Aurelia Butler

WASHINGTON (Reuters) – The U.S. nominee to lead the World Bank, former Mastercard (NYSE:MA) CEO Ajay Banga, returns to his native India on Thursday, capping a three-week global tour to drum up support and discuss development and climate needs with donor and borrowing countries.The Treasury said Banga will visit New Delhi on March 23 and 24, where his likeness has already been posted on billboards. He will meet with Prime Minister Narendra Modi as well as the minister of finance, Nirmala Sitharaman, and the minister of external affairs, Subrahmanyam Jaishankar.”These discussions will focus on India’s development priorities, the World Bank, and global economic development challenges,” the Treasury said in a statement.India’s government endorsed the candidacy of Banga, a longtime finance and development executive who is now a U.S. citizen, soon after his nomination was announced in late February. He has won the support of enough other governments to virtually assure his confirmation as the next World Bank president, including Britain, France, Germany, Italy, Japan, Bangladesh, Colombia, Egypt, Ivory Coast, Kenya, Saudi Arabia and South Korea.The World Bank will accept nominations from other countries until March 29, but no competitors have been announced. The World Bank has been led by an American since its founding at the end of World War Two, while the International Monetary Fund has been led by a European.U.S. President Joe Biden last month nominated Banga, 63, to replace David Malpass, who announced his resignation after months of controversy over his initial failure to say he backed the scientific consensus on climate change.In India, Banga will also visit a vocational skills development institute funded in part by the World Bank, the Treasury said.Over the past month, Banga has met with government officials, civil society groups, business leaders and other stakeholders on a “global listening tour” that started in Africa before progressing to Europe, Latin America and Asia. More

Spy balloons over the American midwest, warnings from Beijing of a clash if Washington “doesn’t hit the brakes” and intense congressional scrutiny of investment in China — there could hardly be a less auspicious time for US business to attend Beijing’s flagship investment conference.But this weekend, former secretary of state Henry Kissinger, investor Ray Dalio and American business chiefs including Jon Moeller of Procter & Gamble will head to Beijing for what has been billed as an opening-up party after three years of a strict zero-Covid policy.Many of the business figures attending the China Development Forum will be seeing their mainland operations and meeting Beijing officials for the first time in three years. But while the Davos-like event is focused on “opportunities and co-operation” as the Chinese economy rebounds from the pandemic, the headwinds facing US business interests in China are also coming from Washington. “They’re making so much money off their investments, their factories and their engagement there now that they lobby here for free on China’s behalf,” Florida senator Marco Rubio said this month of US businesses and individuals operating in China.The full list of attendees is not available. Senior government regulators and policymakers are expected to be there, including possibly Li Qiang, Xi Jinping’s number two and the head of China’s cabinet. Panel participants and speakers include Mike Henry, chief executive at BHP, Liu Jin president of the state-owned Bank of China, Robert E Moritz, global chair at PwC, Zhao Dong, president of Chinese oil company Sinopec and Noel Quinn, chief executive at HSBC, as well as several leading academics. Those from the US are expected to attract scrutiny at home. Former US secretary of state Henry Kissinger with Chinese president Xi Jinping at a previous forum. Kissinger is attending this year’s event in Beijing © Jason Lee/POOL/AFP/Getty Images“I don’t think the Americans are going to sit it out, but they’re probably going to do whatever they can to stay in the background and out of the limelight,” said Francis Bassolino, managing partner at Alaris Consultancy in Shanghai. Last month, Geoffrey Siebengartner, an American Chamber of Commerce official and head of government affairs and corporate responsibility in Asia Pacific for JPMorgan, was the focus of a select committee in Washington after appearing in a video promoting Hong Kong. Beijing imposed a National Security Law in 2020 that prompted sharp criticism from the US.That incident, which followed the controversy over a Chinese balloon in US airspace, cast a chill over a mainland foreign business community that had already been isolated by the country’s strict zero-Covid policy.In the past, the benefits of investing in China had offset the perceived risks for foreign companies of technology transfer, over-dependence on the market and political criticism, said Duncan Clark, an author and chair of advisory firm BDA China. “The difference now is that companies face much greater scrutiny from Congress,” he said.Mark Warner, a senator who chairs the select committee on intelligence, said US private equity firms were paying more attention to lawmakers’ concerns. “We had 40 Business Roundtable CEOs and there were some more saying, ‘you know, the stuff with Taiwan really is not going to bubble up is it?’ I think we may have dissuaded them from that view,” he told reporters.Denis Depoux, a Shanghai-based global managing director at consultancy Roland Berger, who is speaking at the forum, suggested that “everybody is more cautious on potential political implications of presence here”.“How likely is my business impacted by American sanctions, or if not sanctions, insistent questions by bodies like Congress?” he said. “It’s [about] imagining what will come next.”Recent earnings calls out of the US, however, show that awareness of the geopolitical landscape is tempered by optimism over the Chinese market.Seifi Ghasemi, chief executive of Air Products & Chemicals, told Wall Street in February “the political situation” was not affecting its operations or Chinese customers’ acceptance of its products. Colgate-Palmolive in February told analysts that its market share growth in China was “a beautiful story”, while Illinois Tool Works said last year it exceeded $1bn in China revenue for the first time. “We feel very good about China,” it said.

