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Tag: Recessions and depressions

  • Asian markets extend Wall St losses; China COVID cases rise

    Asian markets extend Wall St losses; China COVID cases rise

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    BANGKOK — Shares slipped in Asia on Monday after last week’s decline on Wall Street, while signs of a surge in coronavirus infections in China suggested progress may be bumpy as it rolls back its “zero-COVID” pandemic restrictions.

    Attention was turning to an update on U.S. consumer prices and the Federal Reserve’s last meeting of the year.

    The last big piece of data on inflation before the Fed’s next decision is due Tuesday, when economists expect the consumer price index to show inflation slowed to 7.3% last month from 7.7% in October.

    Meetings of major central banks including the Fed mean “there is potential for a whole load of volatility in markets; especially given the palpable tensions between inflation risks and fears of policy-induced recession,” analysts at Mizuho Bank said in a commentary.

    A survey of Japanese manufacturers showed a sharp deterioration in the outlook, with recession a growing possibility in the U.S. and other major markets. The business survey index fell to minus 3.6% in October-December from 1.7% in the previous quarter as manufacturers grappled with high prices for energy and other raw materials.

    Hong Kong’s Hang Seng sank 2.1% to 19,484.88 and the Shanghai Composite index shed 0.7% to 3,186.05.

    Tokyo’s Nikkei 225 index gave up 0.2% to 27,835.63 while the Kospi in Seoul lost 0.6% to 2,375.27.

    Australia’s S&P/ASX 200 declined 0.4% to 7,181.40.

    China was setting up more intensive care facilities and trying to strengthen hospitals as it rolls back anti-virus controls that confined millions of people to their homes, crushed economic growth and set off protests.

    The precautions come as the number of cases appeared to be rising, though a sharp reduction in the number of tests makes measuring any changes uncertain.

    President Xi Jinping’s government is officially committed to stopping virus transmission, the last major country to try. But the latest moves suggest the ruling Communist Party will tolerate more cases without quarantines or shutting down travel or businesses as it winds down its “zero-COVID” strategy.

    A choppy day of trading on Wall Street ended with stocks broadly lower Friday.

    The S&P 500 and Nasdaq composite each fell 0.7%, while the Dow Jones Industrial Average dropped 0.9%. Smaller company stocks fell even more, pulling the Russell 2000 index 1.2% lower. The indexes marked their first losing week in the last three.

    The S&P 500 finished 3.4% lower for the week and is now down 17.5% this year.

    The U.S. government reported that prices paid at the wholesale level were 7.4% higher in November than a year earlier. That’s a slowdown from October’s wholesale inflation rate of 8.1%, but it was still slightly worse than economists expected.

    The Fed has been battling inflation by aggressively raising interest rates to raise the cost of borrowing and slow economic activity. The central bank has already hiked its key overnight rate to a range of 3.75% to 4%, up from basically zero as recently as March.

    It generally is expected to raise rates by another half percentage point on Wednesday as it wraps up a two-day meeting.

    Stocks have recovered some of their losses recently, as inflation has slowed since hitting a peak in the summer. But it remains too high, raising the risk the Federal Reserve will have to keep hiking interest rates sharply to get it fully under control.

    In other trading Monday, U.S. benchmark crude oil gained 54 cents to $71.56 per barrel in electronic trading on the New York Mercantile Exchange. It lost 44 cents to $71.02 on Friday.

    Brent crude, the pricing basis for international trading, added 40 cents to $76.50 per barrel.

    The U.S. dollar rose to 137.03 Japanese yen from 136.60 yen. The euro slipped to $1.0516 from $1.0537.

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  • OPEC+ oil producers face uncertainty over Russian sanctions

    OPEC+ oil producers face uncertainty over Russian sanctions

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    FRANKFURT, Germany — The Saudi-led OPEC oil cartel and allied producing countries, including Russia, are expected to decide how much oil to supply to the global economy amid weakening demand in China and uncertainty about the impact of new Western sanctions against Russia that could take significant amounts of oil off the market.

    The 23-country OPEC+ alliance are scheduled to meet Sunday, a day ahead of the planned start of two measures aimed at hitting Moscow’s oil earnings in response to its war in Ukraine. Those are a European Union boycott of most Russian oil and a $60-per-barrel price cap on Russian exports imposed by the EU and Group of Seven democracies.

    Russia rejected the price cap approved Friday and threatened to stop supplying the nations that endorsed it.

    Oil has been trading lower on fears that coronavirus outbreaks and China’s strict zero-COVID restrictions would reduce demand for fuel in one of the world’s major economies. Concerns about recessions in the U.S. and Europe also raise the prospect of lower demand for gasoline and other fuel made from crude.

    That uncertainty is the reason OPEC+ gave in October for a slashing production by 2 million barrels per day starting in November, which some saw as a possible move to help Russia weather the European embargo. The impact had some limitations because OPEC+ countries already can’t meet their quotas.

    With the global economy slowing, oil prices have been falling since summertime highs, with international benchmark Brent closing Friday at $85.42 per barrel, down from $98 a month ago. That has eased gasoline prices for drivers in the U.S. and around the world.

    On the other side, the price cap and EU boycott could take an unknown amount of Russian oil off the global market, tightening supply and driving up prices. To prevent a sudden loss of Russian crude, the price cap allows shipping and insurance companies to transport Russian oil to non-Western nations at or below that threshold. Most of the globe’s tanker fleet is covered by insurers in the G-7 or EU.

    Russia would likely try to evade the cap by organizing its own insurance and using the world’s shadowy fleet of off-the-books tankers, as Iran and Venezuela have done, but that would be costly and cumbersome, analysts say.

    Facing those uncertainties for the global oil market, OPEC oil ministers led by Saudi Arabia could leave production levels unchanged or cut output again to keep prices from declining further. Low prices mean less revenue for governments of producing nations.

    “We feel that the meeting will be fairly short, and the alliance will stick to the current output targets,” said Gary Peach, oil markets analyst with Energy Intelligence. Standing pat makes sense “all the more so because oil is at $87 per barrel (earlier Friday), which is a good price for everybody. … Of course, $98 is better, but right now I think they see the market as adequately priced, adequately supplied and there’s no reason to rock the boat.”

    Analysts at Clearview Energy Partners, on the other hand, expect OPEC+ to announce a production cut of 1 million barrels per day. Some members are underproducing, so that would more likely amount to a production cut of roughly 580,000 barrels per day.

    A cut of that magnitude wouldn’t cause a problem with global supplies, even when taking into consideration the EU ban on Russian oil, which is expected to pull another 1 million barrels off the market, said Jacques Rousseau, managing director at Clearview Energy Partners. Oil use declines in the winter, in part because fewer people are driving.

    But the G-7 price cap could prompt Russia to retaliate and take more oil off the market. The Saudis are “likely to share the Kremlin’s interest in quashing the G-7’s rising buyers’ cartel,” said Kevin Book, another managing director at Clearview.

    The cap of $60 a barrel is near the current price of Russian oil, meaning Moscow could continue to sell while rejecting the cap in principle.

    “If Russia ends up taking off more oil than about a million barrels per day, then the world becomes short on oil, and there would need to be an offset somewhere, whether that’s from OPEC or not,” Rousseau said. “That’s going to be the key factor — is to figure out how much Russian oil is really leaving the market.”

    ———

    Bussewitz reported from New York.

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  • OPEC+ oil producers face uncertainty over Russian sanctions

    OPEC+ oil producers face uncertainty over Russian sanctions

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    FRANKFURT, Germany — The Saudi-led OPEC oil cartel and allied producing countries, including Russia, are expected to decide how much oil to supply to the global economy amid weakening demand in China and uncertainty about the impact of new Western sanctions against Russia that could take significant amounts of oil off the market.

    The 23-country OPEC+ alliance are scheduled to meet Sunday, a day ahead of the planned start of two measures aimed at hitting Moscow’s oil earnings in response to its war in Ukraine. Those are a European Union boycott of most Russian oil and a $60-per-barrel price cap on Russian exports imposed by the EU and Group of Seven democracies.

