Aurelia Butler

The order came ahead of a deadline next week to intervene in nationwide U.S. railroad labor talks covering 115,000 workers, or open the door to a potential strike or lockout that could threaten an already-fragile economy and choke supplies of food and fuel.If the president had not created the Presidential Emergency Board (PEB) before 12:01 a.m. EDT on Monday, the railroads and unions could have opted for operational shutdowns or strikes, respectively. The order becomes effective Monday.The board “will provide a structure for workers and management to resolve their disagreements. The Board will investigate the dispute and, within 30 days of its establishment, deliver a report recommending how the dispute should be resolved,” the White House said.Talks between major freight railroads, including Union Pacific (NYSE:UNP) and Berkshire Hathaway-owned BNSF, and unions representing their workers have dragged out more than two years.The order triggers a “cooling off” period so the two sides can work toward settlement.”We look forward to the forthcoming recommendations of the presidentially appointed arbitrators,” said Greg Regan, president of the AFL-CIO Transportation Trades Department that represents several railroad unions. U.S. business groups representing retailers as well as food and fuel producers in letters to Biden warned that failing to appoint a PEB would be “disastrous” for the softening economy. Railroads move everything from Amazon (NASDAQ:AMZN) packages to fuel oil and soybeans, and a shutdown of any kind could send prices for necessities higher and upend battered supply chains. More

NEW YORK (Reuters) – Fears of a potential economic slowdown are clouding the outlook for value stocks, which have outperformed broader indexes this year in the face of surging inflation and rising interest rates. Value stocks – commonly defined as those trading at a discount on metrics such as book value or price-to-earnings – have typically underperformed their growth counterparts over the past decade, when the S&P 500’s gains were driven by tech-focused giants such as Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL). That dynamic shifted this year, as the Federal Reserve kicked off its first interest rate-hike cycle since 2018, disproportionately hurting growth stocks, which are more sensitive to higher interest rates. The Russell 1000 value index is down around 13% year-to-date, while the Russell 1000 growth index has fallen about 26%. This month, however, fears that the Fed’s monetary policy tightening could bring on a U.S. recession have shifted the momentum away from value stocks, which tend to be more sensitive to the economy. The Russell value index is up 0.7% in July, compared with a 3.4% gain for its growth-stock counterpart. “If you think we are in a recession or are going into a recession, that does not necessarily … work to the advantage of value stocks,” said Chuck Carlson, chief executive at Horizon Investment Services. The nascent shift to growth stocks is one example of how investors are adjusting portfolios in the face of a potential U.S. economic downturn. BofA Global Research on Thursday cut its year-end target price for the S&P 500 to 3,600 from 4,500 previously and became the latest Wall Street bank to forecast a coming recession.The index closed at 3,863.16 on Friday and is down 18.95% this year.Corporate earnings arriving in force next week will give investors a better idea of how soaring inflation has affected companies’ bottom lines, with results from Goldman Sachs (NYSE:GS), Johnson & Johnson (NYSE:JNJ) and Tesla (NASDAQ:TSLA) among those on deck. For much of the year, value stocks benefited from broader market trends. Energy shares, which comprise around 7% of the Russell 1000 value index, soared over the first half of 2022, jumping along with oil prices as supply constraints for crude were exacerbated by Russia’s invasion of Ukraine. But energy shares along with crude prices and other commodities have tumbled in recent weeks on concerns that a recession would sap demand. A recession also stands to weigh on bank stocks, with a slowing economy hurting loan growth and increasing credit losses. Financial shares represent nearly 19% of the value index. An earnings beat from Citigroup (NYSE:C), however, buoyed bank shares on Friday, with the S&P 500 banks index gaining 5.76%. At the same time, tech and other growth companies also tend to have businesses that are less cyclical and more likely able to weather a broad economic slowdown. “People pay a premium for growth stocks when growth is scarce,” said Burns McKinney, portfolio manager at NFJ Investment Group. JPMorgan (NYSE:JPM) analysts earlier this week wrote they believe growth stocks have a “tactical opportunity” to make up lost ground, citing cheaper valuations after this year’s sharp sell-off as one of the reasons. Value stock proponents cite many reasons for the investing style to continue its run. Growth stocks are still more expensive than value shares on a historical basis, with the Russell 1000 growth index trading at a 65% premium to its value counterpart, compared to a 35% premium over the past 20 years, according to Refinitiv Datastream.Meanwhile, earnings per share for value companies are expected to rise 15.6% this year, more than twice the rate of growth companies, Credit Suisse estimates. Data from UBS Global Wealth Management on Thursday showed value stocks tend to outperform growth stocks when inflation is running above 3% – around a third of the 9.1% annual growth U.S. consumer prices registered in June. Josh Kutin, head of asset allocation, North America at Columbia Threadneedle, believes a possible U.S. recession in the next year would be a mild one, leaving economically sensitive value stocks primed to outperform if growth picks up.”If I had to pick one, I’d still pick value over growth,” he said. “But that conviction has come down since the start of the year,” Kutin said. More

