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    China’s central bank tries to save the economy

    As China’s economy has descended into deflation, the central bank’s lack of urgency has been a source of frustration. Officials at the People’s Bank of China (PBoC) at first expressed confidence that deflation was, so to speak, transitory. When it persisted, they worried less about falling prices than about the side-effects of fighting them. They were reluctant to ease monetary policy decisively as China’s currency was too weak, banks’ profit margins too slim and bond yields too low. More

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    Fed Governor Bowman explains dissent on rate vote, says she’s worried about inflation

    Fed Governor Michelle Bowman said Tuesday she thought her colleagues should have taken a more measured approach to last week’s half percentage point interest rate cut.
    The jumbo cut “could be interpreted as a premature declaration of victory on our price-stability mandate,” she said in remarks to a bankers’ group in Kentucky.

    US Federal Reserve Governor Michelle Bowman attends a “Fed Listens” event at the Federal Reserve headquarters in Washington, DC, on October 4, 2019. 
    Eric Baradat | AFP | Getty Images

    Federal Reserve Governor Michelle Bowman said Tuesday she thought her colleagues should have taken a more measured approach to last week’s half percentage point interest rate cut as she worries that inflation could reignite.
    Bowman was the lone dissenter from the Federal Open Market Committee’s decision to lower benchmark interest rates for the first time in more than four years. No governor had dissented from an interest rate decision since 2005.

    In explaining her rationale, Bowman said the half percentage point, or 50 basis point, reduction posed a number of risks to the Fed’s twin goals of achieving low inflation and full employment.
    The jumbo cut “could be interpreted as a premature declaration of victory on our price-stability mandate. Accomplishing our mission of returning to low and stable inflation at our 2 percent goal is necessary to foster a strong labor market and an economy that works for everyone in the longer term,” she said in remarks to a bankers group in Kentucky.
    Inflation by the Fed’s preferred metric is running at 2.5%, above the central bank’s 2% goal. Excluding food and energy, core inflation is at 2.6%.
    Though Bowman favored a reduction, she preferred the Fed lower by a quarter percentage point, more in line with the traditional moves at the central bank. The FOMC last cut by half a point in the early days of the Covid pandemic in March 2020, and before that the global financial crisis in 2008.
    Bowman cited several specific concerns: that the big move would indicate that Fed officials see “some fragility or greater downside risks to the economy”; that markets might expect a series of large cuts; that large amounts of sideline cash could be put to work as rates fall, stoking inflation; and her general feeling that rates won’t need to come down as much as her fellow policymakers have indicated.

    “In light of these considerations, I believe that, by moving at a measured pace toward a more neutral policy stance, we will be better positioned to achieve further progress in bringing inflation down to our 2 percent target, while closely watching the evolution of labor market conditions,” she said.
    In recent statements, Fed officials have cited easing inflation and a softening labor market as justification for the cut. At last week’s meeting, individual policymakers indicated they expect another half percentage point in cuts this year and another full point in 2025. Market pricing, however, is more aggressive, expecting 2 full percentage points in cuts through next year.
    The Fed’s benchmark overnight borrowing rate is now targeted at 4.75%-5%.
    Bowman said she respects the committee’s decision and emphasized that policy isn’t on a preset course and will depend on the data, which she said has indicated the labor market has softened a bit but is still strong
    “I continue to see greater risks to price stability, especially while the labor market continues to be near estimates of full employment,” she said. More

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    Commerzbank board member warns of significant job losses with a hostile UniCredit takeover

    Commerzbank supervisory board member Stefan Wittmann told CNBC’s Annette Weisbach that “we certainly hope we can avoid” a hostile takeover by the Italian bank.
    UniCredit believes substantial value can be unlocked within Commerzbank, Germany’s second-largest lender, but it said that further action is required for that value to be “crystalized.”

    15 February 2024, Hesse, Frankfurt/M.: The lettering “Commerzbank” can be seen on the Commerzbank Tower in the center of the banking city. Boosted by the turnaround in interest rates, Commerzbank is aiming for another profit increase after a record year. Photo: Helmut Fricke/dpa (Photo by Helmut Fricke/picture alliance via Getty Images)
    Picture Alliance | Picture Alliance | Getty Images

    Two-thirds of the jobs at Commerzbank could disappear if UniCredit successfully carries out a hostile takeover of the German lender, a Commerzbank supervisory board member warned on Tuesday.
    Stefan Wittmann, who is also a senior official at German trade union Verdi, told CNBC’s Annette Weisbach that “we certainly hope we can avoid” a hostile takeover by the Italian bank. Witmann said Commerzbank’s board had called on the German government to carry out an internal review of the possible takeover, which he hopes will give the bank a six-month period to take stock of the situation.