    Russia rejected the price cap approved Friday and threatened to stop supplying the nations that endorsed it.

    Oil has been trading lower on fears that coronavirus outbreaks and China’s strict zero-COVID restrictions would reduce demand for fuel in one of the world’s major economies. Concerns about recessions in the U.S. and Europe also raise the prospect of lower demand for gasoline and other fuel made from crude.

    That uncertainty is the reason OPEC+ gave in October for a slashing production by 2 million barrels per day starting in November, which some saw as a possible move to help Russia weather the European embargo. The impact had some limitations because OPEC+ countries already can’t meet their quotas.

    With the global economy slowing, oil prices have been falling since summertime highs, with international benchmark Brent closing Friday at $85.42 per barrel, down from $98 a month ago. That has eased gasoline prices for drivers in the U.S. and around the world.

    On the other side, the price cap and EU boycott could take an unknown amount of Russian oil off the global market, tightening supply and driving up prices. To prevent a sudden loss of Russian crude, the price cap allows shipping and insurance companies to transport Russian oil to non-Western nations at or below that threshold. Most of the globe’s tanker fleet is covered by insurers in the G-7 or EU.

    Russia would likely try to evade the cap by organizing its own insurance and using the world’s shadowy fleet of off-the-books tankers, as Iran and Venezuela have done, but that would be costly and cumbersome, analysts say.

    Facing those uncertainties for the global oil market, OPEC oil ministers led by Saudi Arabia could leave production levels unchanged or cut output again to keep prices from declining further. Low prices mean less revenue for governments of producing nations.

    “We feel that the meeting will be fairly short, and the alliance will stick to the current output targets,” said Gary Peach, oil markets analyst with Energy Intelligence. Standing pat makes sense “all the more so because oil is at $87 per barrel (earlier Friday), which is a good price for everybody. … Of course, $98 is better, but right now I think they see the market as adequately priced, adequately supplied and there’s no reason to rock the boat.”

    Analysts at Clearview Energy Partners, on the other hand, expect OPEC+ to announce a production cut of 1 million barrels per day. Some members are underproducing, so that would more likely amount to a production cut of roughly 580,000 barrels per day.

    A cut of that magnitude wouldn’t cause a problem with global supplies, even when taking into consideration the EU ban on Russian oil, which is expected to pull another 1 million barrels off the market, said Jacques Rousseau, managing director at Clearview Energy Partners. Oil use declines in the winter, in part because fewer people are driving.

    But the G-7 price cap could prompt Russia to retaliate and take more oil off the market. The Saudis are “likely to share the Kremlin’s interest in quashing the G-7’s rising buyers’ cartel,” said Kevin Book, another managing director at Clearview.

    The cap of $60 a barrel is near the current price of Russian oil, meaning Moscow could continue to sell while rejecting the cap in principle.

    “If Russia ends up taking off more oil than about a million barrels per day, then the world becomes short on oil, and there would need to be an offset somewhere, whether that’s from OPEC or not,” Rousseau said. “That’s going to be the key factor — is to figure out how much Russian oil is really leaving the market.”

    ———

    Bussewitz reported from New York.

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  • ‘The Phantom of the Opera’ extends its long Broadway goodbye

    ‘The Phantom of the Opera’ extends its long Broadway goodbye

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    NEW YORK — The masked man of Broadway is going out strong.

    “The Phantom of the Opera” — Broadway’s longest-running show — has postponed its final performance by eight weeks, pushing its final curtain from February to April after ticket demand spiked. Last week, the show raked in an eye-popping $2,2 million with a full house.

    The musical — a fixture on Broadway since 1988, weathering recessions, war and cultural shifts — will now play its final Broadway performance on April 16. When it closes, it will have played 13,981 performances.

    “We are all thrilled that not only the show’s wonderful fans have been snapping up the remaining tickets, but also that a new, younger audience is equally eager to see this legendary production before it disappears,” lead producer Cameron Mackintosh said in a statement.

    Producers said there would be no more postponements. “This is the only possible extension for the Broadway champion, as the theater will then be closed for major renovations after the show’s incredible 35-year run.”

    Based on a novel by Gaston Leroux, “Phantom” tells the story of a deformed composer who haunts the Paris Opera House and falls madly in love with an innocent young soprano, Christine. Andrew Lloyd Webber’s lavish songs include “Masquerade,” ″Angel of Music,” ″All I Ask of You” and “The Music of the Night.”

    The closing of “Phantom” would mean the longest-running show crown would go to “Chicago,” which started in 1996. “The Lion King” is next, having begun performances in 1997.

    Broadway took a pounding during the pandemic, with all theaters closed for more than 18 months. Some of the most popular shows — “Hamilton,” “The Lion King” and “Wicked” — have rebounded well, but other shows have struggled. Breaking even usually requires a steady stream of tourists, especially for the costly “Phantom,” and visitors to the city haven’t returned to pre-pandemic levels.

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  • Shutterfly CEO sees ‘choppy’ times through her economic lens

    Shutterfly CEO sees ‘choppy’ times through her economic lens

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    SAN FRANCISCO — While other technology companies lay off workers and try to cut other costs amid a post-pandemic comedown, Shutterfly CEO Hilary Schneider is gearing up for a busy holiday season. Orders are pouring in for the digital photo and printing company’s photo books, which capture moments from all the postponed vacations, weddings and other diversions people could finally enjoy this year.

    Schneider, who became Shutterfly’s CEO in 2020 shortly after Apollo Global Management took the company private in a $2.7 billion deal, also sympathizes with the belt-tightening at other technology companies. Her past experience includes being CEO of Red Herring, a technology magazine that collapsed during the dot-com bust 20 years ago, and working as a top executive at Yahoo during the Great Recession of 2008 and 2009. She recently shared her perspective with The Associated Press.

    Q: How do you view the current state of the economy?

    A: We’re certainly going through an economic reconciliation here. It’s hard to remember what that’s like because we have been in a bull market for so long. But those of us with some gray hair have seen this before. I think the reality is it’s a choppy environment. While we are not in a recession yet, there are certainly things that are impacting everyone already. You have the war in Ukraine, you have inflation, you have supply chain issues, and higher labor costs with nearly full employment.

    So that puts everyone in a cautious mode because of the lack of predictability about not only the next day or the next week, but what the next month is going to be. When my boys were young, I remember in soccer they would line them up and teach them to get into a crouch so you could react to the ball. I feel like that’s what all these businesses are doing right now,

    Q: We have seen thousands upon thousands of layoffs at major tech companies in recent weeks. Do you think this will be a prime opportunity for smaller tech firms to add talent?

    A: I was recently at a good friend’s 60th birthday party that had an interesting group there and everyone was talking about cutbacks. What I heard from the venture investors who were there is that they are in a more conservative mode just because they are trying to preserve cash for their existing portfolio (of funded companies). So you just look at number of new companies being funded, I think that number will go down. And that means there will be less of a call for new talent. Everybody is a little more risk averse in this current environment.

    Q: Do you expect the tougher economy to yield any new growth opportunities?

    A: The smarter companies — and I know we certainly are thinking about it this way — will remember the adage about not letting any downturn go by without taking advantage of it. Ultimately, I think some of the smarter companies are thinking, “OK, this is a harder economic environment but what are the jujitsu moves you can make right now?” So you are a company with more resources and more brand recognition than smaller competitors, you are going to be trying to make moves that allow you to come out of this downturn in a situation where you have actually gained market share.

    Q: Is it strange to see a company like Yahoo where you once worked go from a technology powerhouse to an afterthought?

    A: The interesting thing about something like Yahoo is there is still significant residual value in brands like that. I don’t know the specifics, but I think if you look at AOL, which was sort of the original internet, there is still a significant number of people with AOL email. There are habits that get formed and alliances that continue. There are companies that continue reinventing themselves, but unfortunately you also see technology companies that hit a peak and then didn’t catch that next wave.

