Aurelia Butler

SHANGHAI (Reuters) -Almost a month since Shanghai lifted its strict COVID-19 lockdowns, fashion retailers are stuck with piles of unsold stock as cautious consumers stay away from the commercial hub’s glitzy shopping districts.Curbs to stop the virus in Shanghai, China’s fashion capital, ground the city of 25 million to a halt in April and May, leaving clothing and beauty product displays in stores untouched and containers of imported apparel stranded at port.The city’s re-opening this month saw a flood of goods ship from warehouses to store shelves already laden with merchandise unsold during two months of lockdown. Normally around a fifth of all imported goods coming into China pass through Shanghai’s port.Days after COVID-19 curbs eased, large “sales” signs went up across Shanghai, with retailers from Lululemon to Victoria’s Secret offering discounts to lure shoppers.Even online retailers have struggled to clear a glut caused by lockdowns and supply interruptions.”This affected us a lot,” said Josh Gardner, founder and chief executive of China market e-commerce partner Kung Fu Data, which manages online stores for 10 fashion brands, including G-Star Raw.    “In April, May on (China’s major e-commerce) platforms, there wasn’t a t-shirt to be found, we were sold out of summer stock and so was everyone else, there was just no product,” he said. “Now, everyone’s just bleeding and stuck with a lot of inventory they can’t move.”China is a major market for personal luxury goods companies with sales reaching $74.4 billion in 2021, according to Bain.    One consultancy estimated that sales during “618” – a major shopping event in China from May 31 to June 20 – across the main e-commerce sites, such as Tmall and JD (NASDAQ:JD).com, were flat year-on-year.In the event’s opening week, data from Tmall showed men’s wear sales had dropped 22% and women’s wear was down 4%, although activewear sales rose 26%, possibly due to an increased focus on fitness during the lockdown.    For now, some retailers are warehousing inventory and ordering less for the fourth quarter when they will try to clear existing stock through November’s Singles’ Day.”For the apparel category, due to the epidemic and sluggish consumption, there is a high level of inventory backlog of spring collections,” JD.com chief executive Lei Xu said following the online retailer’s first quarter earnings. “As a result, many factories are considering skipping their … summer collections.”    Flash sales specialists OnTheList, which sells luxury products for brands including Versace, Jimmy Choo and Lanvin at discounts of 70% or more, re-opened its physical Shanghai showroom last weekend with a sale from Salvatore Ferragamo. The high-end Italian fashion brand and almost all other retailers in Shanghai closed stores closed throughout April and May. Salvatore Ferragamo declined to comment.    Jean Liang, OnTheList’s China managing director, said luxury brands are now more open to online sales, as well as offline sales, while cosmetics brands are pro-actively looking to hold sales to clear excess inventory.    “Before it was always us pitching asking them about their plans and now they approach us, which means they have inventory they need to clean out to have a healthy stock situation,” she said. OnTheList’s calendar of flash sales, which run every few days, is already booked through to September.Sending products abroad to be distributed in Europe or America is another solution but is currently complicated by surging shipping and air transport costs, said Benny Wong, supply chain director at online wholesale marketplace, Peeba. “Now the main hurdle is transportation … that creates a big problem for the inventory owner,” he said. “Inventory can kill (and) some product categories have huge inventory to move.”    CONSUMERS WARYWeeks after re-opening, retail sentiment is downbeat with Shanghai’s consumers yet to return to malls in significant numbers and footfall around half its usual levels in major downtown malls, according to retail staff.    People in Shanghai are reluctant to return to indoor public areas largely out of fear of being locked down again, as China’s dogged zero-COVID policies demand each time new infections emerge.    A continued ban on in-restaurant dining also means malls remain without their usual food and beverage attractions.    Across China, retail sales slipped 6.7% in May from a year earlier, extending the previous month’s 11.1% decline, as a slowdown in the world’s second-largest economy discouraged consumer spending.    “In terms of inventory clearance there’s not really a good solution in China,” Kung Fu Data’s Gardner said. “I mean, what are you going to do that’s not going to destroy your brand?” More

