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    How China, Russia and Iran are forging closer ties

    Vladimir Putin, Russia’s president, and Ebrahim Raisi, his Iranian counterpart, have several things in common. Both belong to a tiny group of leaders personally targeted by American sanctions. Even though neither travels much, both have been to China in recent years. And both seem increasingly fond of one another. In December they met in the Kremlin to discuss the war in Gaza. On March 18th Mr Raisi was quick to congratulate Mr Putin for his “decisive” election victory.For much of history, Russia, Iran and China were less chummy. Imperialists at heart, they often meddled in one another’s neighbourhoods and jostled for control of Asia’s trade routes. Lately, however, America’s actions have changed the dynamic. In 2020, two years after exiting a deal that limited Iran’s nuclear programme, Uncle Sam reimposed an embargo; more penalties were announced in January this year, to punish Iran for supporting Hamas and Yemen’s Houthi rebels. Russia fell under Western sanctions in 2022, after invading Ukraine, and they were recently tightened. Meanwhile, China faces restrictions of its own, which could become much more stringent if Donald Trump is elected president in November. United by a common foe, the trio now vow to advance a common foreign policy: support for a multipolar world no longer dominated by America. All see stronger economic ties as the basis for their new alliance.China has promised a “no limits” partnership with Russia, and signed a 25-year, $400bn “strategic agreement” with Iran in 2021. All three countries are joining the same multilateral clubs, such as the BRICS. Bilateral trade between them is growing; plans are being drawn up for tariff-free blocs, new payment systems and trade routes that bypass Western-controlled locations. For America and its allies, this is the stuff of nightmares. A thriving anti-Western axis could help foes dodge sanctions, win wars and recruit other malign actors. The new entente involves areas where links are already strong, others where collaboration is only partial and some unresolved questions. What might the alliance look like in five to ten years?Start with booming business. China has long been a customer of petrostates, including Iran and Russia. But these two also used to sell lots of oil to Europe, which was close to Russia’s fields and easy to reach from the Gulf. Since Europe started snubbing them, China has been buying barrels at bargain prices. Inflows from Russia’s western ports have risen to 500,000 barrels a day (b/d), up from less than 100,000 pre-war, reckons Reid l’Anson of Kpler, a data firm. In December that pushed imports of Russian crude to 2.2m b/d, or 19% of China’s total, up from 1.5m b/d two years ago. In the second half of last year Iran’s exports to China averaged 1m b/d, a 150% rise from the same period in 2021.image: The EconomistWhereas Western sanctions allow anyone outside the G7 to import Russian oil, the Iranian energy industry is subject to so-called secondary sanctions, which restrict third countries. Since 2022, however, the Biden administration has relaxed enforcement—willing to see rules broken if it means lower prices. The result has been a surge in Chinese imports, with the beneficiaries not China’s state-owned firms, which could one day be exposed to sanctions, but smaller “teapot refineries” with no presence abroad. As a bonus, China also gets cheap gas from Russia: imports via the Power of Siberia pipeline have doubled since Mr Putin’s invasion of Ukraine.Russia and Iran have little choice but to sell to China. In contrast, China is only subject to restrictions on imports of Western technology—it does not face finance bans or trade embargoes. Thus it can, and does, buy oil from other countries, which gives it the upper hand in negotiations. China gets Russian and Iranian supplies at a discount of $15-30 on the global oil price, and then processes the cheap hydrocarbons into higher-value products. The production capacity of its petrochemicals industry has grown more in the past two years than that of all other countries combined since 2019. China also cranks out enormous volumes of refined-oil products.Trade not aidBoosting commodity trade between the three countries was always going to be the easy bit. Everyone wants oil; once on a ship, it can be sent anywhere. Yet China has an informal policy of limiting dependence on any commodity supplier to 15-20% of its total needs, meaning that it is close to the maximum it will want to import from Iran and Russia. Although the trade is still enough to provide the two countries with a lifeline, it is helpful only if they can spend the hard currency earned on importing goods. Hence the ambition to develop other types of trade.image: The EconomistChina’s exports to Russia have duly soared. As covid-19 restrictions strangled its economy, China sought to compensate by boosting manufacturing exports. Instead of shoes and t-shirts, it tried to sell high-value wares, such as machinery and mechanical devices, for which Russia acted as a test market. Last year the biggest importer of Chinese automobiles was not Europe, a big electric-vehicle buyer, but Russia, which purchased three times as many petrol cars it did as before the war.Purchasing-manager surveys show that Iranian companies are constantly short of “raw materials”, a category including both sophisticated wares, like computer chips, and more basic ones, such as plastic parts. This hampers Iran’s manufacturing industry, which is as large as its petroleum sector. Yet China exports few parts and just 300-500 cars a month to Iran, compared with 3,000 or so to neighbouring Iraq. Not many of China’s manufactured-goods exporters, which sell a lot to the West, are brave enough to risk American retribution.In theory, more business with Russia could help Iran. The two countries supply each other with useful goods. Since 2022 Iran has sold Russia drones and weapons systems that are causing damage in Ukraine—its first military support for a non-Islamic country since the revolution in 1979. Early this year Iran also sent Russia 1m barrels of crude by tanker, another first. But sanctions make deeper ties tricky. Although Russia stopped releasing detailed statistics in 2023, ship-traffic data in the Caspian Sea show only a modest rise since 2022, when the country’s leaders set an ambitious target to boost bilateral trade.Limited trade between Iran and Russia means they lack common banking channels and payment systems. Despite government pressure, neither SPFS (Russia’s alternative to SWIFT, the global interbank messaging system) or Mir (Russia’s answer to American credit-card networks) is widely used by Iranian banks. Efforts to de-dollarise trade led to the creation of a rouble-rial exchange in August 2022, but transaction volumes remain low.To resist sanctions in the longer run, Iran and Russia also need investment—the weakest area of co-operation at present. China’s stock of foreign direct investment in the Islamic Republic has been