Economy

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Asian markets on Wednesday should be well-placed to bounce back from the previous day’s declines, supported by another positive showing on Wall Street that secured the S&P 500’s and Nasdaq’s longest winning streak in two years.Tuesday’s slide in U.S. Treasury yields will also support risk appetite in Asia, although some of that could be tempered by the dollar’s resilience.With little on the regional economic data and policy events calendar to give markets a steer, investors will probably take their cue from Wall Street. If so, a positive open to Wednesday’s session is in the cards.The Nasdaq rose for the eighth day in a row and the S&P 500 rose for a seventh, both marking their best runs in two years. But investors won’t be getting too carried away.The Nasdaq peaked in November 2021 and the S&P 500’s high watermark came a few weeks later. Between then and October last year, the Nasdaq lost as much as 35% of its value and the S&P 500 shed nearly 30%.The mostly cautious tone from U.S. policymakers on Tuesday should also help support sentiment in Asia on Wednesday. That said, no Fed official is closing the door to further rate hikes, so a good degree of two-way risk should be factored into emerging and Asian markets.Perhaps surprisingly, given the ongoing violence and tension in the Middle East, oil prices are now back at their lowest levels since July. Year-on-year, oil is down 15% – the inflationary burst of September has completely reversed.The news for investors in China over the last 24 hours, meanwhile, was fairly positive. The International Monetary Fund upgraded China’s growth outlook, and Beijing reported a surprise increase in imports last month.Although the IMF’s move can perhaps be seen as just lagging the private sector, it does come only a few weeks after it released its World Economic Outlook. The IMF now expects China’s economy to grow 5.4% this year and 4.6% next year, up from 5.0% and 4.2%, respectively.In currency markets, the yen has fallen back below the key 150.00 per dollar mark, while the biggest loser overnight was the Aussie dollar, down 0.9% for its biggest fall in a month.The Reserve Bank of Australia raised rates to a 12-year high, as expected, but left it open on whether further tightening would be needed to bring inflation to heel.On the corporate front, perhaps the most interesting of all Japanese corporate earnings reports on Wednesday will be technology group Softbank (OTC:SFTBY), after WeWork filed for bankruptcy. Softbank held a 60% stake in the flexible office space provider.Here are key developments that could provide more direction to markets on Wednesday:- Fed’s Powell, Williams, Barr, Jefferson, Cook all speak- Japan tankan manufacturing, services indexes (November)- Japan FX reserves (October) (By Jamie McGeever; Editing by Josie Kao) More

Seeking re-election in 1984, Ronald Reagan presided over an economy similar in many ways to today’s. But he sold a message of progress and promise.President Ronald Reagan rode a “Morning in America” message to a blowout re-election victory in 1984, based partly on warm feelings about his economic performance. Today’s economy is similar in many ways to Mr. Reagan’s as he entered that campaign, with one big difference: There is widespread voter angst over the incumbent’s economic stewardship.A New York Times/Siena College poll shows President Biden trailing his likely Republican opponent, former President Donald J. Trump, in key battleground states. Poll respondents rate the economy poorly and say they trust Mr. Trump more to fix it. That’s true even though the economy grew faster and added more jobs over the last year than forecasters expected, while inflation fell sharply from what had been a four-decade high.In public and private conversations, and in consultation with outside economists and other experts, Mr. Biden’s economic team has been consumed with that disconnect: Why do Americans remain so down on the economy when economic data are trending up?The answer is almost certainly some combination of how Americans process the economic moment and how Mr. Biden communicates about it.In both cases, the contrast with Mr. Reagan — and with the economic environment of the early 1980s — is instructive.In the fall of 1983, Mr. Reagan’s re-election was not assured. The nation was still emerging from a recession that had marred his first two years in office. Consumer prices had risen more than 15 percent since he took office — nearly as much as they have risen on Mr. Biden’s watch. Translated into today’s dollars, the price of a gallon of gasoline was about $3.80, about 40 cents higher than it is now. The typical American’s wages had not increased at all during Mr. Reagan’s tenure, after adjustment for higher prices, similar to Mr. Biden’s experience.But public faith in the economy, and in Mr. Reagan’s handling of it, was significantly stronger than it is for Mr. Biden.President Ronald Reagan rode a “Morning in America” message to re-election in 1984, partly on the strength of warm feelings about his economic performance.Bettmann/Getty ImagesThe University of Michigan’s Index of Consumer Sentiment was roughly 50 percent higher under Mr. Reagan in the fall of 1983 than it is now. Polls showed his approval rating climbing, including sentiment on the economy, in a reversal from the start of the year.A year later, Mr. Reagan would air “Prouder, Stronger, Better,” a television ad that began with the words “It’s