Economy

A 3.6% year-on-year rise in profits last month followed a 0.7% gain in May, while first-half earnings were up 3.5%, accelerating from a 3.4% increase in the January-May period, National Bureau of Statistics (NBS) data showed.“Relatively rapid industrial production growth, coupled with a significantly easing in factory-gate price declines since the second quarter, have promoted a stable recovery of corporate revenue,” NBS statistician Wei Ning said in a separate statement. “Meanwhile, we should also see that insufficient domestic effective demand has constrained the continuous improvement of corporate performance, and the severe and complex international environment has increased the operating pressure of enterprises.”The robust data contrasted with a slowing economy, which missed forecasts in the second quarter as the consumer sector was downbeat amid job market woes and a protracted housing downturn.Roughly half of more than 10 mainland-listed alcoholic beverage firms that had released forecasts for H1 earnings expected a loss-making first half.Yet in spite of rising trade tensions with the West, optical transceiver firms Zhongji Innolight and Suzhou TFC Optical Communication forecast multi-fold rises in first-half earnings, as the two suppliers for U.S. chip giant Nvidia (NASDAQ:NVDA) turn out to be big winners from a global artificial intelligence build out.China is trying to provide heavier monetary stimulus to prop up its fragile economy, surprising markets for a second time on Thursday by conducting an unscheduled lending operation at steeply lower rates. Only days earlier the authorities cut several benchmark lending rates in the wake of a top leadership meeting, which had mapped out other major reforms.The country’s state planner and finance ministry announced plans on Thursday to arrange about 300 billion yuan of funds from ultra-long special treasury bonds to step up a nationwide equipment upgrade and consumer goods trade-in campaign.State-owned firms reported profits up 0.3% in the first half, foreign firms recorded an 11% gain, while private-sector companies booked a 6.8% rise, according to a breakdown of the NBS data.Industrial profit numbers cover firms with annual revenues of at least 20 million yuan ($2.75 million) from their main operations.($1 = 7.2767 Chinese yuan) More

The rise followed a 3.4% rise for January-May, according to the National Bureau of Statistics (NBS).The data covers firms with annual revenues of at least 20 million yuan ($2.75 million) from their main operations.China’s economy expanded much more slowly than expected in the second quarter of 2024, the latest GDP data showed this month, reflecting sluggish domestic demand and a protracted property downturn.($1=7.2767 Chinese yuan) More

NEW YORK (Reuters) – Six banks including Bank of America and Citigroup agreed to pay $80 million to settle antitrust litigation in New York accusing them of conspiring to rig prices of European government bonds.A preliminary settlement with Bank of America, Citigroup, Jefferies, NatWest, Nomura and UBS was filed late Friday in Manhattan federal court, and requires a judge’s approval.Investors led by three public pension funds accused the banks of having colluded, including in online chatrooms, to bid high prices at bond auctions to ensure a dominant market share, and then to sell the bonds at inflated prices to mutual funds, pension funds, insurers and other investors.The alleged collusion occurred between 2007 and 2012. All six banks denied wrongdoing in agreeing to settle.Friday’s settlements would upon approval end the litigation, with $120 million of settlements. JPMorgan Chase (NYSE:JPM), Natixis, State Street (NYSE:STT) and UniCredit previously settled for a combined $40 million.The case is part of more than a decade of litigation in the Manhattan court accusing banks of colluding in various markets including U.S. Treasuries, currencies and commodities, as well as on interest rate benchmarks.The case is In re European Government Bonds Antitrust Litigation, U.S. District Court, Southern District of New York, No. 19-02601. More