flat since 2014, even as it has poured money into other emerging economies, and at roughly $3bn remains puny for an economy of Iran’s size. Deals agreed during the last visit of Iran’s president to Beijing, which could be valued at $10bn at most, are dwarfed by the $50bn China pledged to Saudi Arabia, Iran’s great rival, in 2022.Although China remains involved in Russian projects such as Arctic LNG, a gas-liquefaction facility in the country’s north, it has not snapped up assets dumped by Western firms, notes Rachel Ziemba of CNAS, a think-tank, nor backed new ventures. Russia had been expecting China to bankroll the Power of Siberia 2 pipeline, due to carry 50bn cubic metres of gas to the Middle Kingdom when complete—almost as much as Russia’s biggest pipeline used to deliver to Europe. Without China’s support, the project is now in limbo.A little help from your friendsThe alliance has already achieved something remarkable: saving its junior members from collapse in the face of Western embargoes. But has it reached its full potential? The answer depends on the ability of its members to surmount external and internal obstacles.Various forums aim to promote co-operation and cross-border investment. Last July Iran became the ninth member of the Shanghai Co-operation Organisation, a China-led security alliance that also includes Russia. In December it signed a free-trade agreement with the Russia-led Eurasian Economic Union, which covers much of Central Asia. In January it joined the BRICS, an emerging-market group that includes both China and Russia.These get-togethers give the trio more chances to talk. At recent summits, Iranian and Russian ministers have revived negotiations to extend the International North-South Transport Corridor (INSTC), a 7,200km route connecting Russia to the Indian Ocean via Iran. At present Russian grain must travel to the Middle East through the NATO-controlled Bosporus. The proposal, which includes a mixture of roads, rail and ports, could turn Iran into an export outlet for Russia.Iran and Russia’s bureaucracies have relatively little experience of working with one another, and the amount of investment required is daunting: the Russia-backed Eurasian Development Bank estimates it to be $26bn in Iran and Russia alone. Mustering such funding, in two countries not known for investor friendliness, would be hard at the best of times, let alone under sanctions. Still, the idea is gaining traction. On February 1st envoys discussed the next steps for the Rasht-Astara railway, a $1.6bn project that could ease cargo transit in northern Iran. Last year Russia used part of the INSTC to move goods to Iran by rail for the first time.The more serious problem is that Iran and Russia’s economies are too similar to be natural trading partners. Of the top 15 categories of goods that each exports, nine are shared; ten of their 15 biggest imports are also the same. Only two of Russia’s 15 most wanted goods count among Iran’s top exports. Where Iran does have demand gaps Russia could fill, such as in cars, electronics and machinery, Russia’s production capacity is constrained.With gains from trade curtailed by various sanctions, the relationship between the two countries will instead be a competitive one, particularly when it comes to energy exports. Since the West imposed an embargo on Russia’s oil, the country has been vying with Iran to win a bigger share of China’s imports, resulting in a price war. It is a battle that Iran is losing. Russia is a bigger oil producer and its energy is not subject to secondary sanctions. Some of its crude can also be piped to China, a cheaper option.Having the upper hand makes Russia uninterested in offering assistance to its allies. Early in the war, Ukraine’s supporters feared that Russia and Iran would team up to evade sanctions. Instead, Russia developed its own “shadow” fleet of tankers and gave no access to the Iranians, says Yesar Al-Maleki of MEES, a research outfit. Iran has sought Russian funds and technology to tap its giant gas reserves; Russia has provided little help so far.In other areas, China has become a competitor to Iran. Until recently, the Islamic Republic’s sizeable manufacturing base was a source of resilience. The country could take advantage of a devalued currency to sell nuts and toiletries, says Esfandyar Batmanghelidj of Bourse & Bazaar Foundation, another think-tank. Its hope, in time, was to climb the value chain, exporting air-conditioning units and perhaps even cars. China is dashing such dreams. As it shifts towards higher-value exports, it is flooding Iran’s target markets with cheaper, better versions of these goods.The West seems to have little appetite for wholesale secondary sanctions. But existing measures will continue to cause trouble. In December America announced penalties for anyone dealing with Russian firms in industries including construction, manufacturing and technology. These look similar to those it imposed on Iran in 2011, which were later suspended in 2015, after the nuclear deal was signed. Before the suspension, the measures caused Iran’s imports from China to plummet. There is evidence that some Chinese banks are already dumping Russian business.Although these new sanctions do not target Russia’s energy sector, they could hinder Russia’s oil trade with customers other than China if banks react by pausing business with the energy giant. Since October America has also imposed sanctions on 50 tankers that it says breach sanctions on Russia; around half of them have not loaded Russian oil since. All this is making exports to China both more necessary and more difficult for Russia, which is bound to increase competition with Iran. America could fan the flames further by leaning on Malaysia to inhibit oil smuggling in its waters, choking off Iranian flows. And China itself is under growing scrutiny. In February the EU announced sanctions on three Chinese firms it reckons are helping Russia.The scareometerAt this stage, then, the anti-Western entente is worrying but not truly scary. How will it develop over the years and decades to come? The likeliest scenario is that it remains a vehicle that serves China’s interests, rather than becoming a true partnership. China will use it for as long as it can reap opportunistic gains, and stop short of giving it proper wings. China will decline to put weight behind alternative trade routes or payment systems, not wanting to put at risk its business in the West.Yet that might change if America, perhaps during a second Trump presidency, attempts to force China out of Western markets. With nothing more to lose, China would then put far greater resources into forming an alternative bloc, and would inevitably attempt to build on existing relationships and broaden its alliances. Junior partners may not be pleased: their manufacturing industries would suffer as China redirected its exports. America would also suffer: its consumers would pay more for their imports, and in time its leaders would see the first serious challenge to their dominance of the global trading system. ■ More