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  • New Zealand hikes interest rate to 4.25% to fight inflation

    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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  • OECD forecast: High rates, inflation to slow world growth

    OECD forecast: High rates, inflation to slow world growth

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    Hobbled by high interest rates, punishing inflation and Russia’s war against Ukraine, the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023.

    That was the sobering forecast issued Tuesday by the Paris-based Organization for Economic Cooperation and Development. In the OECD’s estimation, the world economy will grow just 3.1% this year, down sharply from a robust 5.9% in 2021.

    Next year, the OECD predicts, would be even worse: The international economy would expand only 2.2%.

    “It is true we are not predicting a global recession,” OECD Secretary-General Mathias Cormann said at a news conference. “But this is a very, very challenging outlook, and I don’t think that anyone will take great comfort from the projection of 2.2% global growth.”

    The OECD, made up of 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses. Figures from the organization showed fully 18% of economic output in member countries being spent on energy after Russia’s invasion of Ukraine helped drive up prices for oil and natural gas. That has confronted the world with an energy crisis on the scale of the two historic energy price spikes in the 1970s that also slowed growth and fueled inflation.

    Inflation — largely fueled by high energy prices — “has become broad-based and persistent,” Cormann said, while “real household incomes across many countries have weakened despite support measures that many governments have been rolling out.”

    In its latest forecast, OECD predicts that the U.S. Federal Reserve’s aggressive drive to tame inflation with higher interest rates — it’s raised its benchmark rate six times this year, in substantial increments — will grind the U.S. economy to a near-halt. It expects the United States, the world’s largest economy, to grow just 1.8% this year (down drastically from 5.9% in 2021), 0.5% in 2023 and 1% in 2024.

    That grim outlook is widely shared. Most economists expect the United States to enter at least a mild recession next year, though the OECD did not specifically predict one.

    The report foresees U.S. inflation, though decelerating, to remain well above the Fed’s 2% annual target next year and into 2024.

    The OECD’s forecast for the 19 European countries that share the euro currency, which are enduring an energy crisis from Russia’s war, is hardly brighter. The organization expects the eurozone to collectively manage just 0.5% growth next year before accelerating slightly to 1.4% in 2024.

    And it expects inflation to continue squeezing the continent: The OECD predicts that consumer prices, which rose just 2.6% in 2021, will jump 8.3% for all of 2022 and 6.8% in 2023.

    Whatever growth the international economy produces next year, the OECD says, will come largely from the emerging market countries of Asia: Together, it estimates, they will account for three-quarters of world growth next year while the U.S. and European economies falter. India’s economy, for instance, is expected to grow 6.6% this year and 5.7% next year.

    China’s economy, which not long ago boasted double-digit annual growth, will expand just 3.3% this year and 4.6% in 2023. The world’s second-biggest economy has been hobbled by weakness in its real estate markets, high debts and draconian zero-COVID policies that have disrupted commerce.

    Fueled by vast government spending and record-low borrowing rates, the world economy soared out of the pandemic recession of early 2020. The recovery was so strong that it overwhelmed factories, ports and freight yards, causing shortages and higher prices. Moscow’s invasion of Ukraine in February disrupted trade in energy and food and further accelerated prices.

    After decades of low prices and ultra-low interest rates, the consequences of chronically high inflation and interest rates are unpredictable.

    “Financial strategies put in place during the long period of hyper-low interest rates may be exposed by rapidly rising rates and exert stress in unexpected ways,’’ the OECD said in Tuesday’s report.

    The higher interest rates being engineered by the Fed and other central banks will make it difficult for heavily indebted governments, businesses and consumers to pay their bills. In particular, a stronger U.S. dollar, arising in part from higher U.S. rates, will imperil foreign companies that borrowed in the U.S. currency and may lack the means to repay their now-costlier debt.

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  • Asian stocks down after Wall St weekly loss on rate fears

    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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  • Ukraine, China-US frictions dominate at G-20 summit in Bali

    Ukraine, China-US frictions dominate at G-20 summit in Bali

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    NUSA DUA, Indonesia — Discord over Russia’s war on Ukraine and festering tensions between the U.S. and China are proving to be ominous backdrops for world leaders gathering in Indonesia’s tropical Bali island for a summit of the Group of 20 biggest economies starting Tuesday.

    With recession looming as central banks fight decades-high inflation partly brought on by the war, U.S. Treasury Secretary Janet Yellen said that ending the conflict would be the “single best thing that we can do for the global economy.”

    British Prime Minister Rishi Sunak, writing in the newspaper The Telegraph, called Russia a “rogue state” and slammed its president, Vladimir Putin, for staying away.

    “Leaders take responsibility. They show up. Yet, at the G-20 summit in Indonesia this week, one seat will remain vacant,” wrote Sunak, who took office last month. “The man who is responsible for so much bloodshed in Ukraine and economic strife around the world will not be there to face his peers. He won’t even attempt to explain his actions.”

    Pressures have been mounting as Russian attacks destroy vital infrastructure in Ukraine, adding to miseries in damaged cities just as winter cold takes hold.

    The G-20 meetings provide another opportunity for leaders to show unity in their support for Ukraine, discussions that “are inseparable from those on how we can strengthen our collective security,” Sunak said.

    In myriad ways, the war’s repercussions have encompassed the globe as disruptions to grain shipments and energy supplies have pushed costs of living sharply higher.

    “Russia’s brutal war in Ukraine is creating food and energy crises. It’s disrupting supply chains and raising the cost of living. Families are worried that they’re not going to be able to put food on the table or won’t be able to heat their homes during winter,” Canadian Prime Minister Justin Trudeau told a business conference on the sidelines of the G-20 meetings.

    Most vital for countries threatened with famine is whether Russia will agree to extend the U.N. Black Sea Grain Initiative, which is up for renewal on Saturday.

    The deal, reached in July, enabled major global grain producer Ukraine to resume exports from ports that had been largely blocked for months because of the war. Russia briefly pulled out of the deal but rejoined it days later.

    U.N. Secretary General Antonio Guterres said Monday that he was “hopeful” the initiative will be renewed after progress was made on resolving issues related to payments for Russian exports of food and fertilizers.

    The effort helped stabilize markets and bring down food prices, he said.

    “I’m hopeful that our efforts will go on being successful and we will be able to remove the last obstacles.”

    Guterres said he was happy that U.S. President Joe Biden and Chinese President Xi Jinping met Monday in their first face-to-face encounter since Biden took office in January 2021.

    Cooperation between the two largest economies is vital for global efforts to curb the carbon emissions that cause climate change, among other issues, he said.

    The meeting between Biden and Xi on the eve of the start of the formal G-20 summit meetings was a step toward finding common ground despite antagonisms over trade, technology and other issues as relations have grown increasingly strained.

    In opening the meeting, Biden said the two countries shared a responsibility to “prevent competition from becoming anything ever near conflict, and to find ways to work together on urgent global issues that require our mutual cooperation.”

    Xi said he hoped they would “chart the right course for the China-U.S. relationship.”

    Chinese officials have condemned the Biden administration’s decision last month to block exports of advanced computer chips to China — a national security move that bolsters U.S. competition against Beijing.

    U.S. officials said no joint statement was expected after the meeting with Xi and suggested policy breakthroughs were unlikely.

    But even having top leaders of the two sides meet after a long hiatus during the pandemic is progress of a kind that might facilitate more productive talks in the larger G-20 meeting, which includes 19 of the largest economies and the European Union. Another 10 countries were invited as guests.

    The G-20 was founded in 1999 as a forum for cooperation on economic and financial matters. In 2009, top G-20 leaders began holding annual meetings to craft a response to the global financial crisis.

    The group consists of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union. Spain holds a permanent guest seat.

    “The G-20 was made for moments like these and built for these challenges,” Australian Prime Minister Anthony Albanese told the “B-20″ business conference, which wrapped up on Monday.

