swift’s tour and thanked fans for their “patience.”

Klobuchar is the latest high-profile politician to openly criticize Ticketmaster for the ticketing disaster that left bad blood between Swift fans and the company.

“@Ticketmaster’s excessive wait times and fees are completely unacceptable, as seen with today’s @taylorswift13 tickets, and are a symptom of a larger problem. It’s no secret that Live Nation-Ticketmaster is an unchecked monopoly,” Rep. David Cicilline, currently the chairman of the Antitrust Subcommittee, tweeted on Tuesday.

“Daily reminder that Ticketmaster is a monopoly, its merger with LiveNation should never have been approved, and they need to be reined in,” tweeted Rep. Alexandria Ocasio-Cortez.

Complaints about the company’s monopoly power go back long, long before Tuesday’s ticket problems, when the platform appeared to crash or freeze during presale purchases for Swift’s latest tour.

In 1994, when Taylor Swift was only four years old and ticket purchase queues were in person or on the phone, not online, the rock group Pearl Jam filed a complaint with the Justice Department’s antitrust division asserting that Ticketmaster has a “virtually absolute monopoly on the distribution of tickets to concerts.” It tried to book its tour only at venues that didn’t use Ticketmaster.

The Justice Department and many state attorneys general have made similar complaints over the years.

Despite those concerns, Ticketmaster continued to grow more dominant. Pearl Jam’s complaint was quietly dismissed. The Justice Department and states allowed the Live Nation Ticketmaster merger to go through despite a 2010 court filing in the case raising objections to the merger. In the filing, the Justice Department said that Ticketmaster’s share among major concert venues exceeded 80%.

– CNN Business’ Chris Isidore contributed to this report.

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November 17, 2022
Divided government is more productive than you think | CNN Politics

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A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.

CNN
—

Now that CNN has projected Republicans will win the House of Representatives, it’s time to consider a Washington where both parties have some control.

Despite underperforming on Election Day, the GOP gains will have a major impact on what’s accomplished in the coming two years.

Additional climate change policy? Don’t count on it. National abortion legislation? Not a chance. Voting rights? Not likely.

Plus, Republicans have indicated they will use any leverage they can find – including the debt ceiling – to force spending cuts.

While you might immediately think this is all a recipe for a stalemate in Washington, I was surprised to read the argument, backed up by research, that the US government actually overperforms during periods of divided government.

Those periods are coming more and more frequently, by the way. While there used to be relatively long periods of a decade or more during which one party controlled all of Washington, recent presidents have lost control of the House.

Barack Obama, Donald Trump and George W. Bush each saw their party lose the House. President Joe Biden will join that club.

The two Republicans in the ’80s and ‘90s – Ronald Reagan and George H.W. Bush – both had productive presidencies and never enjoyed a sympathetic congressional majority. The last president to enjoy unified government throughout his presidency was Democrat Jimmy Carter, and voters did not look very kindly on him in the final analysis.

What’s below are excerpts from separate phone conversations conducted before the midterm election with Frances Lee and James Curry, authors of the 2020 book, “The Limits of Party: Congress and Lawmaking in a Polarized Era.” Lee is a professor of politics and public affairs at Princeton University, and Curry is a political science professor at the University of Utah. What led me to them was their 2020 argument that divided government overperforms and unified government underperforms expectations.

What should Americans know about divided government?

LEE: It’s the normal state of affairs in our politics in the modern era. Since 1980, something like two-thirds of the time we’ve had a divided government.

And yet you think about all the things that government has undertaken in the years since the Second World War. The role and scope of the US government is so much greater now than it was then. And a lot of that happened in divided government. Most of that has been under divided government time. …

Unified government usually results in disappointment for the party in power, which is just exactly what we’ve seen here in (this) Congress. Democrats were unable to deliver on their bold agenda, and that’s not different than what Republicans faced when they had unified government and couldn’t pass repeal and replace of Obamacare.

Now hold on. Republicans passed a massive tax cut bill with unified government. Democrats passed the Affordable Care Act and the Inflation Reduction Act, which included spending to address climate change. Those are the major accomplishments of recent years, no?

CURRY: I think we’re making a mistake when we say that those are the three biggest things that have happened. For instance, earlier you talked about the American Rescue Plan (another Covid relief bill passed with only Democratic support) – it is not as significant as the CARES Act, which was the first major Covid relief legislation passed by Congress. It passed in March of 2020, and it passed on an overwhelming bipartisan basis.

