Raphael Stevens

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    Bank of England bond sales creating a ‘selling gold at the bottom’ moment, strategist says

    Among all the central banks, the Bank of England has been the most aggressive in selling the bonds purchased to bolster the economy during the quantitative easing era, according to Christopher Mahon of Columbia Threadneedle.
    Yields on benchmark 10-year U.K. gilts rose from around 2.99% in early February to a 13-year high of almost 4.75% in mid-August, before moderating slightly. Yields move inversely to prices.
    “In our view, the actions of the … Bank of England could again mark the bottom of the market,” Mahon said.

    People walk outside the Bank of England in the City of London financial district, in London, Britain, January 26, 2023.
    Henry Nicholls | Reuters

    LONDON — The Bank of England’s rapid pace of bond sales is creating a “selling gold at the bottom” moment for investors, according to Christopher Mahon, head of dynamic real return at Columbia Threadneedle.
    In the aftermath of the 2008 financial crisis, the central bank spent 13 years buying up £895 billion ($1.12 trillion) of U.K. government bonds — known as gilts — while interest rates were historically low.

    Now, despite the fact that the value of gilts has fallen dramatically since then, the central bank is unwinding those holdings, and fast.
    Among all the central banks, the Bank of England has been the most aggressive in selling the bonds purchased to bolster the economy during the quantitative easing era, according to Mahon.

    “Selling bonds on this scale has never been done before, nor has it been tried when bond markets have had to digest the ramifications of both high inflation and substantial rate hikes,” he said in a video blog last week.
    The BOE is crystallizing massive losses as a result of the sales, which are being backstopped by the U.K. Treasury. In late July, the central bank estimated that it would require the Treasury to indemnify £150 billion ($189 billion) of losses on its asset purchase facility (APF).
    “Our analysis suggests the reduction has been the equivalent of around 7.5% of all outstanding government debt,” Mahon said. “This is a huge amount, and is effectively additional issuance that the market has had to digest.”

    Yields on benchmark 10-year U.K. gilts have risen from around 2.99% in early February to a 13-year high of almost 4.75% in mid-August, before moderating slightly. Yields move inversely to prices.
    Columbia Threadneedle’s analysis suggests that the pace of bond sales is 70% faster than that of the U.S. Federal Reserve and around twice the rate of the European Central Bank.
    “It’s unclear to us why the Bank has been so hasty. The fast pace of these sales has been pushing down on gilt prices, it’s been worsening the losses for the taxpayer, and worse, it crystallizes what would have been paper losses into a drain that the U.K. Treasury has to make good,” Mahon said.
    “For markets, the pace of such hefty selling pressure by the U.K. central bank is in our view, one factor why gilts have struggled this year and struggled to find buyers.”

    Investment opportunity?

    The U.K. certainly has a shaky track record when it comes to the mass disposal of assets.
    Between 1999 and 2002, the U.K. controversially offloaded 401 metric tons of gold — out of a total holding of 715 tonnes — at what turned out to be the bottom of the market for the precious metal.

    For Mahon, there are clear similarities in how the Bank of England is now disposing of its gilt stock.
    “Similar pre-announcements of sales are used which act to depress the prices, similar disinterest is expressed by the Bank of England in the prices achieved or the scale of the losses crystallized, and similarly, there is a big fear in the market that the pace of the sales could even increase,” he said.
    “In our view, the actions of the … Bank of England could again mark the bottom of the market.”
    A spokesperson for the Bank declined to comment when contacted by CNBC.
    Mahon added that, with inflation coming down and peak interest rates in sight, this could provide an opportunity for investors and “is one of the reasons why we think that gilts and indeed fixed income are very attractively priced.”

    Next meeting

    The central bank’s Monetary Policy Committee is next due to meet on Sept. 21. At its last meeting, the committee did not provide any further information on its plans for gilt sales, but Deputy Governor Dave Ramsden in July suggested that the pace of quantitative tightening could be set to increase.
    In a research note last month, BNP Paribas economists predicted that the central bank will hike the pace of gilt sales from £80 billion a year to £95 billion.
    The Bank of England, for its part, disputes that the asset sales are affecting markets in any substantive way. In his July speech, Ramsden said analysis of the evidence to date suggested that “QT [quantitative tightening] effects on gilt yields, while greater than zero, appear to be materially smaller than the effects of QE [quantitative easing].”
    “Given our experience so far, as a very rough indication of scale, Bank staff estimate that a one-off additional £80 billion of QT relative to expectations is likely to increase 10-year gilt yields by less than 10 bps in prevailing market conditions,” Ramsden added. More

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    Taylor Swift could change the movie theater industry with her Eras Tour concert film — here’s how

    Theaters are no stranger to screening taped concerts, plays and musicals to guests, but Taylor Swift could usher in a new era of event cinema.
    The Eras Tour concert movie is slated to open Oct. 13 in major movie theater chains such as AMC and Cinemark.
    Interest in unique cinematic experiences and communal events is growing after Barbenheimer, and Swift’s concert film could bring it to a new level.

    Taylor Swift pauses between songs during her first sold-out concert of three nights at AT&T Stadium in Arlington, Texas, in March.
    Fort Worth Star-telegram | Tribune News Service | Getty Images

    LOS ANGELES – Taylor Swift changed the music industry. Now she’s coming for the movies.
    The cinema industry is in a state of flux. Audience tastes have shifted and dual Hollywood strikes have only acerbated pandemic-related production delays that left the movie calendar sparse.