    “But if it [a hostile takeover] is unavoidable, we think that two-thirds of jobs will disappear, that there will be another significant cut in the branches,” he said, according to a translation.
    “We will see in particular that UniCredit does not want all Commerzbank customers at all, but that it focuses on the supposedly best customers, namely the wealthy customers,” he added.
    Berlin, which was the largest shareholder of Commerzbank after it injected 18.2 billion euros ($20.2 billion) to rescue the lender during the 2008 financial crisis, is likely to play a key role in any potential merger between the banks.
    “We are actually concerned with our economic and industrial responsibility. As far as the workforce is concerned, which trade unions are of course particularly focused on, they would always lose out in the merger, regardless of the point in time,” Wittmann said. The bank has yet to respond to a request for comment on Wittmann’s statements.

    UniCredit announced Monday it had increased its stake in the German lender to around 21% and submitted a request to boost that holding to up to 29.9%, signaling a takeover bid might be in the cards. Earlier this month, the Italian bank took a 9% stake in Commerzbank, confirming that half of this shareholding was acquired from the German government.

    UniCredit believes substantial value can be unlocked within Commerzbank, Germany’s second-largest lender, but it said that further action is required for that value to be “crystalized.”
    German Chancellor Olaf Scholz criticized UniCredit’s move on Monday, saying, “unfriendly attacks, hostile takeovers are not a good thing for banks and that is why the German government has clearly positioned itself in this direction,” Reuters reported.

    ‘Very tense’

    Commerzbank’s supervisory board is due to meet this week to discuss UniCredit’s stake, people familiar with the matter who asked to remain anonymous previously told CNBC.
    Wittmann said the mood is currently “very tense” within the company, adding that the bank was surprised by UniCredit’s announcement on Monday, which he described as a “180 degree-turn within 48 hours.”
    “[UniCredit CEO Andrea Orcel] last spoke on Friday that he wanted a friendly takeover in agreement with all stakeholders and politicians. And yesterday we were surprised by his hostile takeover attempt. That doesn’t add up,” Wittmann said.
    The supervisory board member explained that the two main reasons to regard a potential merger in a critical light are the lack of a banking union in Europe, and the fact that UniCredit has “absorbed itself with Italian government bonds in recent years.”
    He questioned what might happen should geopolitical tensions or “upheavals” impact UniCredit’s availability of capital to finance Commerzbank’s industry.
    In response to the 2008 financial crisis, the European Commission announced plans to create a banking union to improve the regulation and supervision of banks across the region.

    Commerzbank board member warns of significant job losses with a hostile UniCredit takeover

    Economist and former European Central Bank Governor Mario Draghi flagged in a recent report that banks in Europe face regulatory hurdles which “constrain their capacity to lend,” also citing the “incomplete” banking union as one factor that impacts competitiveness for the region’s banks.
    “We have always spoken out, including as employee representatives on the Supervisory Board, that there can and should be mergers at [a] European level, but only when the banking union is in place. And that is just our second point of criticism, that we say: create the rules of the game and the guardrails first, and then do it sensibly when it is clear which playing field we are on,” Wittmann said. More

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    Novo Nordisk CEO to testify at Senate hearing over high weight loss drug prices

    Novo Nordisk’s top executive is slated to face a Senate grilling over the high prices of the company’s weight loss drug Wegovy and diabetes treatment Ozempic.
    The Danish drugmaker’s CEO, Lars Fruergaard Jørgensen, will testify at a Senate Health, Education, Labor and Pensions Committee hearing at 10 a.m. ET on Tuesday in Washington, D.C.
    Sen. Bernie Sanders, who chairs the Senate panel, argues that Novo Nordisk charges Americans substantially higher prices for its blockbuster injections than it does for patients in other countries.

