Aurelia Butler

Investing.com — China’s economic recovery appears on track following the release of stronger than expected growth data. However, investors are awaiting the release of more corporate earnings, including from Netflix, with a degree of caution as they could point to a more financially stressed consumer.1. China’s recovery on trackRisk sentiment received a boost Tuesday after growth data showed that China’s economic recovery from the slowdown caused in part by its severe COVID restrictions was fully on track.China’s first quarter GDP grew 4.5% on an annual basis in the first three months of 2023, more than expectations of 4% and the previous quarter’s 2.2% growth.The recovery appears to be a little uneven, as industrial production grew slightly less than expected in March, but retail sales blew past expectations, surging 10.6% in March against estimates for growth of 7.4%. Investors have been banking on growth in the second largest economy in the world to pick up the slack caused by western economies contracting under the weight of aggressive interest rate hikes to combat inflation.2. Earnings pick up, with Netflix the highlightThere are more significant quarterly earnings for investors to digest Tuesday, including more of the major U.S. banks as well as streaming giant Netflix (NASDAQ:NFLX).The financial sector has been under scrutiny since March’s turmoil and Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) report later in the day, looking to follow in the path of JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), who all beat Wall Street forecasts.That said, the sectorial news hasn’t been universally good, with State Street (NYSE:STT) stock falling more than 9% overnight after fee income fell as investors responded to the turbulence by moving their deposits to the largest banks.Pharma giant Johnson & Johnson (NYSE:JNJ) is also scheduled to report, and analysts will be listening for updates on its proposed settlement of talc-related litigation.The day’s highlight, however, is likely to come after the close, in the form of quarterly results from streaming giant Netflix. The focus will also be on subscriber numbers, and the company is expected to have added some 2 million subscribers in the first quarter. Netflix lost 200,000 subscribers in the year-ago quarter but returned to subscriber growth in the second half of 2022 even if the pace of additions slowed dramatically.3. Futures edge higher; caution ahead of earningsU.S. futures edged higher Tuesday, as investors brace for another batch of quarterly earnings, including from the popular streaming platform Netflix [see above].At 04:00 ET (08:00 GMT), the Dow futures contract had gained 59 points or 0.7%, S&P 500 futures inched up 5 points or 0.3%, and Nasdaq 100 futures added 8 points or 0.0%.Aside from the corporate sector, investors will also be keeping an eye on the real estate market, with March economic data in the form of housing starts and building permits due.Investors will also be listening to what an array of Fed officials will be saying in speeches this week, with FOMC member Michelle Bowman scheduled to speak later in the session.4. U.K. unemployment edges up, pay growth still highBritain’s unemployment rate rose unexpectedly in the three months to February, climbing to 3.8% rather than holding at January’s 3.7%.This is the highest level since the second quarter of 2022, and suggests that the country’s red-hot labor market may be loosening.That said, annual pay growth for the three months to February came in at 5.9%, well above the 5.1% forecast, and the same as the revised higher January figure.This highlights the dilemma facing the Bank of England ahead of May’s rate-setting meeting.Wednesday sees the release of the official inflation figures for March. They are expected to fall back from February’s 10.4%, but will remain highly elevated. This suggests the BoE will continue to hike rates even with no economic growth last quarter and as unemployment starts to grow.5. Oil prices retreat despite strong Chinese growth dataCrude prices edged lower Tuesday, handing back some of the recent gains despite stronger than expected economic growth in China [see above], the world’s largest crude importer.By 04:00 ET, U.S. crude futures were 0.3% lower at $80.59 a barrel, while the Brent contract edged lower by 0.3% to $84.50 per barrel. Both benchmarks are up over 16% this month.Aside from China’s GDP growth, additional data showed that the country’s refiners processed 63.29 million tons of crude in March, up 8.8% on a yearly basis and the highest ever for that particular month.The International Energy Agency last week forecast record demand in 2023, largely predicated on the recovery of the Chinese economy after the lifting of its zero-COVID policy.Elsewhere, the American Petroleum Institute, an industry body, will release its weekly forecast of U.S. crude stocks later in the session, with a drop of around 2.5 million barrels expected. More

