Aurelia Butler

(Reuters) – Americans from New York to Washington may finally get a reprieve on Monday from the oppressive heat wave of the past week, although sizzling temperatures threaten much of the Southeast and Southwest, weather forecasters said.The heat wave will likely peak in the Southwest, Mid-South and Plains early this week, with heat index readings exceeding 110 degrees Fahrenheit (43 Celsius) in some places, the National Weather Service (NWS) said.Meanwhile, the Upper Midwest can expect severe thunderstorms on Monday while the Southwest may get monsoon-like conditions due to moisture coming from the remnants of Tropical Cyclone Alberto that could produce flash flooding.Although the final day of the heat wave in the New York-Washington corridor was forecast for Sunday, heat advisories were still in effect throughout the country.”Instead of cooler, it may be appropriate to say not quite as hot. In DC tomorrow we’re still looking at a high temperature of 88 to 90 degrees (31 to 32 C),” said Rich Bann, a meteorologist with NWS’s Weather Prediction Center.”In many ways it still does pose hazards. That’s why we continue to message the idea of stay hydrated, stay cool, and worry about others who don’t have air conditioning,” Bann said.More than 100 million people across the U.S. were under heat warnings on Sunday, when temperatures surpassed 100 degrees Fahrenheit (38 degrees Celsius) in many places.Palm Springs, California, hit a high of 112 F (44 C) on Sunday while Las Vegas recorded a high of 109 F (43 C).Death Valley, a remote part of the California desert that is 282 feet (86 meters) below sea level and often has the nation’s high temperature, reached 121 F (49 C) on Sunday.Monsoon conditions may help cool off parts of the scorching Southwest, Bann said.Climate change has fueled dangerous heat waves across the Northern Hemisphere and will continue to deliver dangerous weather for decades to come, research shows.Extreme heat is suspected of causing hundreds of deaths across Asia and Europe as it has taken over cities on four continents. More than 1,000 have died during Haj, the annual pilgrimage to Mecca in Saudi Arabia, amid sweltering temperatures this year, according to a Reuters tally. More

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TOKYO (Reuters) -Moody’s doesn’t expect Japan to meet its fiscal 2025 primary budget-balancing target but that won’t trigger negative ratings action because the goal is still a “commitment” to fiscal reform, its Japan sovereign analyst told Reuters.”No, failure to meet the target is not a trigger,” Moody’s (NYSE:MCO) Christian de Guzman said in an interview with Reuters on Monday. “Even six to seven years ago we were saying they are not going to hit the target. But even back then, we did not pursue any sort of negative rating action.”If Japan abandons that commitment and significant deterioration in the fiscal deficit leads to much higher debt, Moody’s would examine the pillars of the rating, he said.De Guzman also spoke about the potential for Japan to raise interest rates further and its impact on Japanese fiscal and monetary policy. “We expect the Bank of Japan (BOJ) to take a very gradual approach to normalisation,” he said.”That means they (the government) have some time to adjust their fiscal settings to prepare for a time when interest rates at some point could rise even higher,” de Guzman said. “We don’t see that happening in let’s say one to two years.”Fiscal reform has become an urgent task in Japan since the central bank in March ended years of negative interest rates and other unconventional policy measures that had kept borrowing costs extraordinarily low.Public borrowing is now more than twice the size of the economy, by far the highest proportion among industrialised nations.The government has pledged a primary budget surplus by the next fiscal year, a target many analysts regard as optimistic. The primary budget balance, which excludes new bond sales and debt-servicing costs, indicates to what extent policy measures can be financed without issuing debt.”The government won’t be able to achieve the target,” de Guzman said. As long as the government sticks to spending and revenue reform commitments, failure to meet the target will not trigger any rating action, at least for the time being, he said.”I don’t think those are forthcoming yet. Still, I think it’s signalling there’s a commitment, and I think it’s important to anchor that commitment.”Moody’s rating for Japanese credit was last set in late 2014 at A1 with a stable outlook. More

