Economy

NEW YORK (Reuters) -Americans reported a fairly stable outlook for inflation at the start of the year, as medium-term expectations settled back to levels last seen before the coronavirus pandemic struck, amid notable declines in the projected rises for a number of key spending areas. The Federal Reserve Bank of New York said Monday in its January Survey of Consumer Expectations that inflation a year and five years from now were unchanged at readings of 3% and 2.5%, respectively, while the projected rise in inflation three years from now dropped to 2.4%, the lowest since March 2020, from December’s 2.6%. The report found a broad retreat in where the public expects future price rises to go for a range of key areas. The year- ahead expected rise for gasoline hit its lowest reading since December 2022, while the year-ahead increase in food was at its lowest point since March 2020, the onset of the coronavirus pandemic, and the expected rise in rent hit its lowest reading since December 2020. The New York Fed data on inflation expectations comes after the Fed’s most recent policy meeting, which held short-term interest rates steady while opening the door to cutting them at some point later this year due to falling inflation pressures. Fed officials’ confidence that they are on a path back to 2% inflation is in part buttressed by a trend of retreating inflation expectations readings, which officials believe have a strong influence on what will actually happen with price pressures. The Fed’s preferred price pressure gauge, the personal consumption expenditures price index, was up by 2.6% in December from the same month a year ago. That measure has been steadily falling back to the central bank target and some suspect it could get there this year. Speaking at his press conference after the last Federal Open Market Committee meeting on Jan. 31, Fed Chair Jerome Powell said longer-run inflation expectations are “well anchored,” while noting “inflation expectations are very close to where they were before the inflation emergency of the last three years.” In the report, the bank found that respondents in January continued to expect home prices will rise by 3%, the same reading seen over the last four months. Respondents have “mixed” views on the state of the job market, and forecast one-year ahead expected earnings growth of 2.8%, above December’s 2.5% reading. Survey respondents also said it was getting easier to access credit and that overall perceptions of their personal financial situations improved in January. In a separate report, the Cleveland Fed said business leaders also see lower inflation pressures. In the first-quarter survey, chief executive officers expected consumer price index inflation of 3.4% over the next year, down notably from 4.2% in the fourth-quarter survey. The CPI was up by 3.4% in December from the same month a year before. The government is set to report on the CPI for January on Tuesday and economists forecast a 2.9% year-over-year rise. The Cleveland Fed noted “business leaders’ inflation expectations can influence the prices their firms charge customers, and these prices can, in turn, influence the path of inflation.” More

WASHINGTON (Reuters) – The U.S. should review Chinese biotech firm WuXi AppTec and its affiliate WuXi Biologics (HK:2269) for sanctions, a bipartisan group of lawmakers told top Biden administration officials on Monday.     In a letter dated Feb. 12 and seen by Reuters, the lawmakers told Treasury Secretary Janet Yellen, Defense Secretary Lloyd Austin and Commerce Secretary Gina Raimondo that the global pharmaceutical giant’s links to China’s Communist Party and military threatened U.S. national security.    The letter, signed by the Republican chair and Democratic ranking member of the House select committee on China, Representatives Mike Gallagher and Raja Krishnamoorthi, and Senators Gary Peters and Bill Hagerty, is Congress’ latest effort to highlight what it says are risks posed by China’s biotech leaders.Congress has introduced legislation that would restrict federally-funded medical providers from allowing China’s BGI Group, WuXi AppTec and other biotech firms from getting genetic information about Americans. WuXi AppTec did not respond immediately to a request for comment, but has repeatedly said that it is not a national security risk to any country. “We are concerned by a misguided U.S. legislative initiative to target our company without a fair and transparent review of the facts,” WuXi AppTec said previously in a statement still on its website home page.    The four lawmakers – citing public Chinese government documents, Chinese university websites and media articles – outlined what they called WuXi AppTec’s clear military ties, as well as support for China’s policies in Xinjiang, a region where Washington has accused Beijing of committing genocide against Muslim minorities.    