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Dale Buckner, chief executive of Global Guardian, a security consultancy, said the Russian invasion of Ukraine had prompted “more real conversations” about the risks of decoupling with China but added he was unaware of any companies leaving China.The geopolitical climate may counter-intuitively encourage some companies to invest more heavily in Chinese supply chains so that their operations there can stand on their own in a decoupling scenario. A 2023 report by Deloitte suggested there were multiple scenarios for companies, such as the establishment of joint ventures with either majority or minority shares for multinationals depending on how severe the decoupling was.“China remains, arguably, the most attractive growth market in the world — for those companies able to anticipate rapid, fundamental change,” the report said.Meanwhile, Li, the new premier of China, said this month that in his former role as head of Shanghai “senior managers of multinational corporations, including many American companies . . . all told me that they were optimistic about the future of Shanghai and China”.“Some in the US have been trumpeting the idea of decoupling from China,” he added. “But I wonder how many people can truly benefit from this kind of hype?” In a recent survey, the American Chamber of Commerce in China found that a record of more than 50 per cent of companies were not profitable in China last year. But Michael Hart, its president, said this year “it looks like the economy is going in the right direction”.He estimated half of the current crop of global chief executives had not been to China because of the pandemic. “The China Development Forum is going to be important to see what [message] the European and handful of US CEOs [in attendance] go away with,” he said. More