    With would-be blockbusters fleeing the fall and winter slate, a direct result of strike rules that prevent top talent from promoting upcoming films, movie theater chains like AMC, Regal and Cinemark are desperately seeking unique offerings. Even IMAX, which started as place to screen documentaries and educational programming, stands to benefit from alternative theatrical content.
    “The need has been there for many years, becoming more apparent during the early pandemic recovery era when audiences began coming back but there wasn’t enough big screen content ready for release on a weekly basis,” said Shawn Robbins, chief analyst at BoxOffice.com.
    Enter Swift.
    Despite placing her previous documentaries and concert films on streaming services in the past, the iconic pop star opted to deliver her Eras Tour film directly to cinemagoers this October. The filmed concert is already breaking records for movie theaters and is expected to top $100 million during its opening weekend.
    Swift is a member of the Screen Actors Guild and American Federation of Television and Radio Artists, but she was granted a waiver by the unions because the Eras Tour filmed concert is unscripted and does has no actors or writers associated with it.

    The Taylor Swift effect

    The theater industry is no stranger to alternative content. Cinemas often show taped concerts, plays and musicals, as well as live sports from organizations like the National Football League and Ultimate Fighting Championship. Then there are showings of classic films, anime screenings and live-broadcast Dungeons and Dragons games.
    But none of these have ever come close to generating the fervor circling Swift’s upcoming release.
    The excitement, which has led movie theaters to design specialty popcorn buckets, create boutique cocktails and even set up friendship bracelet-making tables, illustrates there’s a hunger for making something bigger and more memorable out of a trip to the movies.
    Just recently, audiences were drawn en masse to see big-budgeted superhero flicks on opening weekend. The urgency was driven by a need to see what happens next in the giant tapestry of storytelling and a worry that not seeing it as soon as possible would risk spoiler reveals.
    Sony and Marvel’s “Spider-Man: No Way Home,” released in late 2021, is one such film. However, few superhero movies that followed drummed up that same enthusiasm, likely because there was a glut of content, much of which was considered lackluster. Disney and Marvel’s “Ant-Man and the Wasp: Quantumania,” and DC’s “The Flash” and “Blue Beetle” all underwhelmed at the box office this year.
    Then came Barbenheimer.
    Warner Bros.’ “Barbie” and Universal’s “Oppenheimer,” two films on the opposite spectrum of cinematic experiences, opened on the same weekend in July. The combination of the releases thrilled audiences, bringing millions out to cinemas to see double features. Clad in pink or donning fedoras, audiences drove the two films to set attendance records. They’re still making big money, too. “Barbie” has cleared $600 million at the domestic box office, while historical drama “Oppenheimer” has garnered more than $300 million.
    Following the early days of the pandemic, consumers have gravitated more toward experiences out of the house. With so many streaming options, audiences need a reason to leave their couches beyond just content. Because of this, communal experiences that can only be experienced outside the home are more important than ever to the theatrical industry.

    It’s why when Swift first unveiled that her concert film was coming to the three major theaters — AMC, Regal and Cinemark — on Oct. 13, dozens of smaller theater chains sought to also showcase the film. It’s also why Universal opted to remove “Exorcist: Believer” from the same release date and move it to Oct. 6, killing the short-lived hope for a Barbenheimer-type Exorswift double feature event.
    “True nationwide releases can have a meaningful impact,” Robbins said. “Even if Taylor Swift may prove to set a very high bar, it’s not hard to imagine the potential success of more concert events with superstars like Beyonce or Adele, major sporting events screened in premium formats, synergistic promotional campaigns, and numerous other specialty release ideas.”
    In a rare move, Swift opted to distribute the film through AMC, not a traditional studio partner. It is expected that the 43% of ticket proceeds will remain with theaters and 57% will be split between Swift and AMC. Swift will likely keep a large chunk of that share, according to industry insiders.
    Of course, the theater company will generate significantly more than that in concession sales, perhaps the real upside to Swift’s film release. The theater chair is already promoting collectible popcorn tubs for $14.99 and cups for $11.99.
    AMC, in particular, needs this kind of revenue, as the company continues to spend more on film licensing costs and theater rentals than it makes in ticket and concession sales. In fact, the company only recently posted a profit during its second quarter this year, having generated net income of just $8.6 million.
    Ultimately, box office analysts foresee the film snatching around $400 million during its run. Only “Barbie” and “The Super Mario Bros. Movie” have grossed more than that domestically this year.

    A new era for concert films?