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    This is the easiest way for newbies to start investing, financial experts say

    Investing smartly doesn’t have to be complicated, according to financial experts.
    Target-date funds are the easiest way for novice long-term investors to get started, experts said.
    Target-allocation funds or global market index funds are other easy entry points, they said.

    Kate_sept2004 | E+ | Getty Images

    Investing can seem overly complicated, and that complexity may paralyze Americans into doing nothing.
    But investing — and doing so smartly — doesn’t have to be hard. In fact, getting started can be relatively easy, according to financial experts.

    “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ,” Warren Buffett, chair and CEO of Berkshire Hathaway, famously said.
    For many people, investing is a necessity to grow one’s savings and provide financial security in retirement. Starting early in one’s career benefits the investor due to a longer time horizon for interest and investment returns to compound.
    While appropriate long-term goals may differ from person to person, one rule of thumb is to save roughly 1x your salary by age 30, 3x by 40 and ultimately 10x by 67, according to Fidelity Investments.

    A ‘fabulous, simple solution’ for beginners

    Target-date funds, known as TDFs, are the simplest entry point to investing for the long term, according to financial pros.
    “I think they’re a fabulous, simple solution for novice investors — and any investor,” said Christine Benz, director of personal finance and retirement planning at Morningstar.

    TDFs are based on age: Investors choose a fund based on the year in which they aim to retire. For example, a current 25-year-old who expects to retire in roughly 40 years may pick a 2065 fund.

    These mutual funds do most of the hard work for investors, like rebalancing, diversifying across many different stocks and bonds, and choosing a relatively appropriate level of risk.
    Asset managers automatically throttle back risk as investors age by reducing the share of stocks in the TDF and raising the exposure to bonds and cash.

    How to pick a target-date fund

    TDFs are a good starting point for “do nothing” investors who seek a hands-off approach, said Lee Baker, a certified financial planner and founder of Apex Financial Services in Atlanta.
    “That’s the easiest thing for a lot of people,” said Baker, a member of CNBC’s Advisor Council.
    Investors need only choose their TDF provider, their target year and how much to invest.

    Benz recommends selecting a TDF that uses underlying index funds. Index funds, unlike actively managed funds, aim to replicate broad stock and bond market returns, and are generally cheaper; index funds (also known as passive funds) tend to outperform their actively managed counterparts over the long term.
    “You definitely want a passive TDF,” said Carolyn McClanahan, a CFP and the founder of Life Planning Partners in Jacksonville, Florida.
    Benz also advises investors seek out funds from among the biggest TDF providers, like Fidelity, Vanguard Group, Charles Schwab, BlackRock or T. Rowe Price.

