Economy

In measures Ottawa said were aimed at shielding advanced and emerging technologies, government grants will not be provided to researchers with links to universities connected to defense and security entities of countries that could harm security.The universities are mostly based in China but a few from Iran and Russia are also listed.”While Canadian-led research is defined by its excellence and collaborative nature, its openness can make it a target for foreign influence,” the ministers of innovation, health, and public safety said in a joint statement.An official said that while the policy affected only federal funding, the Ottawa government hoped it would used as guidance by provincial governments and Canadian institutions. In 2022, Canada arrested and charged a researcher with espionage for allegedly trying to steal trade secrets to benefit China.Canada is a member of the “Five Eyes” alliance with Britain, the United States, New Zealand and Australia. Last year the grouping’s intelligence chiefs accused China of intellectual property theft and using artificial intelligence for hacking and spying against the nations.China routinely rejects such charges.The U.S. has long accused China of intellectual property theft and the issue has been a major sore point in U.S.-China relations. More

WASHINGTON (Reuters) – Negotiations with congressional leaders on how to step up enforcement at the nation’s southern border are on the right track, White House spokesperson Karine Jean-Pierre said on Tuesday. President Joe Biden invited congressional leaders to the White House on Wednesday to discuss the border and supplemental funding bill for Ukraine and Israel, Jean-Pierre said. More

WASHINGTON (Reuters) -The leaders of Congress tax-writing committees on Tuesday announced a nearly $80 billion bipartisan deal to enhance tax breaks for businesses and low-income families through 2025, but prospects for passage are unclear amid bitter fiscal divisions.The $78 billion package, agreed by Senate Finance Committee Chairman Ron Wyden, a Democrat, and House Ways and Means Committee Chair Jason Smith, a Republican, would temporarily expand the child tax credit and boost the low-income housing tax credit. It would restore business tax deductions for 100% of research and development expenses and capital expenditures for plant and equipment. The extensions would last until the end of 2025, aligning them with the expiration of personal tax cuts passed by Republicans in 2017 and raising the stakes for tax policy differences in November’s presidential election.The deal would increase the maximum “refundable” child tax credit — the amount available as a cash payment — by $200 per child to $1,800 for 2023, $1,900 for 2024 and $2,000 for 2025.Democrats have been trying to restore a much larger COVID-era expansion of the child tax credit of up to $3,600 per child, which expired in 2021.Wyden said the plan would benefit 15 million children from low-income families while enabling the construction of more than 200,000 affordable housing units.SHORT TIMELINE, UNCLEAR PATHWyden said he and Smith want to pass the package quickly so that families and businesses can take advantage of the breaks as they file tax returns this year. The filing season for 2023 income is due to start on Jan. 29. “I’m going to pull out all the stops to get that done,” Wyden said.But the early legislative calendar this year is consumed with bitter divisions over government spending, including another proposed stopgap to avert a federal shutdown until March to buy more time to pass funding measures. Smith emphasized the extension of business tax breaks, which Republicans have sought to extend as they began to phase out after 2022.”This legislation locks in over $600 billion in proven pro-growth, pro-America tax policies with key provisions that support over 21 million jobs,” Smith said.The lawmakers plan to offset the tax package’s cost by closing the COVID-era Employee Retention Tax Credit to new claims by the end of January 2024, rather than April 15, 2025. The early end of the troubled program, along with increased enforcement and higher penalties for fraudulent claims, is expected to save more than $70 billion, according to Joint Committee on Taxation estimates.According to a summary of the legislation, the deal also includes provisions to shield Taiwanese semiconductor manufacturers operating in the U.S. from dual taxation despite the lack of a U.S.-Taiwan tax treaty.It also includes tax breaks for disaster-related losses, including from certain wildfires.In a sign that changes would likely be needed, the top Senate Finance Committee Republican, Mike Crapo, called the Wyden-Smith deal “a thoughtful starting point” for the legislation, indicating that it needed changes. He said in a statement that he would work “to build broad, bipartisan support for a tax package that provides appropriate relief for working families and businesses.”The White House was still reviewing the agreement, spokesperson Michael Kikukawa said, noting that President Joe Biden “remains committed to fighting for the full expanded child tax credit.” More