NEW YORK (Reuters) – Rattled investors are bracing for earnings from the market’s biggest tech companies, a Federal Reserve policy meeting and closely watched employment data in a week that could determine the near-term trajectory of U.S. stocks following a bout of severe turbulence.A months-long rally in massive tech stocks hit a wall in the second half of July, culminating in a selloff that saw the S&P 500 and Nasdaq Composite Index notch their biggest one-day losses since 2022 on Wednesday after disappointing earnings from Tesla (NASDAQ:TSLA) and Google-parent Alphabet (NASDAQ:GOOGL). More volatility could be ahead. Next week’s results from Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Facebook-parent Meta Platforms (NASDAQ:META) could further test investors’ tolerance of potential earnings shortfalls from tech titans. The blistering rallies in the world’s biggest tech companies this year pushed markets higher, but have sparked concerns about stretched valuations. Though the S&P 500 is still only about 5% below its all-time high and is up nearly 14% this year, some investors worry that Wall Street may have become too optimistic about earnings growth, leaving stocks vulnerable if companies are unable to meet expectations in coming months.Investors also will be closely watching comments following the end of the Federal Reserve’s monetary policy meeting on Wednesday for clues on whether officials are set to deliver interest rate cuts, which market participants widely expect to begin in September. Employment data at the end of the week, including the closely watched monthly jobs report, could indicate if a nascent downshift in the labor market has become more severe.”This is a critical time for the markets,” said Bryant VanCronkhite, a senior portfolio manager at Allspring. “You’re having people start to question why they are paying so much for these AI businesses at the same time the market fears that the Fed will miss its chance to secure a soft landing, and it’s causing a violent reaction.” Recent weeks have shown signs of a rotation out of the high-flying tech leaders and into market sectors that have languished for much of the year, including small caps and value stocks such as financials. The Russell 1000 Value index is up more than 3% for the month-to-date while the Russell 1000 Growth index is down nearly 3%. The small-cap-focused Russell 2000 is up nearly 9% this month, while the S&P 500 has lost more than 1%. Even strong earnings may not be enough to get the broad market out of its recent malaise, at least in the near term, said Keith Lerner, chief market strategist at Truist. “The market is going to take direction based on the fact that these stocks have pulled back,” he said. “My thinking is that tech came down so hard, even if you get a bounce from these names due to earnings you will have people itching to sell into any gains.”And any signs that the Fed is seeing worse-than-expected deterioration of the economy could also unnerve investors, disrupting the narrative of cooling inflation but still-resilient growth that has supported markets in recent months.”We think they are going to stay with the script that they will be data dependent but the data has not been going in a straight line,” said Matt Peron, global head of solutions at Janus Henderson Investors. Conflicting signs in the economy have included faster-than-expected GDP growth in the second quarter alongside declining manufacturing activity. Markets are currently pricing in a near-certainty that the Fed will begin cutting interest rates at its September meeting, and expect 66 basis points in total cuts by the end of the year, according to CME’s FedWatch Tool. The employment data at the end of the week could sway those odds if it shows that the economy has been slowing faster than expected, or conversely, if a picture of rebounding growth emerges. Still, the recent selloff could be seen as a healthy part of a bull market that burns off excess froth, said Charles Lemonides, head of hedge fund ValueWorks LLC. “I think the longer-term story is that growth names will carry us through another market high somewhere down the road,” he said. More

RIO DE JANEIRO (Reuters) -Japan sees the reaffirmation in the latest G20 joint communique of existing commitments against excessive foreign exchange volatility as one of the major achievements, Finance Minister Shunichi Suzuki said on Friday.”We believe there were major achievements at G20, such as the inclusion of the reaffirmed foreign exchange commitments in the joint communique,” Suzuki said, speaking at a press conference after the Group of Twenty (G20) finance ministers and central bank governors meeting in Rio de Janeiro.The commitments say the G20 major economies recognize that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability.In the same press conference, Japan’s top currency diplomat Masato Kanda said that Japan pushed for the inclusion of the commitments in the communique as their absence “could give a misleading message to the market.”While a weak yen gives exports a boost, it has become a source of concern for policymakers by pushing up the cost of imports and hurting consumption.The yen rallied sharply this week, rebounding from 38-year lows hit earlier this month, as market participants unwound their long-held bets against the currency ahead of a Bank of Japan (BOJ) meeting next week.Some politicians have recently called on the BOJ to offer more clarity on its rate hike plan partly to prevent the yen from testing fresh lows against the dollar.Suzuki said he met with U.S. Treasury Secretary Janet Yellen on the sidelines of the G20 meeting on Friday.They discussed “wide-ranging topics including Russia, taxation and markets,” according to Kanda, who briefed reporters on the bilateral meeting.Asked if foreign exchange was included in the talks on markets, Kanda confirmed it was on agenda, but noted that it was just an extension of two countries’ routine communications and did not mean there were any major issues that needed to be addressed. More

NEW YORK (Reuters) – A hedge fund study that said the U.S. Treasury last year effectively provided economic stimulus by moderating long-dated bond sales has sparked a debate in the bond market and a denial from the U.S. Treasury that said it was not aiming for such an effect.The U.S. Treasury Department announced in November it would slow the pace of auction size increases of long-dated debt securities, a move that gave relief to bond markets rattled by previous increases in long-term debt supply.This led to a decline in 10-year Treasury yields equivalent to the economic stimulus that would be provided by a one percentage point reduction in the Fed’s policy rate, according to a study published by Hudson (NYSE:HUD) Bay Capital Management.The study was authored by senior economic advisor Nouriel Roubini, an economist who rose to prominence for predicting the global credit crisis, and senior strategist Stephen Miran, who was an advisor for economic policy at the U.S. Department of the Treasury under former Treasury Secretary Steven Mnuchin, when Republican nominee Donald Trump was U.S. president. “Our interpretation is that while the Fed was raising the Fed fund rate all the way to 5.5%, these (Treasury) policies were effectively pushing long yields lower,” said Roubini in an interview. “The Fed has been trying to raise rates to pull down the economy and achieve a soft landing, but … it looks like we could be in a no landing zone, with growth persistently above potential.”The study echoes suggestions by Republican senators last month that the Treasury deliberately increased issuance of short-term Treasury bills to give the economy a “sugar high” ahead of the elections. Roubini’s paper drew a similar parallel. The U.S. Treasury denied any such strategy. The Roubini paper “suggests a strategy that is intended to ease financial conditions, and I can assure you one hundred percent that there is no such strategy. We have never, ever discussed anything of the sort,” Treasury Secretary Janet Yellen, who was appointed by U.S. President Joe Biden, said on Friday.Assistant Secretary for Financial Markets Joshua Frost in a speech earlier this month addressed what he said were common misconceptions about Treasury issuance, saying the reduction in long-dated debt increases last year was modest.The Hudson Bay’s paper compares changes in Treasury issuance to quantitative easing – a bond buying program used by the Fed to stimulate the economy. Several bond market analysts said the comparison was overstated.”At best, this … kept rates marginally lower than they would have otherwise been,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities USA. “This is highly consistent with Treasury’s goal to obtain the best possible funding for the taxpayer and is not in any way a sinister plot to ‘ease’ monetary policy,” he added.The move demonstrated “higher than expected market sensitivity on the Treasury’s part during a period of volatility,” said Jonathan Cohn, head of U.S. rates desk strategy at Nomura Securities International.”Treasury may not be a market timer, but it is also not market agnostic nor deliberately ignorant of market functioning,” he added. More