WASHINGTON (Reuters) – The U.S. Internal Revenue Service declared on Tuesday that it is completing its first “normal” tax filing season since the COVID-19 pandemic struck in 2020, with a backlog of millions of unprocessed returns from previous years fully cleared.New IRS Commissioner Danny Werfel told reporters that the initial spending of $80 billion in new IRS funding helped purchase new scanning technology that has allowed paper returns to be digitized and quickly processed.The COVID pandemic led to a three-month filing delay in 2020 followed by a one-month delay in 2021. The delays collided with staffing shortages to pile up a massive backlog of some 23.5 million individual and business tax returns by February 2022 that needed some form of manual processing, according to the National Taxpayer Advocate’s office.Ahead of the 2023 tax season, which has a midnight Tuesday filing deadline, the IRS hired 5,000 new taxpayer service agents to cut down call waiting times, and with the new scanning technology, it was able to clear the backlog of all error-free returns, Werfel said, leaving only those with questions, audits or other issues to be resolved. A U.S. Treasury spokesperson said the IRS ended 2022 with a backlog of 1.4 million unprocessed individual and business returns and those were cleared by mid-March.Including the new 5,000 taxpayer services personnel, the IRS plans to hire some nearly 20,000 new staff over two years as it deploys new funding from the climate-focused Inflation Reduction Act.Republicans in the U.S. House of Representatives have targeted the $80 billion in new IRS funding as part of their spending cut demands in exchange for raising the $31.4 trillion U.S. debt ceiling.The funding, aimed at beefing up enforcement and audits for wealthy taxpayers and business partnerships, modernizing computer systems and improving taxpayer services, comes on top of the agency’s annual operating budget.Werfel said the funding was making an “immediate, meaningful difference to deliver the service American taxpayers deserve on the phone, in person and online” with more improvements in coming years. More

China’s first-quarter gross domestic product data showed an economy rebounding following one of its worst years for growth in decades after the country’s largest cities were locked down to stem a coronavirus outbreak and a global slowdown hit demand for exports.But while the figures indicated China was on track to meet or exceed its target of 5 per cent growth for the year, with momentum expected to pick up in the second quarter, economists warned that the recovery was uneven and remained in the early stages. The National Bureau of Statistics said that while the first quarter had “made a good start”, domestic demand remained “inadequate” and “the foundation for economic recovery is not solid yet”.Here are five takeaways from Tuesday’s release:Retail rebounds after lockdown lowsThe retail sector, which was among the worst affected by Beijing’s Covid-19 controls, experienced one of the strongest rebounds. Retail sales grew 10.6 per cent in March, exceeding analysts’ forecasts of 7.5 per cent, and picking up pace from January and February when the economy was still recovering from the vestiges of a nationwide Covid outbreak. However, part of the dramatic rise, with sales over the quarter advancing 5.8 per cent, was because of the low base effect of last year’s lockdown of Shanghai. “We expect activity data to improve further in April-May [in year-on-year terms] on a very low base last year when Shanghai imposed stringent lockdowns,” Goldman Sachs analysts wrote in a note.Booming exports face slowdownExports have roared ahead, expanding 14.8 per cent year on year in March, beating market expectations of a fall of 5 per cent. Much of this growth was driven by electric vehicle sales and exports to Russia. But many economists expect a weaker outlook ahead, as declining global demand for Chinese exports, the delayed impact of rising rates in developed markets and banking sector turmoil overseas weighs on trade. “The pace of growth is likely to slow from now on,” said Louise Loo at Capital Economics.Economists have been debating whether Beijing will need to boost stimulus spending as it chases its 5 per cent growth target for 2023. “The challenge this year is that it is a year of recovery for China, but it is a year of almost a recession coming for the US and very slow growth for Europe,” said Iris Pang, chief China economist at ING. She predicted that Beijing would delay plans for stimulus to spur demand and support jobs after the better than expected first quarter.“There is no immediate need for fiscal stimulus to support consumers. But the government will probably keep its plan of infrastructure investment as a supplementary growth engine as we expect the external market to deteriorate further in 2023,” she added.Property woes persistThe property sector, a critical pillar of the Chinese economy, remained under pressure from a liquidity crisis that has hit the sector and sparked a series of defaults. Real estate investment fell 5.8 per cent and home sales by area slipped 1.8 per cent in the first quarter, while new housing starts also continued to decline, diving 19.2 per cent year on year. But sales by value were up 4.1 per cent in the first three months, and new home prices rose at their fastest pace in 21 months in March, pointing to some improvement. The property sector gloom also continued to spread into areas such as durable goods, including household appliances, sales of which declined 1.4 per cent year on year in March.The recovery in private sector business confidence might be slower than expected, JPMorgan Asset Management strategist Chaoping Zhu said in a note. The public sector led fixed asset investment with 10 per cent growth, but private sector investment grew only 0.6 per cent in the quarter, “suggesting business confidence still has a long way to go to be fully restored”, Zhu said.Stubborn unemploymentA record one in five Chinese youths remained unemployed, Tuesday’s data release showed, highlighting a mounting challenge for President Xi Jinping’s government.The ruling Chinese Communist party claims legitimacy from its ability to improve the lives of the country’s 1.4bn people, but a structural slowdown in manufacturing has hampered its ability to boost employment. Raymond Yeung, chief China economist at ANZ, said that the youth jobless rate, which at 19.6 per cent hit its second-highest level on record, indicated slack in the economy despite the national rate edging lower to 5.3 per cent.“By June, there will be a new batch of graduates looking for jobs. The jobless condition could worsen further if China’s economic momentum falters,” he said.Growth target attainableEconomists were optimistic about the government hitting its full-year growth target of 5 per cent in 2023, after the first quarter headline figure came in at 4.5 per cent.“The Chinese economy has clearly shaken off its Covid-related malaise and is settling into a trajectory of decent if unspectacular growth,” Eswar Prasad at Cornell University wrote in a note. “On the economy’s present trajectory . . . this year’s growth target looks eminently attainable barring any major adverse shocks.”

