Aurelia Butler

Reuters reported in March that Boeing was edging toward a landmark order from Delta for up to 100 of its 737 MAX 10 jets..Asked at an industry conference if he saw a place for the MAX in Delta’s fleet, Bastian said he agreed.”I think there is. We’ve been trying to get a deal done with Boeing. We’re keeping our eye on that, and hopefully, we’ll be able to figure that out,” Bastian said on Wednesday.A Boeing spokeswoman declined to comment.At the event in New York to celebrate the opening of a new terminal at LaGuardia Airport, Bastian declined to offer details of the size of any potential 737 MAX order and emphasized no decision had been made.”We continue to see if there’s opportunities with the MAX but no decisions, no hold ups,” Bastian told Reuters.Delta is the only major U.S. carrier without a 737 MAX on order.The MAX 10 competes with Airbus’ strongest-selling model, the A321neo. Both planes are aimed at the fast-growing segment of the market just above 200 seats.In September, Airline Weekly quoted Bastian as saying there was a place for the MAX at Delta if the carrier could figure out how to bring them in. More

Government bond prices fell on Wednesday as investors on both sides of the Atlantic bet that central banks would act aggressively to combat inflation.The yield on the 10-year US Treasury note rose 0.08 percentage points to 2.92 per cent, while the more policy-sensitive two-year note climbed 0.12 percentage points to 2.66 per cent. Yields rise when prices fall.The moves followed stronger than forecast results from a closely watched survey of the US manufacturing sector. The Institute for Supply Management’s factory activity index rose to 56.1 in May, higher than consensus forecasts of 54.5 and well above the 50 level that indicates expansion.Markets have been volatile in recent weeks as investors grappled with conflicting signs about the health of the global economy and predictions about the future paths of inflation and interest rates. Wednesday’s manufacturing data was seen as a sign that the Federal Reserve has more leeway to lift rates without pushing the US economy into recession.Investors now expect the fed funds rate to reach 3 per cent by next February, according to futures markets, up from 2.8 per cent at the start of the week.“Clearly, the initial post-shock surge in activity is over, but output is still increasing at a healthy pace and some industries, notably autos, have a long way to go before a full recovery is complete,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.The pressure on Treasuries also came as the Fed on Wednesday began the long process of quantitative tightening, reducing its balance sheet by allowing bonds that it bought to mature without replacing them.The prospect of higher rates weighed on stock markets, with the benchmark S&P 500 index and tech-dominated Nasdaq Composite each closing 0.7 per cent lower. After several weeks of wild swings, the broad S&P index ended May at almost exactly the same level it started. Some analysts warned of further declines to come. Anna Stupnytska, global economist at Fidelity International, said: “When we look at various historical episodes, we think equities have not found the trough yet, given headwinds of further aggressive tightening from central banks, the risk related to the war in Ukraine, which is clearly systemic, and commodity markets performing strongly.”European assets followed a similar pattern, with the Stoxx 600 stock index falling 1 per cent while the yield on Germany’s benchmark 10-year Bund rose 0.06 percentage points, to 1.18 per cent.Data on Tuesday showed eurozone inflation hit a record high in May, though worse than predicted German retail sales data on Wednesday exacerbated worries about slowing economic growth in the currency bloc.European Central Bank policymakers will meet next week to discuss how quickly the central bank should raise interest rates to combat inflation without pushing the region into recession.EU leaders also earlier this week struck a deal to ban most Russian oil imports. Brent crude, the international oil benchmark, rose 0.6 per cent to $116.29 a barrel on Wednesday.In Asia, Hong Kong’s Hang Seng fell 0.6 per cent, as investors weighed the easing of coronavirus restrictions in Shanghai following two months of lockdown against growth concerns. A privately compiled gauge from Caixin showed that activity in China’s manufacturing sector had contracted for a third consecutive month. More