They said WuXi AppTec had received investment from numerous PLA funds, including the AVIC Military-Civil Integration Selected Hybrid Securities Investment Fund.     They also cited a resume for WuXi Biologics CEO Chen Zhisheng, posted in 2018 to a Tsinghua University website, that listed him as a visiting professor at China’s Academy of Military Medical Sciences, which was added to the Commerce Department’s export control list in 2021.    “Given WuXi AppTec’s clear ties to the CCP and the PLA and its likely role in enabling the genocide in Xinjiang, we urge your departments to consider the inclusion of WuXi AppTec and its subsidiaries on your respective control lists,” they said in the letter.    Those should include sanctions under Treasury’s Non-SDN Chinese Military-Industrial Complex Companies List, the Commerce list restricting U.S. sales to named entities and the Pentagon’s “1260H” list, which carries implicit warnings about U.S. cooperation with certain firms.     “WuXi AppTec and WuXi Biologics have obscured their ties to the CCP and PLA and, as a result, are rapidly integrating themselves into U.S. supply chains by signing agreements with prominent U.S. biotech entities,” the lawmakers wrote.     The two companies have counted Pfizer (NYSE:PFE), AstraZeneca (NASDAQ:AZN), GlaxoSmithKline (NYSE:GSK) , and U.S. national labs as partners. More

By Mark Miller(Reuters) – Marian Leonard filed for Social Security when she turned 65 years old. She did not sign up for Medicare at the same time, because she could not afford to pay the monthly premiums. But that was a costly mistake that serves as a warning to anyone navigating the transition to retirement. Leonard signed up for Medicare four years later – only to learn that the delay would cost her dearly. Leonard would be paying about 40% more in premiums for Part B (outpatient services) because she failed to enroll at age 65. What’s more, she would be paying this penalty for the rest of her life. “I’m being penalized for having been too poor to afford Medicare,” said Leonard, who lives in eastern Pennsylvania.Here is what Leonard did not know: Medicare requires that nearly all workers sign up for the program during a seven-month Initial Enrollment Period (IEP) that includes the three months before, the month of, and the three months following their 65th birthday. If you are already receiving Social Security at that point, you will be signed up for Medicare Part A (hospitalization) and Part B (outpatient services) automatically.But everyone else needs to pay careful attention to the enrollment rules. Missing your IEP can trigger late-enrollment penalties levied in the form of higher premiums that continue for life.There really is only one important exception to the enrollment mandate. You can postpone enrollment if you are still working beyond age 65 and have insurance through your employer, or if you receive insurance through your spouse’s employer. (One exception to that exception: if you work for an employer with fewer than 20 workers, you can continue with that coverage, but Medicare becomes your primary source of insurance at age 65, and you should sign up during your IEP). The penalties were included in the 1965 legislation that created Medicare. The idea was to prevent so-called adverse selection, which occurs when only the people who think they need benefits enroll in an insurance program. That can drive up the program’s costs, so it is important to enroll most eligible people when they reach age 65.The late enrollment premium penalty for Part B is equal to 10% of the standard Part B premium for each 12 months of delay. Since it is a lifetime penalty, it will become larger in dollar amounts over time, since it is levied as a percentage of the standard Part B premium. That can saddle you with thousands of dollars of extra expenses over the course of retirement. Leonard made the decision to postpone Medicare enrollment in 2019. She had just relocated to the U.S. following a four-year stint in Germany for her husband’s work. He planned to stop working on their return to work on a fixer-upper house that they purchased in rural Pennsylvania; they would live on savings and her Social Security. (Her husband was too young to claim benefits.) Her Social Security benefit was just $1,200, and she did not feel she could afford the additional Medicare premium – $135.50 per month that year.