    Other ‘solid choices’ for novice investors

    Investors who want to be a bit more hands-on relative to TDF investors have other simple options, experts said.
    Some may opt for a target-allocation fund, for example, Baker said. These funds are like TDFs in that asset managers diversify among stocks and bonds according to a particular asset allocation — say, 60% stocks and 40% bonds.
    But this allocation is static: It doesn’t change over time as with TDFs, meaning investors may eventually need to revisit their choice. They can determine which fund might be a good starting point by filling out an online risk profile questionnaire, Baker said.
    More from Personal Finance:Why Social Security COLAs may be smaller in 2025 and beyond’Take the emotion out of investing’ during an election yearWhy Social Security is so important for women
    As another option, investors may instead opt for a global market index fund, an all-stock portfolio diversified across U.S. and non-U.S. equities, Benz said. As with target-allocation funds, these funds don’t de-risk as one ages.
    “I think sometimes novice investors question the simple elegance of some of these very solid choices,” Benz said. “People crave something more complex because they assume it has to be better, but it’s not.”

    Ask yourself: Why am I investing?

    Young, long-term investors should generally ensure their fund — whether TDF or otherwise — has a high allocation to stocks, around 90% or more, said McClanahan, a member of CNBC’s Advisor Council.
    Retirement investors under age 50 would likely be well-suited with a portfolio tilted mostly to stocks, with some cash reserves set aside in the event of emergencies like job loss or health issues, Benz said.

    You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.

    Warren Buffett
    chair and CEO of Berkshire Hathaway

    One caveat: Investors saving for a short- or intermediate-term need — maybe a house or car — would likely be better served putting allotted money in safer vehicles like money market accounts or certificates of deposit, McClanahan said.
    The easiest place for long-term investors to save is a workplace retirement plan like a 401(k) plan. Those with an employer match should aim to invest at least enough to get the full match, McClanahan said.
    “Where else do you get 100% on your money?” she said.
    Investors who don’t have access to a 401(k)-type plan can instead save in an individual retirement account — another type of tax-preferred retirement account — and set up automatic deposit, McClanahan said.
    TDF investors who save in a taxable brokerage account may get hit with an unexpected tax bill, experts said. Because TDFs regularly rebalance, there are likely to be transactions within the fund that trigger capital-gains taxes if not held in a tax-advantaged retirement account.

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    UAW says VW workers at Tennessee plant file for union election

    Volkswagen workers at a plant in Tennessee have filed a petition with the National Labor Relations Board for a vote to join the United Auto Workers.
    The filing comes after a “supermajority of Volkswagen workers have signed union cards in just 100 days,” the union said.
     In 2019, VW workers at the Chattanooga, Tennessee, plant rejected union representation in an 833-776 vote. 

    A Volkswagen EV ID.4 crossover at the Volkswagen of America plant in Chattanooga, Tenneessee, on June 8, 2022.
    Michael Wayland | CNBC

    DETROIT — Volkswagen workers at a plant in Tennessee have filed a petition with the National Labor Relations Board for a vote to join the United Auto Workers, the union announced Monday.
    The filing comes after a “supermajority of Volkswagen workers have signed union cards in just 100 days,” the union said, marking a major milestone in the labor group’s organizing drives of nonunionized auto plants in the U.S.

    The UAW has previously failed to organize foreign-based automakers in the U.S. Most recently, plants with Volkswagen and Nissan fell short of the support needed to unionize. In 2019, VW workers at the Chattanooga, Tennessee, plant rejected union representation in an 833-776 vote. 
    The Chattanooga plant is VW’s only U.S. assembly plant and employs more than 4,000 autoworkers who would be eligible to vote for union representation.

    Read more CNBC auto news

    VW confirmed receiving a notice that the UAW has filed a petition with the NLRB to hold an election. The company said it respects its workers’ right to a democratic process and to organize.
    “We will fully support an NLRB vote so every team member has a chance to vote in privacy in this important decision. The election timeline will be determined by the NLRB. Volkswagen is proud of our working environment in Chattanooga that provides some of the best paying jobs in the area,” the company said in an emailed statement.
    VW production workers at the plant earn between $23.40 per hour and $32.40 per hour, with a four-year grow-in period to top wages, according to the company.

    VW’s hourly wages are lower than those the UAW negotiated last year with the Detroit automakers, which this year range between about $25 an hour and $36 an hour for production workers, including estimated cost-of-living adjustments, or COLA. By the end of the UAW contracts, top wages are expected to surpass $42 an hour for production workers.
    VW is one of 13 nonunion automakers in the U.S. that the UAW set its sights on late last year after securing record contracts with the Detroit automakers.
    The drive covers nearly 150,000 autoworkers across BMW, Honda, Hyundai, Lucid, Mazda, Mercedes-Benz, Nissan, Rivian, Subaru, Tesla, Toyota, Volkswagen and Volvo.

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    Audi reveals new all-electric Q6 e-tron SUV, its first next-generation EV

    Audi on Monday revealed its new all-electric Q6 e-tron SUV, the first production vehicle on its next-generation EV architecture.
    Ordering for the Q6 e-tron quattro and a performance variant will open this month in Europe.
    Audi plans to introduce about 20 new or significantly redesigned models and derivatives globally through 2025, more than half of which will be electric.

    The Audi SQ6 e-tron SUV.

