Aurelia Butler

(Reuters) – Drew Greenblatt loves that the Federal Reserve has cut interest rates.But the half-point reduction, the first in what is expected to be a series of cuts, won’t help him win what he calls the “trench warfare” he’s fighting with one of his big customers.That buyer moved work out of China during the COVID-19 pandemic – placing about $800,000 in orders at Greenblatt’s small U.S. factory last year. Greenblatt bought robots and hired more workers to meet the new demand. Then orders stopped earlier this year.”When I asked why, they said they’d gone back to China, to save money,” said Greenblatt, president of Marlin Steel, a Baltimore-based maker of highly engineered wire baskets used in industrial and laboratory machines.Greenblatt’s problem underscores headwinds facing U.S. producers that lower interest rates won’t alleviate, including supply chain snarls, stubbornly high prices for many raw materials, simmering labor unrest in some sectors, and especially, China.U.S. Vice President Kamala Harris plans to roll out new economic policies on Wednesday that aim to help Americans build wealth, and set economic incentives for businesses to aid that goal, Reuters reported. The new policies come as undecided voters seek more information about how Harris would help them economically if she were elected president, the sources said.A key issue in the Nov. 5 election is how Harris and former President Donald Trump plan to respond to the competitive challenge posed by China. The Biden administration has proposed prohibiting key Chinese software and hardware in connected vehicles on American roads due to national security concerns.Greenblatt, the basket manufacturer, is hoping for more aggressive action on trade, and not just against China.”If they put on more tariffs, we’d have more shipments to our clients,” he said. “Instead, our clients are buying from countries that allowed their currencies to be subsidized.”‘CHALLENGING PICTURE’High interest rates make it costlier to borrow or fund ongoing operations and are often cited as a leading contributor to the broad slowdown at U.S. factories since early last year. After adding nearly 750,000 jobs in 2021 and 2022, U.S. manufacturers have shed about 7,000 jobs in 2023 and so far this year, according to the Labor Department. Production at U.S. factories surged in August, according to the Federal Reserve, amid a rebound in motor vehicle production, but data for July was revised lower, suggesting that manufacturing continued to tread water.A report last week from the Philadelphia Fed, meanwhile, pointed to rising supply chain aggravations and a pickup in input costs hitting factories in their region in September.”What the Fed can do is create expectations for short-term growth with a rate cut, which is powerful,” said Cliff Waldman, CEO of New World Economics, an economic consulting firm in Washington that focuses on the industrial sector. Lower rates could encourage companies to move forward with new capital projects.”But that’s really only a small part of the challenging picture facing U.S. manufacturing,” Waldman said.He noted that many producers continue to battle one another over who will absorb the higher costs due to inflation.  Add to this the disruption of global supply chains during the pandemic, which is still playing out.THE UNEXPECTEDFor Kevin Kelly, the latest headache is an unexpected surge in electricity prices. Emerald Packaging (NYSE:PKG), his family-run business, makes plastic bags for produce companies at its factory outside San Francisco and uses large amounts of power to run huge printing presses that put labels and images onto the bags.Kelly said his power bill in June jumped to $350,000 from $290,000 the month before because of higher-than-expected summer rates.  “We just didn’t see that coming,” he said. “We knew there were increases coming through and that the summer rates would be expensive, but we didn’t realize they’d be that expensive.”Utility rates in California are the second-highest in the U.S. after Hawaii, driven up in part by the cost of reinforcing the state’s power grid against wildfires.Kelly is rushing to install solar panels that should help offset some of those increases, albeit after the hefty cost of installing the system. He has also altered the factory’s work schedule, shutting the big machines down for two hours late in the day when rates are highest.”We have people cleaning the presses, doing odd labor around the plant during those two hours, so people are working, but it’s still reduced our output,” he said.Another jolt could come from a major strike at East Coast and Gulf of Mexico ports, which could hit on Oct. 1. Anything on the water now could get stuck on ships and force manufacturers to scramble for alternative ways to move goods, further adding to costs. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to receive the newsletter every weekday. Explore all of our newsletters hereGood morning. Today we’re covering:Hundreds killed in Lebanon’s deadliest day since 2006US energy secretary likens scrapping IRA to self-harm The rise of antimicrobial resistance drugsBut we start with a swath of new stimulus measures unveiled this morning by China’s central bank.The measures include cuts to the People’s Bank of China’s benchmark interest rate, government funding to boost the stock market and aid share buybacks, as well as more support for the stricken property sector.The package of measures sent China’s CSI 300 of Shanghai- and Shenzhen-listed shares up 4.3 per cent. Hong Kong’s Hang Seng index rose 3.9 per cent, led higher by mainland Chinese companies listed in the territory. Shares in Europe also rose. China’s economy has slowed this year as a prolonged downturn in the property sector has weighed on consumer sentiment and curbed spending. Economists are sceptical that growth will hit the government’s 2024 target of 5 per cent, down from 5.2 per cent last year. “In our view, this signals a new round of policy easing ahead to support the real economy,” Goldman Sachs said in a note to clients this morning.Here’s what else I’m keeping tabs on today: US Congress: Novo Nordisk chief executive Lars Fruergaard Jørgensen testifies in a hearing focusing on prices for weight-loss drugs Ozempic and Wegovy. The cybersecurity and infrastructure protection subcommittee holds a hearing into July’s global IT outage. Adam Meyers, senior vice-president for counter-adversary operations at CrowdStrike, the company at the centre of the outage, testifies.Monetary policy: US Federal Reserve board governor Michelle Bowman speaks about the economic outlook and monetary policy at the Kentucky Bankers Association annual convention in Hot Springs, Virginia.FTX: Caroline Ellison, a former executive of bankrupt cryptocurrency hedge fund Alameda Research who testified against founder Sam Bankman-Fried, is scheduled to be sentenced on fraud charges.UN: US President Joe Biden will address the UN General Assembly for the last time as president. Brazilian President Luiz Inácio Lula da Silva will open the 79th session of the general assembly later today in New York.Five more top stories1. Israeli air strikes against what it said were Hizbollah targets yesterday killed almost 500 people in Lebanon’s deadliest day for decades. The “new phase of the war” heightened concerns about escalating hostilities in the Middle East and spread panic across Lebanon. The death toll was the highest since Israel launched a ground offensive against Hizbollah in 2006. ‘Leave your homes now’: The strikes came hours after Israel sent warnings via texts and phone calls. Raya Jalabi reports on yesterday’s chaotic exodus from Beirut.Netanyahu’s popularity: The Israeli prime minister’s standing in national polls has recovered from post-October 7 lows after he launched more aggressive operations in Lebanon and Iran.2. The US Department of Justice is preparing to file an antitrust lawsuit against Visa, accusing the payments company of anti-competitive behaviour. Federal prosecutors are set to file a lawsuit as early as today, said a person familiar with the matter. Here’s what to expect. 3. German Chancellor Olaf Scholz has opposed a UniCredit takeover of Commerzbank after the Italian lender said it was raising its stake from about 9 per cent to 21 per cent. The emergence of UniCredit as a major shareholder has ignited political opposition in Berlin against a cross-border tie-up. Here’s what’s driving the uproar.4. Sheikh Mohamed bin Zayed al-Nahyan, the United Arab Emirates’ leader, met US President Joe Biden in Washington yesterday to advance artificial intelligence co-operation as the Gulf nation tries to secure easier access to US-made technology. The meeting underscores the UAE’s ambitions to become a leader in the new emerging technology. 5. Boeing has offered staff a 30 per cent pay increase in an attempt to end a debilitating strike, sparking anger from union leaders who accused the aircraft maker of circumventing normal bargaining by taking the offer directly to workers. The manufacturer has said the offer is only good if union members vote in favour by Friday. Read the latest on the fractious talks.Today’s big readHuawei’s Qingyun L540 laptop features a Chinese-made operating system More

OSAKA (Reuters) -The Bank of Japan can afford to spend time watching developments in financial markets and overseas economies as it sets monetary policy, Governor Kazuo Ueda said on Tuesday, suggesting that the central bank was in no rush to raise interest rates further.He also voiced hope of scrutinising service-price data for October, many of which are due out in November, in determining whether underlying inflation was accelerating toward the BOJ’s 2% inflation target – a prerequisite for hiking interest rates.”October is a month when service-price revisions are concentrated in Japan, so we must scrutinise data carefully,” Ueda told a news conference after meeting with business leaders in the western Japan city of Osaka.”While there are some elements we can estimate in advance, we need to look at actual data to confirm,” he said, suggesting the BOJ will wait at least until December to hike rates again.The BOJ next meets for a policy meeting on Oct. 30-31, when the board will also conduct a quarterly review of its growth and inflation forecasts.Ueda reiterated that the BOJ will raise rates if underlying inflation accelerates towards its 2% target as projected, a sign there was no change to its stance to gradually push up borrowing costs from still near-zero levels.But he warned