Economy

WASHINGTON (Reuters) – President-elect Donald Trump’s pick for Treasury secretary, Scott Bessent, said on Thursday that the dollar should remain the world’s reserve currency, the Federal Reserve should stay independent, and that he is ready to impose tougher sanctions on Russia’s oil sector.Bessent, testifying at a Senate Finance Committee confirmation hearing, underscored an urgent need to extend Trump’s 2017 individual tax cuts, saying that allowing them to expire at the end of this year would unleash a $4 trillion tax hike that could crush the U.S. economy.”If we do not renew and extend, then we will be facing an economic calamity,” Bessent said. “We will see a gigantic middle class tax increase.”Bessent, a hedge fund manager and founder of Key Square Capital Management, voiced support for Trump’s plans to impose steep tariffs, saying they would combat unfair trade practices, raise revenues and increase U.S. negotiating leverage, including on non-trade issues.In prepared remarks he said pro-growth tax, investment, trade and energy policies would usher in a “a new economic golden age” of prosperity.RUSSIAN OIL SANCTIONSBessent said that U.S. sanctions against Russia’s oil sector have been too weak, partly because the Biden administration was too concerned about increasing prices at the same time it was constraining U.S. oil output. Increased U.S. oil production would allow for tougher sanctions on Russian oil majors, he said.”I think if any officials in the Russian Federation are watching this confirmation hearing, they should know that if I’m confirmed, and if President Trump requests as part of his strategy to end the Ukraine war, that I will be 100% on board with taking sanctions up – especially on the Russian oil majors – to levels that would bring the Russian Federation to the table,” Bessent said.He also had harsh words for China, calling it “the most imbalanced, unbalanced economy in the history of the world,” one that was trying to export its way out of a “severe recession/depression” and the U.S. could not allow China to flood U.S. or world markets with cheap goods.NO DRAMA If confirmed by the Senate, Bessent would be the first openly gay Treasury secretary and confirmed cabinet member of a Republican administration. The South Carolina native’s husband, former New York City prosecutor John Freeman, and their two children, Cole and Caroline, sat behind him.In a hearing marked by no heated exchanges, Bessent coolly fielded questions ranging from child tax credits to tariff impacts on farmers and did not stray from answers consistent with previous Republican Treasury nominees, but without contradicting Trump’s policy plans.He said that U.S. spending on President Joe Biden’s clean energy tax credit and that high deficits in recent years were due to a “spending problem.” Asked if a 100% tax credit for business research and development needed to be restored, he said his “inclination” would be to support that.FED INDEPENDENCEMarkets were expected to scrutinize Bessent’s comments on keeping the Federal Reserve independent for clues as to whether Trump would try to exert control over the U.S. central bank given the president-elect’s frequent complaints over Fed interest rate decisions.But he came down firmly on the side of Fed monetary policy independence, adding that Trump would still make his views known.”I think on monetary policy decisions, the FOMC should be independent,” Bessent said, referring to the Fed’s rate-setting panel, the Federal Open Market Committee.Although some economists have said that Trump’s plans to impose tariffs, cut taxes and curb immigration would be inflationary, Bessent disagreed, saying Trump’s plans, including increased energy production would lower inflation to the Fed’s 2% target while increasing wages.Despite Trump’s longstanding complaints about a strong dollar hurting U.S. exports, Bessent said: “Critically – critically – we must ensure that the dollar remains the world’s reserve currency.”Bessent also rejected the idea of a central bank digital currency for the Fed, saying that the dollar’s wide use and security made this unnecessary. He said he was open to the idea of creating a U.S. sovereign wealth fund, but said the U.S. needed to get control over short-term deficit growth first.HIGH DEBT, LESS CAPACITY Bessent vowed that there would be no debt default on U.S. Treasury debt under his watch. Asked whether Congress should abandon the federal debt ceiling, Bessent said that if Trump requested that, he would work with Congress to make it happen.The high debt level means that there is less capacity to borrow heavily to combat a crisis, Bessent said, citing examples of the 1930s Great Depression, World War Two and the recent COVID-19 pandemic.”Treasury – along with the whole of government and Congress – has used its borrowing capacity to save the union, save the world, and save the American people,” Bessent said. “What we currently have now, we would be hard pressed to do the same.” More