morning again in America.” It highlighted falling inflation and lower interest rates allowing more Americans to buy a home.Mr. Reagan’s appeals worked in part because Americans had just endured more than a decade of persistently high prices and high interest rates. Economists and historians generally agree that voters came to see the progress under Mr. Reagan as relief from a long, difficult period.Voter psychology is very different under Mr. Biden. The 9 percent annual inflation rate that the country experienced last year was more than triple the average rate from the end of Mr. Reagan’s time in the White House to the start of Mr. Biden’s. Those mortgage rates Mr. Reagan trumpeted? They were around 14 percent in 1984. Right now, rates are just below 8 percent. The difference is that under Mr. Reagan, rates fell, and under Mr. Biden, they’ve gone up.For Mr. Biden and his economic team, “the problem is really in the way people think about and process economic information, rather than the economic fundamentals,” said Francesco D’Acunto, an economist at Georgetown University’s McDonough School of Business who recently briefed the White House Council of Economic Advisers.Mr. D’Acunto presented slides at the White House highlighting work he and colleagues have done, drilling down into how consumers process price increases. They find that consumers’ attitudes are shaped most by the products they buy most often — like milk, gasoline, bread and beer — and not by the things they spend the most money on.They also find that unexpected price surges stick in shoppers’ minds, negatively. They linger in a way that slower-building price increases, or even prolonged periods of high prices, do not.That research helps explain why voters did not punish Mr. Reagan for inflation even though the price growth he oversaw never reversed itself: They were accustomed to rapid price growth and grateful for improvement.One overly simplistic explanation for Mr. Biden’s woes is that voters are waiting for prices to fall back to their prepandemic levels. If that were true, Mr. Biden would almost certainly be doomed electorally. On the whole, the path of prices across American history is an upward march.But Mr. D’Acunto says his research suggests that Mr. Biden might be able to brighten voters’ moods by mounting a public persuasion campaign, focusing on prices that have begun to come down from recent highs. That includes consumer electronics like smartphones and computers, which are less expensive today than they were a year ago, on average, and which are often large-dollar purchases.For Mr. Biden and his economic team, “the problem is really in the way people think about and process economic information,” said Francesco D’Acunto, a Georgetown University economist.Desiree Rios for The New York TimesMr. Biden’s campaign recently spent $25 million on television ads to promote “Bidenomics” — a mix of the president’s blue-collar background and policy blueprint that is meant to resonate with the working class. It includes an ad focusing on a provision in the Inflation Reduction Act, which Mr. Biden signed last year, that seeks to reduce the cost of prescription drugs through Medicare. Campaign aides say it is scoring well in surveys with viewers.There is little evidence in polls that those efforts have broken through. Biden aides say they did not expect immediate results. They are testing messages, they say, including how best to talk about Mr. Biden’s economic record, as the president prepares to spend $1 billion or more in advertising before the election.Aides also insist that continued economic improvement will eventually punch through to the public. They contend that continued wage growth will restore some of the buying power Americans lost to recent inflation, and that consumers will gradually acclimate to prices that are higher than what they were used to before the pandemic.“What the president brings to the table is a deep and effective pro-worker agenda that’s maintaining a great job market, putting downward pressure on prices,” Jared Bernstein, the chair of the Council of Economic Advisers, said in an interview. “I understand that hasn’t reached the sentiment indexes yet. But I’m confident it will.”Some Democrats worry that Mr. Biden himself is a barrier to getting that message through, particularly to younger voters who express concerns over his age. Campaign officials say his direct appeals resonate well in tests. The Reagan comparison offers evidence for both sides.Economic surveys have become more politicized in recent years, with Republicans in particular resistant to praising the economy’s performance with a Democrat in office. Still, components of the Michigan survey suggest that Mr. Reagan had far more success than Mr. Biden as an economic cheerleader.Mr. Reagan made a habit of both championing the economy’s performance and critiquing press coverage of its flaws. At this point in his presidency, Americans were far more likely to report hearing positive news about the economy and prices than they do under Mr. Biden. They even reported hearing better news on unemployment, at a time when the rate was near 9 percent. It is under 4 percent today.Mr. Biden has often tried to strike more of a balance between celebrating strong job growth and acknowledging the pain of high prices. He has leaned more into boosterism in recent months — as the share of Americans reporting in the Michigan index that they hear good economic news has grown. More