“I went onto the Social Security website and filled out the form – I indicated that I didn’t want to take Medicare Part B, and didn’t bother to read any further,” she recalls.Her financial circumstances changed last year after her husband passed away. At that point, she started collecting a Social Security survivor benefit, and her Social Security benefit increased substantially. As a result, she felt she could now handle paying for Medicare. She signed up at her local Social Security office – and that is when she learned about the penalty. This year, she is paying $245.30 per month for Part B – a whopping $70.60 surcharge over the standard premium of $174.70. “In what world does it make sense to penalize somebody who is already struggling to survive for no other reason than they were too poor to afford insurance sooner?” she said.HELP FOR LOW-INCOME SENIORSSeniors with very low income and assets may be able to get help paying their premiums from federal programs. Unfortunately, Leonard’s financial situation puts that help out of reach due to a small retirement nest egg and her Social Security income.The Medicare Savings Program will pay Part B programs for enrollees who qualify. The program is available in every state, and it is administered by state Medicaid agencies; each state has different rules for counting income and assets to determine if you qualify. The programs often are underutilized because of a lack of awareness, and the complexity of application procedures. Help with prescription drug costs (Part D) is available through the Extra Help program. This federal program can help low-income seniors with premiums, deductibles and cost-sharing in Part D prescription drug plans. Access to the subsidy was expanded under the Inflation Reduction Act.A BETTER WARNING SYSTEM Part of the problem is the complexity of the enrollment rules. But we also need better information and warnings to help people avoid these penalties.Social Security provides warnings about the Medicare late enrollment penalties in various online statements and fact sheets. But consumer advocates have been pushing for legislation that would require Social Security to send a notification – either by mail or email – to workers at ages 60 and 65 to warn them about the penalties.That is a common-sense idea that could help people better navigate the Medicare maze.  The opinions expressed here are those of the author, a columnist for Reuters. More

TORONTO (Reuters) – Ontario on Monday projected a smaller deficit for the current fiscal year than it previously expected due to increased revenue and lower borrowing costs, a third-quarter report from Canada’s most populous province showed.The province, one of the world’s biggest sub-sovereign borrowers, said it expected a deficit of C$4.5 billion for 2023-24, C$1.1 billion less than was forecast in a fiscal update in November. The fiscal year ends on March 31. More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesThe German president and the EU’s chief diplomat joined other leaders in condemning former US president Donald Trump’s suggestion that he would allow Russia to attack any Nato member that failed to spend enough on defence.In her first speech as the eurozone’s top banking supervisor, Claudia Buch warned that lenders must prepare for “unexpected risks” from geopolitical turmoil, climate change and other structural shifts that could eat into their recent high profits. Private equity chiefs have enjoyed a $40bn gain in share value over the past year thanks to high interest rates, with earnings boosted by the growth of credit operationsFor up-to-the-minute news updates, visit our live blogGood evening.From the disruption of shipping lanes to fears about the conflict sparking a wider conflagration, the war in Gaza continues to have a sizeable impact on the global economy.US and UK air strikes may have reduced the risk to vessels of attacks from Yemen’s Houthis — who claim to be targeting ships in solidarity with Palestinians under siege — but as we report today, this does not mean shipping companies are rushing back to use the strategically vital Suez Canal.The Houthis have only launched a handful of serious attacks since January 6, with most missiles failing to hit their targets. Shippers, however, are still using the much longer and more expensive route between Europe and Asia via the Cape of Good Hope, meaning arrivals by container ships in the Gulf of Aden are down 92 per cent, car carrier arrivals have fallen 91 per cent and overall traffic through the region is down 73 per cent.An exception seems to be Chinese container companies, which appear to be confident that China’s close links with the Houthi’s backers in Iran make them immune to attacks.The environment is also a victim of the current hostilities: vessels diverting from the Red Sea produce up to 70 per cent more emissions as operators increase speeds to compensate for the longer route, which adds up to two weeks on a voyage from Asia to Europe. The speed increase follows a decade of “slow steaming” as shipping companies sought to economise on fuel use and minimise carbon emissions.Freight rates have also been pushed higher by the disruption, posing an extra problem for the global shipping industry, a bellwether of global trade, following a boom fuelled by the Covid-19 pandemic. AP Møller-Maersk, the world’s second-largest container shipping company, last week warned of a “difficult