A lot of what was included in the American Rescue Plan were things that were initially set out under the CARES Act. Arguably the CARES Act was the single most important legislative accomplishment that we’ve had in this country in several decades.

And there are other examples too … things like criminal justice reform that was passed with bipartisan support in 2018, and many others things that are just as significant from a public policy standpoint, including also the bipartisan infrastructure bill that Congress passed last year.

They don’t have as much political significance, foremost because they were passed on a single-party basis. But I don’t think you can make the case that they’re necessarily more significant in terms of policy consequences for the country.

(In a follow-up email, Curry said that Congress often flies its bipartisanship accomplishments under the radar as part of larger bills, which means they don’t get as much attention. He pointed to big-ticket items that passed quietly in 2019 as part of larger spending bills, including raising the age to buy tobacco to 21, pushing through the first major pay raise for federal employees in years and repealing unpopular Obamacare taxes. He has similar examples for each recent year. But if they are not contentious, they get less attention, he said.)

Your argument is counter to the current narrative of American politics – that parties enact more on their own. Is that a media problem? A partisanship problem?

LEE: I’m still blown away by how much was done on Covid. Basically the United States government spent 75% more in 2020 than it spent in 2019. All that was Covid.

You’re talking about New Deal levels of spending and yet people just didn’t even seem to notice it because it was done on a bipartisan basis. We basically had a universal basic income in response to Covid and all the small business aid – it’s just extraordinary – and yet, it just seemed to pass people by as though nothing important occurred.

I don’t think it’s just a media story. The media wrote stories about the Covid aid bills, but it just didn’t capture people’s attention.

And I think that’s because it didn’t cut in favor of or against either party. When you don’t have a story that drives a partisan narrative, most people are just not that interested in it. Most people that pay attention to politics are not that interested in it. It lacks a rooting interest.

What about the big things that need action? Immigration reform has eluded Congress for decades and climate change is an existential threat. How can divided government be preferable if Congress can’t come together to address these problems?

CURRY: I’m not saying divided government is preferable, which I think is important. I’m just saying it doesn’t make that big a difference on a lot of these issues.

So we’ve seen that list of issues you just mentioned – climate change, immigration, etc. These are issues that Congress has equally struggled to take big, bold action on under divided or unified government.

On climate change, for instance, Democrats want to do big, bold things, but they aren’t able to go as far as they want to, because not only are there disagreements between the parties on how to address climate change, there are disagreements among Democrats about the best way to address climate and environmental legislation.

On immigration, you have clear divisions across party lines, but also divisions within each party.

LEE: Congress can pass legislation spending money or cutting taxes. The problem is it’s difficult to do things that create backlash. It’s hard to do serious climate legislation without being prepared to accept a backlash.

Isn’t this just a structural problem then? If there was no requirement for a filibuster supermajority, couldn’t a simple majority of lawmakers be more effective?

LEE: On the two examples that you just put forward – on immigration and climate – the filibuster has not been the obstacle to recent efforts.

In immigration reform that Republicans attempted to do (under Trump), they couldn’t get majorities in either the House or Senate. Democrats were way short of a Senate majority when they tried to do climate legislation under Obama. They barely got out of the House.

(Curry and Lee’s research shows the filibuster is not the primary culprit standing in the way of four out of five of the priorities that parties have failed to enact since 1985.)

CURRY: We found a more common reason why the parties fail on the things that can be accomplished is because they are unable to unify internally about what to do. The filibuster matters, but it is far from the most significant thing.

But certainly the legislation that passes under divided government is different than what would have passed under a unified government. The parties must compromise more. Whether the government is unified or divided matters, right?

CURRY: It makes a difference certainly for precisely what is in these final policy bills. It certainly makes a difference for the politics of the moment. It really makes a difference for each side of the aisle in terms of being able to say, we got this much done or that much done that matches my hopes and dreams as a Democrat or a Republican.

But it’s just sort of an overstated story that unified government means big, bold things happen and divided government means they don’t.

Wouldn’t Washington work better if one party was more easily able to deliver on its goals when voters gave it power?

CURRY: Whether it would be better if we had a situation like you have in more parliamentary-style governments where a party takes control, they pass what they will and stand to voters, I think it’s just in the eye of the beholder.

On one hand, potentially, yes, because it’s very clear and clean from a party responsibility or electoral responsibility standpoint, where parties pass things and then voters can hold them accountable or not. On the other hand, then you would see more wild swings in policy from election to election.

Does the growing number of swings in power in Congress mean American voters consciously prefer divided government?