RIO DE JANEIRO (Reuters) – The first-ever joint declaration by G20 finance leaders vowing to cooperate on effectively taxing the world’s largest fortunes on Friday papered over deeper disagreement about the right forum to advance the agenda.Finance ministers and central bankers from the Group of 20 major economies agreed to reference fair taxation of “ultra-high-net-worth individuals” in both their joint communique and a separate declaration on international tax cooperation on Friday.”We will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed,” said the final draft of the G20 ministerial declaration in Rio de Janeiro, seen by Reuters.However, fault lines have already emerged about whether to do that in talks at the United Nations or via the Organization for Economic Cooperation and Development (OECD), a group of wealthier democracies founded by U.S. and European allies.U.S. Treasury Secretary Janet Yellen told Reuters on the sidelines of the G20 meeting that she believes the OECD, which shepherded negotiations for a global two-part corporate tax deal for the past three years, is better placed to handle such talks.”We don’t want to see this shifted to the UN,” Yellen said, adding that the OECD “is a consensus-based organization. We’ve made a huge amount of progress, and the UN doesn’t have the technical expertise to do this.”Major developing nations have already bristled at that approach, according to an official familiar with the matter, who said Brazil should use its G20 presidency to advance discussion at both the UN and OECD.Some of the most vocal advocates of a global minimum tax on billionaires, including Nobel laureate Joseph Stiglitz, insisted that the UN was the proper forum for global tax cooperation.”We call on G20 leaders to align with the progress being made at the UN and establish a truly democratic process for setting global standards on taxing the ultra-rich,” said Oxfam International’s Tax Policy Lead Susana Ruiz.”Entrusting this task to the OECD — the club of mostly rich countries — would simply not be good enough,” she added.Brazilian Finance Ministry official Guilherme Mello, said that the UN Framework Convention on International Tax Cooperation represented a victory for the developing nations of the “Global South” who seek a venue where they are better represented, as most countries are not members of the OECD.Still, Mello recognized both the OECD and the UN as legitimate forums, and he said an ongoing discussion of how to effectively tax the super-rich is progress, whatever the forum.”The shape this will take depends on many dialogues that will be held,” he added.Some observers remained skeptical about the chances for a global “billionaire tax” targeting the world’s largest fortunes.European officials pointed out that not even the 27-nation European Union has power of taxation as a bloc. Although France lent early support to a global minimum wealth tax, Germans have offered stiff resistance.”It seems that it might be very difficult to bring this forward,” said one European official at the G20 meetings. More

RIO DE JANEIRO (Reuters) – U.S. Treasury Secretary Janet Yellen said on Friday that emerging markets, including some G20 countries, share her concerns about China’s excess industrial capacity and should press Beijing to change its economic model.THE TAKE: Yellen told Reuters in an interview that the concerns about China overinvesting in factories and flooding the world with cheap goods extends well beyond the wealthy G7 democracies to countries including G20 host Brazil, which has raised tariffs on Chinese steel and electric vehicles.Yellen said that China is not taking advice from other countries and the International Monetary Fund to revive its economy with measures to increase consumer spending and demand for services. Instead, Beijing was channeling too much of its GDP into investment in advanced manufacturing that is flooding the world with cheap Chinese goods, adding that China’s economy was now too large to grow through that model.KEY QUOTE: “There are a lot of countries around the world that are not willing to say, “Well, China, you want to dominate manufacturing, so all of our manufacturing sectors can just go out of business because you want to be the world’s factory. We’re not willing to do that,'” Yellen said. “And that’s the fundamental thing that unites us, and that should be a message that we’re sending.” More