    “We can achieve far more together than we ever could alone,” he said.

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  • UK’s self-billed ‘Scrooge’ promises tax rises, spending cuts

    UK’s self-billed ‘Scrooge’ promises tax rises, spending cuts

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    Britain’s Treasury chief, Jeremy Hunt, has warned a spending crunch and tax increases are on their way as he bids to fill the “black hole” in the country’s finances

    LONDON — Britain’s Treasury chief warned Sunday of a coming spending crunch and tax increases for cash-strapped Britons as he bids to fill the “black hole” in the country’s finances.

    Billing himself as a Scrooge figure ahead of Thursday’s Autumn Statement, when he will update Parliament on the government’s budget measures, Jeremy Hunt said he was forced to make “very difficult decisions” in his attempt to curb inflation and put the economy back on an even keel.

    He told British broadcasters that he was determined to make an expected recession as shallow as possible, and warned that everyone could expect to pay more tax.

    “I’m a Conservative chancellor and I think I’ve been completely explicit that taxes are going to go up, and that’s a very difficult thing for me to do because I came into politics to do the exact opposite,” he told the BBC, using his official title, Chancellor of the Exchequer.

    Hunt is seeking to make up to 60 billion pounds ($71 billion) in savings and extra revenue in a bid to tighten up public finances and undo some of the damage economists say was done by his predecessor, Kwasi Kwarteng, and former prime minister Liz Truss.

    According to the Resolution Foundation, a think tank, Truss and Kwarteng blew 20 billion pounds on unfunded cuts to national insurance and stamp duty, with a further 10 billion lost to higher interest rates and Government borrowing costs.

    Hunt said he would continue his predecessor’s pledge to help Britons with soaring energy bills, but added government departments could expect to see cuts.

    Earlier he told The Sunday Times in an interview “I’m Scrooge who’s going to do things that make sure Christmas is never canceled.”

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  • Asian stocks surge after lower US inflation eases rate fears

    Asian stocks surge after lower US inflation eases rate fears

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    BEIJING — Asian stock markets surged Friday after U.S. inflation eased by more than expected, spurring hopes the Federal Reserve might scale down plans for more interest rate hikes.

    Hong Kong’s market benchmark jumped 5.7% and Seoul rose 3.3%. Shanghai, Tokyo and Sydney advanced. Oil prices edged higher.

    Wall Street’s benchmark S&P 500 index soared 5.5% on Thursday for its biggest one-day gain in 2 1/2 years after the government reported consumer prices rose 7.7% over a year ago in October. That was lower than the 8% expected by economists and the fourth month of decline.

    The announcement “drove a ‘more dovish’ calibration of interest rate expectations,” said Yeap Jun Rong of IG in a report.

    The Fed and central banks in Europe and Asia are raising rates to cool inflation that is at multi-decade highs. Investors worry that might tip the global economy into recession. They hope lower inflation might prompt the Fed to ease off plans for more increases.

    Forecasters warned Thursday it was too early to be certain prices are under control. Fed officials have said rates might have to stay elevated for some time.

    Hong Kong’s Hang Seng index soared to 16,994.66 and the Nikkei 225 in Tokyo gained 2.9% to 28,229.68.

    The Shanghai Composite Index added 1.4% to 3,078.42 after the ruling Communist Party promised to alter quarantine and other anti-virus tactics to reduce the cost of China’s severe “zero-COVID” strategy that has disrupted the economy.

    The Kospi in Seoul rose to 2,481.50 and Sydney’s S&P-ASX 200 was up 2.7% at 7,154.20.

    India’s Sensex opened up 1.6% to 61,579.12. New Zealand and Southeast Asian markets advanced.

    On Wall Street, the S&P 500 gained to 3,956.37, propelled by big gains for tech heavyweights. Amazon soared 12.2%, Apple rose 8.9% and Microsoft climbed 8.2%.

    The Dow Jones Industrial Average gained 3.7%, or more than 1,200 points, to 33,715.37.

    The Nasdaq composite, dominated by tech stocks, shot up 7.4% to 11,114.15 for its best day since March 2020, when Wall Street was rebounding from a crash at the start of the coronavirus pandemic.

    Investors were reassured that U.S. inflation was declining from its June peak of 9.1%, though forecasters said the Fed’s campaign to cool price rises was far from over.

    Traders expect the Fed to raise its benchmark lending rate in December but by a smaller margin of half a percent following four increases of 0.75 percentage points, triple its usual margin. That benchmark stands at a range of 3.75% to 4%, up from close to zero in March.

    The Fed is trying to slow economic activity to reduce pressure for prices to rise.

    The latest figures are a sign the Fed is “on the right path,” but it will face “a lot of variables” over the next few quarters, said Edward Moya of Oanda in a report. He said the benchmark rate could be raised to 5% and “if inflation proves to be sticker, it could be as high as 5.50%.”

    Core inflation, which strips out volatile food and energy prices and is more closely watched by the Fed, was 6.3% over a year earlier, down from September’s 6.6% and below the consensus forecast of 6.5%. Core prices rose 0.3% month on month, half of September’s 0.6% gain.

    The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, fell to 3.82% from 4.15%. The two-year yield, which more closely follows expectations for Fed action, fell to 4.32% from 4.62% and was on pace for its sharpest fall since 2008.

    In energy markets, benchmark U.S. crude gained 20 cents to $86.67 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 64 cents to $86.47 on Thursday. Brent crude, the price basis for international oil trading, advanced 20 cents to $93.87 per barrel in London. It rose $1.02 to $93.67 the previous session.

    The dollar declined to 141.52 yen from Thursday’s 141.83 yen. The euro edged up to $1.0206 from $1.0180.

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  • Biden stumps on job growth, as voters dread inflation

    Biden stumps on job growth, as voters dread inflation

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    WASHINGTON — President Joe Biden has notched an envious record on jobs, with 10.3 million gained during his tenure. But voters in Tuesday’s midterm elections are far more focused on inflation hovering near 40-year highs.

    That’s left the president trying to convince the public that the job gains mean better days are ahead, even as fears of a recession build.

    Presidents have long trusted that voters would reward them for strong economic growth, but inflation has thrown a monkey wrench into the already difficult probability of Democrats’ retaining control of the House and Senate.

    Economic anxieties have compounded as the Federal Reserve has repeatedly hiked its benchmark interest rates to lower inflation and possibly raise unemployment. Mortgage costs have shot upwards, while the S&P 500 stock index has dropped more than 20% so far this year as the world braces for a possible downturn.

    Biden is asking voters to look beyond the current financial pain, saying that what matters are the job gains that he believes his policies are fostering. The government reported Friday that employers added 261,000 jobs in October as the unemployment rate bumped up to 3.7%.

    Roughly 740,000 manufacturing jobs have been added since the start of Biden’s presidency, a figure that the president says will keep rising because of his funding for infrastructure projects, the production of computer chips and the switch to clean energy sources.

    “America is reasserting itself — it’s as simple as that,” Biden said in a Friday speech. “We also know folks are still struggling with inflation. It’s our number one priority.”

    Yet the president is also warning that a Republican majority in Congress could make inflation worse by seeking to undo his programs and treating payments on the federal debt as a bargaining chip instead of an obligation to honor.

    His challenge is that the party in power generally faces skeptical voters in U.S. midterms and inflation looms over the public mindset more than job growth.

    “If you have a job, it’s small comfort to know that the job market is strong if at the same time you feel like every paycheck is worth less and less anyway,” said pollster Kristen Soltis Anderson. “Inflation is such political poison because voters are reminded every day whenever they spend money that it is a problem we are experiencing.”

    As Biden tries to fend off fears that inflation is causing the country to slide into a recession, his chief evidence of the economy’s resilience is the continued job growth.

    “As we see the economy as a whole, we do not see it going into a recession,” White House press secretary Karine Jean-Pierre told reporters in anticipation of the latest jobs report.