(Reuters) – The United States has not ruled out more comprehensive trade negotiations with Kenya after launching a strategic trade and investment partnership with the African country on Thursday, Deputy U.S. Trade Representative Sarah Bianchi told Reuters.Bianchi said U.S. trade officials viewed the agreement with Kenya as a potential model for other countries. Officials would focus in coming months on hammering out high-standard agreements in areas such as agriculture safety and digital trade standards, climate change and customs procedures.She said there could be future talks on a broader deal with Kenya, as U.S. House Ways and Means Committee Chairman Richard Neal has suggested, but said the next “several months” would be focused on the just-announced partnership.”We haven’t ruled out doing more comprehensive negotiations,” Bianchi told Reuters in an interview, when asked if Washington could pursue a free trade agreement with Kenya. “Our goal right now is to expand the bilateral relationship and get agreement on a whole number of these important issues.”No other African countries had yet expressed interest in a non-tariff partnership deal like the one with Kenya, but that could happen as well, she said.”Kenya has really stepped forward and this could be a model for things going forward,” she said. “We don’t have any immediate plans with any other countries but certainly all eyes are on this initiative and seeing if it becomes a model.”The United States and Kenya on Thursday launched a strategic trade and investment partnership focused on boosting economic growth, supporting African regional economic integration and deepening trade cooperation, but made no mention of reducing tariffs or enhancing market access.The deal calls for the U.S. and Kenyan governments to start work within three months on a road map for engagement in areas including agriculture safety and digital trade standards, climate change, regulatory practices, and customs procedures.Kenya and the United States had launched negotiations for a free trade agreement to lower bilateral tariffs under the Trump administration in 2020. But the Biden administration, which has shunned traditional trade deals, did not resume those talks.Kenya already enjoys substantial duty-free access to the U.S. market through the Africa Growth and Opportunity Act (AGOA), but had wanted to lock in those trade preferences before AGOA expires in September 2025.Kenya exported $685.1 million worth of goods to the United States in 2021, chiefly apparel, macadamia nuts, coffee, tea and titanium ores, while the United States exported $561.6 million in goods to Kenya in 2021, with aircraft, plastics, machinery and wheat among the biggest categories. More

US stocks rose on Friday, bringing an upbeat end to a disappointing week, as strong retail sales data and a survey hinting at easing inflation expectations tempered concerns over the economic outlook. The S&P 500 share index ended the day 1.9 per cent higher, but remained down roughly 1 per cent for the week. The technology-focused Nasdaq Composite gained 1.8 per cent, but was 1.6 per cent lower on the week. Europe’s Stoxx 600 equity index closed 1.8 per cent higher. International oil benchmark Brent crude, which on Thursday fell to levels last seen before Russia’s invasion of Ukraine, added 2.1 per cent to settle at $101.16 a barrel. There was little reaction in late-afternoon trade to US president Joe Biden’s speech during his trip to Saudi Arabia. Data on Friday showed US retail sales rose 1 per cent month on month in June, exceeding economists’ forecasts for a 0.8 per cent gain. Separately, the University of Michigan’s closely watched consumer sentiment index indicated that medium-term inflation expectations had dropped to a one-year low of 2.8 per cent.Markets in recent months have been gripped by debate over whether the US economy is strong enough to withstand aggressive rate rises by the Federal Reserve in response to red-hot inflation, after downbeat business surveys cast a pall over the outlook. The S&P is more than 19 per cent lower for the year. “The consumer is still spending money, still confident, there’s still pent-up demand,” said Ron Temple, head of US equity at Lazard. He cautioned, however, that this could firm the US central bank’s resolve to tighten monetary policy, with the retail sales numbers showing “the rate hikes so far have not had an effect” in terms of cooling demand. Futures markets are tipping the Fed to lift its main funds rate to about 3.5 per cent by February, from a range of 1.5 per cent to 1.75 per cent at present. US consumer prices rose at an unexpectedly rapid annual rate of 9.1 per cent in June. A weak Chinese gross domestic product report also stoked some bullishness on Friday, prompting speculation that Beijing would unleash hundreds of billions of dollars of additional stimulus funds to boost growth. The world’s second-biggest economy expanded 0.4 per cent year on year in the three months to the end of June, below the 1.2 per cent forecast by economists and down from 4.8 per cent recorded in the first quarter.“We think these kinds of numbers are only going to strengthen [the Chinese government’s] resolve to push more stimulus for the rest of the year and that matters on a global level as well,” said Hani Redha, multi-asset fund manager at PineBridge Investments. Hong Kong’s Hang Seng index fell 2.2 per cent on Friday, however, taking it 6.6 per cent lower for the week in its largest weekly decline since March 2020. In US Treasury markets, the yield on the benchmark 10-year note was 0.03 percentage points lower at 2.93 per cent. This yield, which underpins debt prices worldwide, has dropped from about 3.5 per cent a month ago as recession fears have fed demand for low-risk government debt instruments. Bond yields fall as prices rise. The two-year Treasury yield traded at 3.12 per cent in a so-called inverted yield curve pattern that has historically preceded recessions. Despite falling 0.4 per cent on Friday, the dollar index, which measures the US currency against six others, notched up its third straight week of gains as the growing spectre of recession pushed investors into the safe-haven asset.The euro rose 0.6 per cent to $1.008, having fallen below $1 earlier this week for the first time in 20 years. More