    Lars Fruergaard Jørgensen, CEO of Novo Nordisk, speaks during an interview in New York on Aug. 10, 2022.
    Christopher Goodney | Bloomberg | Getty Images

    Novo Nordisk’s top executive is slated to face a Senate grilling on Tuesday over the high prices of the company’s weight loss drug Wegovy and diabetes treatment Ozempic, as demand for both injections soars in the U.S. 
    Novo Nordisk CEO Lars Fruergaard Jørgensen will testify at a Senate Health, Education, Labor and Pensions Committee hearing at 10 a.m. ET on Tuesday in Washington, D.C. It comes roughly five months after Sen. Bernie Sanders, the Vermont independent who chairs the Senate panel, opened an investigation into the Danish drugmaker’s pricing practices. 

    Sanders contends that Novo Nordisk charges Americans substantially higher prices for its blockbuster drugs than it does for patients in other countries. Before insurance, Ozempic costs nearly $969 per month and Wegovy costs almost $1,350 per month in the U.S. 
    Meanwhile, both treatments can cost as little as under $100 for a month’s supply in some European countries, according to a release from the committee. Ozempic costs just $59 in Germany, while Wegovy costs $92 in the U.K.
    Sanders also said last week that the CEOs of major generic pharmaceutical companies have told him that they could sell a version of Ozempic for less than $100 a month at a profit. There are currently no generic alternatives to Ozempic available in the U.S. 

    Weight loss syringes of the brands “Wegovy”, “Ozempic” and “Mounjaro” are sold at In der Achat Apotheke in Mitte, Germany.
    Picture Alliance | Picture Alliance | Getty Images

    Sanders and other lawmakers, health experts and insurers have warned that the insatiable demand for Novo Nordisk’s drugs and similar weight loss and diabetes treatments from rival Eli Lilly could potentially bankrupt the U.S. health-care system unless prices drop.
    Both drugmakers make GLP-1s, which mimic hormones produced in the gut to tamp down a person’s appetite and regulate their blood sugar. Eli Lilly’s weight loss injection Zepbound and diabetes drug Mounjaro similarly cost around $1,000 per month before insurance and other rebates.

    In a release, the Senate Health Committee said it would cost the U.S. $411 billion per year if half of all Americans took weight loss drugs from Novo Nordisk and Eli Lilly. That’s $5 billion more than what Americans spent on all prescription drugs in 2022. 
    Medicare spent $4.6 billion on Ozempic in 2022 alone, according to health policy research organization KFF. 

    More CNBC health coverage

    Other insurers and employers have implemented strict requirements to control weight loss drug costs, or have dropped coverage of those treatments altogether. Many health plans cover GLP-1s for diabetes, but not for weight loss. The federal Medicare program doesn’t pay for weight loss treatments unless they are approved and prescribed for another health condition. 
    The hearing comes as the Biden administration and lawmakers on both sides of the aisle try to rein in health-care costs in the U.S., in part by pressuring the pharmaceutical industry and drug supply chain middlemen. On average, Americans pay two to three times more than patients in other developed nations for prescription drugs, according to a fact sheet from the White House.
    Notably, Ozempic will likely be subject to the next round of price negotiations between manufacturers and Medicare — a key provision of President Joe Biden’s Inflation Reduction Act that aims to lower costs for seniors. Wall Street analysts say Ozempic will likely be eligible for negotiations by the time the next round of drugs is selected in 2025, for price changes that will go into effect in 2027.

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    China launches probe into Calvin Klein parent over Xinjiang supply chain ‘disruptions’

    China’s Ministry of Commerce said Tuesday it was launching a probe into Calvin Klein-parent PVH Group over alleged business disruptions around its Xinjiang supply chain.
    The ministry said the investigation is part of its “unreliable entities” list mechanism, which was launched shortly after the U.S. blacklisted Huawei.
    The U.S. Commerce Department on Monday announced plans to ban the import or sale of cars with specific hardware or software linked to China or Russia.

    Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019.
    Aly Song | Reuters

    BEIJING — China’s Ministry of Commerce said Tuesday it was launching a probe into Calvin Klein-parent PVH Group over alleged business disruptions around its Xinjiang supply chain.
    The ministry said the investigation is part of its “unreliable entities” list mechanism. Launched in 2019 shortly after the U.S. blacklisted Huawei, the list is China’s version of the U.S. Commerce Department’s entity list that restricts named companies from accessing items originating in the U.S.