CURRY: I don’t think that Americans necessarily have a preference for divided government. That’s something that people sometimes say. It sounds nice.

But the reality is that roughly since the 1980s and early 1990s, it’s been the case that electoral margins are really tight – you have relatively even numbers of Americans that prefer Democrats and Republicans. And so from election to election, based on turnout and swings back and forth, you get this constant back and forth of our electoral politics where one party is in control for two to four years and then the other party is in control.

That’s really important because it has massive implications for our politics. If you have a political system and political dynamic like we have today, where each party thinks they can constantly win back control or lose control of the House, the Senate and the presidency, it ups the stakes for every single decision that’s going to be made.

Everything is considered through a lens of how will this affect our partisan fortunes in the next election, and that makes things just naturally more contentious.

Can we agree that ours is not a very effective way to govern?

CURRY: It is certainly the case that Congress does not pass every single thing that every person wants it to. But I don’t think that is ever true of any government. Nor do I think that’s a reasonable bar to set a government against.

The reality is Congress does a lot of stuff and does a lot more than people give it credit for, but it also fails to take action on a lot of policies. I think that’s just politics. That’s just government. It’s not just an American problem, and it’s not just a facet of our specific political system.

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November 17, 2022
Fewer Americans file for jobless benefits last week

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The U.S. job market remains healthy as fewer Americans applied for unemployment benefits last week, despite the Federal Reserve’s rapid interest rate hikes this year intended to bring down inflation and tighten the labor market

WASHINGTON — The U.S. job market remains healthy as fewer Americans applied for unemployment benefits last week, despite the Federal Reserve’s rapid interest rate hikes this year intended to bring down inflation and tighten the labor market.

Applications for jobless claims for the week ending Nov. 12 fell by 4,000 to 222,000 from 226,000 the previous week, the Labor Department reported Thursday. The four-week moving average rose by 2,000 to 221,000.

The total number of Americans collecting unemployment aid rose by 13,000 to 1.51 million for the week ending Nov. 5. a seven-month high, but still not a troubling level.

Applications for jobless claims, which generally represent layoffs in the U.S., have remained historically low this year, deepening the challenges the Federal Reserve faces as it raises interest rates to try to bring inflation down from near a 40-year high.

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November 17, 2022
Sanctioned tycoon says Russia wants to engage on climate

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SHARM EL-SHEIKH, Egypt — A Russian billionaire under sanctions by the United States and Europe over his alleged ties to the Kremlin said Wednesday that he was not surprised by protests against his country at this year’s U.N. climate talks, but insisted that Russia wants to remain engaged on the issue of global warming because it deeply affects the nation.

Andrey Melnichenko, who heads the climate policy panel of Russian business lobby group RSPP, told The Associated Press that “regardless of the very terrible moment which we all experience now, we will participate, we will observe” at the meeting in Sharm el-Sheikh, Egypt.

Pro-Ukraine activists disrupted the start of an event hosted by the Russian delegation at the climate talks Tuesday before being escorted out by security staff.

“I wasn’t surprised,” said Melnichenko, who was speaking on the panel alongside Russian delegates. “What’s so surprising? That there are people who are deeply concerned about what’s happening in Ukraine and want to make their opinion known?”

“I completely 100% understand that,” he said.

His comments, while not directly critical of Russia’s invasion of Ukraine, indicate a more nuanced view of the bloody conflict than the official Kremlin line, which describes the war as a “special military operation.”

Since late February the war has devastated Ukraine, with bombs and shelling decimating towns and cities and killing thousands.

The war has resulted in a raft of sanctions being imposed on Russian officials and prominent businesspeople linked to the Kremlin.

Melnichenko — who now lives in Dubai — criticized Western sanctions on Russia, which he said were applied without regard for possible consequences, such as the effect restrictions on fertilizer exports would have on global food prices and Russia’s efforts to cut greenhouse gas emissions. Russia is the world’s largest exporter of fertilizers.

“Sanctions were put like a blanket on the Russian economy,” said Melnichenko, who once ran the fertilizer producer Eurochem and SUEK, one the the world’s largest coal companies. “It affects everything. Take for example food and fertilizer supply.”

He claimed the sanctions had affected food supply for “hundreds of millions” of people worldwide.

“Of course, this decision affects Russia’s possibility to move faster on the way of the decarbonization of its economy,” added Melnichenko.

Russian participants at the climate talks in Egypt have kept a low public profile, with no top government officials attending. Although the Russian delegation is half the size of last year’s, it is still larger than that of the United States, according to an analysis by Carbon Brief.