Fraudsters are using the cost of living crisis to expand their scams, with a sharp rise in energy-related schemes that exploit Britons’ desire to save money on electricity and gas bills, according to analysis of official data. Cons mentioning the names of the UK’s biggest energy companies rose 10 per cent year-on-year in the first quarter of 2022, the consumer group Which? said in its assessment of Action Fraud figures.In January, the annual jump was 27 per cent. As energy bills soar, Which? said the true figure was likely to be higher, noting that many scam attempts go unreported. Scammers are targeting consumers with “phishing” attempts designed to harvest their personal information, including bank details, which can then be used to carry out more sophisticated frauds. UK Finance, the banking trade body, said data breaches and phishing attempts contributed to £784mn of bank fraud losses in 2020, the latest year for which data is available.One of the most common methods Which? has seen are emails from scammers posing as energy suppliers inviting customers to claim a refund due to a “miscalculation” on their energy bill. The emails look like genuine communications from energy suppliers, as the scammers “spoof” the email display name, so it appears to be coming from an official address. In order to claim the rebate, customers are invited to click a link and input their bank details.Other phishing scams in circulation relate to the government’s £15bn energy help package. Earlier this month, Ofgem wrote to all energy suppliers urging them to warn customers about bogus texts and WhatsApp messages purporting to be from the energy regulator. The fake messages read: “You are eligible for the government funded £400 energy rebate,” inviting customers to click on a fake link to “complete your application”. In reality, this rebate will be automatically applied to customer bills from October. Which? said the collapse of dozens of energy companies had created an atmosphere of confusion around outstanding bills, with scammers posing as debt collection companies in an attempt to extract money from former customers. The consumer group has seen “sophisticated” emails received by customers including their full names and knowledge of their former supplier, adding it was particularly concerned that customer data could have been “mishandled or stolen” as companies were wound down. Action Fraud, the national reporting centre for fraud and cyber crime, has also warned of a scam where criminals clone prepayment meter tokens, and sell these on at reduced prices. It warned that in reality, customers would end up paying for their energy consumption twice, once their legitimate supplier had established what was happening. “We advise all consumers to be wary of unsolicited emails, texts or letters, especially those not addressed to you by name which might request sensitive information or ask you to complete a bank transfer,” said Jenny Ross, Which? money editor. A simple way to check the origin of emails claiming to be from an energy provider is by clicking the sender name to display the source email address. Consumers can then check their supplier’s official domain name on the company’s official website. Which? also cautions that consumers’ legitimate supplier will never ask for bank details, as they have them on record. “If in doubt, contact your energy supplier directly using the contact information on their website,” Ross added. More

(Reuters) – The Federal Reserve’s commitment to reining in 40-year-high inflation is “unconditional,” U.S. central bank chief Jerome Powell told lawmakers on Thursday, even as he acknowledged that sharply higher interest rates may push up unemployment.”We really need to restore price stability … because without that we’re not going to be able to have a sustained period of maximum employment where the benefits are spread very widely,” Powell told the U.S. House of Representatives Financial Services Committee. “It’s something that we need to do, we must do.”Powell’s testimony marked a second straight day of grilling in Congress over the Fed’s efforts to control inflation that, by the central bank’s preferred measure, is running at more than three times its 2% target. Fast-rising prices for gas, food, housing and a broad array of other items are sapping American wages, hurting businesses, and lifting fears of a sharp economic downturn and a steep rise in unemployment.On Wednesday, Powell told the U.S. Senate Banking Committee that the Fed was not trying to provoke a recession but that one was “certainly a possibility,” with recent global events, specifically the Ukraine war and COVID-19 pandemic, making it more difficult to tame inflation without inducing a downturn.Price pressures have continued to build for months, forcing the Fed to ramp up its tightening of financial conditions in an attempt to cool demand while hoping that some supply chain issues begin to untangle this year.Last week, the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point – its biggest hike since 1994 – to a range of 1.50% to 1.75%, and signaled its policy rate would rise to 3.4% by the end of this year.Speaking in a June 15 news conference, Powell said the central bank would very likely need to raise rates by either 50 or 75 basis points at its next meeting in July. Since then, other Fed officials have echoed his stance on getting borrowing costs into slightly restrictive territory in short order.Some have gone further.Fed Governor Michelle Bowman on Thursday said she supported a 75-basis-point increase in July, followed by 50-basis-point increases in “the next few” subsequent meetings, a more aggressive path of rate hikes than most of her fellow central bankers currently contemplate.Economists polled by Reuters earlier this week forecast the Fed would deliver another 75-basis-point rate hike next month, followed by a half-percentage-point rise in September, with no scaling back to quarter-percentage-point moves until November at the earliest.NO PRECISION TOOLSThere are already some tentative signs of softening in the still red-hot U.S. labor market. Data released on Thursday showed new claims for unemployment benefits, which hit a 