Democratic Senate Majority Leader Chuck Schumer, Republican Senate Minority Leader Mitch McConnell, House Speaker Mike Johnson and House Minority Leader Hakeem Jeffries are expected to attend the meeting.White House Press Secretary Karine Jean-Pierre said on Tuesday that Biden will also host “key committee leaders and ranking members.” More

The number of companies that failed to make required payments on their debt totaled 153 for 2023, up from 85 the year before, an increase of 80%, according to S&P Global Ratings.
“In 2024, we expect further credit deterioration globally, predominantly at the lower end of the rating scale” the firm said.

Javier Ghersi | Moment | Getty Images

Corporate debt defaults soared last year and could be a problem again in 2024 as cash-strapped companies deal with the burden of high interest rates, S&P Global Ratings reported Tuesday.
The number of companies that failed to make required payments on their debt totaled 153 for 2023, up from 85 the year before, an increase of 80%. It was the highest default rate outside of the Covid-related spike in 2020 in seven years.

Much of the total came from low-rated companies that had negative cash flows, high debt burdens and weak liquidity, S&P said. From a sector standpoint, consumer-facing companies — media and entertainment in particular — led the defaults.
S&P said there could be hard times ahead for corporate America, which, according to the Federal Reserve, is carrying a $13.7 trillion debt load. Company debt has jumped 18.3% since 2020 as companies took advantage of the Fed slashing interest rates in the early days of the Covid-19 pandemic.
“In 2024, we expect further credit deterioration globally, predominantly at the lower end of the rating scale (rated ‘B-‘ or below), where close to 40% of issuers are at risk of downgrades,” the firm wrote. “We expect financing costs to remain elevated despite the prospect of rate cuts. And while borrowers have reduced their 2024 maturities, a large share of speculative-grade debt is expected to mature in 2025 and 2026.”
Some economists worry that a “corporate debt cliff” could become a more serious problem as a large share of maturing debt that initially was financed at very low rates comes due in the next few years.
The burden, both in the U.S. and globally, could be exacerbated by “slower economic growth and higher financing costs” that could contribute to defaults, S&P said. Along with media and entertainment, the firm sees potential trouble spots in consumer products and retail because of a weaker economy “and the already elevated number of weakest links in those sectors.”

But the damage won’t be isolated in those areas, as S&P sees higher rates causing more widespread pain to sectors such as health care, which is suffering from elevated debt and staffing problems that are constraining revenue.
Fed rate cuts are expected to alleviate the burden somewhat, though rates are expected to remain elevated at least through 2024. While markets think the central bank could cut short-term rates as much as 1.5 percentage points this year, Fed officials have indicated a slower course of perhaps half that much, depending on how the inflation data unfolds.Don’t miss these stories from CNBC PRO: More

Federal Reserve Governor Christopher Waller acknowledged Tuesday that interest rate cuts are likely this year, but said the central bank can take its time relaxing monetary policy.
The comments, delivered during a speech in Washington, D.C., seemed to counter market anticipation for aggressive easing this year.