patch” for the industry, as the group suspended its share buyback programme and slashed its dividend, sending its shares plunging. Others, however, point out that the industry is running at low capacity, with many ships due to be launched in the next couple of years, meaning it can absorb the cost of longer journeys, even if the Red Sea problems persist.The bigger worry, as our recent Big Read explains, is that the Houthi attacks may be a harbinger for large-scale regional wars to come. Risks in the Middle East add to worries over potential aggression from China against Taiwan or a spillover into other countries of Russia’s war in Ukraine which could all contribute to sending globalisation into reverse.The current hostilities also underline the risks of leaving the policing of ocean trade to a single superpower. The US has played a vital role in keeping shipping lanes open in recent decades, particularly by clearing them of pirates, although a Donald Trump presidency could call time on this practice. Meanwhile, China, the US’s main geopolitical and commercial rival, has been building up its forces and now has the world’s largest navy — albeit without the global network of hubs and bases the US enjoys.All of which makes an interesting backdrop to the World Trade Organization ministerial meeting in Abu Dhabi in a couple of weeks, writes Alan Beattie in today’s Trade Secrets newsletter (for Premium subscribers). The mood among delegates, he says, is “sober, bordering on sombre, bordering on sepulchral”.Need to know: UK and Europe economyThe UK statistics watchdog said there was “a way to go” before official jobs numbers could be relied on again. A closely watched survey suggests the rate of pay rises is set to fall for the first time since the pandemic, pointing to a “sustained period of high wage growth in response to a tight labour market and high inflation pushing up the cost of living”.The opposition Labour party said it would “modernise” the UK non-dom tax regime should it win the next general election, but experts have warned that its long list of tax pledges could mean it is forced to embrace the government’s current trajectory of brutal spending cuts.An FT Big Read details how protests by farmers have spread across Europe and whether they are pushing politics towards the populist right. Amid the demonstrations, France, the EU’s biggest agricultural producer and the world’s fifth-largest food exporter, is seeking a new generation of farmers.Ukraine said Russia was using Elon Musk’s Starlink satellite internet system on the front line. Need to know: global economyThe hot new topic among economists is the hunt for the elusive “neutral” level of interest rates — the borrowing rate that keeps economies growing steadily, with full employment and inflation around 2 per cent. Here’s our explainer. A Financial Times/University of Michigan poll found US presidential contender Donald Trump had an 11-point leave over incumbent Joe Biden on handling the economy, highlighting Biden’s difficulty in convincing voters his policies are improving their financial position despite the ever-improving data. The Swamp Notes newsletter tries to explain the cognitive dissonance.The success of candidates allied to former prime minister Imran Khan — currently in jail — in Pakistan’s election looks set to create prolonged instability as rival parties vie for control, just as the country nears a crucial deadline for a new IMF bailout.China’s consumers are tightening their belts even as prices are falling at their fastest rate in 15 years. Businesses selling everything from cosmetics to electrical goods and cars are offering discounts. Policymakers hope the lunar new year celebrations will get consumers spending again.Joko Widodo, who will bow out as Indonesia’s president after Wednesday’s general election, has overseen the country’s reinvention as one of the world’s most attractive investment markets thanks to green energy technology and a boom in nickel. Governments around the world are intensifying their scrutiny over the building of data centres because of the huge strain they put on electricity grids — and national climate targets.Need to know: businessThe boss of France’s TotalEnergies told the FT that governments risked mis-selling the energy transition if they failed to point out that energy costs could rise.Biotech companies are rushing to raise money in US equity markets again after a two-year deal drought that pushed many companies to cut jobs and shelve projects to save costs, forcing some out of business.Investors are piling into biotech start-ups seeking to use psychedelic drugs for mental health disorders. Once considered a relic of 1960s counterculture, psychedelics have experienced a renaissance in the past two decades, including the rise of “microdosing” by Silicon Valley tech executives. Tech companies have cut 34,000 jobs this year as they refocus