    Going into the election, Biden and Democrats are already at a disadvantage. Voters generally favor the party out of the White House in midterms, giving Republicans an automatic leg up. When Yale University economist Ray Fair looked at past elections, his model forecast that Democrats would get just 46.4% of the national vote largely because Biden was in the Oval Office.

    Fair’s analysis suggests that inflation basically erased the political boost that Democrats could have gotten from strong economic growth during three quarters in 2021. Even if the economy is top of mind for many voters, the conflicting forces of past growth and high inflation cancel out each other.

    This makes the Democrats’ vote share roughly the same as suggested by the historical trend, Fair concluded.

    But inflation compounds the obstacles for a president who has tried to convey optimism as he tours the country in the run-up to the elections. Research in social psychology and behavioral economics generally shows that people often focus on the negatives and can block out the positives.

    “People pay more attention to bad news than to good news and are more likely to retain and recall bad news,” said Matthew Incantalupo, a political scientist at Yeshiva University.

    Incantalupo’s research looks at how voters absorb economic news. When unemployment is low, as it is now, he said, voters generally think about jobs as a personal issue — rather than a systemic one involving government policies. But most think about inflation as a social problem beyond any person’s control, unless that individual happens to run the Fed.

    “When it is high, everyone experiences it at least a little bit, and there really is no individual way to avoid it,” Incantalupo said. “Voters are going to look to government for remedies under those circumstances, and in many cases that will result in them punishing incumbents, even in the presence of other positive news about the economy.”

    Republican candidates have specifically said Biden’s $1.9 trillion coronavirus relief package last year overheated the economy, causing prices to rise alongside the job gains that they claim would have happened anyway as the pandemic receded. They have also said that Biden should have loosened restrictions on oil production, in order to increase domestic output and lower gasoline prices.

    House Republican leader Kevin McCarthy — who could become speaker if the GOP wins a House majority — has hammered Biden on high prices. As Biden has warned that Republicans who deny the outcome of the 2020 election are a threat to democracy, the California congressman countered that what voters care about are the costs of gas and groceries.

    “President Biden is trying to divide and deflect at a time when America needs to unite — because he can’t talk about his policies that have driven up the cost of living,” McCarthy tweeted this past week. “The American people aren’t buying it.”

    Still, inflation is not solely a domestic issue. After Russia invaded Ukraine, energy and food costs rose and suddenly flipped the global dynamics as inflation rose faster in parts of the world with less aggressive coronavirus relief than the U.S. Annual inflation in the euro zone is a record 10.7%, much higher than the 8.2% in the U.S.

    Meanwhile, growth has slowed in China, the pace of world trade is slipping and Saudi Arabia-led OPEC+ has cut oil production in order to prop up prices. And because the Fed is raising rates to lower domestic inflation, the dollar has increased in value and essentially exported higher prices to the rest of the world.

    This has left U.S. voters in the curious position of not necessarily blaming the president for inflation, even as they disapprove of his economic leadership.

    An October poll by AP-NORC Center for Public Affairs captured this split. More than half of voters say that prices are higher because of factors beyond Biden’s control. But just 36% approve of his economic leadership.

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  • Stocks end lower as the Fed continues to fight inflation

    Stocks end lower as the Fed continues to fight inflation

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    NEW YORK — Stocks racked up more losses on Wall Street and Treasury yields again rose to multiyear highs Thursday as investors looked ahead to a closely watched job market report from the government that could influence the Federal Reserve’s next move in its fight to bring down inflation.

    Technology stocks led the market pullback, which came a day after the central bank raised its benchmark rate for the sixth time this year and signaled that it may need to keep hiking rates for some time before its can successfully squash the highest inflation in decades.

    The S&P 500 fell 1.1%, while the Dow Jones Industrial Average dropped 0.5%. The tech-heavy Nasdaq composite closed 1.7% lower. The declines extended the major indexes’ losing streak to a fourth day. They’re each on pace for a weekly loss.

    Expectations of higher rates helped push up Treasury yields, weighing on stocks. The two-year Treasury note, which tends to track expectations for future Fed moves, rose to 4.72% from 4.61% late Wednesday and is now at its highest level since 2007, according to Tradeweb.

    The yield on the 10-year Treasury rose to 4.15% from 4.09% late Wednesday. The rise in the 10-year Treasury yield has prompted mortgage rates to more than double this year and it continues putting pressure on stocks.

    The Fed on Wednesday added another jumbo rate increase and suggested that the pace of rate hikes may slow. The central bank also indicated that interest rates might need to ultimately go even higher than previously thought in order to tame the worst inflation in decades.

    The central bank’s latest three-quarters of a percentage point raise brings short-term interest rates to a range of 3.75% to 4%, its highest level in 15 years. Wall Street is evenly split on whether the central bank ultimately raises rates to a range of 5% to 5.25% or 5.25% to 5.50% next year.

    Higher rates not only slow the economy by discouraging borrowing, they also make stocks look less appealing compared to lower-risk assets like bonds and CDs.

    Stubbornly hot inflation has been prompting central banks around the world to also raise interest rates. On Thursday, the Bank of England announced its biggest interest rate increase in three decades. The increase is the Bank of England’s eighth in a row and the biggest since 1992.

    European and Asian markets closed mostly lower.

    In the U.S., the S&P 500 fell 39.80 points to 3,719.89. The Dow lost 146.51 points to close at 32,001.25. The Nasdaq slid 181.86 points to 10,342.94. Smaller company stocks also lost ground. The Russell 2000 fell 9.41 points, or 0.5%, to 1,779.73.

    Technology and communication services stocks were among the biggest weights on the market. Apple fell 4.2% and Warner Bros. Discovery slid 5.6%.

    Those losses kept gains in industrial, energy and other sectors in check. Boeing jumped 6.3% and Marathon Petroleum rose 3%.

    Investors had been hoping for economic data signaling that the Fed might ease up on rate increases. The fear is that the Fed will go too far in slowing the economy and bring on a recession.

    Hotter-than-expected data from the employment sector this week has so far signaled that the Fed has to remain aggressive. On Friday, Wall Street will get a broader update from the U.S. government’s October jobs report.

    So far, hiring and wage growth have not fallen fast enough for the Fed to slow its inflation-fighting efforts. If the October data shows a stronger-than-expected rise in hiring or wages, that could put pressure on the Fed to keep raising interest rates.

    The Labor Department is expected to report that nonfarm employers added 200,000 jobs last month. That would be the worst showing since December 2020, when the economy lost 115,000 jobs.

    Investors will also be looking ahead to the latest data on inflation at the consumer level. That report, the consumer price index, is due out next week.

    “The next two or three quarters are incredibly important in assessing how far the Federal Reserve will need to go to achieve their objective of bringing down inflation,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “Why the CPI data is so important, why the labor report is so important, is because they feed into that next six-month cycle.”

    Wall Street has also been closely watching the latest company earnings reports. The reports have been mixed and many companies have warned that inflation will likely continue pressuring operations.

    Booking Holdings rose 2.7% after reporting strong third-quarter financial results. Robinhood Markets climbed 8.2% after the investing app operator reported third-quarter earnings that topped Wall Street’s forecasts. Chipmaker Qualcomm fell 7.7% after giving investors a weak profit and revenue forecast.

    ——

    Joe McDonald and Matt Ott contributed to this report.

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  • Job openings hit 10.7M despite Fed attempts to cool economy

    Job openings hit 10.7M despite Fed attempts to cool economy

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    WASHINGTON — U.S. job openings rose unexpectedly in September, suggesting that the American labor market is not cooling as fast as the inflation fighters at the Federal Reserve hoped.

    Employers posted 10.7 million job vacancies in September, up from 10.3 million in August, the Labor Department said Tuesday. Economists had expected the number of job openings to drop below 10 million for the first time since June 2021.

    For the past two years, as the economy rebounded from 2020’s COVID-19 recession, employers have complained they can’t find enough workers. With so many jobs available, workers can afford to resign and seek employment that pays more or offers better perks or flexibility. So companies have been forced to raise wages to attract and keep staff. Higher pay has contributed to inflation that has hit 40-year highs in 2022.