“As long as inflation doesn’t rebound and stay elevated, I believe the [Federal Open Market Committee] will be able to lower the target range for the federal funds rate this year,” Waller said in prepared remarks for an audience at the Brookings Institution.
“When the time is right to begin lowering rates, I believe it can and should be lowered methodically and carefully,” he added. “In many previous cycles … the FOMC cut rates reactively and did so quickly and often by large amounts. This cycle, however, … I see no reason to move as quickly or cut as rapidly as in the past.”
Market pricing Tuesday morning indicated about a 67% chance the FOMC will begin cutting in March, according to the CME Group’s FedWatch measure. In fact, traders had further ramped up expectations for 2024 to seven cuts, but brought it back to six following Waller’s remarks.
Along with rate cuts, Waller said he anticipates the Fed this year can start slowing the pace of “quantitative tightening,” or the reduction of the central bank balance sheet by allowing proceeds from maturing bonds to roll off without reinvesting them. The Fed has been allowing up to $95 billion a month roll off and thus far has cut its holdings by about $1.2 trillion.
“I would say sometime this year will be a reasonable thing to start thinking about it,” he said. However, Waller noted that “tapering” would apply only to Treasurys and not mortgage-backed securities holdings, which he prefers to allow to decrease at the current pace.

Data ‘almost as good as it gets’

At their December meeting, Fed officials indicated three cuts were likely this year. The benchmark fed funds rate is currently in a targeted range between 5.25%-5.5%.
In making the pitch for rate cuts, Waller noted the progress made against inflation has not come at the cost of the labor market. As a governor, Waller is a permanent FOMC voter.
Stocks held in sharply negative territory after the release of Waller’s remarks, while Treasury yields moved higher.
While 12-month inflation is still running well above the Fed’s 2% goal, measures over shorter time frames such as six months are much closer to target. For instance, the core personal consumption expenditures price index, one of the Fed’s preferred measures, is showing annual inflation at 3.2%, the six-month measure is around 1.9%.
At the same time, unemployment has held below 4% and gross domestic product has grown at a rate defying Wall Street expectations for a recession.
“For a macroeconomist, this is almost as good as it gets. But will it last?” Waller said. “Time will tell whether inflation can be sustained on its recent path and allow us to conclude that we have achieved the FOMC’s price-stability goal. Time will tell if this can happen while the labor market still performs above expectations.”
While the Fed has wrestled with the quandary of not tightening enough and allowing inflation to expand and tightening too much that it chokes off growth, Waller said those risks are becoming more balanced.
In fact, he said that as the level of job openings compared with the size of the labor force declines, the Fed is now running more of a risk of doing too much.
“So, from now on, the setting of policy needs to proceed with more caution to avoid over-tightening,” he said.
Waller said he thinks the Fed is “within striking distance” of achieving its 2% inflation goal, “but I will need more information” before declaring victory. One data point he said he will be especially focused on is upcoming revisions to the Labor Department’s consumer price index inflation measure.
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US forces on Tuesday carried out fresh strikes on targets linked with Houthi militants in Yemen, amid disruption to global trade caused by cargo ships diverting to avoid the Iran-backed group’s attacks in the Red Sea.The US military’s Central Command said its forces struck and destroyed four anti-ship ballistic missiles that the Houthis had prepared to launch from Yemen in the early hours of Tuesday. It was the third round of strikes by American forces on Houthi targets in Yemen in less than a week as the US seeks to deter the rebels’ attacks on shipping in the crucial waterway.However, the Houthis still succeeded hours later in launching a missile that struck the Zografia, a Greek-owned Maltese-flag ship for carrying dry bulk commodities, which was sailing towards the Suez Canal. That followed Monday’s missile strike on another bulk carrier in the Gulf of Aden. The latest Houthi strikes have prompted more categories of ships to avoid the key shipping route through the Red Sea, instead taking a longer journey between Asia and Europe via the Cape of Good Hope and delaying deliveries to companies.Automotive groups have been especially affected by delays to ships, which have so far mainly affected container vessels carrying manufactured goods and semi-finished components.Volvo Cars on Tuesday said it had halted production at its factory in Belgium after the shipping disruption delayed a delivery of gearboxes, while tyre manufacturer Michelin said Red Sea delays would lead to “occasional stoppages” at its European factories in January.Figures from Clarksons, the