Economy

NEW YORK (Reuters) -U.S. Council of Economic Advisers Chair Jared Bernstein said on Wednesday he did not “thus far” see the Israel-Gaza war as an exogenous shock that could derail U.S. economic growth, but noted that Washington was watching its impact on oil prices.Bernstein said he remained generally upbeat about the U.S. economy, and did not expect a possible government shutdown to result in a recession, although it was hard to be sure without knowing the length of any potential disruption.”I’d say from the tailwind perspective, we’re looking at a pretty clear transition to steady and stable growth,” he told the Reuters NEXT conference in New York, citing a “gangbuster” of GDP growth, low unemployment rates and real wage gains.”On the headwind side, certainly being in a higher rate environment is something we have to be mindful of. There is obviously a terrible new conflict in a part of the world that is sensitive for energy production, so we have to watch the price of oil, which has actually come down recently.”The price of U.S. crude initially jumped after the militant Hamas group’s Oct. 7 attack on Israel, but it has since fallen to about $75 per barrel, the lowest since July.The U.S. economy has defied nearly universal expectations that the Federal Reserve’s aggressive rate hikes – beginning in March 2022 – would bring activity to a halt and trigger a recession and a rise in joblessness.Instead, the economy in the most recent quarter grew at a 4.9% annualized rate, more than double the pace that Fed policymakers see as its long-term trend potential of 1.8%. However, there are signs emerging that the 5.25 percentage points of rate hikes the Fed has imposed is beginning to weigh on parts of the economy and could finally slow consumer spending, which has continued to rise at a rate above its pre-pandemic trend.Job growth recently has slowed as well and the unemployment rate in October rose to 3.9%, the highest in nearly two years, but it remains near historic lows. Fed officials in their most recent projections in September estimated on balance that the jobless rate would edge up a bit further next year – to 4.1% – before leveling off around 4%.Bernstein said the U.S. economy was outperforming virtually all its competitors and urged Congress to pass the necessary appropriations bills to keep the government running.”Congress has a responsibility to keep the lights on … at a time when we really don’t need any own-goal kicks. There’s a lot of stuff going on in the world. We’ve got a very strong backdrop to a U.S. economy that’s outperforming virtually all our competitors,” he said. “We’d like to keep it that way.”Asked about recent negative polls reflecting concern about President Joe Biden’s handling of the economy, Bernstein said Americans had to reset their price expectations given an increase in their buying power.Bernstein said the Biden administration had taken a series of steps to ease prices while maintaining a strong labor market. More

(Reuters) – National Australia Bank (OTC:NABZY) on Thursday reported a rise in annual cash profit as it benefited from higher interest rates, but cautioned elevated competition and inflationary pressures that crimped second-half earnings by 10% would persist.The country’s second-largest lender reported stronger annual earnings on deposits and capital against the backdrop of higher interest rates, which has allowed Australian lenders to widen their margins and capitalise on higher borrowing costs.But for the half-year ended Sept. 30, cash earnings sank as the impact of monetary policy tightening and inflationary pressures crippled households and the economy.”This has seen our financial results soften in 2H23 compared with 1H23,” NAB CEO Ross McEwan said in a statement. “While the economic transition has further to go, we are well placed to navigate this environment.”NAB’s net interest margin, a key metric of profitability, shrank to 1.71% as of Sept. 30, from 1.77% seen at March-end. The lender’s full-year cash profit of A$7.73 billion ($4.95 billion) for the year ended Sept. 30 was up 8.8% from a year earlier and marginally lower than consensus estimates of A$7.80 billion. The annual performance of its business and institutional banking divisions stood out with of 10.1% and 14.9% in cash profits respectively, while the personal banking division was a drag on its results, posting a 9.1% decline in cash earnings to A$1.45 billion.The bank reported a jump in its credit impairment charge for the year to A$802 million, up from just A$125 million a year ago, which it said reflected volume growth and worsening asset quality.The bank declared a final dividend of 84 Australian cents per share, up from 78 Australian cents apiece a year earlier.($1 = 1.5620 Australian dollars) More