    In another sign the labor market remains tight and employers unwilling to let workers go, layoffs dropped in September to 1.3 million, fewest since April. But the number of people quitting their jobs slipped in September to just below 4.1 million, still high by historical standards.

    To combat higher prices, the Federal Reserve has hiked its benchmark interest rate five times this year and is expected to deliver another increase Wednesday and again at its meeting in December. The central bank is aiming for a so-called soft landing — raising rates just enough to slow economic growth and bring inflation down without causing a recession.

    Fed Chair Jerome Powell has expressed hope that inflationary pressure can be relieved by employers cutting job openings, not jobs.

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  • Ahead of harsh winter, tourism roars back in Mediterranean

    Ahead of harsh winter, tourism roars back in Mediterranean

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    CAPE SOUNION, Greece — When Stelios Zompanakis quit his job at Greece’s central bank to try his luck at boat racing, friends and family pleaded with him to reconsider.

    Nine years later, he spends summers on the “Ikigai,” a 53-foot yacht he named after the Japanese concept of finding happiness through a life of meaning.

    Weeklong holiday trips on his yacht around some of the lesser-known Greek islands — Milos, Sifnos, Serifos, Kythnos and many others — were booked up through October.

    “The demand is insane,” said Zompanakis, who recently paced barefoot around the teak-paneled deck to adjust the sail and check instrument panels as the boat swung past the ancient Temple of Poseidon, on a clifftop south of Athens.

    Tourism around the Mediterranean has been booming. Helped by a strong U.S. dollar and Europeans’ pent-up demand to find a beach after years of COVID-19 travel restrictions, it’s been a stronger comeback from the pandemic slump than many expected, which led to long lines, canceled flights and lost luggage this summer at many European airports — though not in Greece.

    “People after COVID, after two years of frustration, probably put some money aside and decided they needed a vacation,” Zompanakis said. “And I think the income from their budgets that they are willing to spend rose so that also brought more quality … and this helped Greece a lot.”

    Greece is on course to beat its annual record revenue haul from tourism. Portugal also is eyeing a full recovery, while late-summer data suggested Spain, Italy and Cyprus will end the year just shy of pre-pandemic visitor levels.

    A blessing for Europe’s southern economies, the rebound is also easing the continent’s tilt toward recession brought on by rocketing energy prices, the war in Ukraine and enduring disruptions caused by the pandemic.

    “For countries like Greece and others like Italy and Spain, they have actually produced plenty of resilience during the summer … despite the tsunami that is coming from the cost-of-living crisis and the energy crisis,” said Lorenzo Codogno, chief economist at LC Macro Advisors and a visiting professor at the London School of Economics.

    Europe’s Mediterranean coast also offers destinations that are safe and have cultural interest, Codogno said, but the good news may not last.

    Economic growth in 19 countries using the euro currency is set to sink to 0.5% in 2023 from an increase of 3.1% this year, according to a new forecast from the International Monetary Fund.

    Greece, Italy, Portugal and Spain have the highest debt levels in the eurozone relative to the size of their economies and also face rising borrowing costs.

    Stephen Rooney, a senior economist focused on tourism at Oxford Economics, says tourism-dependent countries will eventually see their industries hit harder next year by the cost-of-living crisis driven by soaring inflation and high energy bills.

    “There is an expectation that these challenges will begin to bite as we move into the final quarter of this year and into 2023,” he said. “We do not expect the travel recovery to stall in 2023, but we do expect it will slow somewhat in 2023 in line with the general economic slowdown, before picking up again in 2024.”

    In Athens’ historic Plaka district, tourists were still packing the narrow streets during a mild late October, crowding around ice cream sellers and stopping to browse at stores selling leather bags, jewelry, hats and souvenirs.

    At Loom Carpets, co-owner Vahan Apikian, folded and stacked carpets and laid out shoulder bags for customers, happy that demand has remained high well into the autumn.

    “Business has gone very well: We had many more visitors than in 2019, which was a record year. This year was even better,” he said.

    As the days get shorter and the outlook darkens over European Union economies, Greece and other southern member states have renewed national efforts to set up year-round holiday destinations, hoping that hiking trails, rock climbing and visits to historic churches can dampen the winter drop in arrivals.

    But year-round tourism also exposes the shortcomings in governments’ ability to plan and coordinate, said Panagiotis Karkatsoulis, a senior policy analyst at the Athens-based Institute for Regulatory Research who has advised governments in southern Europe and the Middle East on policy reforms.

    “There isn’t much point in advertising a trail to a historic monastery that closes at 3 p.m. or trying to bring seniors to a destination with bad roads and no hospital access … tourism exposes every weakness an administration has,” he said.

    The revenue windfall this winter, he argued, will have to fund continued government aid for struggling businesses and households rather than go to longer-term improvements.

    “Anything like tourism that generates wealth is unquestionably positive,” he said. “But how that money is spent — that’s a different conversation.”

    ———

    AP reporters Theodora Tongas and Lefteris Pitarakis in Athens, Barry Hatton in Lisbon, Portugal; Raquel Redondo in Madrid; Menelaos Hadjicostis in Nicosia, Cyprus; and Colleen Barry in Milan contributed.

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  • Wall Street heads for first weekly win streak since summer

    Wall Street heads for first weekly win streak since summer

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    NEW YORK — Wall Street is rallying Friday, led by Apple, Exxon Mobil and other companies that made even bigger profits during the summer than expected.

    The S&P 500 was 1.2% higher in early trading and on pace to close out its first back-to-back weekly gains since August. The Dow Jones Industrial Average was up 533 points, or 1.7%, to 32,576, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 1.1% higher.

    Stocks have revived recently in part on hopes that the big hikes to interest rates shaking the market may be set to dial down later this year. Some investors are even talking again about a “pivot” by the Federal Reserve away from a focus solely on beating down inflation through rate hikes, even if many analysts say such hopes may be overstretched. More recently, many big U.S. companies have been reporting stronger earnings than expected, though the bag remains decidedly mixed.

    Apple rose 5% and was the strongest force lifting the S&P 500 in its first trading after reporting fatter revenue and profit than expected for the latest quarter. Oil producers were also strong after delivering record earnings on the back of rising crude prices. Exxon Mobil climbed 2.8%, and Chevron rose 2%.

    They helped to offset a 10.8% drop for Amazon, which offered a weaker-than-expected forecast for upcoming revenue. It was the latest in a lengthening list of discouraging trends for some of the Big Tech companies that have dominated Wall Street for years with their seemingly unstoppable growth.

    Earlier in the week, Meta Platforms lost nearly a quarter of its value after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. Microsoft and Google’s parent company also reported weaker trends than Wall Street expected.

    Rising interest rates have hit Big Tech stock prices harder than the rest of the market, and the pressure increased Friday as yields climbed.

    Data released in the morning showed the raises that U.S. workers got in wages and other compensation during the summer was in line with economists’ expectations. That should keep the Fed on track to keep hiking rates sharply in hopes of weakening the job market enough to undercut the nation’s high inflation.

    The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.38% from 4.28% late Thursady.

    The 10-year yield, which helps set rates for mortgages and many other loans, climbed to 3.98% from 3.93% and was briefly back above 4%.

    Trading in Twitter’s stock has ended, after Elon Musk has taken control of the company following a lengthy legal battle.

    In Europe, stock indexes were mixed in relatively muted trading.

    Shares fell 0.9% in Tokyo even as the government approved a massive stimulus spending package to help the world’s No. 3 economy cope with inflation. As expected, the Bank of Japan wrapped up a policy meeting by keeping its ultra-lax monetary policy unchanged even as it forecast higher inflation.

    ———

    Associated Press writers Elaine Kurtenbach, Matt Ott and Mari Yamaguchi contributed.