    The U.S. Commerce Department on Monday announced plans to ban the import or sale of cars with specific hardware or software linked to China or Russia.
    China’s Commerce Ministry on Tuesday did not state why it was probing PVH now, but said the U.S. retail group had 30 days to respond. U.S. defense companies that previously landed on the “unreliable entities” list are barred from China-related imports or exports.
    The Chinese probe alleges PVH “targeted Xinjiang suppliers in violation of the principles of normal market transactions, with disruptions to normal transactions with Chinese businesses, individuals and other people, along with other discriminatory measures,” according to a CNBC translation of the Chinese text.
    PVH did not immediately respond to a CNBC request for comment outside of U.S. business hours.

    The group, which also owns Tommy Hilfiger, is one of several foreign retail companies that have faced scrutiny in China over efforts to distance themselves from alleged forced labor in China’s Xinjiang region.

    In a July 2022 corporate responsibility report, PVH said that Xinjiang is one of the regions where no direct or indirect sourcing is permitted.
    International revenue for Calvin Klein and Tommy Hilfiger fell by 4.3% year-on-year to $1.38 billion in the quarter ended Aug. 4, dragged down by a “challenging consumer environment in Asia Pacific, particularly in China and Australia,” PVH said in an earnings release.
    That overseas revenue accounted for more than half PVH’s total revenue of $2.07 billion for the quarter.
    Xinjiang is home to the Uyghur Muslims, who have been identified by the United Nations, United States, United Kingdom and others as a repressed ethnic group. China has repeatedly denied allegations of forced labor and other abuses in Xinjiang. The government says that facilities there that the U.S., U.K., Canada and human rights groups have characterized as internment camps are actually vocational training centers.
    —CNBC’s Sonia Heng contributed to this report. More

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    China will cut reserve requirement ratio by 50 basis points, PBOC chief says

    China will cut the amount of cash banks need to have on hand, known as the reserve requirement ratio, or RRR, People’s Bank of China Gov. Pan Gongsheng said during a press conference on Tuesday.
    Pan, who was speaking to reporters alongside two other financial regulator heads, did not indicate exactly when the central bank would ease policy but indicated it would happen by the end of the year.
    The relatively rare high-level press conference was scheduled after the U.S. Federal Reserve cut interest rates last week.

    Pan Gongsheng, governor of the People’s Bank of China, delivers a speech during the 2024 Lujiazui Forum on June 19, 2024 in Shanghai, China.
    Vcg | Visual China Group | Getty Images

    BEIJING — China will cut the amount of cash banks need to have on hand, known as the reserve requirement ratio, or RRR, People’s Bank of China Gov. Pan Gongsheng said during a press conference on Tuesday.
    Pan, who was speaking to reporters alongside two other financial regulator heads, did not indicate exactly when the central bank would ease policy but indicated it would happen by the end of the year.

    The relatively rare high-level press conference was scheduled after the U.S. Federal Reserve cut interest rates last week. That kicked off an easing cycle that gave China’s central bank further room to cut its rates and boost growth in the face of deflationary pressure.
    Pan became PBOC governor in July 2023. During his first press conference as central bank governor in January, Pan said the PBOC would cut the amount of cash banks need to have on hand, known as the reserve requirement ratio, or RRR. Such policy announcements are rarely made during such events, and are typically disseminated through online releases and state media.
    He then told reporters in March, alongside China’s annual parliamentary meeting, there was room to cut the RRR further. Such a reduction is widely expected in coming months.
    Unlike the Fed’s focus on a main interest rate, the PBOC uses a variety of rates to manage monetary policy. The PBOC on Friday did not change its loan prime rate, a benchmark that affects corporate and household loans, including mortgages.
    China’s government system also means that policy is set at a far higher level than that of the financial regulators speaking Tuesday. Such top-level meetings in July called for efforts to reach full-year growth targets and to boost domestic demand.

    While the PBOC kept the loan prime rate unchanged in the days since the Fed’s cut, it has moved to lower a short-term rate, which determines the supply of money. The PBOC on Monday lowered the 14-day reverse repo rate by 10 basis points to 1.85%, but did not reduce the 7-day reverse repo rate, which was cut in July to 1.7%. Pan has indicated he would like the 7-day rate to become the main policy rate.
    China’s economic growth has slowed, dragged down by the real estate slump and low consumer confidence. Economists have called for more stimulus, especially on the fiscal front. More

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    Boeing sweetens labor proposal in ‘best and final’ offer as strike enters second week

    More than 30,000 Boeing machinists began a strike on Sept. 13 after overwhelmingly turning down a tentative agreement.
    The financial impact of Boeing’s strike will depend on how long it lasts, but Bank of America estimates it’s costing Boeing $50 million a day.