LONDON (Reuters) – The Bank of England is expected to raise interest rates for the 11th time in a row on Thursday after a surprise jump in inflation dashed speculation that it might have been about to go on pause.The BoE is trying to reconcile Britain’s weak economic outlook and the worries about global banks with stubbornly high price growth, and it is due to announce its latest decision on rates at 1200 GMT.Most economists had believed inflation was on course to fall steadily, after hitting a 41-year high above 11% in October. But Wednesday’s data – showing inflation rising to 10.4% in February rather continuing its descent – immediately turned Thursday’s announcement into an almost one-way bet on a quarter percentage-point increase in Bank Rate. As recently as Tuesday, investors were split almost 50-50 on whether the BoE would leave Bank Rate unchanged for the first time since November 2021.Bets earlier this week on the BoE halting its run of rate hikes were further bolstered by the rescue of Credit Suisse and the collapse of Silicon Valley Bank which showed how some global banks were struggling to adjust to higher borrowing costs.But investors in rate futures markets are now positioning for possibly two more 25-basis-point moves by the BoE by September after Thursday’s expected hike.On Wednesday, the U.S. Federal Reserve raised its main interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases. The European Central Bank last week stuck to its plans and raised rates by 50 basis points despite the Credit Suisse turmoil. While some of the increase in the headline rate of British inflation announced on Wednesday was due to potentially one-off factors such as cold weather in Spain and North Africa which caused vegetable shortages, the underlying inflation measures that the BoE watches also rose.WHEN WILL THE BOE STOPBen Nicholl, a fund manager with Royal London Asset Management, said the inflation jump was a “shocking data point” which added to other signs that the BoE will struggle to bring inflation all the way back down to its 2% target.”It was only back in November when the BoE were sitting there saying: ‘We are going into one of the longest recessions the UK has ever experienced’. Well, we’ve avoided recession for now,” Nicholl said. Pay growth is cooling but still running far above its historical average and shortages of workers remain acute which threatens to keep inflationary heat in the labour market. The BoE was the first major central bank to start raising rates in December 2021 and had seemed likely to join the Bank of Canada which this month stopped raising borrowing costs.BoE Governor Andrew Bailey and his colleagues last month dropped language saying that they were ready to act forcefully if the outlook suggested persistent inflationary pressures.Thursday’s announcement by the BoE is set to be limited to its Monetary Policy Summary and the minutes of its March meeting. No news conference by Bailey and his top colleagues is scheduled although Bailey is due to make a speech on Monday. ING economist James Smith said he expected a rate hike on Thursday was likely to prove the last in the BoE’s run.”Assuming the broader inflation data continues to point to an easing in pipeline pressures, then we suspect the committee will be comfortable with pausing by the time of the next meeting in May,” Smith said. (Graphic by Sumanta Sen; Additional reporting by Amanda Cooper; Writing by William Schomberg; Editing by Jonathan Oatis) More

WASHINGTON (Reuters) – Federal Reserve Chair Jerome Powell on Wednesday said banking industry stress could trigger a credit crunch with “significant” implications for an economy that U.S. central bank officials projected will slow even more this year than previously thought.Banks either hit with sudden deposit outflows or worried about them may become steadily more reluctant to lend to businesses and households, a risk that prompted the U.S. central bank to reset its own expectations for monetary policy as it waits to see how far any contraction of credit may spread and how long it may last.”We’ll be looking to see … how serious is this and does it look like it’s going to be sustained,” Powell said at a news conference following the conclusion of the Fed’s latest policy meeting. “It could easily have a significant macroeconomic effect, and we would factor that into our policies.”The Fed’s policy-setting committee raised interest rates by another quarter of a percentage point in a unanimous decision on Wednesday, lifting its benchmark overnight interest rate to the 4.75%-5.00% range.But in doing so it recast its outlook from a hawkish preoccupation with inflation to a more cautious stance to account for the fact that changes in bank behavior may have the equivalent impact of the Fed’s own rate hikes – perhaps just a quarter of a percentage point, but possibly far more than that.Fed officials still feel that “some additional policy firming” may be needed, and they penciled in one more quarter-of-a-percentage-point rate increase by the end of the year.But the more conditional language, replacing a promise of “ongoing increases,” amounted to a seismic shift driven by the rapid failure this month of California-based Silicon Valley Bank and New York-based Signature Bank (NASDAQ:SBNY), as well as the Swiss-engineered rescue of Credit Suisse.U.S. officials across several agencies have been coping with the fallout, debating what new rules or regulations might be needed and whether changes are needed to the U.S. deposit insurance program – a systemwide backstop that failed to stem a deposit run at SVB.The policy statement and Powell’s remarks to reporters also showed Fed officials’ rising attention to credit dynamics, something that could actually help them in the fight to tame inflation as long as any changes to the flow of loans does not become disorderly and that more bank failures are not in the offing.”Financial conditions seem to have tightened and probably by more than the traditional indexes say because … they don’t necessarily capture lending conditions,” Powell said. “The question for us is how significant will that be?” Powell on Wednesday repeatedly voiced confidence in the stability of the U.S. financial system, noting that “deposit flows in the banking system have stabilized over the last week,” and that SVB collapsed because “management failed badly,” not because of generic weaknesses in the banking sector.Still, the Fed chief said the collapse showed a breakdown of central bank supervision that needed to be fixed, and was being studied in a review due to be completed by May 1 under the direction of Michael Barr, the Fed’s vice chair for supervision.Yields on Treasury securities dropped following the release of the policy statement. The yield on the 2-year Treasury note, which is highly sensitive to Fed rate expectations, was down more than 21 basis points in the session.U.S. stocks, which initially surged after the release of the policy statement, fell through the afternoon, with the benchmark S&P 500 index closing 1.6% lower. The dollar weakened against a basket of major trading partner currencies.’SPOOKED’ The outcome of the policy meeting puts the Fed likely near the end of an aggressive series of rate increases that have dominated financial headlines for a year as the central bank tried to lower inflation from the 40-year-highs hit last summer to its 2% annual target.Financial markets went a step further, betting that the Fed won’t raise rates any further from here and will be reducing them by this summer.”That’s not our baseline expectation,” Powell said in the news conference, adding that “the key is we have to have policies tight enough to bring inflation down to 2%,” whether that comes from a higher Fed policy rate or market conditions that tighten on their own. GRAPHIC: Traders bet on Fed rate cut by year end https://www.reuters.com/graphics/USA-RATES/FEDWATCH/akveqeebbvr/chart.png Still, the turmoil will likely take a toll on GDP growth and the economic outlook.New economic projections from Fed officials see the unemployment rate rising nearly a full percentage point in the remaining months of the year, to 4.5% from the current 3.6%, with inflation falling only slowly and growth in gross domestic product downgraded from an already sluggish 0.5% to 0.4%. “The Fed has been spooked by Silicon Valley Bank and other banking turmoil. They certainly point to that as a potential depressant on inflation, perhaps helping them do their job without having to raise rates as aggressively,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder. More