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  • Auto prices finally begin to creep down from inflated highs

    Auto prices finally begin to creep down from inflated highs

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    DETROIT — All summer long, Aleen Hudson kept looking for a new minivan or SUV for her growing passenger shuttle service.

    She had a good credit rating and enough cash for a down payment. Yet dealerships in the Detroit area didn’t have any suitable vehicles. Or they’d demand she pay $3,000 to $6,000 above the sticker price. Months of frustration left her despondent.

    “I was depressed,” Hudson said. “I was angry, too.”

    A breakthrough arrived in late September, when a dealer called about a 2022 Chrysler Pacifica. At $41,000, it was hardly a bargain. And it wasn’t quite what Hudson wanted. Yet the dealer was asking only slightly above sticker price, and Hudson felt in no position to walk away. She’s back in business with her own van.

    It could have been worse. Hudson made her purchase just as the prices of both new and used vehicles have been inching down from their eye-watering record highs and more vehicles are gradually becoming available at dealerships. Hudson’s van likely would have cost even more a few months ago.

    Not that anyone should expect prices to fall anywhere near where they were before the pandemic recession struck in early 2020. The swift recovery from the recession left automakers short of parts and vehicles to meet demand. Price skyrocketed, and they’ve scarcely budged since.

    Prices on new and used vehicles remain 30% to 50% above where they were when the pandemic erupted. The average used auto cost nearly $31,000 last month. The average new? $47,000. With higher prices and loan rates combining to push average monthly payments on a new vehicle above $700, millions of buyers have been priced out of the new-vehicle market and are now confined to used vehicles.

    The high prices are yielding substantial profits for most automakers despite sluggish sales. On Tuesday, for example, General Motors reported that its third-quarter net profit jumped more than 36%, thanks in part to sales of pricey pickup trucks and large SUVs.

    Still, as Hudson discovered, many vehicles are becoming slightly more affordable. Signs first emerged weeks ago in the 40-million-sales-a-year used market. As demand waned and inventories rose, prices eased from their springtime heights.

    CarMax said it sold nearly 15,000 fewer vehicles last quarter than it had a year earlier. The CEO of the used-vehicle company, based in Richmond, Virginia, pointed to inflation, higher borrowing rates and diminished consumer confidence.

    A “buyer’s strike” is how Adam Jonas, an auto analyst at Morgan Stanley, characterized the sales drops — a dynamic that typically foretells lower prices. And indeed, the average used vehicle price in September was down 1% from its May peak, according to Edmunds.com.

    At AutoNation, the nation’s largest dealership chain, sales of used vehicles and profit-per-vehicle both dropped last quarter. CEO Mike Manley noted that while the supply of vehicles remains low, used-auto prices are declining.

    “Our analysis shows that we are coming off the high values that we saw before,” Manley told analysts Thursday.

    Ivan Drury, director of insights at Edmunds cautioned that it will take years for used prices to fall close to their pre-pandemic levels. Since 2020, automakers haven’t been leasing as many cars, thereby choking off one key source of late-model used vehicles.

    Similarly, rental companies haven’t been able to buy many new vehicles. So eventually, they are selling fewer autos into the used market. That’s crimped another source of vehicles. And because used cars aren’t sitting long on dealer lots, demand remains strong enough to prop up prices.

    When auto prices first soared two years ago, lower-income buyers were elbowed out of the new-vehicle market. Eventually, many of them couldn’t afford even used autos. People with subprime credit scores (620 or below) bought only 5% of new vehicles last month, down from nearly 9% before the pandemic. That indicated that many lower-income households could no longer afford vehicles, said J.D. Power Vice President Tyson Jominy.

    Higher borrowing rates have compounded the problem. In January 2020, shortly before the pandemic hit, used-vehicle buyers paid an average of 8.4% annual interest, according to Edmunds. Monthly payments averaged $412. By last month, the average rate had reached 9.2%. And because prices had risen for over two years, the average payment had jumped to $567.

    The 1% average drop in used prices will help financially secure buyers with solid credit scores who can qualify for lower loan rates. But for those with poor credit and lower incomes, any price drop will be wiped out by higher borrowing costs.

    The new-vehicle market, by contrast, has become an option mainly for affluent buyers. Automakers are increasingly deploying scarce computer chips to make costly, loaded-out versions of pickups, SUVs and other outsize vehicles, typically with relatively low gas mileage. Last month, the average price of a new vehicle was down slightly from August but remained more than $11,000 above its level in January 2020.

    Glenn Mears, who runs five dealerships south of Canton, Ohio, says the Federal Reserve’s interest rate hikes, by contributing to pricier auto loans, are slowing his showroom traffic.

    “We can feel some pullback,” he said.

    Analysts generally say that with shortages of computer chips and other parts still hobbling factories, new-vehicle prices won’t likely fall substantially. But further modest price drops may be likely. The availability of vehicles on U.S. dealer lots improved to nearly 1.4 million vehicles last month, up from 1 million for most of the year, Cox Automotive reported.

    Before the pandemic, normal supply was far higher — around 4 million. So historically speaking, inventory remains tight and demand still high. Like Hudson, many buyers are still stuck paying sticker price or above.

    “It’s extraordinarily expensive these days,” said Jominy, who estimates that there are still 5 million U.S. customers waiting to buy new vehicles.

    Despite recent stock market declines, many such buyers have built up wealth, especially in their homes, and are rewarding themselves with high-end autos. In the San Francisco Bay area, for example, notes Inder Dosanjh, who runs a 20-dealership group that includes General Motors, Ford, Acura, Volkswagen and Stellantis brands, many people have received substantial pay raises.

    “There’s just a lot of money out there,” he said.

    In its earnings report Tuesday, GM noted that its customer demand is holding up. Though GM and other automakers would like to produce more vehicles, at the moment they are benefiting from slower production, which typically means higher prices and profits.

    John Lawler, Ford’s chief financial officer, noted Wednesday that near-record new-vehicle prices were starting to decline. And consumer appetites are starting to change: Demand for midrange vehicles, he said, has begun to outpace more profitable autos loaded with options.

    Next year could be a turning point, suggested Jeff Windau, an analyst at Edward Jones. With the economy likely to weaken and possibly enter a recession, prices could fall “as consumers become more focused on their financial situation and what they’re willing to bite off from a payment perspective.”

    ————

    This story has been corrected to show that 9% of new-vehicle buyers had subprime credit scores, and that has since dropped to 5%.

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  • US stock indexes are mixed as Facebook parent company slumps

    US stock indexes are mixed as Facebook parent company slumps

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    NEW YORK — Stock indexes are mixed on Wall Street in afternoon trading Thursday as more big companies report quarterly results.

    The S&P 500 fell 0.5% as of 2:11 p.m. Eastern. Roughly 70% of stocks within the benchmark index gained ground, but slides in several big technology stocks more than offset hose gains.

    The tech-heavy Nasdaq fell 1.5%. Facebook’s parent company, Meta Platforms, plummeted 23.7% after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. It joins other tech and communications stocks, such as Google’s parent company, Alphabet, and Microsoft, in reporting weak results and worrisome forecasts over advertising demand.

    The Dow Jones Industrial Average rose 263 points, or 0.8%, to 32,099. Construction equipment maker Caterpillar jumped 8.2% and contributed greatly to the index’s gains after it handily beat analysts’ third-quarter profit forecasts.

    Long-term Treasury yields fell. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.95% from 4.01% late Wednesday. The two-year yield fell to 4.34% from 4.42%.

    “What you’re seeing is a little bit of relief,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Earnings are not great but they’re not awful either.”

    The benchmark S&P 500 is still holding on to weekly gains and remains solidly on track to end October in the green.

    Earnings have been the big focus for Wall Street this week, but markets got some encouraging economic news Thursday as the government reported the U.S. economy returned to growth last quarter, expanding 2.6%. That marks a turnaround after the economy contracted during the first half of the year.