    Audi on Monday revealed its new all-electric Q6 e-tron SUV, the first production vehicle on its next-generation electric vehicle architecture.
    The Volkswagen-owned luxury carmaker says the new “Premium Platform Electric” opens up new levels of technology for Audi, including a rapid EV recharge time of 158 miles in 10 minutes.

    The vehicle ushers in the next generation of EVs for Audi, which continues to offer more all-electric and plug-in hybrid EVs despite growth slowing recently for EVs.
    Audi confirmed it plans to introduce about 20 new or significantly redesigned models and derivatives globally through 2025, more than half of which will be electric.

    The Audi SQ6 e-tron SUV,

    Ordering for the Q6 e-tron quattro as well as an “S” performance variant will open this month in Europe, starting at 74,400 euros or about $81,000, and 93,800 euros, or $102,030, respectively. The Q6 e-tron has an estimated range on a single charge of 625 kilometers, or 388 miles.
    Top performance specifications for the U.S. include up to 510 horsepower, max speed of 143 miles per hour and 0 mph to 60 mph in 4.2 seconds.
    Exact pricing and model details for the U.S. are expected closer to when the midsize SUV goes on sale domestically later this year, according to an Audi spokesman.

    Audi currently offers all-electric Q4 and Q8 SUVs as well as a $106,500 GT sedan in the U.S. market.
    The Q6 e-tron features a new but familiar Audi design including sleek headlamps, mesh-style grille and an overall aggressive exterior design.
    The new EV platform includes an 800-volt battery architecture and a maximum charging capacity of 270 kilowatt hours.

    The Audi SQ6 e-tron SUV.

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    Homebuilder sentiment turns positive for the first time since July

    U.S. homebuilders are feeling more confident about their businesses than they have since last summer, as they see better demand despite stubbornly high mortgage rates.
    Homebuilder sentiment went positive for the first time since July and gained for the fourth-straight month.
    The popular 30-year fixed mortgage rate has hovered around 7% since February.

    U.S. homebuilders are feeling more confident about their businesses than they have since last summer, as they see better demand despite stubbornly high mortgage rates.
    Homebuilder sentiment rose 3 points in March to 51 on the National Association of Home Builders/Wells Fargo Housing Market Index. The reading gained for the fourth-straight month, hitting its highest level since July.

    Sentiment also moved into positive territory for the first time since July. Fifty is the line between positive and negative sentiment.
    Mortgage rates came down in the first week of March, only to shoot back up in the second week. The average rate on the popular 30-year fixed mortgage has hovered around 7% since early February.
    “Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year,” said NAHB Chairman Carl Harris, a custom homebuilder from Wichita, Kansas. “But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”
    Of the index’s three components, current sales conditions rose 4 points to 56, expectations in the next six months rose 2 points to 62 and buyer traffic increased 2 points to 34.
     Regionally, on a three-month moving average, sentiment rose most in the Midwest and West. 

    The report also noted that fewer builders are lowering home prices to attract buyers. In March, 24% of builders reported cutting home prices, down from 36% in December 2023 and the lowest share since July.
    The average price cut remains steady at around 6%. Builders are still using sales incentives such as buying down mortgage rates.
    “With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market,” said Robert Dietz, chief economist for the NAHB. “However, as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber.”

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    United Airlines CEO tries to reassure customers after string of flight problems

    United Airlines flights have suffered a series of problems in recent weeks.
    A tire fell off a Boeing 777 after takeoff from San Francisco, and, in a separate incident, a missing panel was discovered after a flight landed in Oregon.
    United’s CEO told customers that the incidents were unrelated but the airline will incorporate the findings into training and procedures.

    United Airlines CEO Scott Kirby speaking in Chicago on June 5, 2019.
    Kamil Krzaczynski | Reuters

    United Airlines CEO Scott Kirby on Monday sought to reassure customers about the carrier’s safety after a series of flight problems in recent weeks.
    In one incident this month, a tire fell from one of the carrier’s Japan-bound Boeing 777s shortly after takeoff, damaging cars in a San Francisco airport parking lot. In another, a missing panel from the plane was discovered after the older Boeing 737 landed in Oregon on Friday.

    “Safety is our highest priority and is at the center of everything we do,” Kirby said in an email to customers. “Unfortunately, in the past few weeks, our airline has experienced a number of incidents that are reminders of the importance of safety.”
    Kirby said the incidents, which the Federal Aviation Administration is investigating, were “all unrelated” but that the team is reviewing the details “and using those insights to inform our safety training and procedures across all employee groups.”
    The string of recent mishaps occurred during heightened scrutiny of the aviation industry after a door plug panel blew off an Alaska Airlines’ nearly new Boeing 737 Max 9 on Jan. 5.