(Reuters) -Swedish electric vehicle maker Polestar (NASDAQ:PSNY) trimmed its 2023 delivery forecast on Wednesday to the lower end of its earlier guidance and halved its gross margin target, amid fears of a slowdown in EV demand and global economic uncertainty.High interest rates to cool stubborn inflation have hampered sentiment as consumers looking to buy EVs face higher borrowing costs that largely offset price cuts by automakers to stimulate demand. Polestar, which operates in 27 markets globally, said it would now deliver about 60,000 vehicles this year, down from between 60,000 to 70,000. It had reiterated that forecast just last month after slashing the target in May from the 80,000 it had estimated earlier. The U.S.-listed company, founded by China’s Geely and Volvo (OTC:VLVLY) Cars, also said it would achieve a gross margin of 2% in 2023, down from its prior 4% forecast.The company said on Wednesday it would double down on cutting costs to boost margins and that it had secured additional term loans from Volvo and Geely totaling $450 million, maturing June 2027. “These actions and these initiatives are done in the context of what is currently a more challenging market environment and that’s reflected in our volume aspirations,” Polestar Chief Financial Officer Johan Malmqvist said in an interview with Reuters.CEO Thomas Ingenlath said Polestar, with its focus on premium rather than mass market sales, was chasing profitability rather than volumes and would shy away from cutting prices. Wednesday’s revised forecast from Polestar came after market leader Tesla (NASDAQ:TSLA)’s CEO Elon Musk last month flagged his concerns over expanding factory capacity until interest rates fall, in line with similar caution from General Motors (NYSE:GM) and Ford (NYSE:F). EV startup Lucid (NASDAQ:LCID) cut its full-year production forecast on Tuesday “to prudently align with deliveries.”Even as pandemic-driven supply chain bottlenecks eased, Polestar has grappled with a delayed production start and growing competition, especially from Chinese players, forcing the company to cut jobs to keep a lid on costs.After the additional loans from Volvo and Geely and efforts to reduce costs, Polestar said it would need external funding of about $1.3 billion in debt and equity until cash flow breaks even in 2025.The company said it sees gross margin in the high teens with a total annual volume of about 155,000 to 165,000 vehicles in 2025.Polestar reported cash and cash equivalents of $951.1 million as of the end of September, compared with $1.06 billion three months prior.Revenue for the third quarter rose 41% to $613.2 million, driven primarily by increased prices of its vehicles, but higher expenses led to operating losses swelling 33% to $261.2 million. More

The deal was announced two days before a strike deadline set by two unions. The walkout threat still hangs over other resorts and the city’s economy.Unions representing hospitality workers in Las Vegas reached a tentative agreement on Wednesday with one of the city’s three major resort operators, two days before a strike deadline that loomed just as tourists arrive for a major sporting event.Culinary Workers Union Local 226 and Bartenders Union Local 165, which are affiliates of UNITE HERE, announced the tentative agreement on a five-year contract with Caesars Entertainment. Negotiations with MGM Resorts International and Wynn Resorts are continuing.Contracts for housekeepers, bartenders, cooks and food servers at the three companies and Caesars expired on Sept. 15, after being extended from a June deadline.At a news conference on Wednesday afternoon, Ted Pappageorge, the head of Local 226, said the tentative agreement would provide compensation increases “far above” those in the last five-year contract, which amounted to $4.57 an hour overall in wages, health care and pensions. Members of the union make $26 an hour on average.The culinary union said the deal with Caesars had been reached after 20 straight hours of negotiations and covered 10,000 workers. Those workers will have 10 days to ratify the contract. Caesars said in a statement that the accord would provide “meaningful wage increases that align with our past performance, along with continued opportunities for growth tied to our future plans to bring more union jobs to the Las Vegas Strip.”The Caesars properties in Las Vegas include Caesars Forum, Caesars Palace, Flamingo, Harrah’s, Horseshoe, Paris, Planet Hollywood, the Cromwell and the Linq.The two unions said last week that 35,000 members would walk off the job on Friday at 18 hotels along the Strip owned by Caesars, MGM Resorts International and Wynn Resorts, posing a major threat to the city’s economy. The last major strike