    The theater industry hopes Swift reinvigorates the concert genre, which blossomed in the 1960s and 1970s with films like “Monterey Pop,” “Woodstock” and “The Last Waltz.” And while movies can’t fully replicate the experience of attending a concert, cinema tickets are a lot cheaper.
    Tickets for Swift’s Eras Tour were priced at $49 to $450, with VIP packages starting at $199 and reaching $899. However, at the secondary market many tickets sold for thousands of dollars each. Tickets for her filmed concert start at $19.89 for adults and $13.13 for kids. Tickets for premium format screens like IMAX and Dolby come at a higher cost.
    For comparison, average adult ticket prices for regular film releases in 2023 have ranged from $11 to $14 a piece for standard formats.
    “Concert films have seen outstanding results over the years, and now based on massive pre-sales across the country, it’s clear that The Eras Tour will break new ground for the genre,” said Michael O’Leary, CEO of the National Association of Theatre Owners. “We hope this will lead to even more concert films in theaters in the years to come.”
    For the most part, filmed concerts have had extremely limited runs in theater — typically, one night or just one weekend. And most appeared in less than 1,000 locations, according to Comscore data. For comparison, a wide release is considered more than 2,000 locations during opening weekend. Most blockbuster features are released in more than 4,000.
    “In the modern era, the traditionally released concert film that plays for up to a few weeks in theaters has taken a back seat to the very popular event cinema model of a very limited availability of just a few days or even a single night on the big screen,” said Paul Dergarabedian, senior media analyst at Comscore. “Taylor Swift, being a cultural powerhouse and shaper of new business models, may have a hand in bringing back the old-school style concert film.”
    Swift’s concert film seems destined to overtake the current record holder for a theatrical concert film. Miley Cyrus’ “Best of Both Worlds” concert film tallied $31.1 million during its opening weekend back in 2008, appearing in around 680 locations. It ultimately snared $70 million globally during a 15 week run, according to Comscore data.

    Taylor Swift performs in Cincinnati, Ohio, June 30, 2023, during her Eras tour.
    Taylor Hill/tas23 | Getty Images Entertainment | Getty Images

    The total number of theaters offering Swift’s Eras Tour will not be available until about a week before the film is set for release. However, box office analysts expect it will be considered a wide release and could have as many locations as a blockbuster feature.
    And there’s precedent for such a large number of theaters and the eight-week long run. Notably, Justin Bieber’s “Never Say Never” tour film launched in 3,000 cinemas in early 2011 and ran for 13 weeks. It tallied $99 million globally. Similarly, the Michael Jackson documentary and concert film “This Is It” was released in 3,400 theaters in 2009 and generated $263.5 million globally during its five week run.
    “We’ve screened Metallica and it sold out super quick,” said Michael Kustermann, CEO of Alamo Drafthouse. “We’ve obviously done a ton of K-Pop things in the past and they’ve sold out super quick. I think what Taylor Swift is going to do is kind of open up the question of, well, should these be more than one night one weekend?”
    Of course, most concede that Swift is an outlier in the industry and her success at the box office may not be easily replicated.
    “Lest anyone think this is an easily replicable feat, you must first understand that Swift is operating a unique universe of her own and that this makes future successes for other artists in this realm a more elusive goal than one may think,” Dergarabedian said.
    Still, interest in unique cinematic experiences and communal events is growing and Swift’s concert film could be just the beginning.
    “I’ve always said, and I’ve been in this business for over 40 years, that Hollywood is a copycat industry,” said Ray Nutt, CEO of Fathom Events.
    Fathom has long brought entertainment events like shows from the Metropolitan Opera, comedy shows and sports to cinemas. It also schedules screenings of films around release anniversaries as well as genre-based showings for faith-based audiences, anime fans and horror junkies.
    The company is set to bring a filmed version of Sara Bareilles’ Broadway hit “Waitress” to cinemas in December.
    “People are looking for different things to go to theaters for,” Nutt said.
    Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal distributed “Oppenheimer.” More

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    Ozempic, Wegovy may curb drinking, smoking and other addictive behaviors – here’s what we know

    Patients taking diabetes and weight loss drugs say they’ve also noticed changes in their cravings for alcohol, nicotine, opioids and some compulsive behaviors, such as online shopping and gambling.
    These anecdotal reports add to the growing list of potential benefits of GLP-1s like Ozempic and Wegovy beyond shedding unwanted pounds.
    Several studies in animals back up those reports, but more research needs to be done in humans to prove that those treatments can curb addiction.

    An Ozempic (semaglutide) injection pen is seen on a kitchen table in Riga, Latvia on 06 August, 2023. 
    Jaap Arriens | Nurphoto | Getty Images

    Heather Le Biller shed 9 pounds within the first week of taking Novo Nordisk’s blockbuster diabetes drug Ozempic – and then even more as she continued treatment. 
    Le Biller, a flight attendant who lives in France, noticed her appetite quiet down while taking the weekly injection. But so did her cravings for wine, a drink she called “almost customary to pair with every dinner” in France. 

    “When I was on Ozempic, it made me not want that as much anymore,” Le Biller told CNBC. “I could have a few sips of wine and just be satisfied and move on. I didn’t need multiple glasses a night, so it definitely seems to help with that.” 
    Le Biller is among several patients who took diabetes and weight loss drugs and also noticed an effect on their cravings for alcohol, nicotine, opioids or even some compulsive behaviors, such as online shopping and gambling.
    Those drugs – including Ozempic and its weight loss counterpart from Novo Nordisk, Wegovy – are called GLP-1 agonists, which mimic a hormone produced in the gut to suppress a person’s appetite. 
    These anecdotal reports add to the growing list of potential benefits of GLP-1s beyond shedding unwanted pounds. Dramatic weight loss is the primary reason why those drugs have skyrocketed in popularity in the U.S., despite the fact that they can cost around $1,000 a month and some health insurers have stopped covering them altogether. 
    “We’re prescribing these drugs and seeing this effect as a secondary benefit in patients. One of my patients even said they’re not doing as much online shopping, which is helping their wallet,” said Dr. Angela Fitch, an obesity medicine physician and president of the Obesity Medicine Association. That group is the largest organization of physicians, nurse practitioners and other health-care providers dedicated to treating obesity. 