of risks surrounding the outlook, such as volatile financial markets and uncertainty on whether the U.S. economy can achieve a soft landing.”We must conduct policy in a timely, appropriate fashion without having any pre-set schedule in mind, taking into account various uncertainties,” Ueda said in a speech to business leaders in Osaka.The yen’s “one-sided declines” have reversed since August and significantly lowered the risk of an inflation overshoot by moderating the pace of rise in import prices, Ueda said.”We need to scrutinise market moves and overseas economic developments behind them in setting monetary policy. We can afford to spend time doing this,” he said.The remarks highlight a shift in the BOJ’s focus away from inflationary risks, towards the chance of slowing global growth and yen rises weighing on Japan’s export-reliant economy.They were roughly in line with those Ueda made after the BOJ’s policy meeting on Friday, when the board unanimously voted to keep short-term rates steady at 0.25%.Ueda stressed that domestic economic conditions were moving in line with the BOJ’s projection with rising wages underpinning consumption and helping push up service-sector prices.But he highlighted the need to watch growing overseas risks, such as uncertainty on how past aggressive interest rate hikes by the Federal Reserve could affect the U.S. economy.Financial markets remained “somewhat unstable,” Ueda added, stressing the need to keep monitoring market developments with “utmost vigilance.”The BOJ ended negative interest rates in March and hiked short-term rates to 0.25% in July, in a landmark shift away from a decade-long stimulus programme aimed at firing up inflation and economic growth.The start of Japan’s rate-hike cycle comes as many other central banks cut interest rates after tightening monetary policy aggressively to combat high inflation.The Fed, for one, last week kicked off an anticipated series of rate cuts with a half-percentage-point reduction after soft labour market data.Japan’s core consumer inflation accelerated for the fourth straight month in August and tracked comfortably above the central bank’s 2% target, keeping alive expectations for further interest rate hikes. More

The U.S. company must provide documentation and evidence within 30 days detailing any “discriminatory measures” taken regarding Xinjiang products over the past three years, the ministry said in a statement. Additionally, the ministry noted in a separate statement that PVH is suspected of “unjustly boycotting” Xinjiang cotton and other products “without factual basis”. More

Antoine Armand, a 33-year-old ally of President Emmanuel Macron, was named France’s new finance minister over the weekend. On Monday, the country’s 10-year bond yield was just 1-1/2 basis points away from surpassing that of Spain’s traditionally more risky paper for the first time since late 2007. “I understand these questions,” Armand told France Inter radio, adding: “When you’ve had government experience, you have a certain number of habits. When you haven’t got that, yes it’s new, yes it’s quite a thing.” Teaming up with new Budget Minister Laurent Saint Martin, who is 39, Armand has the daunting task of plugging a huge hole in the budget. Previously little-known beyond Parisian political circles, the duo face pressure to figure out how to rein in France’s budget deficit as it spirals towards 6% of GDP. “We have one of the worst deficits in our history, so the situation is serious”, Armand said. “Our hard work will match the seriousness of this situation.” Asked whether the country will meet its budget deficit projection this year, Armand declined to give a clear answer, saying he was working with the budget minister on a “credible” updated estimate to be presented soon. France’s chief auditor last week told lawmakers the finance ministry’s current forecast of a deficit at 5.1% of GDP was out of reach due to reduced tax incomes amid an economic slowdown and lower public sector savings than needed. More

Bailey said he was “very encouraged” by the downward path of inflation since it peaked at 11.1% nearly two years ago.”I do think the path for interest rates will be downwards, gradually,” he told the Kent Messenger newspaper.”Inflation has come down a long way,” Bailey added. “We still have to get it sustainably at the target and we have quite an unbalanced mix of components of inflation at the moment.”British inflation was 2.2% in August but the central bank remains concerned about high rates of growth in services prices and regular wages, both of which are rising at an annual pace of more than 5%.Asked where interest rates would settle, Bailey said he did not expect them to return to the historic lows close to zero last seen four years ago, and his best guess was that it would settle at a neutral rate which he was unable to specify. Last week the BoE kept its main interest rate unchanged at 5% after cutting it from a 16-year high of 5.25% in August. Economists polled by Reuters expect the BoE to cut rates to 4.75% at its next meeting in November.Last week Bailey said he was optimistic rates would fall further, but also said cuts would need to be gradual and the BoE needed “to be careful not to cut too fast or by too much”.Bailey spoke to the Kent Messenger during a visit to southeast England, including the port of Dover (NYSE:DOV), the main route for freight and much passenger travel between Britain and continental Europe.Asked about the economic impact of Brexit, Bailey said: “What we have seen, there will be some short-term painful effect on trade. But over a longer period of time … that trade will be redirected.” More

