Economy

Newly elected House Speaker, Mike Johnson (R-La), has committed to avoiding a government shutdown during his recent appearance on FOX News’ “Sunday Morning Futures.” Congress faces a deadline of November 17 to pass legislation preventing a partial shutdown. Johnson’s proposed solution is a stopgap continuing resolution (CR) that extends funding until either January 15 or April 15 of next year, depending on the support from House Republicans.The GOP’s slim majority, which can only withstand four defections while passing legislation, may be put to the test with upcoming aid packages for Israel and Ukraine. The ousting of former House Speaker Kevin McCarthy (R-Calif) by eight GOP members led to a 22-day scramble for leadership, culminating in Johnson’s election.Goldman Sachs analysts caution that an extended reliance on short-term extensions decreases the likelihood of Congress securing a deal on full-year spending bills. This could potentially impact funding through to the end of the fiscal year on September 30, 2024.Earlier, Goldman Sachs had predicted a 2-3 week government shutdown this quarter due to geopolitical tensions including the Israeli conflict and U.S. air strikes in Syria. However, this prediction has now been nullified due to changes in House leadership. Despite this, Goldman Sachs’ economists, including Jan Hatzius, have emphasized potential triggers for future governmental disruptions such as unresolved policy disagreements and dependency on temporary extensions of spending bills. This could potentially lead to a shutdown in early 2024, resulting in instability in future government operations.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

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(Reuters) -Australia’s Treasury Wine Estates (OTC:TSRYF), the world’s biggest standalone winemaker, agreed to a $900 million buyout of California’s DAOU Vineyards, locking in a strategy of selling higher-margin luxury products amid uncertainty about trade with China.Treasury said it planned to fund the acquisition in part through a A$825 million ($525.53 million) equity raising at A$10.80 per share, a 10.7% discount to its closing price on Monday.The wine producer has been resetting its strategy in an attempt to diversify outside of China, which used to contribute a third of its profits, after Beijing imposed tariffs on Australian wine in 2021 when Canberra called for an inquiry into the origins of COVID-19.The Australian government said this month Beijing had agreed to an expedited review of the tariffs, expected to take up to five months, in a move the maker of Penfolds Grange said could help it rebuild its China business over time.DAOU fills a key Treasury Americas portfolio gap at the $20 to $40 per bottle range and strengthens the existing luxury portfolio above $40 per bottle, the Australian company said.The winemaker’s combined premium and luxury portfolios delivered double-digit gross profit growth in fiscal 2023, according to its annual report. “On face value the acquisition rationale is solid, and financial metrics look attractive….the concern investors will have is that TWE Americas has been underperforming in recent times with the Frank Family Vineyard acquisition driving the earnings,” E&P Capital retail analyst Phillip Kimber said in a note. The deal is expected to near full completion by the end of 2023 and to contribute earnings before interest and taxes between $23 million and $25 million in the second half of 2024. Including cost synergies of more than $20 million, the acquisition is expected to be mid to high-single-digit earnings per share (EPS) accretive in fiscal 2025, the first year of Treasury owning DAOU. Treasury said it would also issue A$157 million of new shares to the existing owners of DAOU. ($1 = 1.5699 Australian dollars) More