The company said it was cutting production forecast “to prudently align with deliveries”.Shares of the company fell 4% in extended trading.The company reported third-quarter revenue of $137.8 million compared with analysts’ estimates of $183.8 million, according to LSEG. More

WASHINGTON (Reuters) – Federal Reserve policymakers fresh from last week’s decision to hold the policy rate steady are weighing strong economic data, some signs of a slowdown, and the impact of higher long-term bond yields as they consider if they will need to hike rates further to bring down inflation.Third-quarter U.S. economic growth, at an annualized 4.9% rate, was a “blowout” performance that warrants “a very close eye when we think about policy going forward, Fed Governor Christopher Waller said on Tuesday. An ardent advocate of aggressive Fed rate hikes to battle high inflation, Waller did not include a policy recommendation in his remarks to an economic data seminar at the St. Louis Fed. His presentation also noted signs that job growth was slowing, and what he called the “earthquake” wrought by higher and potentially growth-dimming long-term bond yields.But in comments to the Ohio Bankers League, Fed Governor Michelle Bowman said she took the recent GDP number as evidence the economy not only “remained strong,” but may have gained speed and require a higher Fed policy rate.”I continue to expect that we will need to increase the federal funds rate further,” Bowman said.At yet another event, Dallas Fed President Lorie Logan noted that “all of us” have been surprised at how strong the economy has been, and that despite some progress inflation is trending toward 3% rather than the Fed’s goal of 2%. The labor market despite cooling remains “very tight,” she said, and longer-term bond yields, whose rise helped convince she and others to leave rates on hold last week, have fallen.”We’re going to continue to need to see tight financial conditions in order to bring inflation to 2% in a timely and sustainable way,” Logan said, adding that she’ll watch both economic and financial conditions as the Fed’s next meeting, in December, approaches.Explicit endorsements for higher rates have become rarer among Fed officials since July, when the Fed raised the benchmark rate by a quarter point, to the current 5.25% to 5.5% range, in what many analysts expect will prove the last move in a monetary tightening cycle that began in March of 2022. Indeed more recent data suggest the outsized pace of growth in the July-September period may prove an outlier for the year, with manufacturing and job growth both cooling in October, a bank loan officers survey showing continued credit tightening and a drop in loan demand in recent months, and a New York Fed report on Tuesday noting a rise in consumer loan delinquencies.That combination of data potentially shows the sort of economic slowing that Fed officials have expected as the sometimes slow-moving impact of central bank interest rate hikes is felt more broadly.Based on incoming economic data, the Atlanta Fed’s GDPNow model suggests fourth-quarter gross domestic product will grow at an annualized rate of just 2.1%, edging towards a pace Fed officials might view as allowing inflation to continue slowing to their 2% target. By the Fed’s preferred personal consumption expenditures price index inflation was 3.4% as of September. ‘CLEARLY CALMING DOWN’Many economists expect the Fed to hold interest rates steady at the upcoming Dec. 12-13 policy meeting, in part due to that anticipated slowdown and the ongoing tightening of borrowing and credit conditions.In comments on Monday, Fed Governor Lisa Cook took particular note of rising debt stress. While it was not broadly apparent among “resilient” U.S. households, she said, “we are seeing emerging signs of stress for households with lower credit scores, and individual borrowers may struggle with debt burdens in the face of economic hardships,” a dynamic that at the margin will begin to trim consumer spending and, in the extreme, could make banks even more reluctant to lend. In comments to CNBC on Tuesday, Chicago Fed President Austan Goolsbee noted that inflation has been slowing, and that the rise in market-based interest rates, “if … sustained at high levels” most likely represents a tightening of credit for families and businesses.The yield on the 10-year Treasury note, which had risen about a full percentage point since July, was still up about 75 basis points from then despite a drop since last week.”We have got to take that into account … We should expect to see that, with a lag, working its way through the economy. So we’re all paying attention and trying to figure out what the driver is,” Goolsbee said.However neither Goolsbee nor Minneapolis Fed President Neel Kashkari, who spoke to Bloomberg Television on Tuesday, ruled out further Fed rate increases.Noting, as Waller did, the recent “hot” readings on economic activity, Kashkari said “that makes me question if policy is as tight as we assume it currently is.””If you saw inflation tick back up and you saw continued very strong economic activity in the real side of the economy, that would tell me we might need to do more,” Kashkari added. More