of Las Vegas casinos occurred in 1984, when workers walked off the job for more than 60 days.As Las Vegas prepared for the impact of a strike, crews began to block off roads and erect bleachers near the Strip, which will serve as the course for the Las Vegas Grand Prix, a big international auto race.In early December, the National Finals Rodeo is planned for two weeks.The local unions have been negotiating with the resorts since April over demands that include higher wages, more safety protections and stronger recall rights, a protection that prioritizes rehiring laid-off employees, such as those let go during the pandemic lockdowns or economic downturns.In September, the union passed a strike authorization vote with 95 percent support. More recently, workers have picketed outside the major hotels, marching under palm trees in 80-degree heat with signs that read, “One Job Should Be Enough,” alluding to low pay.In a series of rolling walkouts that began in July, thousands of housekeepers, front desk clerks and other hospitality workers from several Southern California hotels have been on strike at various times; in Michigan, employees at MGM Grand Detroit have been on strike since mid-October.For years, the culinary union, which represents 60,000 hospitality workers in Nevada, has been a powerful political force, one seen as a critical base for Democratic candidates in the state and nationally. In 2020, the ground operation and door-knocking campaign by union members helped propel Joseph R. Biden Jr. to a narrow victory in the state.Ahead of his re-election campaign next year, President Biden trailed former President Donald J. Trump by 10 percentage points in the state in a recent New York Times/Siena College poll.During a trip last month, Vice President Kamala Harris visited the culinary union’s headquarters and praised the workers as the “true champions for working people.”Lynnette Curtis More

TOKYO (Reuters) – Almost half of Japanese companies see the conflict between Israel and Palestinian militants Hamas potentially hitting their earnings, citing concerns about a further rise in oil and commodity prices, the latest Reuters corporate survey showed.On the issue of ending negative interest rates, which have been a key pillar of Japan’s central bank’s accommodative monetary policy, nearly half of Japanese firms said they expected it to happen by the middle of next year.Forty-eight percent of firms polled by Reuters said the Israel-Hamas conflict would affect their earnings negatively, the poll showed, roughly on par with the 49% who expected no particular impact and outstripping the 3% who saw a positive effect.”Worsening of the Middle East situation will lead to a sharp rise in raw material and fuel prices,” a manager at a chemical manufacturer wrote in the survey.In the survey, 46% of firms that responded to a question about how much oil prices are likely to rise in the near future said they expected them to increase to $120 a barrel or higher. North Sea Brent crude is now around $81 a barrel.The poll highlighted wider worries about conditions in the Middle East. Among concerns about instability in the Middle East, two-thirds of respondents cited rises in raw material prices other than oil.About half of them said they feared more global inflation, while two-fifths saw potential shortages of oil products and those made of them, according to the survey.The monthly Reuters Corporate Survey of 502 large and mid-sized non-financial Japanese firms, in which 251 responded, showed 46% of companies expected the Bank of Japan (BOJ) to end negative interest rates by the June 2024 quarter or earlier.The BOJ last week eased its hold on long-term rates by watering down a 1% cap set for the 10-year yield as a reference rather a rigid ceiling.Sources have said its next focus is to end its negative interest rate policy and push short-term rates to zero, from the current -0.1%.In the survey, 40% of firms said the negative interest rate policy was having a positive impact on their companies’ management.The survey was conducted for Reuters by Nikkei Research on Oct. 24-Nov. 2, with firms responding on condition of anonymity to allow them to speak more freely. More