on new areas such as generative artificial intelligence for their next phase of growth. AI is making advertising campaigns easier and cheaper, but where does that leave creatives? A Big Read explains.US bank profits plunged almost 45 per cent year on year in the final quarter of 2023, mainly because of one-off charges linked to last year’s regional banking crisis. Tech companies continue to invest in commercial drones but the promise of delivering goods cheaply by air still has to overcome complaints about accidents, noise and interference. Using them to deliver medicines may be the way to win regulatory hearts and minds, says the Lex column (for Premium subscribers).The world of workA new generation of chief executives, keen to promote a clean lifestyle and encourage healthy competition among employees, are turning to group fitness challenges such as Hyrox. Some are sceptical, arguing the trend risks excluding some staff and decreasing morale. “Quiet hiring” is on the rise: in a tight labour market, employers are increasingly looking to improve the skills of their existing workforce rather than recruit externally. UK employers are racing to submit visa applications for skilled staff before new immigration rules kick in that will sharply increase the costs of hiring overseas.Ann Harrison, of the Berkeley Haas School of Business, says policymakers need to put people before robots and not let automation drive down incomes.Thinking of an MBA? Browse the FT’s guide to the best business schools in the world in our annual rankings.Some good newsThis stunning image of a starling murmuration was one of the winners in the People’s Choice section of the Wildlife Photographer of the Year competition, developed and produced by the Natural History Museum, London.A mass of starlings swirl into the shape of a giant bird on their way to communal roosts above Rome More

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1. Futures tread waterU.S. stock futures mostly held around the flatline on Monday, as investors geared up for a week of key economic data releases and a slew of quarterly corporate earnings.By 04:27 ET (09:27 GMT), the Dow futures contract had shed 47 points or 0.1%, while S&P 500 futures were broadly unchanged and Nasdaq 100 futures had inched up 11 points or 0.1%.The benchmark S&P 500 closed above 5,000 for the first time ever to end the prior trading week thanks in part to a surge in megacap groups like Microsoft (NASDAQ:MSFT) and Amazon.com (NASDAQ:AMZN). Artificial intelligence chipmaker Nvidia (NASDAQ:NVDA) also jumped to a record high following a Reuters report that it was building a new division that will aim to provide bespoke chips for cloud computing businesses and others.On Friday, the tech-heavy Nasdaq Composite added 1.3% and the blue-chip Dow Jones Industrial Average dipped by 0.1%. All of the main indices on Wall Street posted their fifth consecutive winning week.2. Inflation data, earnings slew aheadHighlighting the economic calendar this week will be the latest publication of the monthly U.S. consumer price index (CPI), a major gauge of inflation that could factor heavily into how the Federal Reserve approaches future interest rate decisions.The measure is expected to show that headline price growth in the world’s largest economy slowed on both an annual and monthly basis in January. The core reading, which strips out volatile items like food and energy, is seen decelerating year-on-year and remaining unchanged versus December.Despite widespread expectations late last year that the Fed would soon begin to start bringing borrowing costs down from more than 2-decade highs, several policymakers have flagged lingering concerns that a recently strong U.S. economy could fuel a rebound in inflation. For that reason, officials at the central bank have said that they want to see more signs that prices are moderating before rolling out cuts.Meanwhile, earnings season marches on, with more than 60 firms in the S&P 500 due to unveil results this week.Some of these names, including Coca-Cola (NYSE:KO), Shopify (NYSE:SHOP) and Kraft Heinz (NASDAQ:KHC), may provide some insight into the health of the U.S. consumer. Analysts will be keen to parse through second-quarter figures from Cisco Systems (NASDAQ:CSCO), which is pushing to capitalize on the AI boom. Cryptocurrency exchange Coinbase (NASDAQ:COIN) will also post its fourth-quarter numbers following a recent spike in volatility in the market for digital coins.3. Fed speakers on deckMarkets may receive fresh interest rate commentary from at least eight scheduled Fed speakers this week.On Monday, Fed Presidents Michelle Bowman, Thomas Barkin and Neel Kashkari are all scheduled to make statements. Later in the week, Federal Open Market Committee voting members Christopher Waller, Mary Daly and Michael Barr will deliver comments.Hopes are rapidly fading that policymakers could slash rates