    A customer drinks a glass of wine at the It’s Italian Cucina restaurant on April 05, 2023 in Austin, Texas. A new analysis of more than 40 years of accumulated research has found that moderate drinking has no health benefits. 
    Brandon Bell | Getty Images

    This striking effect of GLP-1s isn’t a new idea. Several studies have demonstrated that certain GLP-1s curb alcohol intake in rodents and monkeys. More research needs to be done, particularly on humans, to prove that the drugs have that effect. That means it could take years before the Food and Drug Administration and other regulators worldwide approve drugs like Ozempic and Wegovy as addiction treatments. 
    Manufacturers like Novo Nordisk said they aren’t pursuing that research.
    “Pharma has this general lack of interest in investing in the addiction field” due to a perfect storm of factors, including the high stigma around addiction disorders among doctors, physicians and even patients, according to Dr. Lorenzo Leggio, clinical director of the National Institute on Drug Abuse, or NIDA.
    Leggio and other scientists are working to fill the gap – and have already made strides toward confirming the potential of GLP-1s as addiction treatments.

    What do we know so far?

    Scientists have published nearly a dozen studies showing how GLP-1s stop binge drinking in rats and mice, reduce their desire for alcohol, prevent relapse in addicted animals and decrease alcohol consumption overall. 
    Earlier studies have examined older, less potent GLP-1s such as exenatide, a drug approved for diabetes under the names Byetta and Bydureon. 
    But more recent studies on semaglutide – the generic name for Ozempic and Wegovy – and another drug from Eli Lilly called dulaglutide “are the most promising” because they reduced alcohol intake in animals by 60% to 80%, according to pharmacologist Elisabet Jerlhag. 
    Studies have also shown that rats that stop taking dulaglutide, which is approved for diabetes under the name Trulicity, “take weeks before they start drinking again,” she said.
    Jerlhag and her colleagues at the University of Gothenburg in Sweden have studied the effect of GLP-1s on addictive behaviors for more than a decade. 

    Boxes of the drug trulicity, made by Eli Lilly and Company, sit on a counter at a pharmacy in Provo, Utah, January 9, 2020.
    George Frey | Reuters

    Other studies on animals have also found that GLP-1 drugs reduce the consumption of nicotine, cocaine, heroin and amphetamines. 
    Few studies have been done on humans, but six clinical trials are now underway investigating how semaglutide may alter people’s drinking and smoking habits. 
    The reason behind this anti-addiction effect of GLP-1s is that those drugs also affect the brain, not just the gut, according to NIDA’s Leggio. 
    “The mechanism in the brain that regulates overeating is important in regulating addictive behaviors as well,” Leggio told CNBC. “There is a clear shared overlap. So it’s possible that the medications may help people with addiction by acting on that specific mechanism.”
    GLP-1s specifically decrease the amount of dopamine the brain releases after people indulge in behaviors like drinking, smoking or even eating a sweet dessert, according to Dr. Steven Batash, a gastroenterologist who provides nonsurgical weight loss procedures in Queens, New York. 
    Batash said dopamine is a neurotransmitter that “reinforces the pleasure” of doing those activities. When GLP-1s take away that pleasure, they also eliminate the motivation to do those activities. 

    What needs more research?

    Still, NIDA’s Leggio advises against using GLP-1s off-label to reduce addictive behaviors, “simply because there’s not enough evidence in humans that they work.” 
    “The animal studies are very promising and what people are reporting is very, very important, but as a scientist, I will also tell you that that’s not enough,” he told CNBC. 
    Leggio said scientists need to conduct more double-blind, randomized, placebo-controlled studies on humans – or trials where both participants and researchers don’t know who is getting randomly selected to receive a placebo or an actual drug. Those types of studies are “the gold standard” for proving whether a treatment achieves a certain effect or not, he added
    But even if those trials confirm that GLP-1s can reduce addictive behaviors in humans, “it will most likely work for some patients and not others,” according to Leggio. 
    “We already know, as a matter of fact, that these medications and any drug overall do not work for everybody,” he said. 

    The Good Brigade | Digitalvision | Getty Images

    For example, the only clinical study in this area investigated whether exenatide could treat alcohol use disorder in people, as compared with cognitive behavioral therapy.
    But that 2022 study found that exenatide reduced drinking in a subgroup of participants who had obesity, while the drug actually increased drinking in people who didn’t. 
    The reason may be that “leaner patients” treated with exenatide experienced a larger decrease in blood sugar, which might be associated with increased cravings for alcohol, the researchers wrote in the study.
    But even that conclusion needs to be confirmed with further research. 
    It’s also unclear how long the anti-addiction effect of GLP-1s will last. That’s already one complaint patients have when it comes to weight loss: People who lose weight after taking Ozempic or Wegovy tend to gain most of it – or even more – back within a few years. 
    “It’s possible that some people will relapse and go back to heavy drinking if they stopped taking the medication,” Leggio said. He added that some patients will need constant treatment because addiction is a chronic disease. 
    However, Leggio said there’s “nothing wrong” with a patient seeking GLP-1s to treat diabetes or obesity, in addition to an addiction disorder. 
    “If you want to see whether Ozempic will help you better control the sugar in your blood but also help you with your drinking, that’s wonderful. Killing two birds with one stone,” Leggio said. “But if the only reason you want to take the drug is because of your alcohol or smoking, then you should wait for more evidence.” 
    It may take years, but scientists and other health experts hope that a new class of treatments for alcohol use disorder, smoking and other addictive behaviors is on the horizon. 
    “It may be that three, four or five years from now, you and I are going to say that GLP-1 agonists are wonderful for treating mild diabetes, wonderful for weight loss, and perhaps we will also say that they are wonderful for curbing addictive behaviors,” Batash told CNBC.
    But even if GLP-1s get approved to treat addiction, it’s unclear how many people would take them. Uptake of existing medications for addiction is already low. About 14 million American adults had alcohol use disorder – a disease associated with uncontrolled drinking – as of 2019. But only 1.6% used any of the three FDA-approved drugs for the condition.  More

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    Does China face a lost decade?