    The economy has been under pressure from stubbornly hot inflation and the Federal Reserve’s efforts to raise interest rates in order to cool prices. The central bank is trying to slow economic growth through rate increases, but the strategy risks going too far and brining on a recession.

    The rising interest rates have made borrowing more difficult, particularly with mortgage rates. Average long-term U.S. mortgage rates topped 7% for the first time in more than two decades this week.

    The latest economic data is being closely watched for any signs of a slowdown or that inflation might be easing as Wall Street tries to determine if and when the Fed might pull back on its interest rate increases.

    The central bank is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. But traders have grown more confident that it will dial down to a more modest increase of 0.50 percentage points in December, according to CME Group.

    Central banks around the world have also been raising interest rates in an effort to tame inflation. The European Central Bank piled on another outsized interest rate hike on Thursday. Markets in Europe were mixed.

    Wall Street has more earnings to review later Thursday. Internet retail giant Amazon and iPhone maker Apple report results after the market closes. Exxon Mobil will report its latest financial results on Friday.

    ———

    Joe McDonald and Matt Ott contributed to this report.

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  • US economy likely returned to growth last quarter

    US economy likely returned to growth last quarter

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    WASHINGTON — The problems have hardly gone away. Inflation, still near a 40-year high, is punishing households. Rising interest rates have derailed the housing market and threaten to inflict broader damage. And the outlook for the world economy grows bleaker the longer that Russia’s war against Ukraine drags on.

    But for now anyway, the U.S. economy has likely returned to growth after having shrunk in each of the first two quarters of 2022.

    At least that’s what economists expect to see Thursday when the Commerce Department issues its first of three estimates of gross domestic product — the broadest measure of economic output — for the July-September period.

    Economists surveyed by the data firm FactSet have predicted, on average, that GDP grew at a 2% annual rate in the third quarter. That would reverse annual declines of 1.6% from January through March and 0.6% from April through June.

    Consecutive quarters of declining economic output are one informal definition of a recession. But most economists say they believe the economy has so far skirted a recession, noting the still-resilient job market and steady spending by consumers. Most of them have expressed concern, though, that a recession is likely next year as the Federal Reserve continues to steadily ratchet up interest rates to fight inflation.

    Preston Caldwell, head of U.S. economics for the financial services firm Morningstar, notes that the economy’s contraction in the first half of the year was caused largely by factors that don’t reflect its underlying health and so “very likely did not constitute a genuine economic slowdown.” He pointed, for example, to a drop in business inventories, a cyclical event that tends to reverse itself and generally doesn’t reflect the state of the economy.

    By contrast, consumer spending, fueled by a healthy job market, and stronger U.S. exports likely restored the world’s biggest economy to growth last quarter.

    Thursday’s report from the government comes as Americans, worried about high prices and recession risks, are preparing to vote in midterm elections that will determine whether President Joe Biden’s Democratic Party retains control of Congress. Inflation has become a signature issue for Republican attacks on the Democrats’ stewardship of the economy.

    The risk of an economic downturn next year remains elevated as the Fed keeps raising rates aggressively to try to tame stubbornly high consumer prices. The central bank has raised its benchmark short-term rate five times this year, and it’s expected to announce further hikes next week and again in December. Chair Jerome Powell has warned bluntly that taming inflation will “bring some pain’’ — namely, higher unemployment and, possibly, a recession.

    Higher borrowing costs have already hammered the home market. The average rate on a 30-year fixed-rate mortgage, just 3.09% a year ago, is approaching 7%. Sales of existing homes have fallen for eight straight months. Construction of new homes is down nearly 8% from a year ago.

    Still, the economy retains pockets of strength. One is the vitally important job market. Employers have added an average of 420,000 jobs a month this year, putting 2022 on track to be the second-best year for job creation (behind 2021) in Labor Department records going back to 1940. The unemployment rate was 3.5% last month, matching a half-century low.

    But hiring has been decelerating. In September, the economy added 263,000 jobs — solid but the lowest total since April 2021.

    International events are causing further concerns. Russia’s invasion of Ukraine has disrupted trade and raised prices of energy and food, creating a crisis for poor countries. The International Monetary Fund, citing the war, this month downgraded its outlook for the world economy in 2023.

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  • Google’s ad sales slow dramatically, eroding parent’s profit

    Google’s ad sales slow dramatically, eroding parent’s profit

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    SAN FRANCISCO — Summertime revenue growth at Google’s corporate parent slipped to its slowest pace since the pandemic jarred the economy more than two years ago, with advertisers clamping down on spending and bracing for a potential recession.

    Alphabet Inc., which owns an array of smaller technology companies in addition to Google, on Tuesday posted revenue of $69.1 billion for the July-September quarter, a 6% increase from the same time last year.

    It marked the first time Alphabet’s year-over-year quarterly revenue has risen by less than 10% since the April-June period of 2020. At that time, the advertisers that generate most of its revenue pulled in their reins because of the economic uncertainty during the pandemic’s early months.

    Google’s ad sales weakened even more dramatically than Alphabet’s overall revenue. Ad revenue totaled $54.5 billion, up just 2.5% from the same time last year. In another sign of more challenging times, YouTube’s quarterly ad sales decreased 2% from last year, the first time the video site’s revenue has regressed since Google began disclosing its results in 2019.

    The revenue slowdown also created a drag on Alphabet’s profits. The Mountain View, California, company earned $13.9 billion, $1.06 per share, a 27% drop from the same time last year. Both revenue and earnings per share fell below projections of analysts surveyed by FactSet.

    Alphabet’s shares declined nearly 7% in extended trading after the numbers came out. The stock price has plummeted by more than 30% this year, erasing about $600 billion in shareholder wealth.

    “Online ad spending is clearly slowing more than we thought,” said David Heger, an analyst for Edward Jones. “It looks like it is going to be tough sledding for the next few quarters.”

    Alphabet CEO Sundar Pichai described the conditions as “uncertain” and told analysts during a conference call, “it is a moment where you take the time to optimize the company to make sure we are set up for the next decade of growth ahead.”

    Google’s moneymaking machine, propelled by its dominant search engine, roared back as pandemic restrictions loosened last year and government stimulus juiced the economy, helping power Alphabet to a 41% increase in its revenue last year that lifted its stock price to new peaks.

    But the economy has been sputtering in recent months as central bankers steadily lift interest rates to combat the highest inflation rates in more than 40 years, a strategy that is threatening to plunge the economy into a recession. As it is, many households have already tightened their budgets and cut back on some discretionary items — a trend that has prompted advertisers to spend less marketing their products and services.

    “This disappointing quarter for Google signifies hard times ahead,” warned Insider Intelligence analyst Evelyn Mitchell.

    Alphabet has vowed to scale back its hiring, but didn’t show much restraint during the summer months. After adding 17,500 employees to its payroll during the first half of the year, the company’s workforce increased by another 11,765 people in the past quarter. Alphabet ended September with nearly 187,000 employees.

    Ruth Porat, Alphabet’s chief financial officer, predicted during the conference call that the company will hire fewer than 6,380 workers during the final three months of this year, a more measured approach that Pichai said would continue into next year.

    The cautious remarks came after Pichai told Alphabet employees last month to be “a bit more responsible through one of the toughest macroeconomic conditions” of the past decade and urged them not to “equate fun with money.”

    Although the economy is squeezing its finances, Google is faring far better than other internet companies whose fortunes are tied to digital advertising. Facebook suffered its first year-over-year quarterly decline in revenue earlier this year. Another social networking company, Snap, has been so hard hit that its stock price has plunged by more than 80% so far this year.

    Facebook, Snap and a variety of other internet services rely on being able to track users’ whereabouts and online activities to target ads. Apple began blocking that tracking on iPhones 18 months ago unless users consented to the surveillance. Google’s search engine is still able to gather personal information prized by advertisers through its search engine, minimizing the impact of Apple’s tougher privacy controls on its revenue.

    Facebook’s corporate parent, Meta Platforms, is scheduled to report its results for the latest quarter Wednesday afternoon.

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