London-based shipping services company, suggested that more classes of ships were beginning to divert: between January 13 and 15, arrivals of dry bulk carriers in the Gulf of Aden, by the Red Sea, had fallen 25 per cent from the first half of December. Until last week, arrivals of such vessels had hardly been affected.That decline threatens delays and extra costs for industries including food manufacturing and metals that receive shipments of the many commodities transported in dry bulk carriers.Tuesday’s US action followed an initial wave of strikes by both UK and US forces on more than 60 Houthi targets in Yemen on Thursday and Friday nights, which the countries said aimed to deter the Houthis and stem the disruption to shipping.The Houthis have vowed to respond aggressively to the military action against them and to continue targeting ships. They insist their campaign is a response to Israel’s offensive against Hamas, the Palestinian militant movement, in Gaza.The Houthis fired their latest missile at about 1.45pm local time into “international shipping lanes” in the southern Red Sea, according to the US Central Command. The Zografia, which was empty of cargo when attacked, was “struck but seaworthy” and continued on its journey, with no injuries reported, the statement said.US forces also said on Tuesday that the country’s navy had seized Iranian-made ballistic missile and cruise missile components on January 11 from a vessel heading to “resupply Houthi forces in Yemen”. Two Navy Seals were lost at sea in the operation and the search for them continued, they said.The latest Houthi assaults raise the prospect that dry bulk shipowners will divert en masse away from the Red Sea route, as companies operating container ships have already done. Arrivals of container ships have fallen 90 per cent since early December, according to Clarksons.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.One large ship operator, Japan’s NYK Line, said on Tuesday it had “temporarily suspended” Red Sea navigation for all its vessels, which include dry bulk ships, tankers, liquefied natural gas (LNG) carriers and car-carrying roll-on, roll-off ships.“For vessels navigating near the Red Sea, NYK has instructed waiting in safe waters and is considering route changes,” the company said.Other natural gas tanker operators are also changing routes. Nils Kristian Strøm, managing director of Knutsen LNG, which operates six tankers for Shell, confirmed vessels operating for the company had been diverted to the longer route.Another three natural gas carriers working for Qatar’s state-owned QatarEnergy — which had been due to enter the Red Sea to sail on to Europe — had diverted to different routes, according to ship-tracking data from Kpler, an information service.Qatari Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani said on Tuesday that the escalating attacks in the Red Sea had changed “how we view the international trade, how we view international shipping, how interconnected we are from east to west”.Speaking at the World Economic Forum in Davos, Sheikh Mohammed said: “I believe that if we want to address the issue, we need to address the real issue, the central issue, which is [the war in] Gaza, in order to get everything else defused.”Also at Davos, US national security adviser Jake Sullivan said his country had expected the Houthis to continue to threaten the US after its first strikes. More countries would need to confront the group, he said.“[This] comes down . . . to the broad set of countries, including those with influence in Tehran and influence in other capitals in the Middle East, making this a priority,” he said.Such steps would indicate the “entire world” rejected the idea that a group such as the Houthis could “basically hijack the world”, as they were doing, he said.Additional reporting by Peter Campbell in London and Sarah White in Paris More

Christopher Waller, one of seven Washington-based Fed governors, said officials should cut rates as inflation cools — though timing was uncertain.A prominent Federal Reserve official on Tuesday laid out a case for lowering interest rates methodically at some point this year as the economy comes into balance and inflation cools — although he acknowledged that the timing of those cuts remained uncertain.Christopher Waller, one of the Fed’s seven Washington-based officials and one of the 12 policymakers who get to vote at its meetings, said during a speech at the Brookings Institution on Tuesday that he saw a case for cutting interest rates in 2024.“The data we have received the last few months is allowing the committee to consider cutting the policy rate in 2024,” Mr. Waller said. While noting that risks of higher inflation remain, he said, “I am feeling more confident that the economy can continue along its current trajectory.”Mr. Waller suggested that the Fed should lower interest rates as inflation falls. Because interest rates do not incorporate price changes, otherwise so-called real rates that are adjusted for inflation would otherwise be climbing as inflation came down, thus weighing on the economy more and more heavily.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More