    “Ever since the Chinese housing bubble burst,” said Richard Koo of the Nomura Research Institute in a recent talk, “I’ve been getting tonnes of calls from Chinese journalists, economists, investors and sometimes policymakers asking me, ‘Are we going the way of Japan?’”Mr Koo is a good person to ask: he has devoted his career to studying the aftermath of financial excess. When the American economy’s recovery from the first Gulf War faltered in 1991, his then boss at the New York Federal Reserve, Edward Frydl, began to worry about an overhang of debt and commercial property. This was “feeding a pervasive financial and economic conservatism among businesses and consumers”, Frydl argued. Demand for credit was subdued, because firms were “directing their efforts toward balance-sheet restructuring”. To describe these strains, he coined the term “balance-sheet recession”.Mr Koo later realised that Japan was suffering from the same overhangs, only far worse. After its stockmarket bubble burst in 1989, share prices plunged by 60% in less than three years. Property prices in Tokyo fell for over a decade. Deflation, by some measures, persisted even longer. Even the price of golf memberships—tradeable on organised exchanges in Japan—tumbled by 94%. Many companies, which had borrowed to buy property or shares in other firms, found themselves technically insolvent, with assets worth less than liabilities. But they remained liquid, earning enough revenue to meet ongoing obligations. With survival at stake, they redirected their efforts from maximising profit to minimising debt, as Mr Koo put it.In a healthy economy, corporations use funds provided by households and other savers, ploughing the money into growing their businesses. In post-bubble Japan, things looked different. Instead of raising funds, the corporate sector began to repay debts and accumulate financial claims of its own. Its traditional financial deficit turned to a chronic financial surplus. Corporate inhibition robbed the economy of much-needed demand and entrepreneurial vigour, condemning it to a deflationary decade or two.So is China going the way of Japan? Chinese enterprises have accumulated even more debt, relative to the size of the country’s gdp, than Japan’s did in its bubble era. China’s house prices have begun to fall, damaging the balance-sheets of households and property firms. Credit growth has slowed sharply, despite cuts in interest rates. And flow-of-funds statistics show a narrowing in the financial deficit of China’s corporations in recent years. In Mr Koo’s judgment, China is already in a balance-sheet recession. Add to that a declining population and a hostile America and it is easy to be gloomy: will it go the way of Japan? It should be so lucky.Look closer, though, and the case is less conclusive. Much of the debt incurred by China’s corporations is owed by state-owned enterprises that will continue to borrow and spend, with the support of state-owned banks, if required by China’s policymakers. Among private enterprises, debt is concentrated on the books of property developers. They are reducing their liabilities and cutting back on investment in new housing projects. But in the face of falling property prices and weak housing sales, even developers with robust balance-sheets would be doing the same.The end of China’s property boom has made households less wealthy. This is presumably breeding conservatism in their spending. It is also true that households have repaid mortgages early in recent months, contributing to the sharp slowdown in credit growth. But surveys show that household debts are low relative to their assets. Their mortgage prepayments are a rational response to changing interest rates, not a sign of balance-sheet stress. When interest rates fall in China, households cannot easily refinance their mortgages at the lower rates. It therefore makes sense for them to repay old, relatively expensive mortgages, even if that means redeeming investments that now offer lower yields.What about the switch in corporate behaviour revealed by China’s flow-of-funds statistics, which show the corporate sector moving to a financial surplus? This narrowing is largely driven by the crackdown on shadow banks, points out Xiaoqing Pi and her colleagues at Bank of America. When financial institutions are excluded, the corporate sector is still demanding funds from the rest of the economy. Chinese businesses have not made the collectively self-defeating switch from maximising profits to minimising debts that condemned Japan to a deflationary decade.Japanese lessonsThese differences show China is not yet in a recession akin to Japan’s. And Mr Koo is himself keen to emphasise one “huge” difference between the two countries. When Japan was falling into a balance-sheet recession, nobody in the country had a name for the problem or an idea of how to fight it. Today, he says, many Chinese economists are studying his ideas.His prescription is straightforward. If households and firms will not borrow and spend even at low interest rates, then the government will have to do so instead. Fiscal deficits must offset the financial surpluses of the private sector until their balance-sheets are fully repaired. If Xi Jinping, China’s ruler, gets the right advice, he can fix the problem in 20 minutes, Mr Koo has said.Unfortunately, Chinese officials have so far been slow to react. The country’s budget deficit, broadly defined to include various kinds of local-government borrowing, has tightened this year, worsening the downturn. The central government has room to borrow more, but seems reluctant to do so, preferring to keep its powder dry. This is a mistake. If the government spends late, it will probably have to spend more. It is ironic that China risks slipping into a prolonged recession not because the private sector is intent on cleaning up its finances, but because the central government is unwilling to get its own balance-sheet dirty enough. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

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    Ripple buys crypto infrastructure startup in its second acquisition of 2023

    Cryptocurrency company Ripple announced on Friday it will acquire Fortress Trust, a startup specializing in crypto infrastructure, for an undisclosed sum.
    The deal will give Ripple a license in Nevada and allow it to expand beyond its core bread and butter of blockchain-enabled payments.
    In May, Ripple agreed to buy Metaco, a Swiss provider of crypto custody services, for $250 million.