Bullard reminded the Economic Club of Memphis on Wednesday that in late 2019, prior to the Covid-19 pandemic, Fed rates were 1.55%, the 10-year Treasury yield was 1.86% and mortgage rates were below 4%.“This may provide a practical benchmark for where the constellation of rates may settle once inflation comes under control in the U.S.,” he said during the virtual presentation.Bullard, who has been the most hawkish Fed official this year, has supported Chair Jerome Powell’s plan to raise interest rates by a half-point at the next two meetings. He later told reporters that he currently is looking for another hike of that size in September if data comes in as expected. Yet he also repeated that rates may come back down in 2023 or 2024 once inflation returns to target.‘Good Plan’“I think we have a good plan for now,” Bullard told the reporters. “This 50 basis point per meeting increase is twice the normal pace that the committee has used in recent years which shows that there’s a lot of unanimity around expeditiously moving to neutral in this high-inflation environment that we’re in.”The Federal Open Market Committee raised rates by a half-point last month to cool the hottest inflation in 40 years and officials have signaled they’ll hike by the same amount again at their meetings in June and July. They also began shrinking their massive balance sheet at a monthly pace of $47.5 billion from Wednesday, stepping up to $95 billion in September, in a process also called quantitative tightening.Bullard said front-loading the rate hikes this year rather than spreading them out over two or more years would allow the Fed to counter inflation, much of which has been caused by fiscal and monetary stimulus as opposed to supply issues related to Covid.“We want to move as quickly as we can,” he said.The U.S. economy is already beginning to slow in response to less monetary stimulus, cited in the Beige Book report on regional economic conditions. Bullard told reporters that was expected and welcome. Growth should be expected to slow to a long-term trend rate, of around 1.75-2%, he said.‘’This doesn’t surprise me,” Bullard said. “I would say overall the anecdotal reports I’ve heard — some of which filtered in to the Beige Book — are consistent with continued growth in the US economy: In certain markets very, very strong. In others more tempered.”(Updates with comments from media briefing starting in first paragraph.)©2022 Bloomberg L.P. More

UK prime minister Boris Johnson on Wednesday stepped up his calls on the EU to agree to scrap “pointless” checks on goods entering Northern Ireland under the region’s post-Brexit trading regime.Johnson’s remarks came after former UK premier Tony Blair, who signed the 1998 Good Friday Agreement that ended three decades of conflict in Northern Ireland, said the post-Brexit trading arrangements finalised by Johnson were a “bad deal” that risked undermining the peace accord.Johnson has indicated he is willing to take unilateral action to rip up the Northern Ireland protocol contained in his Brexit deal with the EU — which requires checks on goods going to the region from Great Britain — unless Brussels agrees to sweeping changes. The two sides have been in protracted talks about a possible compromise on the protocol.The post-Brexit trading regime has sparked a political crisis in Northern Ireland, with the biggest unionist force, the Democratic Unionist party, boycotting the region’s assembly and government following elections last month.Johnson is preparing legislation that would enable the UK to set aside parts of the Northern Ireland protocol, including the section covering trade.The UK prime minister told Mumsnet, an online parenting forum: “All that we’re trying to do is to get rid of some pretty pointless and bureaucratic checks on stuff that’s going from GB to Northern Ireland.“Now, I did the [Northern Ireland] protocol, I negotiated it. The problem is that I thought that it would be implemented with common sense and pragmatism.”Among other proposed changes to the protocol, the UK wants the EU to agree that no checks should be done on goods coming from Great Britain that are staying in Northern Ireland.Blair called for “maximum flexibility” from the two sides to try to reach an agreement on the protocol.He said that “if left unresolved, the issues at the heart of the protocol have the capability of causing an enlarged trade conflict between the UK and the EU, or undermining the Good Friday Agreement — and quite possibly both”.Johnson has also said the protocol is undermining the peace accord.But Mary Lou McDonald, leader of the nationalist Sinn Féin party, which won the elections in Northern Ireland last month, rubbished the notion that the Good Friday Agreement was at risk because of the protocol.