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However, whether the momentum can be sustained hinges in part on whether Beijing refrains from the unpredictable policy swings that have shaken business confidence over the past two years, including the private sector crackdown and zero-Covid policy. Keyu Jin, a professor at the London School of Economics and author of The New China Playbook, said Xi’s new team of economic planners was trying to avoid a “western-style” system of capitalism dominating politics.“Right now, it is still a recalibration, finding the right words, finding the right balance . . . It doesn’t want to go in either extreme,” she said. “We need to see the same transparency and predictability of the policies, even when the economy bounces back.” More

UK regulator Ofgem has toughened guidelines around energy providers forcibly installing prepayment meters following a scandal that showed highly vulnerable customers being cut off from their gas and electricity supply.Involuntary prepayment meters can no longer be installed in the homes of those aged over 85 or with severe health conditions. Meters that are fitted must come with a £30 credit to avoid the immediate loss of power or heating, while installation teams must now wear bodycams.The move comes after a de facto freeze on the practice after Centrica-owned British Gas was revealed to have forcibly installed prepayment meters in the homes of people who had fallen into arrears as their bills soared during the energy crisis.On Tuesday, Ofgem chief executive Jonathan Brearley said: “Customers in vulnerable situations will be given the extra care and consideration they deserve, over and above the rules already in place, by suppliers — something that has clearly not always been happening.”Brearley told BBC Radio 4 that he had informed suppliers they would need to show a rapid improvement or face “further rules and regulations which will be against your commercial interest”.Citizens Advice, the consumer charity, which was consulted on the changes alongside energy suppliers, said the new guidelines were an “improvement” but called on Ofgem to make them mandatory. “It’s now up to suppliers to follow the rules and for Ofgem to crack down quickly on any sign of bad practice,” said Dame Clare Moriarty, chief executive of Citizens Advice.“For too many the damage has already been done. Suppliers must now check that none of their existing customers are paying for their energy via a pre-pay meter when it’s not a safe option for them.”Campaign groups and charities criticised the new guidelines for not going far enough, highlighting that those in their early 80s or with certain debilitating illnesses could still find themselves facing forced installations of prepayment meters.Tom Marsland, policy manager at disability equality charity Scope, said the changes would “still allow energy companies to install prepayment meters in some disabled households.“We want to see the forced installation of meters and remote switching banned outright for disabled people,” Marsland said.He echoed calls of some of the energy suppliers for the regulator to introduce a “social energy tariff” to help vulnerable and low-income households cope with higher energy costs. Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said there were also concerns about how it will be managed.“There are really vulnerable groups which have been omitted from its full level of protection and we have serious concerns about how it will be implemented, such as how people will prove their medical conditions without being humiliated by an energy firm health inspection,” Francis said. More