    A United Airlines plane.
    Source: NBC Houston KPRC2+

    On March 8, a United 737 Max plane rolled off a Houston runway. On March 4, a United Boeing 737 that was heading to Florida from Houston returned to the airport after the engine ingested plastic bubble wrap, with video on social media showing flames coming out of the engine.
    United’s CEO said the airline had already planned to implement changes such as “an extra day of in-person training for all pilots starting in May and a centralized training curriculum for our new-hire maintenance technicians.”
    “You can be confident that every time a United plane pulls away from the gate, everyone on our team is working together to keep you safe on your trip,” Kirby wrote. More

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    Weight loss drug Wegovy is now approved for heart health — but that won’t mean broad insurance coverage just yet

    The blockbuster weight loss drug Wegovy is now approved in the U.S. for heart health. 
    But some health plans and employers are still reluctant to cover Wegovy due to its hefty price tag, which they say could significantly strain their budgets.
    Plans are likely to take notice of Wegovy’s new approval and start considering whether to cover the treatment when they next update their formularies.

    Victoria Klesty | Reuters

    In the U.S., Wegovy is no longer just for weight loss.
    The blockbuster drug — one of a handful of weight loss treatments to skyrocket in popularity over the last year — is now approved in the U.S. for heart health, too. But that may not translate to wider insurance coverage of the weekly injection drug from Novo Nordisk and similar obesity treatments just yet.

    Some employers and other health plans are still reluctant to cover Wegovy due to its hefty $1,350 monthly price tag, which they say could significantly strain their budgets. They also have other questions, such as how long patients actually stay on the treatment. 
    At the very least, some plans will take notice of Wegovy’s new approval and start assessing whether to cover the treatment when they next update their formularies, some insurance industry experts told CNBC. That could mean difficult decisions ahead for insurers and likely a patchwork system of coverage for Americans who are seeking treatment to navigate.
    “The more benefits that come from weight loss drugs, I think the greater the pressure is going to be to start including those drugs in a formulary and cover them in standard insurance plans,” said John Crable, senior vice president of Corporate Synergies, a national insurance and employee benefits brokerage and consultancy. “But my gut tells me it’s going to take more to convince some insurers.”
    Wegovy is part of a class of drugs called GLP-1s, which mimic a hormone produced in the gut to suppress a person’s appetite and help regulate blood sugar. Coverage for those treatments when used for weight loss is a mixed bag. 
    Roughly 110 million American adults are living with obesity and approximately 50 million of them have insurance coverage for weight loss drugs, a spokesperson for Novo Nordisk said in a statement. The company is actively working with private insurers and employers to encourage broader coverage of those drugs, and is advocating for the federal Medicare program to start covering them, the spokesperson added.

    The Centers for Medicare and Medicaid Services is reviewing the FDA’s expanded approval of Wegovy and will share additional information as appropriate, an agency spokesperson said in an email.
    The spokesperson added that state Medicaid programs would be required to cover Wegovy for its new cardiovascular use. By law, Medicaid must cover nearly all FDA-approved medications, but weight loss treatments are among a small group of drugs that can be excluded from coverage. Around one in five state Medicaid programs currently cover GLP-1 drugs for weight loss.
    Some of the nation’s largest insurers, such as CVS Health’s Aetna, cover those treatments.
    But many employers don’t. An October survey of more than 200 companies by the International Foundation of Employee Benefit Plans, or IFEBP, found only 27% provided coverage for GLP-1s for weight loss, compared with the 76% that covered those drugs for diabetes. Notably, 13% of employers indicated they were considering coverage for weight loss.

    Downstream health effects

    The Food and Drug Administration approved Wegovy for weight management in 2021. In a landmark decision earlier this month, the agency expanded that approval after Wegovy was found to cut the risk of serious cardiovascular complications in adults with obesity and heart disease.
    The decision was based on a five-year, late-stage trial, which showed that weekly injections of Wegovy slashed the overall risk of heart attack, stroke and cardiovascular death by 20%. 
    The approval demonstrates the significant downstream health benefits of Wegovy — and potentially similar drugs — for severe conditions caused by excess weight. Obesity increases the risk of several conditions, such as diabetes, heart disease and even some cancers. 

    An obesity patient takes a injection of weight loss medication.
    Joe Buglewicz | The Washington Post | Getty Images

    It also challenges what some health experts call an “outdated” narrative driving hesitancy among some insurers: that weight loss treatments offer only a cosmetic rather than a medical benefit. 
    “We haven’t previously seen any anti-obesity medication decrease the risk of heart attack and stroke,” said Dr. Jaime Almandoz, a weight management and metabolism specialist at the University of Texas Southwestern Medical Center in Dallas. “What we have is proof that treating obesity is essentially life-saving, and I think it really shifts the conversation.” 
    And the lack of broader insurance coverage for those drugs creates a “huge equity issue in our country around treatment access and even health access,” said Dr. Angela Fitch, knownwell chief medical officer.
    Some health experts also argue that covering Wegovy and other GLP-1s for weight loss could reduce a plan’s health-care costs down the line and improve future health outcomes for patients. 
    Shawn Gremminger, the president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said employers would be “well disposed to cover” those drugs if they are effective at lowering long-term costs. Members of that group represent private, public, nonprofit and union and Taft-Hartley organizations that spend over $400 billion annually on health-care.
    But he said that it will likely take years before employers have access to concrete data on the potential cost savings of covering those treatments. 
    Gremminger added that employers are “a little bit less focused” on what covering weight loss drugs will mean for overall health-care spending 10 years from now. Their focus is on providing care to their current employees, some of whom will end up leaving the company down the line. 