“Nothing could be further from the truth,” she said in Brussels, where she and party vice-president Michelle O’Neill met EU Brexit negotiator Maroš Šefčovič.McDonald said the protocol was “necessary” and was working, and accused Johnson’s government of acting in “bad faith”.The Good Friday Agreement underpinned an open border on the island of Ireland as part of efforts to preserve peace.Under Johnson’s Brexit deal, Northern Ireland was left in the EU single market for goods, and checks were introduced on products entering the region from Great Britain.Northern Ireland’s unionist parties object to how the deal introduced a border in the Irish Sea, saying it undermines the region’s status as part of the UK.DUP leader Sir Jeffrey Donaldson called on the EU to “take note and recognise the harm the [Northern Ireland] protocol is doing to political stability”.Thomas Byrne, Ireland’s minister for Europe, appealed for British ministers to talk to their Irish counterparts to build trust and find a solution to the Northern Ireland protocol. “The UK-Ireland relationship is a foundation of the peace process,” he said. “It is essential it should be maintained and nurtured. It is not being at the moment.”He played down the prospect of swift retaliation by Brussels to any UK unilateral action on the Northern Ireland protocol. More

The brutal end of Sri Lanka’s civil war in 2009 was followed by a repressive calm. But there was still an economic peace dividend. Hapless government, however, made a cautionary example of the Asian nation. Last month, it defaulted on its debt. A nation that held $7.9bn in reserves in 2019 now needs help from allies to pay for deliveries.There is much to Sri Lanka’s travails that is singular. In 2019, a new government tried to build popular support with a cut to income tax and value added tax. According to the IMF’s estimates, Sri Lanka’s gross debt will have risen from 91 per cent of annual output in 2018 to 119 per cent in 2021.But a portion of the damage of the past few years was not unique to Sri Lanka. As a tourism hub, it was particularly vulnerable to the coronavirus pandemic. The disease, though, damaged balance sheets around the world. The Institute of International Finance estimates that, for a panel of 32 emerging markets (not including Sri Lanka), total debt — public and private — is up by 20 percentage points, to 248 per cent of gross domestic product. This extra debt is a worry: during the crisis, poorer countries were helped by ultra-low interest rates in richer economies. That created a flow of cheap money that they could surf. As inflation has taken off in the developed world, however, so interest rates are now rising in response. Investors can no longer risk as much in emerging markets. States cannot afford to borrow.It is not only higher rates doing the damage. Lower expected growth and new fiscal problems driven by the war in Ukraine are also a worry. The food and fuel price surge is causing havoc. According to the UN, key foods are 19 per cent more expensive than they were in December. So states must step in to help their people. It is possible that such pressures will lead to a series of defaults. As during some previous international crises, the IMF may find itself trying to extinguish fires on many fronts at once. There remain problems, too, with how the world deals with defaulting states; for one thing, there is no functional code for helping countries to restructure debts. The treatment of debt-distressed nations is still largely built on the assumption that the main creditors of a struggling nation will be a few rich countries and the institutions they dominate. According to the IMF, as recently as 2006, 86 per cent of poorer nations’ external debt was owed to a group of richer states — known as the Paris Club — and to multilateral organisations. Today, that figure is just 58 per cent. By contrast, private bondholders and China have between them gone from holding 5 per cent of poorer nations’ debt in 2006 to 29 per cent of the total. China has also proved to be needlessly secretive in its dealings, so sovereign debt is more opaque than it was, as well as more fractured.A “common framework”, introduced by the G20 and Paris Club, was intended to help resolve this problem by drawing together creditors with distressed debtors to make restructuring easier. But it has stalled. The three cases where it has been requested — Zambia, Chad and Ethiopia — are stuck. Without an effective process to draw lenders together and assign losses, China’s influence will grow: its prominence as a lender means its strategy for handling defaults may dominate in contrast to previous crises. China is indeed a large creditor to Sri Lanka. If the coming months and years do, as feared, produce a string of sovereign defaults, the extent of the resulting pain and mess will depend on Beijing’s willingness to share losses, rather than exploit its debtors. That makes Sri Lanka an important test case for the rest of the developing world. More