China’s gross domestic product expanded 4.5 per cent year on year in the first quarter, as strong growth in exports and infrastructure investment as well as a rebound in retail consumption and property prices drove a recovery in the world’s second-largest economy.The official figure, which exceeded analyst expectations of a 4 per cent rise, followed efforts by Chinese leader Xi Jinping’s government to restore business confidence damaged by pandemic controls last year and abrupt policy changes.The January-March growth rate was still short of the government’s full-year target of 5 per cent, held back by a nationwide Covid-19 outbreak at the start of this year, but economists expect it to pick up pace as the year progresses.Xi, who formally embarked on an unprecedented third term as China’s president last month, is keen to revive economic growth. Gross domestic product expanded just 3 per cent last year, missing the official target of 5.5 per cent which was already the lowest in decades.“Definitely, the recovery’s on track,” said Tao Wang, UBS chief China economist. “The momentum at the beginning of the year was stronger than expected.”China’s rebound is crucial to global economic growth this year as developed nations grapple with persistently high inflation, rising interest rates and sluggish expansion in the wake of the pandemic and Russia’s full-scale invasion of Ukraine.“The national economy showed a steady recovery and made a good start,” China’s National Bureau of Statistics said. But the agency cautioned the situation was “complex and volatile, inadequate domestic demand remains prominent and the foundation for economic recovery is not solid yet”.

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Chinese commodities markets rallied following Tuesday’s data release, but equities failed to hold on to early gains.China abandoned zero-Covid restrictions in December amid popular opposition to the rolling lockdowns that paralysed cities across the country for most of the year. The easing unleashed pent-up demand in the retail sector, where sales rose 5.8 per cent year on year in the first quarter and 10.6 per cent in March. But the base of comparison with last year was low, given that Shanghai started a months-long lockdown in late February 2022.Premier Li Qiang, Xi’s new number two, signalled at China’s rubber-stamp parliament last month that the government would relax a crackdown on business that has wiped billions of dollars from property developers and internet platforms.Manufacturing investment rose 7 per cent year on year in the first quarter and industrial output gained 3 per cent. Exports showed strong growth, up 8.4 per cent in the first quarter, and state-led infrastructure investment climbed 8.8 per cent, while overall fixed asset investment rose 5.1 per cent. Private investment was weak, up just 0.6 per cent, suggesting a decline in March.The property sector’s woes continued, with new housing starts tumbling 19.2 per cent year on year in the first quarter. Home sales by area declined 1.8 per cent but sales by value rose 4.1 per cent, pointing to a nascent recovery in prices. In March, new home prices rose at their fastest pace in 21 months.The jobless rate fell to 5.3 per cent in March from 5.6 per cent in February, but youth unemployment hit the second-highest mark on record, at 19.6 per cent.

Economists said momentum would pick up in the second quarter, helped by the low base effect, but warned that consumption and property might struggle to maintain strong growth, while exports could be threatened by weaker developed markets.Xi’s administration also remained hamstrung by a lack of credibility after hobbling the private sector, experts said.Keyu Jin, a professor at the London School of Economics and author of The New China Playbook, said the biggest obstacle was the gap in private sector demand, both in consumption and investment.“It will take time for confidence to come back to the Chinese economy,” she said.Additional reporting by Hudson Lockett in Hong Kong More