Here are some excerpts from their interviews at the Reuters NEXT conference in New York:BRIAN MOYNIHAN, CEO AT BANK OF AMERICA * SOFT LANDING EXPECTATIONS”Our research team is the best in the business. They have moved to the soft landing category. They have a slowdown in the economy in the middle of next year.” * RATE HIKE EXPECTATIONS”You’re seeing a precipitous slowdown in consumer spending… Financial conditions have tightened. Loans are more expensive so people aren’t borrowing as much. Mortgage rates have moved up and the housing market has slowed down.””We have one more rate increase, whether that happens or not. And then starting to bring them down in the second half of next year.” * ON INFLATION COMING BACK TO 2% RANGE”It takes to the end of ’25 to get inflation down to the low twos level.” * ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) ISSUES”On a given day, we are criticized for being a large lender to energy companies. On the same day, we are criticized for being a large renewable lender. So you gotta have it right if everybody doesn’t like you.” * ON SUCCESSION”We have a succession planning exercise … nothing is left to chance here, when I decide or the board decides that my time is up we will activate that plan.” * ON DEALING WITH POTENTIAL CYBERSECURITY THREATS”You keep dedicating more resources. You cooperate heavily among the industry and with the government.””The real value is, over the last 10 years, the administration cooperation with the private sector has been much increased. That’s helpful because the information can flow faster and we can defend ourselves better.”HOLLY O’NEILL, PRESIDENT, RETAIL BANKING AT BANK OF AMERICA * CONSUMER SPENDING”There’s a lot of uncertainty across the globe, for sure, and I think that weighs on them but when you look at the actual health of the consumer, it is very strong.” * CAPITAL RULES”The biggest risk is the disruption from regulation and the impact that will have on the system and then the downstream impact on the consumer.”JIM ESPOSITO, CO-HEAD OF GLOBAL BANKING AND MARKETS AT GOLDMAN SACHS * TRADING AND INVESTMENT BANKING”We’re sitting on what is one of the more interesting trading environments in my career. For the medium term, the dealmaking environment will indeed be a little bit less robust.” * BOND MARKETS”There is a little bit of a supply-demand imbalance in government bond markets.”SOLITA MARCELLI, CHIEF INVESTMENT OFFICER AMERICAS FOR UBS GLOBAL WEALTH MANAGEMENT * INVESTMENT TRENDS”Clients are slowly moving out of cash” into fixed income, “we really caution them to not go that much longer out on the curve because the longer end is more susceptible to technical factors like supply.” To view the live broadcast of the World Stage go to the Reuters NEXT news page: https://www.reuters.com/world/reuters-next/ More

Corporate executives will pay $2,000 a head to dine with China’s leader in San Francisco next week, in one of a series of engagements aimed at stabilizing the U.S.-China relationship.The Chinese leader Xi Jinping, who is set to meet with President Biden in San Francisco next week, is expected to speak to top American business executives at a dinner following that bilateral meeting.Mr. Xi, who is traveling to the United States for an international conference, will address business leaders at a challenging moment in U.S.-China relations. The United States has expressed growing concern about China’s military ambitions and has sought to cut off Beijing’s access to technology that could be used against the United States. China’s treatment of Western companies, which are facing tougher restrictions in how they do business, have also prompted firms to question the wisdom of investing in China.Still, Chinese and American leaders have expressed interest in bolstering ties between their economies, the world’s two largest, which remain inextricably linked through trade. The Biden administration has sent several top officials to China this year to try to make clear that while the United States wants to protect national security, it does not seek to sever economic ties with Beijing.It is unclear whether Mr. Xi’s visit will do much to alleviate the skepticism of foreign businesses, many of which are deterred both by China’s slowing economic growth and the tighter grip of the Chinese Communist Party on business activity under Mr. Xi.Tickets to the dinner and reception, hosted by the National Committee on U.S.-China Relations and the U.S.-China Business Council, cost $2,000 each, according to an invitation circulating online. For $40,000, companies can purchase eight seats at a table plus one seat at Mr. Xi’s table, a person familiar with the event said.Engagements between Chinese officials and the U.S. business sector will try to send the signal that China remains an attractive place to do business, “as evidenced by these companies flocking to meet with Xi Jinping and have dinner with him,” Jude Blanchette, the Freeman Chair in China Studies at the Center for Strategic and International Studies, said in a briefing on Tuesday.Beijing wants this for “tactical reasons,” Mr. Blanchette said. “I don’t think, at a broad level, they’re expecting or see the prospect of resetting or recalibrating the relationship.”Foreign firms are particularly concerned about Chinese regulations that block them from selling to the government or into certain markets, and a broader counter-espionage law that can lead to prison time for company executives and researchers who deal in sensitive industries. At the same time, the United States is stepping up restrictions on investing and selling advanced technology to China, saying that such ties can pose national security concerns.Many businesses still see China as an essential market, but an increasing number are starting to look to other countries for their new investments. A survey by the U.S.