as soon as March, particularly after Fed Chair Jerome Powell noted last month that inflation is still running above the central bank’s 2% target. Powell later reiterated this cautious stance, telling the CBS news show “60 Minutes” that the Fed can take a “prudent” approach to possible cuts.Even still, he said that the U.S. economy seems to be on course for a so-called “soft landing,” a scenario in which the Fed successfully cools inflation without sparking an economic meltdown. However, Powell said, the Fed must now find a way to balance the twin risks “moving too soon…or too late.”4. Diamondback, Endeavor agree to merger valued at $26 billionDiamondback Energy (NASDAQ:FANG) and Endeavor Energy Resources have agreed to merge in a transaction valued at approximately $26 billion, the firms announced on Monday.The tie-up gives the new entity a huge stake in the all-important Permian Basin, a prolific oil and gas producing region that stretches across Texas and New Mexico. Combined, the companies would become the top solely Permian producer, Reuters has reported.“Diamondback has proven itself to be a premier low-cost operator in the Permian Basin over the last twelve years, and this combination allows us to bring this cost structure to a larger asset,” Stice added.The merger will consist of about 117.3 million shares of Diamondback common stock and $8B in cash. Following the deal, which is expected to close in the fourth quarter of this year, Diamondback shareholders are projected to own about 60.5% of the combined business. Endeavor’s stakeholders will hold about 39.5% of the entity.5. Oil prices slipOil prices fell in European trade on Monday as investors locked in some profits after stellar gains over the prior week.Brent oil futures expiring in April had fallen 0.7% to $81.63 a barrel, while West Texas Intermediate crude futures dropped 0.6% to $76.29 per barrel by 04:28 ET.Both contracts surged about 5% to 6% in the past week, supported in part by Israel rejecting a ceasefire proposal from Hamas and continuing deadly air strikes on the Gaza Strip. The move pointed to little de-escalation in the conflict, which, along with attacks by Iran-aligned Houthis in the Red Sea, have spurred on concerns over disruptions in global oil supplies.On Tuesday, the Organization of the Petroleum Exporting Countries and International Energy Agency are both set to release their monthly reports. Uncertainty hovers around whether the two will maintain their oil demand forecasts for 2024 and 2025 now that U.S. interest rates seem likely to remain higher for longer this year. More

LONDON (Reuters) – Investments to new hedge funds in 2023 fell to new lows, while established hedge funds hiked fees to the highest on record, said a client report by Goldman Sachs dated Friday and seen by Reuters on Monday. This illustrates a growing bias towards established and bigger hedge funds that average higher returns for their investors, said Goldman Sachs. Hedge fund launches fell in Europe and the Asia Pacific region by 6% and 8% while rising 14% in the U.S. But Goldman Sachs still maintained that 2023 marked a second consecutive record low for new launches by hedge funds that it tracks. However, management fees, where the investor pays back a proportion of the winnings a hedge fund makes, rose to their highest since 2012, Goldman Sachs said. Investors, less focused on fee reduction, have concentrated on agreeing better terms with hedge funds, Goldman said, which based its findings on 358 interviews in December 2023 that accounted for over $1 trillion in assets allocated to hedge funds. One such suggestion was having fees fall as AUM rises.Separately, around a quarter of those surveyed agreed with their hedge funds that performance would have to surpass a certain threshold – or hurdle rate – before the application of fees. Almost half said they planned to ask for this in 2024.Almost a fifth said they would try for a loyalty discount. And 11% said in exchange for a fee reduction they would agree to lock up their money with their hedge funds for longer, the report said. Despite this, hedge fund investors did not end 2023 consistently happy with how their hedge funds performed. The $3.9 trillion industry underperformed traditional stock and bond portfolios by 9%, the worst result in nearly three decades. This year, investors expect them to do better, the bank said. If hedge funds can’t manage a 7.5% positive result, what was the point of taking fees, the complex investments and locked away money, said one unnamed allocator quoted in the report. At the end of 2023, 15% of allocators said they planned to decrease their hedge fund holdings, while 31% said they would add more exposure. Despite any optimism expressed in 2022, the bank noted that over the course of 2023, only 28% of allocators increased their money in hedge funds versus 42% that said they would at the end of 2022. More