According to Melnichenko, Russia is particularly focused on efforts to reduce emissions and reliance on fossil fuels, along with rules for international carbon markets and carbon offsets — an issue where the Russian government sees great potential due to the country’s huge forests.

Melnichenko said that Russia will continue to export fossil fuels to fulfill demand, and it should be left to markets to decide which forms of energy are the most competitive. Russia is a top exporter of oil and natural gas although it has faced sanctions from EU trading partners. Other countries, like India and China, continue to import Russian oil.

“I believe that Russia’s fossil fuel production (is) very competitive globally in terms of the total cost, externalities included,” he said. “That’s why Russia will be able for a reasonably long period of time, a very long period of time, to maintain quite (a) big share of the fossil fuel market and … benefit from it also.”

Melnichenko, who according to Forbes is worth some $23.5 billion, said the world community should pay more attention to the large share of greenhouse gas emissions that aren’t caused by human activity, such as respiration, decomposition and even volcanoes. Scientists say the global warming measured in recent decades is mainly caused by the large-scale burning of fossil fuels since industrialization.

Asked what role concerns about climate change play in Russian civil society, he said that environmental issues such as air pollution had become more prominent in bigger cities over the past six to seven years

Peaceful protests on the issue were possible, he insisted. “And the government really responds.”

“That’s one of the area where you can have freedom of expression,” he said. “And that’s understandable because it’s pretty safe in terms of the political environment.”

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Follow AP’s climate and environment coverage at https://apnews.com/hub/climate-and-environment

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Associated Press climate and environmental coverage receives support from several private foundations. See more about AP’s climate initiative here. The AP is solely responsible for all content.

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November 16, 2022
Britain is bringing back austerity. Here’s why | CNN Business

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London
CNN Business
—

The last time a British finance minister revealed tax and spending plans, markets went haywire and the country’s prime minister ultimately lost her job. The new government is not looking for a repeat performance.

On Thursday, Chancellor Jeremy Hunt is due to unveil a budget that will aim to restore confidence in the United Kingdom’s ability to manage its public finances. But that may be easier said than done.

The country is staring down the barrel of a grueling recession, and investors remain on edge as interest rates rise. That requires Hunt, who has acknowledged that Britain faces “extremely difficult” decisions, to pull off a delicate balancing act.

Media reports indicate that the government is looking to come up with between £50 billion ($59 billion) and £60 billion ($70 billion) through a mix of tax increases and spending cuts, many of which may not take effect until after the next election in 2024.

“If you do too much, too soon, you risk worsening the recession,” said Ben Zaranko, a senior research economist at the Institute for Fiscal Studies. “If you delay everything until after the next election, you risk not being seen as credible.”

A new wave of austerity could help restore the government’s reputation with financial markets after the budget from former Prime Minister Liz Truss — which featured an unorthodox combination of major tax cuts and ramped-up borrowing — unleashed panic.

But it will do little to ease fears about the country’s grim economic prospects. The United Kingdom is one of two G7 economies to have contracted in the third quarter. It’s now smaller than it was before the coronavirus pandemic. The Bank of England is forecasting a lengthy recession, which could stretch into 2024.

New cuts could make matters worse. When the government adopted an austerity program in 2010 on the heels of the Great Recession, it shaved 1% off the country’s GDP, according to the UK budget watchdog. Just four years ago, former Prime Minister Theresa May pledged to bring nearly a decade of austerity to a close.

Now, tax rises could further depress consumer confidence — already near a record low — and spending cuts risk placing further strain on public services that are already buckling under enormous pressure.

Still, Hunt intends to show he has a plan to reduce government debt as a proportion of GDP in the medium-term. It currently stands at 98%. The Office for Budget Responsibility said in July that it could reach nearly 320% in 50 years.

“We do have to do some tax rises, do some spending cuts, if we’re going to show we’re a country that pays our way,” Hunt told Sky News on Sunday.

How did the United Kingdom get here? There’s no shortage of finger pointing.

Part of the problem is global in nature. Interest rates have risen rapidly around the world as central banks attempt to rein in inflation. That’s pushed up borrowing costs for the government, dealing a shock after years in which money was cheap.

At the same time, skyrocketing energy costs, exacerbated by Russia’s war in Ukraine, have compelled governments to step in to cushion the blow of crippling energy bills — shortly after they spent significant sums helping households and businesses through the pandemic.