53-year low in March, edged down last week while a key gauge of manufacturing and services activity cooled to its slowest growth path in five months.Under questioning by members of the House panel on Thursday, Powell said there was a risk the Fed’s actions could lead to a rise in unemployment. The U.S. jobless rate stood at 3.6% in May. “We don’t have precision tools,” he said, “so there is a risk that unemployment would move up, from what is historically a low level though. A labor market with 4.1% or 4.3% unemployment is still a very strong labor market.”At the same time, however, Powell said a recession is not inevitable, as even former Fed colleagues have claimed; he expects U.S. economic growth to pick up in the second half of this year after a sluggish start to 2022.Over the course of the three-hour session, Powell was asked about the possibility of raising the Fed’s 2% inflation target, a solution proposed in some circles as one way to give the central bank more scope to boost employment. His response was definitive: “That’s just not something we would do.” Powell was equally dismissive of the possibility of cutting interest rates in a hypothetical situation where unemployment was rising and inflation remained high. “We can’t fail on this: we really have to get inflation down to 2%,” he said.The Fed chief also was asked about the central bank’s balance sheet, which was built up to around $9 trillion during the pandemic in an effort to ease financial conditions and is now being pared. The Fed aims to get it “roughly in the range of $2.5 or $3 trillion smaller than it is now,” Powell said. More

WASHINGTON (Reuters) – The U.S. Federal Reserve is due to release the results of its annual bank health checks on Thursday. Under the “stress test” exercise, the Fed tests banks’ balance sheets against a hypothetical severe economic downturn, the elements of which change annually.The results dictate how much capital banks need to be healthy and how much they can return to shareholders via share buybacks and dividends. WHY DOES THE FED “STRESS TEST” BANKS?The Fed established the tests following the 2007-2009 financial crisis as a tool to ensure banks could withstand a similar shock in future. The tests formally began in 2011, and large lenders initially struggled to earn passing grades. Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC)., JPMorgan Chase & Co (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS), for example, had to adjust their capital plans to address the Fed’s concerns. Deutsche Bank (ETR:DBKGn)’s U.S. subsidiary failed in 2015, 2016 and 2018 on the “qualitative” aspect of the test, which assessed banks’ operational controls.However, years of practice has made banks more adept at navigating the tests and under its previous Republican leadership the Fed made the tests more transparent and dropped the “qualitative” aspect. It also ended much of the drama of the tests by scrapping the “pass-fail” model and introducing a more nuanced, bank-specific capital regime. SO HOW ARE BANKS ASSESSED NOW?The test assesses whether banks would stay above the required 4.5% minimum capital ratio during the hypothetical downturn. Banks that perform well typically stay well above that. How well a bank performs on the test also dictates the size of its “stress capital buffer,” an additional layer of capital introduced in 2020 which sits on top of the 4.5% minimum.That extra cushion is determined by each bank’s hypothetical losses. The larger the losses, the larger the buffer.THE ROLLOUTThe Fed will release the results after market close on Thursday. It typically publishes each bank’s capital ratios and aggregate losses under the test, with details on how their specific portfolios – like credit cards or mortgages – fared.Banks are not allowed, however, to announce their plans for dividends and buybacks until the following Monday, June 27. The Fed will announce the size of each bank’s stress capital buffer in the coming months.The country’s largest lenders, particularly JPMorgan, Citi, Wells Fargo (NYSE:WFC) & Co, Bank of America, Goldman Sachs, and Morgan Stanley (NYSE:MS) are closely-watched by the markets. A TOUGHER TEST?The Fed changes the scenarios each year. They take months to devise, which means they risk becoming outdated. In 2020, for example, the real economic crash caused by the COVID-19 pandemic was by many measures more severe than the Fed’s scenario that year.The Fed devised this year’s scenario before Russia’s invasion of Ukraine and the current hyper-inflationary outlook.Still, the 2022 test is expected to be more difficult than last year because the actual economic baseline is healthier. That means spikes in unemployment and drops in the size of the economy under the test are felt more acutely. For example, the 2021 stress test envisioned a 4 percentage point jump in unemployment under a “severely adverse” scenario. In 2022, that increase is 5.75 percentage points, thanks largely to rising employment over the past year. As a result, analysts expect banks will be told to set aside slightly more capital than in 2021 to account for expected growth in modeled losses.STRESSES IN COMMERCIAL REAL ESTATE, CORPORATE DEBTThis year’s tests will also include “heightened stress” in commercial real estate, which was hit by the pandemic as workers were sent home, and corporate debt markets. Global watchdogs, including the International Monetary Fund, have warned of high levels of risky corporate debt as interest rates rise globally.ALL BANKS TESTEDIn 2022, all 34 U.S. banks monitored by the Fed with over $100 billion in assets will undergo the stress test, compared with 23 lenders last year. That’s because the Fed adopted a new standard in 2020 that stipulated that banks with less than $250 billion in assets only have to take the test every other year. That means that large regional banks, like Ally Financial (NYSE:ALLY) Inc and Fifth Third Bancorp (NASDAQ:FITB) are up again after a year off. More