NEW YORK – Advertisers reliant on TikTok as a major digital marketing tool rushed to prepare contingency plans this week, as the realization dawned on many that the popular Chinese-owned social media app may not be saved before a U.S. ban takes effect on Sunday.One marketing executive described it as a “hair on fire” moment for the ad world, after months of conventional wisdom saying that a solution would materialize to keep the short-video app up and running.”It seemed unbelievable even as of just a few weeks ago to imagine that there would be no TikTok,” said Kerry Perse, the founder of marketing firm Influence & Inspire Consulting and former head of social media at Omnicom Group (NYSE:OMC)’s media agency OMD.”We all thought that any access issues to the TikTok app would be slow and drawn-out,” she said. Chinese tech firm ByteDance is facing a Jan. 19 deadline to sell TikTok’s U.S. assets or accept an unprecedented ban of the app, used by 170 million Americans, on national security grounds.TikTok plans to shut U.S. operations of the app on Sunday barring a last-minute reprieve, Reuters reported on Wednesday.U.S. President-elect Donald Trump’s incoming national security adviser said the new administration plans to put measures in place “to keep TikTok from going dark,” but it was not immediately clear whether Trump – who takes office on Monday – could legally do so.”I think after a long time feeling like this was a ‘boy who cried wolf’ situation, we may actually have a wolf sighting,” said Craig Atkinson, CEO of digital marketing agency Code3.If a ban does occur, more than $11 billion in annual U.S. ad investment would be up for grabs, according to a forecast from marketing group WARC Media.Most of that spending is likely to shift to platforms where advertisers are already established and running short-video ad campaigns, primarily Meta’s Instagram and Alphabet (NASDAQ:GOOGL)’s YouTube Shorts, four ad agency sources told Reuters.TikTok staffers appeared to be in the dark about what exactly would happen to the app as of Sunday, the sources said, although two of the sources noted that TikTok was offering favorable refund terms in the event services stop in the middle of advertisers’ campaigns. TikTok did not immediately respond to a request for comment.Even as the ban approached, the company continued to pitch advertisers on new features, like a tool launching in test form on Thursday that would make it easier to create, modify and add advertisements in bulk, according to an email from this week described to Reuters.It also planned to host a booth at the upcoming World Economic Forum meeting of political and business leaders in Davos,  Switzerland, next week, after holding cocktail parties at the Consumer Electronics Show in Las Vegas earlier this month.Meanwhile, brands and content creators alike were downloading their data en masse in case the app becomes inaccessible as of Sunday, hoping to salvage at least some of the fruits of their labor.One influencer, who hawks cereal and beauty products in her videos, posted on Tuesday advising her nearly 16,000 followers on how to save their videos.“Here’s how to download your TikTok data so you don’t lose literally everything you’ve had from the past five years,” said Maria Slate, grimacing, as the words “it’s fine I’m fine” displayed over her head.The sentiment was a marked change from the dominant mood last month, when advertisers told Reuters they were in no rush to shift their marketing budgets off TikTok despite a U.S. appeals court upholding the law requiring a divestment or ban.As of Jan. 8, ad spending on TikTok was set to increase 57% in the first two months of 2025, according to Guideline.ai, a research firm that tracks forward booking data from major ad agencies.TikTok has become a powerful tool for advertisers looking to reach young Americans in particular in recent years, growing to 20% of U.S. social media ad spending from only 2% in 2020, its first full year of operation in the United States, Guideline.ai said.Part of that power has come from the platform’s cultivation of influencers and online shopping culture, which has made it a reliable driver of e-commerce sales.E-Marketer, another research firm, forecast late last year that some 43.8% of U.S. TikTok users would have made a purchase on the platform by the end of 2024, a higher share than on Meta-owned services Facebook (NASDAQ:META) and Instagram. More