-China Business Council of its members this year found that 34 percent had stopped or reduced planned investment in China over the past year, a higher percentage than in previous years.Mr. Blanchette said Chinese officials would also see the meeting as an opportunity to try to shift the U.S. trajectory on the technology controls it has placed on China. But the United States is unlikely to change its stance, he said.“I think this will be one of the issues where the U.S. and China will have longstanding tensions. And I’m sure this will be communicated to Beijing,” Mr. Blanchette said.The visit will be Mr. Xi’s first trip to the United States since 2017, when he met with President Donald J. Trump at the Mar-a-Lago estate in Florida. Since then, U.S.-China business relations have changed drastically, with the countries carrying out a trade war and sparring over advanced technology and geopolitical influence, and China turning notably more authoritarian under Mr. Xi.The dinner and reception featuring Mr. Xi will be part of a two-day “C.E.O. Summit” taking place next week on the sidelines of a bigger meeting of the leaders of the Asia Pacific Economic Cooperation, a group of 21 countries that ring the Pacific Ocean. Mr. Biden is expected to meet with Mr. Xi earlier next Wednesday, in their first face-to-face meeting in a year.Mr. Biden and Mr. Xi are expected to discuss business and technology ties, as well as issues like communication between the countries’ militaries, stopping the flow of fentanyl to the United States and new agreements for governing artificial intelligence.In recent weeks high-level Chinese officials have met with U.S. counterparts to lay the groundwork for the trip. In a news release Wednesday, the organizers of the C.E.O. summit said that Mr. Biden and Mr. Xi would be in attendance at the two-day summit, along with other world leaders and the chief executives of companies including Microsoft, Mastercard and Pfizer. More

NEW YORK (Reuters) – A key reform proposed by the U.S. Securities and Exchange Commission to boost the use of central clearing in the Treasury market would need to be implemented over an extended period to avoid disruptions at a time of already turbulent market dynamics, BNY Mellon (NYSE:BK) said on Wednesday.The SEC central clearing rule, first proposed in September last year, would apply to the cash Treasury and repurchase agreements (repo) markets, where banks and other players such as hedge funds borrow short-term loans backed by Treasuries and other securities.Under the rule, more trades would be sent to a clearing house, requiring counterparties to put up cash to guarantee execution in the event of defaults.The regulator is expected to finalize the rule soon, but it is unclear how much time the industry would have to implement it. Some market participants worry that the higher trading costs linked to central clearing could discourage certain investors from trading, undermining the rule’s objective to improve liquidity and resilience in the world’s biggest bond market.”We’re in a period when the Treasury market needs to be relied upon for its safety and liquidity,” Nate Wuerffel, head of market structure at BNY Mellon, said in an interview.”And if on top of that you’re trying to implement very rapidly a fundamental reassembly of the Treasury market, that’s when you run the risk of having market functioning deteriorate.”Liquidity crunches in recent years have raised regulatory concerns about the Treasury market’s ability to function during times of stress. Notably, in March 2020 the market seized up as pandemic fears gripped investors, prompting the Federal Reserve to buy Treasuries to support the market.The rule would likely be implemented at a crucial time for bond investors. The Federal Reserve is reducing its Treasury security holdings as part of quantitative tightening, the Treasury plans to issue more debt to fund rising fiscal deficits, and investors are adjusting to the fastest increase in interest rates in at least 40 years.”An extended implementation timeline in the final rule could substantially lower the risk that the transition itself could worsen market functioning,” Wuerffel said in a note on Wednesday. More