WASHINGTON (Reuters) -The U.S. regulator charged with overseeing the Federal Home Loan Banks said in a report on Tuesday the system is overdue for an overhaul in its mission and structure.The Federal Housing Finance Agency emphasized in the report that there needs to be a clearer distinction between the purpose of the FHL banks and the Federal Reserve, which is the primary emergency lender for banks. The agency said FHL banks were created by Congress in 1932 to provide liquidity to banks for affordable housing and other economic development.Tuesday’s report was the culmination of a year-long project by the agency to review the FHL banks. It indicated that the FHL banks had shifted from that original mission over the years, and the system had not been updated to meet current realities.”For complex and varied reasons, there has been a decreased focus on housing-related activities by many institutions that are members of the FHLBank System,” the report stated. “These changes, taken together, highlight the need for (agency) to clarify the mission of the System so the FHLBanks are held accountable for serving their public purpose.”FHL Banks are 11 regional government-chartered institutions that raise money for low-cost lending to their members. They are a vital source of funding to regional banks, and had morphed over the years into a preferred final stop for cash before banks in need turn to the Federal Reserve itself as a last resort.As part of its recommendations, the agency said it would seek to refocus on the housing mission by proposing most banks be required to hold at least 10% of their assets in residential mortgages to retain access to FHL Banks.The agency also suggested it could consolidate the number of FHL banks in the system, noting it could shrink the numbers of banks to as little as eight without additional authority from Congress.In response to Tuesday’s report, the head of the FHL bank system said any overhaul would be part of a long process, and the firms would be focused on ensuring they can continue to serve members.”The overwhelming sentiment from (agency’s) review was that stakeholders want more, not less, from the FHLBank system,” said Ryan Donovan, head of the Council of Federal Home Loan Banks. More

Standing just metres from a stand promoting American soyabeans exports, Nicholas Burns, US ambassador to China, was eager to emphasise his country’s contribution to one of the world’s biggest trade fairs.“We have the largest number of businesses and exhibitors this year — that’s more than any other country,” Burns told an enthusiastic scrum of reporters at the China International Import Expo in Shanghai this week.The US delegation, he added, was there “to show our commitment to the overall relationship between the United States and China”.The crowded scene contrasted sharply with last year’s sparsely attended event, which took place during the final full month of China’s three-year zero-Covid policy. It also hinted at the prospect of increased Chinese collaboration with US and other foreign companies, despite geopolitical tensions and a weaker-than-hoped post-pandemic recovery.For thousands of global businesses that have felt the chill of those tensions, the Shanghai expo was an opportunity to reiterate their commitment to a market that continues to grow.“Right now we are only targeting ‘tier one’ cities because they have higher consumption,” said Nie Dan, a marketing representative of Irish-US group Dole Food. “But our plan next is to expand to lower tier cities.”This year’s CIIE, an annual event launched in 2018 by Chinese president Xi Jinping, included more than half of the world’s Fortune 500 companies and more than 3,000 businesses in total, each with stalls and exhibits across a vast concrete structure on the outskirts of China’s biggest city.At a time when companies are weighing up their comments on China carefully, pre-arranged interviews with business leaders played on screens in the expo media centre. Jerry Zhang, chief executive of Standard Chartered China, said her bank was “linking China with the global market”, while Titus von dem Bongart of EY hailed CIIE as a major event for foreign businesses.Smaller companies, many with stalls crowded with Chinese business people, were also keen to take advantage of post-pandemic opening. “In Shanghai it’s our first time because before it was Covid,” said Alexandre Ebralidze, who was representing a Georgian wine business. “It’s a huge market,” he added. “We are trying to develop step by step.”Pickering, an electronics group headquartered in the English town of Clacton-on-Sea, also attended for the first time. “I wasn’t really too sure how many individuals would be interested to come and talk to us,” said head of marketing Joe Woodford, adding the footfall exceeded his expectations, with hundreds of visitors to the stand.Woodford said the group stood to benefit from rapid industrial evolution in the country. “As China accelerates its manufacturing and its manufacturing costs go up, they’re obviously going to have to do more automation, and that gives us as a company an opportunity to grow into that sector.”This year’s expo suggested the trend towards greater localisation of overseas companies in China was continuing More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.On November 19 1919, the US Senate repudiated the Versailles Treaty. With that decision, the US withdrew its might from maintaining what had been agreed in the aftermath of the first world war, leaving this task to the British and French, who lacked both the will and the means to do so. The second world war followed. After that conflict, the US played a far more productive role. Today, the world is still in many ways the one the US made. But for how much longer will that be the case? And what might follow