BEIJING (Reuters) – China’s economy likely rebounded in the fourth quarter as several rounds of policy stimulus kicked in, enabling the government to largely meet its 2024 growth target, though the risk of new U.S. tariffs could hold back a broader recovery.A Reuters poll predicts gross domestic product (GDP) grew 5.0% in October-December from a year earlier, quickening from the 4.6% pace in the third quarter.Full-year economic expansion was expected to come in at 4.9%, largely meeting the official target of around 5%, the poll found. The economy grew 5.2% in 2023.Larry Hu, chief China economist at Macquarie, said Beijing’s policy pivot in September underscored its resolve to defend the growth target. Beijing has rarely missed its growth targets in the past.”Thanks to this, GDP growth in the fourth-quarter may rebound above 5% year-on-year, so that full-year GDP growth could reach the target of around 5%,” Hu said in a note.”If 2025 GDP target is set at around 5% again, how much policymakers will do to stimulate the weak track (consumption/property) will depend on the impact from tariffs on the strong track (exports/manufacturing).” On a quarterly basis, the economy is forecast to grow 1.6% in the fourth quarter, versus the 0.9% pace in July-September. Policymakers have rolled out a blitz of stimulus measures since September, including interest rate cuts, cash injections and steps to tackle hidden debt of local governments. They have also expanded a trade-in scheme for consumer goods such as appliances and autos, helping to revive retail sales.The world’s second-biggest economy has struggled for traction since a post-pandemic rebound quickly fizzled out, with a protracted property crisis, mounting local debt and weak consumer demand weighing heavily on activity.Exports, one of the few bright spots, could lose steam as President-elect Donald Trump, who has proposed hefty tariffs on Chinese goods, is set to return to the White House next week.But even as strong exports propelled the country’s trade surplus to a record high of $992 billion last year, the yuan currency has come under selling pressure. A dominant dollar, sliding Chinese bond yields and the threat of higher trade barriers have pushed the yuan to 16-month lows.TOUGH BATTLE AHEADAt an agenda-setting meeting in December, Chinese leaders pledged to increase the budget deficit, issue more debt and loosen monetary policy to support economic growth in 2025.Leaders have agreed to maintain an annual growth target of around 5% for this year, backed by a record high budget deficit ratio of 4% and 3 trillion yuan ($409.2 billion) in special treasury bonds, Reuters has reported, citing sources.Such a target could be more ambitious than last year given the economy’s slowing trajectory and increased external headwinds.China’s economic growth is likely to slow to 4.5% in 2025 and cool further to 4.2% in 2026, according to the poll.The government is expected to unveil growth targets and stimulus plans during the annual parliament meeting in March.China’s central bank is expected to deploy its most aggressive monetary tactics in a decade this year as it tries to revive the economy, but in doing so it risks quickly exhausting its firepower. Separate data on December activity, to be released alongside GDP data, is expected to show consumption picked up while factory output growth steadied.Retail sales, a key gauge of consumption, are forecast to grow 3.5% in December from a year earlier, versus a 3.0% rise in November. Factory output is seen growing 5.4% in December year-on-year, matching November’s rise.($1 = 7.3315 Chinese yuan) More

WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission on Thursday settled charges against hedge fund Two Sigma over failure to address known vulnerabilities in its investment models, the regulatory agency said.Two Sigma voluntarily repaid $165 million to impacted funds and accounts during the SEC’s investigation and agreed to pay $90 million in civil penalties to settle the SEC’s charges, the agency said in a statement.The SEC said that in or before March 2019, Two Sigma employees identified and recognized vulnerabilities in certain Two Sigma investment models that could negatively impact clients’ investment returns, but the hedge fund waited until August 2023 to address the issues.Despite recognizing these vulnerabilities, Two Sigma failed to adopt and implement written policies and procedures to address them and failed to supervise one of its employees who made unauthorized changes to more than a dozen models, which resulted in Two Sigma making investment decisions that it otherwise would not have made on behalf of its clients, the SEC added.”After proactively reporting the issue in 2023 and promptly remediating negatively impacted clients, Two Sigma is pleased to have reached a resolution with the SEC, putting this matter behind us,” a spokesperson of the hedge fund said. “We are committed to acting with the utmost integrity and have made a range of enhancements to our operational policies, procedures, and oversight,” the hedge fund, which has $60 billion in assets under management, added. More

(Reuters) – Scott Bessent, U.S. President-elect Donald Trump’s choice to head the Treasury Department, on Thursday said the question of eliminating the U.S. debt limit is “nuanced,” but said if Trump wants to do so he will work with him and with Congress to get it done.”The debt limit is a very nuanced convention,” Bessent told the U.S. Senate Finance Committee in response to a question from U.S. Senator Elizabeth Warren about whether he would support its repeal. “Look, the United States is not going to default on its debt if I’m confirmed. But I will tell you that, for people who don’t understand the debt limit, it might be like taking out your handbrake in your car, that you can still hit the brakes, but it’s one less feature.” More

Climate-related natural disasters are dramatically driving up insurance costs for homeowners in the most-affected regions, according to a Treasury Department report Thursday.
For consumers living in the 20% of zip codes with the highest expected annual losses, premiums averaged $2,321, or 82% more than those living in the 20% of lowest-risk zip codes from 2018-22.
“This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families,” said outgoing Treasury Secretary Janet Yellen.

Firefighters battle flames during the Eaton Fire in Pasadena, California, U.S., Jan. 7, 2025.
Mario Anzuoni | Reuters

Climate-related natural disasters are driving up insurance costs for homeowners in the most-affected regions, according to a Treasury Department report released Thursday.
In a voluminous study covering 2018-22 and including some data beyond that, the department found that there were 84 disasters costing $1 billion or more, excluding floods, and that they caused a combined $609 billion in damages. Floods are not covered under homeowner policies.