    Boxes of Wegovy lie beside a packaging line at Novo Nordisk’s facility in Hillerod, Denmark, March 8, 2024. 
    Tom Little | Reuters

    Employers have other questions, too, including about longer-term data on GLP-1s for weight loss, and about patients stopping those drugs prematurely. It also isn’t clear to some employers whether patients have to stay on Wegovy for the rest of their lives or if they can eventually taper off of it, Gremminger said.
    Obesity and heart disease are chronic diseases, which means most patients will have to keep taking Wegovy along with diet and exercise to maintain the health benefits. Novo Nordisk said, “not unexpectedly,” data from their clinical trials shows that people who took Wegovy regained weight when they went off the drug.
    “This supports the belief that obesity is a chronic disease that requires long-term management, much like high blood pressure or high cholesterol, for which most patients remain on therapy long term in order to continue to experience the benefits of their medications,” Novo Nordisk said in a statement.
    But Gremminger said the standard of care for the long-term use of weight loss drugs is “in flux.”

    Considering the costs 

    Faced with the dramatic cost of covering Wegovy and similar drugs, the state of North Carolina is paring back.
    State employees will no longer have insurance coverage for GLP-1s when used for weight loss at the beginning of next month. The plan will still cover GLP-1s for diabetes, such as Novo Nordisk’s Ozempic, along with some older obesity drugs.  
    North Carolina’s treasurer and a GOP candidate for governor, Dale Folwell, told CNBC the expanded approval of Wegovy last week doesn’t change anything.
    “We’ve never questioned the efficacy of the drug. We’ve always questioned what we’re having to pay for it,” Folwell said. “Even as the scope of the use of this drug widens, it doesn’t change the cost.” 

    North Carolina State Treasurer Dale Folwell attends the Republican Governors Association conference in Orlando, Florida, Nov. 16, 2022.
    Phelan M. Ebenhack | AP

    He said dropping weight loss drug coverage wasn’t a decision the plan’s board of trustees wanted to make in January, but it did so because the plan is “under financial siege” due to Wegovy. That treatment cost the state’s health plan nearly $87 million last year, according to a state presentation from January. Overall, GLP-1 drugs for weight loss cost the plan roughly $102 million in 2023. 
    An outside consultant projected a $1.5 billion loss by 2030 if the state plan continued to pay for those treatments. North Carolina also estimated that continuing to cover GLP-1s for weight loss would double the premiums for all 482,000 active employees and dependents on the plan, even those not taking the drugs. 
    Folwell said the state has been working with Novo Nordisk and Eli Lilly, the maker of similar treatment Zepbound, to reach an agreement on costs. But he noted that the companies have rejected the state’s recommendations “at every turn.” 
    A spokesperson for Eli Lilly said the company is committed to working with health-care, government and industry partners “to help people who may benefit from Zepbound access it, but obstacles to that goal still exist.” The spokesperson added that policies around insurance have “not caught up to science.” 
    Novo Nordisk said in a statement it urges Folwell and the state health plan to “put patients first” and reconsider the decision to drop weight loss drug coverage.
    Novo Nordisk believes “denying patients insurance coverage for important and effective FDA approved treatments for obesity is irresponsible,” according to a company spokesperson, who said the company will continue to engage with state health plan officials to address any potential cost concerns.
    Both drugmakers have launched programs to help patients, with or without commercial insurance coverage, afford their weight loss treatments.
    Novo Nordisk says its savings program can help patients without insurance coverage save up to $500 per 28-day supply of Wegovy. The company also said roughly 80% of Wegovy patients in the U.S. with commercial coverage for the drug are paying $25 per month or less.

    List prices of weight loss drugs before insurance

    Wegovy from Novo Nordisk: $1,349.02 per monthly package
    Zepbound from Eli Lilly: $1,059.87 per monthly package
    Saxenda from Novo Nordisk: $1,349.02 per monthly package

    Increased competition in the weight loss drug market could force the two companies to drive down the costs of their injectable treatments, said Ceci Connolly, CEO of the Alliance of Community Health Plans. The organization represents regional, community-based health plans that cover more than 18 million Americans across the U.S. 
    Health plans may also be more open to covering convenient and potentially cheaper oral versions of the drugs, which several drugmakers are racing to develop. Those cheaper options, though, are likely still years away. That includes cheaper generic versions of existing GLP-1s, along with treatments from rival drugmakers.