ORLANDO, Florida (Reuters) -The U.S. consumer’s resilience to prolonged elevated borrowing costs has shown signs of wilting recently, but barring a deep downturn in the labor market, soaring household wealth should ensure it doesn’t crack. Federal Reserve figures show that U.S. households’ net worth leaped by $5 trillion in the first quarter to a record $161 trillion, mostly on the back of rising equity prices, while household debt as a share of GDP fell to its lowest in 23 years.While ‘higher for longer’ credit card and mortgage rates are sapping consumers’ strength to some degree, the S&P 500 and Nasdaq are up 5% and 9%, respectively, so far in the second quarter.This suggests wealth effects remain positive, and the economy will continue to enjoy and be driven by consumption-fueled growth. If a soft landing is to be achieved, it will be in no small part thanks to the indefatigable consumer. In a deep-dive analysis last month of U.S. consumer wealth, BNP Paribas (OTC:BNPQY) economists predicted that higher stock and house prices will lift consumer spending by $246 billion this year, providing a “sizable boost” to the economy.That would be the third-largest boost to U.S. consumer demand in 25 years, they reckon, and add roughly 1 percentage point to GDP growth for the year.”Consumer balance sheets are very healthy. Americans have significantly reduced debt burdens since the 2008–09 recession. Household net worth remains elevated relative to liabilities, – a favorable financial backdrop,” they wrote.RECORD EQUITIES, RECORD EXPOSUREThe Federal Reserve’s quarterly update of its ‘Financial Accounts of the United States’ database earlier this month confirmed the increasing strength of U.S. household finances. Granted, they are broad numbers and fail to capture any distribution breakdown, but they are nevertheless instructive. Of the $5.12 trillion increase in total net worth in the first quarter, corporate equity accounted for $3.83 trillion and real estate $907 billion. Real estate might be a little surprising, given that median house prices fell 0.6% in the period, but the equity-driven component is not – at the aggregate level, a rising Wall Street tide lifts all household boats.Analysis from Ned Davis Research shows that households’ exposure to stocks has never been higher – stock holdings as a share of financial assets reached an all-time high of 34.5% in the first quarter.The distribution of that ownership is very uneven, with the richest 1% in the country owning 50% of equity wealth and the top 10% holding around 90%. But in aggregate, consumption still grows as the richest households account for the lion’s share of retail sales in dollar terms.This level of exposure to stocks raises legitimate concerns that households are fully invested at high valuations. The pain from a correction on Wall Street could be felt more widely than usual.But it would need a pretty major pullback to wipe out the positive wealth effects of recent years. Last year alone, equity valuations added $7.39 trillion to total household net worth.Zooming out further, household net wealth has risen by around $40 trillion since the pandemic, Fed data shows. Even adjusting for inflation, that is still up a staggering $19 trillion, analysts at Barclay estimate.$500 BLN DIVIDENDOn the other side of the balance sheet, meanwhile, household debt as a share of GDP slipped to a 23-year low of 71.1% in the January-March period from 71.3% in the fourth quarter last year, the Fed’s latest figures show.Households’ share of total U.S. debt in the first quarter stood at 27% – the last time it was lower than that was in 1956.”With such a large tailwind behind them, it is hard for us to see consumers pull back sharply in the absence of a large exogenous shock,” Barclays analysts Ajay Rajadhyaksha and Amrut Nashikkar wrote on Thursday.While some analysts estimate that the pool of excess household savings built up after the pandemic has all but dried up, Rajadhyaksha and Nashikkar reckon it is still stands at a not-insignificant $850 billion. On top of that, money market fund balances are back above $6 trillion, of which $2.45 trillion is from retail investors, according to the Investment Company Institute. That’s a lot of cash earning around 5% or higher. Apollo Global Management (NYSE:APO)’s chief economist Torsten Slok reckons the high interest rates money market funds are currently paying on deposits equate to around $500 billion in dividends for U.S. households. That’s around 2.5% of annual consumer spending.”Put differently, Fed hikes are boosting consumer spending through higher money market fund dividends,” Slok says.In sum, consumers and Wall Street have so far withstood the Fed’s most aggressive rate-raising campaign in 40 years that has ended up with the highest interest rates in years.Looked at through the prism of household balance sheets and broader wealth effects, these foundations may be strengthening rather than weakening.(The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeeverEditing by) More

NEW YORK (Reuters) – Women in the U.S. have saved just a third of the amount that men have set aside for retirement, setting up a potential crisis among female retirees, according to a Prudential Financial (NYSE:PRU) survey released on Monday.On average, men had saved $157,000 for retirement, while women had only put aside $50,000 according to a survey of 905 U.S. adults between the ages of 55 and 75.”The financial futures of certain cohorts – such as women – are especially precarious,” Caroline Feeney, CEO of Prudential’s U.S. Businesses, said in a statement. “Women have a more challenging time saving for retirement,” she added, citing inflation, housing prices and changes in tax policies as the main barriers. Compared with the men surveyed, women were three times more likely to be focused on providing for their families and children than saving. Of the respondents, 46% of men said they were looking forward to retirement and had more plans, compared with 27% of women polled, the survey showed.  More