During the period, costs for policies across all categories rose 8.7% faster than the rate of inflation. However, the burden went largely to those living in areas most hit by climate-related events.
For consumers living in the 20% of zip codes with the highest expected annual losses, premiums averaged $2,321, or 82% more than those living in the 20% of lowest-risk zip codes.
“Homeowners insurance is becoming more costly and less accessible for consumers as the costs of climate-related events pose growing challenges to both homeowners and insurers alike,” said Nellie Liang, undersecretary of the Treasury for domestic finance.
The report comes as rescue workers continue to battle raging wildfires in the Los Angeles area. At least 25 people have been killed and 180,000 homeowners have been displaced.
Treasury Secretary Janet Yellen said the costs from the fires are still unknown, but noted that the report reflected an ongoing serious problem. During the period studied, there was nearly double the annual total of disasters declared for climate-related events as in the period of 1960-2010 combined.

“Moreover, this [wildfire disaster] does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage – from severe storms in the Great Plans to hurricanes in the Southeast,” Yellen said in a statement. “This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families.”
Both homeowners and insurers in the most-affected areas were paying in other ways as well.
Nonrenewal rates in the highest-risk areas were about 80% higher than those in less-risky areas, while insurers paid average claims of $24,000 in higher-risk areas compared to $19,000 in lowest-risk regions.
In the Southeast, which includes states such as Florida and Louisiana that frequently are slammed by hurricanes, the claim frequency was 20% higher than the national average.
In the Southwest, which includes California, wildfires tore through 3.3 million acres during the time period, with five events causing more than $100 million in damages. The average loss claim was nearly $27,000, or nearly 50% higher than the national average. Nonrenewal rates for insurance were 23.5% higher than the national average.
The Treasury Department released its findings with just three days left in the current administration. Treasury officials said they hope the administration under President-elect Donald Trump uses the report as a springboard for action.
“We certainly are hopeful that our successors stay focused on this issue and continue to produce important research on this issue and think about important and creative ways to address it,” an official said. More

The final tax rate keeps the essence of the text approved by congress, he said, adding that all vetoes were justified by technical adjustment or a constitutionality question.Estimates from the Ministry of Finance indicate that the standard rate of the new consumption tax will be around 28%, he added. More

(Reuters) – A look at the day ahead in Asian markets. Relief from the positive U.S. and UK inflation surprises this week appears to have evaporated, at least as far as equity markets are concerned, even as Treasury yields and the dollar continue to drift lower into the last trading day of the week.Asian markets open on Friday against a mixed global backdrop. Yields are softening and Fed Governor Chris Waller on Thursday again signaled his willingness to cut rates, while U.S. bank earnings are beating expectations. But more evidence is needed that the global bond and inflation respite is anything other than temporary, and investors are nervy ahead of U.S. President-elect Donald Trump’s inauguration on Monday.Investors in Asia, therefore, could be forgiven for playing safe, minimizing exposure to risky assets ahead of the weekend, especially as it is a three-day break in the U.S. where markets are closed Monday for Martin Luther King Jr. Day.But the monthly Chinese ‘data dump’ lands on Friday. Beijing releases the December readings of house prices, industrial production, fixed-asset investment and retail sales, all of which will contribute to the big one: fourth-quarter and full-year GDP. Citi’s China economic surprises index is currently in positive territory, lifted by the series of policy pledges and market-boosting measures announced since September. But that boost has faded, and the index is its lowest in two months.Could Friday’s raft of indicators stop the drift? It’s possible that some, like export and new loans data released earlier this week, are on the strong side as businesses and households ramp up activity before tariff-threatening Trump takes office.On the other hand, the wider trend suggests negative surprises are more likely, and it’s worth noting that December was characterized by strong capital outflows, sluggish stock markets, and the biggest fall in bond yields since December 2008.Investors will also be keeping an eye on the TikTok saga for signs of how cool or otherwise U.S.-Sino relations are ahead of Trump’s return to the White House.The Chinese-owned video app, which is used by more than 170 million Americans monthly, is set to be banned on Sunday under a law mandating that it find a non-Chinese owner. But Trump’s incoming national security adviser said on Thursday the new administration will keep TikTok alive in the U.S. if there is a viable deal, in a potential reprieve for the firm.Currency volatility in Asia, meanwhile, is ticking higher after two central bank policy surprises this week from South Korea and Indonesia, and as the Japanese yen rallies strongly ahead of a possible Bank of Japan rate hike next week.Here are key developments that could provide more direction to markets on Friday:- China ‘data dump’ (December)- China GDP (Q4, full-year 2024)- New Zealand manufacturing PMI (December) More