    Brad Garlinghouse, chief executive officer of Ripple, speaks during the CoinDesk 2022 Consensus Festival in Austin, Texas, US, on Saturday, June 11, 2022.
    Jordan Vonderhaar | Bloomberg | Getty Images

    Cryptocurrency company Ripple announced on Friday it will acquire Fortress Trust, a startup specializing in crypto infrastructure, giving it a license in Nevada and allowing it to expand beyond its core bread and butter of blockchain-enabled payments.
    Ripple did not disclose the terms of the deal.

    Founded in 2021 by Scott Purcell, an entrepreneur with a background in equity and debt crowdfunding, Fortress Trust aims to help large enterprises interact with digital currencies. Purcell was formerly CEO of Prime Trust, a crypto custodian which shut down after BitGo abandoned a deal to acquire the firm.
    Ripple is mostly known for its role as a cross-border payments firm. The company uses a blockchain-based messaging system, akin to SWIFT, to approve speedy transactions between a network of banks and other financial institutions.
    Ripple’s partners include Britain’s Modulr, Singapore’s Nium and Japan’s SBI Remit.
    The company also uses XRP, a cryptocurrency it owns a significant portion of and has become closely associated with, for cross-border payments between banks and other financial institutions.
    XRP didn’t move substantially on the news. The token was up about 0.4% in the past 24 hours, trading at a price of 50 cents.

    Ripple has struggled in recent years, with the U.S. Securities and Exchange Commission targeting the firm with a lawsuit alleging XRP should be considered a security and that its executives sold over $1 billion worth of the token to investors in an illegal securities offering.
    Ripple had previously partnered with MoneyGram, which used XRP in a pilot to make instant transfers, using XRP as a “bridge” currency to move funds without the need for pre-funded accounts. Following the lawsuit, MoneyGram and Ripple abandoned their partnership in March 2021.
    In July, though, Ripple secured a key victory as a judge ruled that the XRP token was “not necessarily a security on its face.”
    Ripple has seen momentum in its business build recently — particularly outside the U.S., where most of its clients are based. Asked whether the ruling meant that American banks would return to Ripple to use its ODL product, Stu Alderoty, Ripple’s chief legal officer, told CNBC, “I think the answer to that is yes.”
    Fortress is Ripple’s second acquisition this year. In May, the company agreed to buy Metaco, a Swiss provider of crypto custody services, for $250 million.
    A Ripple spokesperson declined to comment on the size of the deal but said that it is less than the sum Ripple paid to buy Metaco. Ripple was a minority investor in Fortress Trust’s seed funding round.
    Ripple said the deal would “support our existing lines of business — specifically in terms of improving the customer experience within our payments and liquidity solutions.”
    Ripple also obtained a Nevada trust with its acquisition of Fortress Trust, adding to its growing list of regulatory permits globally. A company spokesperson said this would enable the firm to “provide regulated services — for both fiat and crypto —  to certain customers in the U.S.”
    Ripple already holds a New York BitLicense, which lets it engage in regulated virtual currency activities in the state of New York, as well as 30 money transmitter licenses across the U.S. and an in-principle Major Payment Institution License from the Monetary Authority of Singapore, the country’s central bank. The company told CNBC previously it was also looking to get an e-money license with the Irish central bank.
    “Longer term, we anticipate there will be ways we can leverage the technology to support new initiatives on our roadmap and enable Ripple to serve a broader segment of customers and use cases,” a Ripple spokesperson told CNBC via email.
    Ripple is one of many players in the so-called “crypto custody” space, meaning it’s focused on helping companies and individual users store their tokens in a secure, decentralized address without requiring all the technical knowhow.
    Fortress Trust uses application programming interfaces, or APIs — programs that allow different apps to interact with each other — to allow companies to pull data from other bits of software, such as wallets holding cryptocurrencies and nonfungible tokens.
    Per Fortress’s website, the startup works with “crypto exchanges, NFT marketplaces, tokenization platforms, corporate brands, agencies, securities exchanges, real estate, healthcare, neobanks, sports and entertainment celebrities, musicians, influencers and other innovators.” More

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    Abortion pill company asks Supreme Court to decide mifepristone case

    Drug company Danco Laboratories has asked the Supreme Court to take up the case challenging the legality of the abortion pill mifepristone.
    Danco, the distributor of the pill, wants the justices to reverse a lower court ruling that would impose restrictions on the pill.
    The company said the case is of “indisputable importance” to women’s health.
    The lower court ruling is on hold until the Supreme Court makes a decision in the case.

    Mifepristone, also known as RU-486, is a medication typically used in combination with misoprostol to bring about a medical abortion during pregnancy and manage early miscarriage.
    Soumyabrata Roy | Nurphoto | Getty Images

    Drug company Danco Laboratories on Friday asked the Supreme Court to review the case challenging the legality of the abortion pill mifepristone.
    Danco’s request comes in response to a ruling by the U.S. Court of Appeals for the Fifth Circuit that would impose major restrictions on how the medication is used and distributed to patients.