LONDON (Reuters) – Dashed hopes, so far at least, that Brexit would tilt Britain’s economy towards growth driven by trade and investment are threatening another of Prime Minister Boris Johnson’s flagship policies: “levelling up” the regions outside of London.Six years on from the vote to leave the European Union, the classic low-productivity British model of growth driven by consumption, supported in part by rising house prices, looks as strong as ever.Britain has missed out on much of the global recovery in goods exports as economies re-opened from COVID-19 lockdowns, leaving it bottom among Group of Seven rich industrialised nations by this measure over the last 12 months. The Resolution Foundation think tank this week said that lacklustre performance reflects a more closed economy since Brexit.It also represents a missed opportunity for Johnson’s levelling-up agenda, which aims to reduce regional inequalities. Had British goods exports grown in line with the average among the other six countries in the G7, they would have been worth around 38 billion pounds ($47 billion) more during the year to April 2022, based on a simple extrapolation.This represents several billions of pounds of lost revenue for British factories and by extension the regions outside of London, since around 95% of manufacturing output takes place outside the capital, according to 2017 official data. GRAPHIC: https://fingfx.thomsonreuters.com/gfx/polling/jnpweojzlpw/Pasted%20image%201655990997235.png Manufacturing comprises only about 10% of British economic output overall. But it is a key driver of growth and investment in many of the parts of England and Wales that voted heavily to leave the EU in 2016, such as the East Midlands and North East regions.Unless Britain can meaningfully improve its trade performance, it could mean more missed opportunities to level up. “The regions that probably asked for Brexit are the most likely to have seen the biggest impact negative impact from trade,” said Flaheen Khan, senior economist from the Make UK manufacturing trade group.On Wednesday the Resolution Foundation said Brexit was unlikely to result in a big restructuring of the main sectors of Britain’s economy – but it would have consequences for levelling-up.”Our assessment finds that the North East, one of the poorest regions in the UK, will be one of the hardest hit, and that Brexit will increase its existing – and large – productivity and income gaps,” the think tank said.Estimates of regional economic growth hint at the scale of the opportunity already lost.In the first quarter of 2022, London’s economy – dominated by services firms – was 2.6% larger than its level of late 2019, before the onset of COVID-19.By comparison, no other regional economy in the United Kingdom except for Northern Ireland had fully recovered its pre-pandemic size.GETTING ON WITH ITProponents of Brexit say it is a long-term project that cannot be judged over the space of a few years, before the benefits of an independent trade and regulatory policy become fully apparent.”Regurgitations of Project Fear don’t seem to get anyone anywhere,” said Britain’s minister for Brexit opportunities, Jacob Rees-Mogg, of this week’s Resolution Foundation report.Britain’s government wants to boost exports of goods and services to reach 1 trillion pounds per year in current prices by the end of the decade, up from their pre-pandemic level of 700 billion pounds. The highest rate of inflation in the G7 is likely to be a big driver behind meeting that goal but an improved underlying trade performance would go a long way to boosting economic activity across the United Kingdom. GRAPHIC: https://fingfx.thomsonreuters.com/gfx/polling/zdvxoeqenpx/Pasted%20image%201655993231730.png Businesses, however, need more help to get there, the British Chambers of Commerce said.It pointed to five practical measures that would boost trade with the EU which accounts for more than 40% of British exports, ranging from less red tape for food exports and a sales tax deal for small businesses trading digitally with the EU to arrangements for markings and testing of industrial goods.”Businesses in the UK and EU still have good relationships and trust each other. We need decision-makers to follow our lead and negotiate practical improvements to the Brexit trade deal,” said William Bain, head of trade policy at the BCC.Khan from Make UK said part of the problem for policymakers was that manufacturers had different needs in different parts of the country, with companies in the south of England seeking more spending on digital infrastructure, while those in the north were demanding better transport links.One thing that is shared across the country is an acceptance that Brexit is now an economic reality, for better or worse.”In an ideal world, trade would be frictionless, but they’ve accepted that’s not going to happen and most businesses, despite the impact, are getting on with it,” Khan said.($1 = 0.8148 pounds) More