1. Futures edge upUS stock futures pointed higher on Tuesday, after comments from Fed officials regarding the jumbo rate cut drove up equities on Wall Street in the prior session.By 03:22 ET (07:22 GMT), the Dow futures contract had added 37 points or 0.1%, S&P 500 futures had inched up by 8 points or 0.1%, and Nasdaq 100 futures had gained 47 points or 0.2%.The 30-stock Dow Jones Industrial Average, benchmark S&P 500 and tech-heavy Nasdaq Composite all gained on Monday, as investors assessed statements in support of the Fed’s outsized 50-basis point rate reduction last week. Fed officials including Neel Kashkari, Raphael Bostic, and Austan Goolsbee all backed the move and argued for further slashes to borrowing costs this year.Meanwhile, new data showed that US business activity held steady in September and average prices for goods and services climbed at the fastest pace in half a year. The figures, along with the release of the latest personal consumption expenditures (PCE) price index — one of the Fed’s preferred inflation gauges, could provide an updated glimpse into the state of price growth in the world’s biggest economy.Traders are now betting that there is a roughly 53% chance the Fed will bring rates down by a half-point again at its next meeting in November, according to the CME Group’s (NASDAQ:CME) closely-monitored FedWatch Tool.2. Fed’s Bowman to speakMarkets will likely be following comments on Tuesday from Fed Governor — and sole dissenter to the size of last week’s rate cut — Michelle Bowman.Bowman is due to speak at 09:00 ET at the Kentucky Bankers Association Annual Convention, according to the Fed.The statements will come after Bowman said last week that she had favored a quarter-point drawdown due to concerns that a bigger reduction would be misinterpreted by the public as a sign that the Fed’s long-standing fight against inflation had been won.In particular, she noted that so-called “core” PCE, which strips out volatile items like food and fuel, currently stands above the central bank’s preferred 2% target.”We have not yet achieved our inflation goal,” Bowman said on Friday, adding a more measured rate cut would “avoid unnecessarily stoking demand.”3. Boeing puts improved pay offer to striking workersBoeing has offered a sweetened labor deal to its more than 30,000 striking workers in the US Pacific Northwest, although their union has said it would not put the proposal to a vote.The aerospace giant’s latest offer includes a 30% general pay bump over four years as well as improvement in retirement benefits and an increased ratification bonus if the workers accept the proposal by Friday. Boeing said it was its “best and final” offer.However, the International Association of Machinists and Aerospace Workers District 751, which represents the workers, rebuffed the approach, saying it was “thrown at us” by Boeing without prior negotiations. The company, meanwhile, said it had presented the offer to the union and then to the employees.Finding a resolution to the strike, which began after workers rejected a prior compensation package earlier this month, has become critical for Boeing. Analysts have flagged that a prolonged work stoppage could place a further crimp on the firm’s finances during a time when it is already facing production delays and heightened scrutiny over its safety record.4. Chinese stocks surge on stimulusChina’s Shanghai Shenzhen CSI 300 and Shanghai Composite indices rose more than 4% on Tuesday, while Hong Kong’s Hang Seng index also rallied, following fresh stimulus measures from Beijing.Chinese officials unveiled a slew of planned measures to further spur economic growth, with the People’s Bank of China (PBOC) set to cut reserve requirements for banks by 50 basis points to unlock more liquidity.For the ailing property market, the government said it would reduce mortgage rates for existing loans. Bloomberg reported that the government was planning at least 500 billion yuan ($70.8 billion) of liquidity support for local stocks.The moves come after the PBOC cut a short-term repo rate on Monday in a bid to further boost liquidity. Officials in China are pushing to shore up growth as the world’s second-largest economy struggles with persistent disinflation and an extended property market downturn.5. Crude risesCrude prices advanced on Tuesday, boosted by the monetary stimulus from top importer China as well as escalating tensions in the Middle East.By 03:23 ET, the Brent contract climbed 1.2% to $74.08 per barrel, while U.S. crude futures (WTI) traded 1.4% higher at $71.34 a barrel.China’s broad stimulus measures boosted hopes of expanding demand for crude from the world’s largest importer.Elsewhere, Israel’s military said it launched airstrikes against Hezbollah sites in Lebanon on Monday, raising concerns of a disruption to supplies from this oil-rich region, tightening global markets. More