    Danco, which distributes the abortion pill, wants the Supreme Court to reverse the lower court ruling. The drug company said the case is of “indisputable importance” to women’s health as well as the pharmaceutical industry.
    “For the women and teenage girls, health care providers, and States that depend on FDA’s actions to ensure safe and effective reproductive health care is available, this case matters tremendously,” Danco’s attorneys wrote in their filing.
    “And for the pharmaceutical and biotechnology industry, permitting judicial second-guessing of FDA’s scientific evaluations of data will have a wildly destabilizing effect,” the attorneys wrote.
    Danco’s request for the Supreme Court to take up the case comes nearly 15 months after the court’s conservative majority overturned Roe v. Wade, the landmark 1973 decision that protected abortion as a constitutional right. More than a dozen states have banned abortion in the wake of that ruling.
    The Supreme Court’s new term starts next month. Four justices have to agree to take up the abortion pill case. The U.S. Department of Justice is also expected to ask the high court to review the case.

    Download Danco Laboratories’ filing here.
    The appeals court ruling is on hold until the Supreme Court makes a decision about the case. The high court, in April, pressed pause on lower court decisions as litigation about the pill proceeds in response to a request from the Biden administration.
    A three-judge panel at the Fifth Circuit ruled that decisions the U.S. Food and Drug Administration took in recent years to make mifepristone more accessible to women failed to address safety concerns.
    Should the Supreme Court take the case and uphold the appeals court decision, mifepristone will remain on the market in the U.S., but patients will face more barriers to accessing the medication.
    If the high court declines to take the case, the appeals court restrictions will go into effect.
    Mifepristone, used in combination with another drug called misoprostol, is the most common method to terminate a pregnancy in the U.S.

    CNBC Health & Science

    Read CNBC’s latest health coverage:

    The appeals court order would end mail delivery of mifepristone and prescriptions via telemedicine appointments. Women would have to see a doctor in person to get a prescription and go to three follow-up visits as they take the course of medication.
    The ruling also shortens the time when women can take mifepristone to seven weeks into their pregnancy, down from 10 weeks currently.
    The litigation against mifepristone began last November when a group of physicians who oppose abortion called the Alliance for Hippocratic Medicine sued to overturn the FDA’s original approval of the pill, which dates back more than 20 years.
    U.S. Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas issued a sweeping order in April that suspended the FDA approval of mifepristone.
    The appeals court dialed back Kacsmaryk’s order and kept the original FDA approval in place as well as the agency’s authorization of a generic form of the pill. More

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    Modi, Biden pledge to deepen India-U.S. partnership as world leaders descend on Delhi for G20 summit

    Indian Prime Minister Narendra Modi and U.S. President Joe Biden pledged to deepen the partnership between both countries in their second bilateral meeting in less than six months.
    With both Russian and Chinese presidents absent at this weekend’s G20 leaders’ summit, hopes were low that a binding agreement among member states would be forged since both countries objected to the reference to Russia’s war in Ukraine.
    India and the U.S. hope to present themselves as a viable alternative to China for the Global South at a time of shifting global geopolitical alliances.

    Indian artist Jagjot Singh Rubal gives final touches to an oil painting of U.S. President Joe Biden, at his workshop in Amritsar on September 5, 2023, ahead of the two-day G20 summit in New Delhi.
    Narinder Nanu | Afp | Getty Images

    NEW DELHI — Indian Prime Minister Narendra Modi and U.S. President Joe Biden pledged Friday to deepen the partnership between their countries in their second bilateral meeting in less than six months, as Delhi prepares to host a meeting among leaders of the Group of 20 leading industrialized and developing countries.
    The two leaders met shortly at Modi’s official residence after Biden’s arrival in Delhi and then issued a 29-point statement that highlighted the depth and breath of their relationship at a time of evolving global alliances — from building resilient strategic technology value chains and linking defense industrial ecosystems, to collaborating on renewable and nuclear energy, climate financing and cancer research.

    The two leaders “reaffirmed the importance of the Quad in supporting a free, open, inclusive, and resilient Indo-Pacific” and “expressed their appreciation for the substantial progress underway to implement the ground breaking achievements of Prime Minister Modi’s historic June 2023 visit to Washington.” The Quad is an informal security alignment of Australia, India, Japan and the U.S., which came about in response to China’s rising strength in the Indo-Pacific region.

    This closed-door meeting with Biden was the third — after meetings with leaders from Mauritius and Bangladesh — that Modi convened on the eve of the G20 leaders’ summit and part of the dozen or so bilateral meetings planned for this weekend, underscoring India’s strategic ambitions as a key global player connecting the developed world and the Global South.
    The summit is an important one for Modi, whose government has turned the normally sedate rotating G20 presidency into a branding vehicle to burnish India’s geopolitical importance ahead of national elections next year. Many governments, investors and businesses are also starting to look toward India — as China slows — which the International Monetary Fund expects to be the fastest growing economy this year.

    Weekend consensus

    This weekend’s agenda includes the expected admission of the African Union as an official G20 member as part of India’s broad focus on elevating the place of the Global South and fostering inclusive and sustainable growth in the multilateral forum founded in 1999 as a platform to address issues afflicting the global economy.
    Russian President Vladimir Putin and China President Xi Jinping though won’t be in attendance this weekend.

    While Putin is sending Foreign Minister Sergey Lavrov to take his place, China Premier Li Qiang will take Xi’s place — the first time Xi is skipping the G20 meeting in the decade since he became president.