    Coverage with cost controls 

    More employers will likely start considering coverage of Wegovy following its expanded approval, according to Julie Stich, vice president of content at IFEBP.
    But the plans that decide to include Wegovy when they next update their formularies will likely consider implementing certain requirements to control costs. Those requirements will look different for Wegovy’s two approved uses. 
    Most employers that cover GLP-1s for weight loss already use cost controls, according to the October survey by IFEBP.
    Nearly a third of companies said they used “step therapy,” which requires their members to try other lower-cost medications or means of losing weight before using a GLP-1. Around 16% of employers used certain eligibility rules, such as requiring employees to have a certain BMI, or body-mass index, to receive coverage. 

    Fiordaliso | Moment | Getty Images

    Other employers are using financial requirements, such as annual or lifetime spending caps for the treatments. For example, the Mayo Clinic’s employee health plan added a lifetime coverage limit of $20,000 for weight loss drug prescriptions filled after Jan. 1. 
    Meanwhile some players in the insurance industry are trying to find ways to help health plans manage the costs of covering the treatments. 
    Last week, Cigna’s pharmacy benefits management unit said it will limit spending increases for GLP-1s to a maximum of 15% annually for employers and other health plans. Currently, some of the company’s clients are seeing spending for those treatments rise 40% to 50% annually. 
    If more insurers and pharmacy benefits managers pursue similar efforts, their affiliated health plans could become more open to covering weight loss drugs “knowing that their risk will be limited in that way,” Stich said.
    Clarification: This story has been updated to clarify the price of Wegovy. It’s $1,350 per month. More

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    China kicks off the year on strong note as retail, industrial data tops expectations

    Retail sales rose 5.5%, better than the 5.2% increase forecast in a Reuters’ poll, while industrial production increased 7%, compared with estimates of 5% growth.
    Fixed asset investment rose by 4.2%, more than the forecast of 3.2%.
    Online retail sales of physical goods rose by 14.4% from a year ago during the first two months of the year.

    High-rise residential and commercial buildings are being constructed near Dongyu Road, Qiantan, in the Pudong New Area of Shanghai, China, on March 15, 2024. 
    Nurphoto | Nurphoto | Getty Images

    BEIJING —  China on Monday reported economic data for the first two months of the year that beat analysts’ expectations.
    Retail sales rose 5.5%, better than the 5.2% increase forecast in a Reuters’ poll, while industrial production increased 7%, compared with estimates of 5% growth.

    Fixed asset investment rose by 4.2%, more than the forecast of 3.2%.
    The unemployment rate for cities was 5.3% in February.
    Online retail sales of physical goods rose by 14.4% from a year ago during the first two months of the year.
    Investment into real estate fell by 9% in the first two months of the year from a year ago. Investment in infrastructure rose by 6.3% while that in manufacturing increased by 9.4% during that time.
    Economic figures for January and February are typically combined in China to smooth out variations from the Lunar New Year, which can fall in either month depending on the calendar year. It is the country’s biggest national holiday, in which factories and businesses remain closed for at least a week.

    This year, the number of domestic tourist trips and revenue during the holiday grew compared with last year as well as pre-pandemic figures from 2019. But Nomura’s Chief China Economist Ting Lu pointed out that “average tourism spending per trip was still 9.5% below pre-pandemic levels in 2019.”
    Retail sales did not rebound from the pandemic as strongly as many had expected as consumers have grown uncertain about their future income.
    New loans in February missed expectations and fell from the prior month, “even after adjusting for seasonality,” Goldman Sachs analysts said in a report Friday.
    “The persistent weakness in property transactions and low consumer sentiment may continue to weigh on household borrowing,” the analysts said. “More monetary policy easing is needed.”
    People’s Bank of China Governor Pan Gongsheng said earlier this month there was still room to cut the reserve requirement ratio, or the amount of cash banks need to have on hand.
    Goldman expects 25 basis point cuts to that ratio in the second quarter of this year, as well as in the fourth quarter.
    Real estate, which accounts for a significant part of household assets, has slumped over the last few years after Beijing’s crackdown on developers’ high reliance on debt for growth.
    The average property price for 70 major Chinese cities fell by 4.5% in February from January on a seasonally adjusted, annualized basis, according to Goldman Sachs’ analysis using a weighted average of official figures.
    That’s steeper than the 3.5% month-on-month drop in property prices in January, Goldman Sachs said.
    “Our high frequency tracker suggests that 30-city new home transaction volume declined by 53.2% [year-on-year] in early March after adjusting to the lunar calendar basis,” the analysts said in a report.
    Chinese authorities did not reveal significant new support for the massive real estate sector during an annual parliamentary meeting that ended last week.
    Instead, Beijing emphasized the country’s focus on developing manufacturing and technological capabilities.
    Data earlier this month showed China’s exports for January and February rose by 7.1% in U.S. dollar terms, beating expectations for a 1.9% increase.
    Imports climbed by 3.5% during that time, also topping Reuters’ forecast for growth of 1.5%. More