it? The outcome of the next presidential election might answer these questions, not just decisively, but, alas, very badly.Recent polls suggest that almost 55 per cent of US voters disapprove of Joe Biden’s performance. They also suggest that Trump is slightly ahead of Biden in head-to-head polling before the election now a year away. Finally, they suggest that Trump is ahead of Biden in five of the six most important “battleground” states. In all, a Trump victory is clearly and disturbingly plausible. (See charts.)What would that mean? The most important answer is that the US, not just the world’s most powerful democracy, but its saviour in the 20th century, is no longer committed to democratic norms. The most fundamental of such norms is that power has to be won in free and fair elections. Whether US presidential elections are “fair” is debatable. But they do have rules. Efforts by the incumbent to overthrow those rules amount to insurrection. That Trump attempted to do so is not debatable. Neither is the absence of evidence of fraud to support his attempted coup. He is properly under indictment. Yet he might still win a presidential election. One reason why he might do so is that close to 70 per cent of people who identify as Republicans say they believe his lies. This is shocking, though, alas, not that surprising.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.What would another Trump presidency mean for the US, beyond an endorsement of a man who attempted to overthrow the constitution? Obviously, the answer would depend partly on the balance in Congress. Yet it would be wrong to draw additional comfort from how he behaved last time. Then he relied on quite traditional figures from the military and business. Next time will be different. “Maga” is now a cult with a sizeable number of believers.A crucial domestic plan of Trump’s is to replace the career civil service with loyal servants of the president. The excuse is the alleged existence of a “deep state”, by which critics mean knowledgeable career civil servants whose loyalty is to the law and the state, not to the person in power. One reason this is objectionable is that modern government cannot run without such people. The bigger reason is that if the intelligence, homeland security and internal revenue services, the military, the Federal Bureau of Investigation and the Department of Justice are subservient to the whims of the head of state, one has autocracy. Yes, it’s that simple. With a vengeful head of state, abuses of power could be pervasive. This would not be the US we have known. It might be more like Viktor Orbán’s Hungary or even Recep Tayyip Erdoğan’s Turkey.What might this mean for the world?Most obviously, embrace by the US of a man and a party that have openly repudiated the central norm of liberal democracy would dishearten those who believe in it and encourage despots and their lackeys everywhere. It is hard to exaggerate the effect of such a betrayal by the US.The mixture of this despair with Trump’s avowedly transactional approach would weaken, if not destroy, the trust on which current US alliances are based. Americans are right to decry the freeriding of most allies. There is no doubt, above all, that Europeans (among which the UK is included) must do more. But the alliance needs a leader. For the foreseeable future, the US has to be that leader. With Russia threatening Europe, and China a peer competitor, alliances are going to be more important than ever — not just for its allies, but for the US, too. Trump neither understands nor cares about this.Then there are the implications for the world economy. Trump is proposing to introduce a 10 per cent across-the-board tariff on all imports. This would be a contemporary (albeit milder) version of the infamous Smoot-Hawley tariff of 1930. It would surely lead to retaliation. It would also do huge damage to the World Trade Organization, by repudiating US commitments to lower tariff barriers over many decades.As important is likely to be the impact on efforts to tackle climate change. The US itself would presumably reverse many measures in Biden’s Inflation Reduction Act. As significant might be a likely US withdrawal from efforts to promote investment in clean energy in emerging and developing countries.Prospective relations with China must also be in question. Here the changes might not be that dramatic, because hostility to China’s rise is bipartisan. But the opposition to China would be less about ideology under Trump, who cares not a whit about such differences between autocracies and democracies. He rather prefers the former. It would become just a contest over power, with Trump trying to keep the US number one. How differently that would turn out is unclear. Trump might seek to turn Russia against China, as Nixon did China against the Soviet Union. Abandonment of Ukraine might be his bait.One Must-ReadThis article was featured in the One Must-Read newsletter, where we recommend one remarkable story each weekday. Sign up for the newsletter hereA second Trump presidency might not ruin the US forever. But both it and the rest of the world would lose their innocence. We would have to adapt to the reality that the US had re-elected a man who had openly tried to subvert its democracy. It is possible that the indictments against Trump will save the day. But that fragile hope highlights today’s threat to [email protected] Martin Wolf with myFT and on X More

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