    Putin has not traveled outside of Russia since the International Criminal Court issued a warrant for his arrest for war crimes in Ukraine.
    The pair’s absence has sparked fears that a communique binding member states may not be issued at the end of a G20 leaders’ summit — undercutting India’s clout and diminishing his domestic messaging.
    India’s diplomats have been unable to foster binding agreements in the key discussion tracks since it assumed the rotating presidency in December 2022 — because Russia and China have objected to the wording referring to the war in Ukraine.
    A war of words has ensued ahead of this weekend’s meeting.
    “The G7 countries (primarily the US, the UK, Germany, and France) have been exerting pressure on India in a bid to have their unilateral approaches to the Ukraine situation reflected in the final documents of G20 forums,” the Russian foreign ministry said in a statement.

    At a pre-summit press conference Friday, India’s G20 sherpa Amitabh Kant said the final declaration “is almost ready.”
    “I can assure you our presidency has been inclusive, decisive and action-oriented,” Kant said.

    Alternative to China

    With Putin and Xi conspicuously absent this weekend, India and the U.S. will hope this will be sufficient to persuade member states and other observers from the Global South they represent a more viable proposition from food security to debt resolution.
    In their joint statement after their Friday bilateral meeting, Biden and Modi “reaffirmed their commitment to the G20.”
    They also “expressed confidence that the outcomes of the G20 Leaders’ Summit in New Delhi will advance the shared goals of accelerating sustainable development, bolstering multilateral cooperation, and building global consensus around inclusive economic policies to address our greatest common challenges, including fundamentally reshaping and scaling up multilateral development banks.”

    While Putin has an obvious reason accounting for his absence, Xi, though, has not indicated a reason — triggering speculation the Chinese leader may be snubbing Modi for a variety of reasons.
    Despite recently traveling to South Africa for a BRICS meeting, Xi has rarely traveled abroad. Instead, he has tended to receive visiting dignitaries in Beijing — including Zambia and Venezuela in overlapping visits this weekend.
    India’s warming ties with the U.S. also sharply contrasts against its standoff with its neighbor, China.
    India — along with Malaysia, the Philippines, Vietnam and Taiwan — sharply rebuked China last week for a new national map that Beijing claims contested territories as its own.
    India also stands to gain from American companies looking to diversify their supply chains — at China’s expense — as the U.S. ramps up efforts to limit the transfers of strategic technology to China on the grounds of national security.
    This would likely be what Modi and Biden conceived as “their ambitious vision for an enduring India-U.S. partnership that advances the aspirations of our people for a bright and prosperous future, serves the global good, and contributes to a free, open, inclusive, and resilient Indo-Pacific.” More

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    Stellantis offers 14.5% pay increase to UAW, days before possible strike

    Stellantis offered significant four-year wage increases to its hourly workers represented by the United Auto Workers, as it scrambles to avoid a costly strike.
    The current contracts between the UAW and the three Detroit automakers will expire at 11:59 p.m. on Thursday.
    The UAW president has dismissed recent offers from GM and Ford.

    Demonstrators during a United Auto Workers (UAW) practice picket outside the Stellantis Mack Assembly Plant in Detroit, Michigan, US, on Wednesday, Aug. 23, 2023.
    Jeff Kowalsky | Bloomberg | Getty Images

    Stellantis on Friday offered significant four-year wage increases to its hourly workers represented by the United Auto Workers, as it scrambles to avoid a costly strike.
    The automaker’s offer would provide a 14.5% wage increase over the four-year term of the proposed deal for most of Stellantis’s roughly 43,000 UAW-represented hourly workers. Newer, or in-progression, employees would get a 27% boost to their starting wages and a shorter time period — six years, versus eight years under the current deal — to advance to the maximum wage rate.

    The current contracts between the UAW and the three Detroit automakers will expire at 11:59 p.m. on Thursday. Union leaders have threatened strikes if no deal is in place by that time. The UAW has never in its history called major strikes simultaneously against all three companies.
    Stellantis’s offer also provides its UAW-represented employees with a $6,000 one-time “inflation protection payment” in the first year of the deal, and a total of $4,500 in additional payments over the following three years.
    In addition, the proposal would make Juneteenth a paid holiday for workers covered by the deal.
    “This is a responsible and strong offer that positions us to continue providing good jobs for our employees today and in the next generation here in the U.S.,” said Mark Stewart, chief operating officer of Stellantis’s North America unit. “It also protects the Company’s future ability to continue to compete globally in an industry that is rapidly transitioning to electric vehicles.”
    UAW Vice President Rich Boyer told CNBC that negotiations are ongoing and will continue in hopes of getting a deal before the deadline. If no agreement is reached, the union will take appropriate action, he said.

    The proposed wage increase is larger than those offered to the union by rivals General Motors and Ford Motor, which offered raises of 10% and 9%, respectively. The two companies also put forward additional ratification bonuses that Stellantis didn’t offer.
    But the proposed deal still falls well short of the union’s demands, which include a 40% hourly pay increase, a 32-hour workweek, and restoration of traditional-style pension plans, among other items. Only about 30% of Stellantis’s UAW-represented workers — those hired before October 2007 — currently have pension plans.
    UAW President Shawn Fain dismissed the offers from both GM and Ford as insufficient. He called GM’s offer, presented on Thursday, “an insulting proposal that doesn’t come close to an equitable agreement for America’s autoworkers.”
    UAW members voted overwhelmingly last month to grant union leaders the authority to call strikes if warranted.
    — CNBC’s Michael Wayland contributed to this story. More