EU governments agreed in May to use profits from the assets frozen inside the bloc to help Ukraine, with 90% of funds earmarked for military aid. But Hungary has been holding up approval of the necessary legal measures, diplomats say.Hungary maintains warmer relations with Moscow than any other EU country. It does not give arms to Ukraine and Hungarian Prime Minister Viktor Orban has criticised other EU and NATO members for doing so, saying they are fueling the war.With a first tranche of proceeds worth 1.4 billion euros ($1.5 billion) due next week, EU officials had been looking for a way to allow the funds to be used immediately to help Ukraine defend itself from Russia’s invasion.Borrell said EU officials had now found a way to approve the measures without needing the consent of any member country that abstained from the original decision.”We have a legal procedure in order to avoid any kind of blockage,” he said before a meeting of EU foreign affairs ministers in Luxembourg.Hungarian Foreign Minister Peter Szijjarto did not speak to reporters on his way into the meeting. In a brief comment on Facebook (NASDAQ:META), he said: “Billions more for Ukraine – this time by breaking European rules and leaving Hungary out.”But Borrell said that “since Hungary didn’t participate in the decision, it is not necessary that they … participate in the implementation”.”Now we have to implement this decision. The money will come next week. And I cannot have this money in my pocket – this money is for military support to Ukraine,” he told reporters. Borrell said he hoped the ministers would endorse the plan at their meeting.The EU’s plan for the immediate use of profits from frozen Russian assets is separate from a decision by G7 leaders this month to use future proceeds to fund $50 billion in loans to Ukraine.($1 = 0.9336 euros)(Reporting Bart Meijer, Andrew Gray and Boldizsar Gyori, editing by Tassilo Hummel, Michael Perry and Angus MacSwan) More

(Reuters) – As she heads toward retirement at the end of the month, Federal Reserve Bank of Cleveland President Loretta Mester still believes the central bank needs to remain open to active sales of mortgage bonds as part of its ongoing efforts to reduce the size of its balance sheet. While any such action is not “imminent,” Mester noted that the Fed’s existing goal to get back to holding only Treasury bonds means it may have to take active measures to shed mortgage bonds, or MBS, bought as part of the effort to restore market function and stimulate the economy in the wake of the onset of the coronavirus pandemic. “At some point I would be open to selling, for the [Federal Open Market] Committee to sell MBS,” Mester said in an interview with Reuters. “I don’t think it’s immediate that we should be selling MBS,” Mester said. “I think eventually we may want to” and would need to educate the public on why that might happen, especially since there may be losses for the Fed on some of those bonds. Mester spoke on the outlook for the Fed’s balance sheet as the central bank crossed the two-year mark of allowing its holdings of Treasury and mortgage bonds to contract passively. The Fed has since June 2022 been allowing a portion of its bonds to mature and not be replaced, taking holdings from a peak of $9 trillion to the current level of $7.3 trillion. Most of the drawdown is attributable to the runoff of Treasury bonds owned by the Fed. The central bank has faced a much tougher time unloading mortgage securities due to a much-slowed home housing market that’s lowered refinancing and purchasing activity, meaning mortgage bonds are taking longer to mature. The Fed expressly aims for an all-Treasury balance sheet but if current trends persist it may be impossible to get there without turning to active sales. But in two episodes of quantitative tightening, or QT, the Fed has never actively sold bonds, and it’s unclear how markets might react. Mester’s ongoing openness to mortgage bond sales comes as she is set to retire at the end of the month after a career at the Fed, with the last decade helming the Cleveland Fed. Mester exits amid an expectation that inflation will cool over time and eventually allow the Fed to cut rates. If the economy performs as expected, “then it is reasonable to have policy begin to move back the interest rate, the Fed funds rate, back to a more normal level,” Mester said. “I’d like to see a few more months of data” before gaining confidence easier policy is warranted, she said, noting monetary policy is in a good place to deal with how the economy might perform. MARKET MAKEOVERMester’s retirement also comes amid a shift in the profiles of those who lead some of the Fed’s 12 regional banks, with a rise in the number of regional bank chiefs with expertise in how markets work.Her successor is Beth Hammack, a former top Goldman Sachs banker with extensive market experience. Earlier this year the St. Louis Fed also named a new leader with deep trading and investing experience, and the current head of the Dallas Fed, Lorie Logan, previously had a central role in monetary policy implementation at the New York Fed. The rise of market experience at regional banks could in the view of some Fed watchers provide an unusual counterweight to the New York Fed, which acts as the Fed system’s main market agent. The rise of these new regional Fed chiefs signals “a clear trend” by the Fed “to prioritize the concentration and diversification of financial market experience directly at the highest level of the [Federal Open Market Committee,]” said analysts at advisory firm LHMeyer. “Having more market expertise has to be useful, when the Fed is dominated by Ph.D economists,” said William Dudley, who led the New York Fed from 2009 to his retirement in 2018. “One value of a markets background is that it teaches you to question what is the conventional wisdom.” “I, for one, think that is a useful orientation if you want to look a bit better around the corners,” he said.Speaking to reporters at the end of May, New York Fed President John Williams was also upbeat about the shift, saying the central bank’s greater involvement in markets by way of balance sheet policies changes what leaders need to know. “Getting kind of a really good understanding of not only economic conditions but conditions in financial markets is really important.” Mester, who was not involved in the process of selecting a new bank president, said from her perspective “different backgrounds are very important” for the Fed. By way of her own legacy, Mester said she was particularly proud of the work her bank had done on studying inflation, including establishing the Cleveland Fed’s Center for Inflation Research. Mester said that has been a long-standing specialty of the Cleveland Fed, adding the center has been “contributing a lot, not just to our bank, but to the public as well, so they understand inflation a bit more than they did, and to the whole FOMC because we’re all using that research.” More