Michael Dell, billionaire founder and chief executive of one of the world’s biggest computing groups, is “intently focused” on buying components from outside China due to growing concern over supply-chain disruptions.Speaking to the Financial Times, Dell said customers of his eponymous company were asking it to diversify where it sources components. That push comes at a time of rising tension between Washington and Beijing and after the Covid-19 pandemic exposed vulnerabilities to disruption in the production of semiconductors.“We want to ensure the ongoing availability of products and so having a more resilient supply chain is incredibly important given the nature of the world that we live in today,” said Dell. However, he would not be drawn on the quantity of parts Dell currently purchases from China, nor on recent reports that the company was seeking to stop using China-made chips by 2024. Dell’s supply chain is still heavily reliant on China. Many of its components, including print circuit boards and casing, are manufactured in the country and a significant portion of its computer product assembly takes place there. The company is also one of the three largest computer vendors in China, along with Lenovo and HP.Over the past few decades tech groups developed complex, interwoven and global supply chains. But western companies are increasingly seeking to untangle and reconfigure commercial relationships in China under pressure from the US government.In 2019, Samsung shifted the production of its televisions and smartphones away from China and towards Vietnam. Google and Microsoft have also moved chunks of their production to neighbouring countries, while Apple has tried and struggled to expand manufacturing of its iPhones to India.Dell, who founded his IT company in 1984 aged 19, noted that diversifying his company’s supply chain had been a priority “for a long time”. The PC and server group has manufacturing outposts in the US and China, as well as Malaysia, Brazil, India, Poland and Ireland. The 58-year-old businessman said it was now “quite a bit more possible” to source parts from outside of China because of investments being made in Europe and the US into production of chips and other crucial components. “Certainly that’s something we’re intently focused on because there are customers that are asking for that,” he said.After a boom in demand for computers during the pandemic, sales of PCs have declined over the past 18 months, denting the core business of Dell and rival computer manufacturers. Industry analyst IDC found that computer shipments fell nearly 30 per cent in the last quarter of 2022 to levels not seen since 2018.“Economies around the world are moderating and wobbly,” Dell said, though he added that there were early signs demand would start to pick up again in the second half of the year as companies invest in tech upgrades, in large part to attract and retain talent. He noted that one of the biggest drivers of growth in Dell’s infrastructure division — which accounts for nearly 40 per cent of sales — is increasing workloads for machine learning and artificial intelligence. “If you’re an enterprise or an organisation that has a lot of data and you’re not using AI with your data, you’re already doing it wrong,” he said.Asked about concerns from the tech and scientific community about the rapid speed at which AI systems are being developed, he said he was “more of an optimist”.Elon Musk and more than 1,000 tech researchers and executives wrote an open letter last month calling for a pause in the development of advanced artificial intelligence systems such as OpenAI’s ChatGPT to halt what they call a “dangerous” arms race.“We have to put the safeguards in, but for as long as humans have been around, stories have been told about unknown powers that are going to wreak all sorts of havoc,” Dell said. “For the most part that hasn’t really happened and that’s because humans are pretty good at course correcting. I think that’s what we’ll do in this instance as well.” More

LOS ANGELES (Reuters) -Hollywood writers voted overwhelmingly in favor of giving union negotiators the power to call a strike, moving a step closer to a production shutdown that would hamper studios and disrupt what viewers see on television.The Writers Guild of America (WGA) on Monday said 97.85% of members who voted supported letting negotiators order a work stoppage if they do not have a new contract by May 1. Nearly 80% of the group’s 11,500 members voted.The WGA negotiating committee in a note to members said the group had expressed “collective strength, solidarity, and the demand for meaningful change in overwhelming numbers.”Writers say they have suffered during the streaming TV boom, in part due to shorter seasons and smaller residuals, and they are seeking pay increases from Netflix Inc (NASDAQ:NFLX), Walt Disney (NYSE:DIS) Co and other studios.”Insecure” writer Amy Aniobi said she supported the strike authorization because pay had slumped to a level where many low- and mid-level writers must work second jobs to support themselves, especially in expensive cities such as New York and Los Angeles.”What I’d like to get to achieve is to return the act of writing to a career and not a gig for most writers,” she said.The last WGA strike in 2007 and 2008 lasted 100 days. TV networks broadcast re-runs and more reality shows, while the cost to the California economy was estimated at $2.1 billion, according to the Milken Institute. If a strike is called, audiences would first see the impact on late-night talk shows, which use teams of writers to pen topical jokes. Daytime soap operas would be next. Many comedies and dramas are filmed months in advance, giving them a longer lead time before fresh episodes would run out. Studios do not want another disruption after the COVID-19 pandemic shut down production worldwide for months. But sources close to the studios say budgets are tight at a time when Wall Street wants profits from the billions of dollars they spend to make streaming TV shows.The Alliance of Motion Picture and Television Producers (AMPTP), which represents Comcast Corp (NASDAQ:CMCSA), Disney, Warner Bros Discovery (NASDAQ:WBD), Netflix and others, said in a statement that its goal was “to reach a fair and reasonable agreement.””An agreement is only possible if the Guild is committed to turning its focus to serious bargaining by engaging in full discussions of the issues with the companies and searching for reasonable compromises,” the statement said. More