    Striking Boeing workers hold rally at the Boeing Portland Facility on September 19, 2024, in Portland, Oregon. 
    Jordan Gale | AFP | Getty Images

    Boeing on Monday sweetened its contract offer and said it was its “best and final” proposal for its more than 30,000 machinists as their strike, which has halted most of the aerospace giant’s aircraft production, entered its second week.
    The new offer raised pay, reinstated annual bonuses and increased a bonus that would be given upon the contract’s ratification, among other changes, Boeing said on its website.

    The company’s new offer would boost general wages by 30% over four years, up from a previously proposed 25%. It also doubled the ratification bonus to $6,000, reinstated an annual machinist bonus and raised the company’s 401(k) match.
    The labor union, the International Association of Machinists and Aerospace Workers, said Monday that it is reviewing the offer.
    “Boeing executives have always known they could do better and this proposal shows the company can do better,” Brian Bryant, the union’s international president, said in a written statement.
    Boeing said the offer is contingent upon ratification by Friday at 11:59 p.m. PT.

    Read more CNBC airline news

    The new offer is Boeing’s latest attempt to end a costly strike, the unionized work group’s first since 2008, as pressure is mounting on new CEO Kelly Ortberg to reach a deal.

    Bank of America analyst Ron Epstein estimated the strike is costing Boeing $50 million a day, and ratings agencies have said the company risks a downgrade the longer the strike lasts.
    In the first few days of the strike, Boeing said it started temporarily furloughing nonunion workers including managers, and implemented other cut costs such as a hiring freeze, reduced travel, and the elimination of first- and business-class air tickets for employees.
    Both Boeing and the union said they were disappointed with negotiations last week.

    Workers with picket signs outside the Boeing Co. manufacturing facility during a strike in Everett, Washington, US, on Friday, Sept. 13, 2024. 
    M. Scott Brauer | Bloomberg | Getty Images

    The strike came as workers voted 94.6% against the previous proposal that the union had endorsed.
    Machinists on picket lines in Renton, Washington, told CNBC last week that they rejected the first contract with higher pay because they wanted their wages to keep up with the sharp increase in the cost of living in the Seattle area.
    Some workers said in interviews that they have prepared for a long strike and have begun taking side jobs like delivering food or working in warehouses.

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    Levi’s teases Beyoncé collaboration as denim trend takes hold

    Levi Strauss teased a potential partnership with Beyoncé in an Instagram post on Monday.
    The post included an image of a woman wearing a cowboy hat and riding a horse with the caption “INTRODUCING: A New Chapter.”
    Levi’s second-quarter earnings in June missed Wall Street’s sales expectations, but the brand’s leadership has maintained that the future of denim is bright.

    Beyoncé at the 2024 iHeartRadio Music Awards held at the Dolby Theatre in Los Angeles on April 1, 2024.
    Michael Buckner | Billboard | Getty Images

    Levi Strauss summoned the Beyhive on Monday after teasing a potential collaboration with Beyoncé in a post on Instagram.
    The brand’s shares briefly popped after the update and were last up about 1% Monday.

    The post included an image of a woman wearing a cowboy hat and riding a horse with the caption “INTRODUCING: A New Chapter.” Aside from the allusions to Beyoncé’s latest album, “Cowboy Carter,” Levi’s also tagged the superstar’s account in the post, fueling buzz from her fanbase, known as the Beyhive.
    Beyoncé’s country album, released earlier this year, features a song titled “LEVII’S JEANS.”
    Denim has been experiencing something of a boost of late, with brands such as American Eagle and Abercrombie & Fitch calling out the trend as helping to revitalize sales.
    Levi’s second-quarter earnings in June missed Wall Street’s sales expectations, but the brand’s leadership has maintained that the future of denim is bright. CEO Michelle Gass told analysts at the time that the growth in denim’s popularity has never been higher, particularly with clothing items other than pants, such as denim skirts or dresses.
    Representatives for Levi’s did not immediately respond to CNBC’s request for comment on the potential Beyoncé collaboration.

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