Hunt has scrapped plans to cap energy bills for typical households at £2,500 ($2,981) for the next two years. Instead, support will only be guaranteed until next spring. But the measures will still prove costly.

The government can’t blame all its problems on the rest of the world, however.

“You can just look at how the UK is performing relative to every other country in Europe, and it’s obvious there’s a UK-specific element to this,” Zaranko said.

The United Kingdom’s exit from the European Union has weighed on trade and contributed to shortages of workers in key industries.

“The UK economy as a whole has been permanently damaged by Brexit,” former Bank of England official Michael Saunders told Bloomberg TV this week. “If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week. The need for tax rises, spending cuts wouldn’t be there.”

And while inflation in the United States cooled more than expected in October, falling to 7.7%, it’s still rising sharply in the United Kingdom, reaching a 41-year high of 11.1% last month.

That’s bolstering expectations that the Bank of England will need to keep raising interest rates and could hold them higher for longer, though recession may complicate those forecasts.

The country’s labor market also remains extremely tight, with an employment rate lower than before the coronavirus hit and a record number of people who aren’t working due to long-term illness.

“The UK does stand out in that labor supply has been very constrained, perhaps more so than in other countries,” said Ruth Gregory, senior UK economist at Capital Economics.

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November 16, 2022
Yet another key economic report is showing inflation pressures are easing | CNN Business

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Minneapolis
CNN Business
—

A key measure of inflation, wholesale prices, rose by 8% in October from a year before, according to the latest report from the Bureau of Labor Statistics.

While still historically high, it was the smallest increase since July of last year and significantly better than forecasts. It’s the second inflation report this month to show signs of cooling in the rising prices that have plagued the economy.

Economists expected the Producer Price Index, which measures prices paid for goods and services before they reach consumers, to show an annual increase of 8.3%, down from September’s revised 8.4%.

On a monthly basis, producer prices rose 0.2%, below expectations and even with the revised 0.2% increase seen in September.

Year-over-year, core PPI — which excludes food and energy, components whose pricing is more prone to market volatility — measured 6.7%, down from September’s revised annual increase of 7.1%.

Month-over-month, core PPI prices were flat, the lowest monthly reading since November 2020. In September, core PPI increased by a revised 0.2% from the month before.

Economists had expected annual and monthly core PPI to measure 7.2% and 0.3%, respectively, according to estimates on Refinitiv.

President Joe Biden heralded October’s PPI report Tuesday calling it “more good news for our economy this morning, and more indications that we are starting to see inflation moderate.”

“Today’s news – that prices paid by businesses moderated last month – comes a week after news that prices paid by consumers have also moderated,” Biden wrote Tuesday. “And, today’s report also showed that food inflation slowed – a welcome sign for family’s grocery bills as we head into the holidays.”

For much of this year, the Federal Reserve has sought to tamp down decades-high inflation by tightening monetary policy, including issuing an unprecedented four consecutive rate hikes of 75 basis points, or three-quarters of a percentage point.

The better-than-expected PPI data reflects an economy that has slowed, with supply moving more into balance, said Jeffrey Roach, chief economist for LPL Financial.

Costs associated with transportation and warehousing, for example, declined for the fourth consecutive month, a likely result of the improved global shipping climate, he said. Producer costs for new cars fell the most since May 2017, he added.

“Barring geopolitical or financial crises, inflation should continue its deceleration into 2023,” he said in a statement.

Since PPI captures price changes happening further upstream, the report is considered by some to be a leading indicator for broader inflationary trends and a predictor of what consumers will eventually see at the store level.

“The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend,” Mike Loewengart, Morgan Stanley’s head of model portfolio construction, said in a statement.

Last week’s Consumer Price Index showed inflation slowed to 7.7% from 8.2% year-over-year for consumer goods, surprising investors and giving Wall Street its biggest boost since 2020.

The CPI data was “reassuring,” Fed vice chair Lael Brainard said on Monday, signaling that the rate hikes appear to be taking hold, and if the economic data continues to show inflation on the decline, then the central bank could scale back the extent of its future rate hikes.

“When you look at the inflation numbers, there’s some evidence that we’ve peaked, but are we coming down quickly?” Steven Ricchiuto, chief economist for Mizuho Americas told CNN Business.

Ricchiuto noted that the October figures are only a couple steps lower than what was seen in September.

“These aren’t the types of things that tell the Fed to stop tightening rates,” he said. However, “they may tell you [that] you don’t need 75 basis points.”

CNN’s DJ Judd and Matt Egan contributed to this report.

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November 15, 2022