The California-based company expects net orders for the second quarter, which began in March, between 3,000 and 3,700, a 14% decline when compared with the midpoint of the range from a year earlier, when steady employment and wage growth were fueling housing demand.”Interest rate and economic uncertainties posed a large risk to the near-term demand,” Chief Executive Officer Jeffrey Mezger said on a post-earnings call with analysts.While the outlook for the housing market largely remained unclear, mortgage rates, which in February resumed their upward trend, are falling again in tandem with a sharp fall in U.S. Treasury yields after the recent turmoil in the banking sector sparked fears of contagion.Interest rates on the most popular U.S. home loan tumbled by the most in four months last week after emergency measures taken to shore up the wider banking system drove a mad dash by investors to the safety of government bonds, the Mortgage Bankers Association said on Wednesday.”The banking crisis could lead to a little bit of injection of life into the housing market by lowering mortgage rates,” said Lisa Sturtevant, chief economist at Bright MLS.KB Home reported better-than-expected first-quarter revenue, sending its shares up by 3% after the bell. More

TikTok: TikTok chief executive Shou Zi Chew will testify before Congress where lawmakers are expected to grill him over the app’s potential national security risks. The popular short-form video app faces a potential ban in the US, if it doesn’t spin off from Chinese parent company ByteDance. Starbucks: The coffee retailer is holding its annual shareholder meeting today and it will mark the first public appearance for the company’s new chief executive Laxman Narasimhan, who will lead the meeting.Economic data: New applications for unemployment aid are forecast to have increased to 197,000 in the week ended March 18, from 192,000 claims the previous week. Separately, sales of new homes in the US are forecast to have slowed.Earnings: General Mills, the company behind Cheerios cereal and Häagen-Dazs ice cream, is expected to say higher prices boosted its profits and revenues. Olive Garden parent Darden Restaurants is also due to report before the market opens. More