WASHINGTON (Reuters) – The Republican-led U.S. House of Representatives on Wednesday plans to vote on legislation that would bar the Biden administration from awarding funds to California’s High-Speed Rail project.The White House on Monday said it opposed the bill that would also dramatically cut funds for U.S. passenger railroad Amtrak and mass transit programs.The California high-speed rail program aims to ultimately move travelers from San Francisco to the Los Angeles basin at speeds above 200 miles per hour in under three hours.California recently won $202 million in federal funds for grade separation projects and is seeking $8 billion in federal grants over five years. California voters approved an initial $10 billion bond for the project in 2008. The initial segment is now estimated to cost up to $35 billion and launch service as early as 2030. The full San Francisco to Los Angeles project is estimated to cost between $88 billion and $128 billion.California Governor Gavin Newsom said in an Oct. 13 letter to President Joe Biden that combined with $754 million in state funding, the $3 billion federal grant would allow the state to complete an initial 119-mile segment, buy six electric high-speed trains and construct a new high-speed rail station in Fresno. In June 2021, the Biden administration restored a $929 million grant for the California high-speed rail project. In 2019, then-President Donald Trump pulled funding for the project, hobbled by delays and rising costs, calling it a “disaster.”Congress approved $66 billion for rail as part of the 2021 $1 trillion infrastructure bill, with Amtrak receiving $22 billion and $36 billion allocated for competitive grants.Amtrak’s annual federal funding would be cut by 64% under the Republican proposal.The California High-Speed Rail Authority declined to comment on the legislation. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Malaysia is rushing to attract investment into industries producing high-tech goods such as semiconductors and electric vehicles, driving to bolster its position as a manufacturing hub and a key link in global supply chains.Government officials and business leaders this month highlighted the role the nation could play during the Malaysia-Japan Economic Dialogue, hosted by the Federation of Malaysian Manufacturers (FMM), Nikkei and the Japan Chamber of Commerce and Industry.Tengku Zafrul Abdul Aziz, Malaysian minister for investment, trade and industry, said the country was looking to expand its market access and build resilient supply chains for manufacturing sectors.“By leveraging our existing economic ties, we can drive economic growth, facilitate technology transfer, expand market access, diversify our trade sectors and bolster our relations further,” the minister said.In September, Malaysia announced a new industry master plan that would require RM95bn ($20bn) in investments over seven years to build a more advanced manufacturing sector. Priority industries include electronics, chemicals and EVs. The country also aims to create 3.3mn jobs.This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan. Subscribe | Group subscriptionsZafrul added that the plan aimed to “position Malaysia as a preferred investment destination with the right ecosystem in place” to support high-tech and value-added manufacturing.Under the scheme, the government aims to boost the value of high-end manufacturing to RM587.5bn by 2030, up 61 per cent from 2022. Malaysia’s manufacturing sector accounts for more than 20 per cent of the country’s gross domestic product and contributes 80 per cent of its total exports.Sikh Shamsul Ibrahim, senior executive director of the Malaysian Investment Development Authority, said at the forum that Malaysia aimed to take advantage of the realignment and redistribution in the diversification of the global supply chain amid the ongoing trade war and geopolitical tensions.“Supply chain resiliency is among the major sectors we would like to focus on — to have a greater link with [our] trading partners,” Ibrahim said, adding that high-growth sectors, including semiconductors, electric vehicles and renewable energy, were among the priorities.Sikh Shamsul Ibrahim speaks at the Malaysia-Japan Economic Dialogue in Kuala Lumpur More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Asia’s economic calendar is jammed with top-tier releases on Tuesday, from Chinese purchasing managers index data to third quarter GDP figures from Hong Kong and Taiwan, but one stands above all others – the Bank of Japan’s policy meeting.Will the BOJ spook markets on Halloween and the final trading day of the month by effectively tightening monetary policy further with another tweak to its ‘yield curve control’ policy?It is a huge week for global markets and policy – the BOJ’s decision on Tuesday is the first of three major central bank pronouncements, with the U.S. Federal Reserve coming on Wednesday and the Bank of England on Thursday. Speculation that the BOJ will act ramped up on Monday after Nikkei, citing sources close to the matter, reported that policymakers may further tweak YCC to allow the 10-year Japanese Government Bond yield to rise above 1%.The yen rallied strongly for a second straight session, the 10-year yield rose again to a fresh decade-high nudging 0.89%, and the benchmark Nikkei 225 stock index gave back all of Friday’s gains and slid 1%.It is shaping up to be a year of two halves for Japanese stocks as the prospect of the BOJ abandoning its super-loose monetary policy becomes more likely. The Nikkei is down 3.6% this month, on track for its biggest monthly loss since December, and is down 8% so far in the second half of this year. But it is still up 17% year-to-date thanks to a stunning 27% rally in the January-June period that saw it scale a 33-year high close to 34,000 points, as many investors bet that Japan Inc was back after years – decades – in the doldrums.Negative interest rates, the BOJ accumulating 45% of all outstanding Japanese Government Bonds, and a 30% slide in the yen’s value against the dollar since early 2021 made Japanese stocks extremely attractive. By real effective exchange rate measures, the yen is its weakest in over 50 years, luring foreign buyers in to snap up assets on the relative cheap.The question now is, how much of that is firmly in the rear-view mirror? And how far and how powerfully might the elastic snap back if a paradigm shift is underway and domestic borrowing costs keep on rising? Inflation in Japan has finally taken off, and for the first time in decades, appears to be sticking well above 2%.Also on Tuesday, China’s PMI figures are expected to show that manufacturing activity grew slightly again in October, at the same pace as the previous month, according to a Reuters poll forecast. After a deeply disappointing first half of the year, Chinese economic data have started to come in above expectations in recent months. Will this trend continue into the start of the fourth quarter? Here are key developments that could provide more direction to markets on Tuesday:- Bank of Japan policy decision- China PMIs (October) – Japan unemployment, industrial production, retail sales (September) (By Jamie McGeever) More

WASHINGTON (Reuters) – U.S. House of Representatives Republicans on Monday introduced a plan to provide $14.3 billion in aid to Israel by cutting funding for the Internal Revenue Service, setting up a showdown with Democrats who control the Senate. In one of the first major policy actions under new House Speaker Mike Johnson, House Republicans unveiled a standalone supplemental spending bill only for Israel, despite Democratic President Joe Biden’s request for a $106 billion package that would include aid for Israel, Ukraine and border security. Johnson, who voted against aid for Ukraine before he was elected House speaker last week, had said he wanted aid to Israel and Ukraine to be handled separately. He has said he wants more accountability for money that has been sent to the Kyiv government as it fights Russian invaders. “Israel is a separate matter,” Johnson said in an interview on Fox News last week, describing his desire to “bifurcate” the Ukraine and Israel funding issues. Johnson has said bolstering support for Israel should top the U.S. national security agenda in the aftermath of the Oct. 7 attack by Hamas militants that killed more than 1,400 people and saw more than 200 others taken hostage. Democrats accused Republicans of stalling Congress’ ability to help Israel by introducing a partisan bill. White House press secretary Karine Jean-Pierre issued a statement accusing Republicans of “politicizing national security” and calling their bill a non-starter. To become law, the measure would need to pass the House and the Senate and be signed by President Biden. “House Republicans are setting a dangerous precedent by suggesting that protecting national security or responding to natural disasters is contingent upon cuts to other programs,” Representative Rosa DeLauro, the ranking Democrat on the House Appropriations Committee, said in a statement. The House Rules Committee is expected to consider the Republican Israel bill on Wednesday. More

“Lower growth and higher interest rates will certainly impact on the government’s budget,” Governor Tiff Macklem told lawmakers in the House of Commons. “I don’t think fiscal policy in Canada is in a situation where it’s unsustainable. But I do think protecting our very good fiscal position is important” for social programs and prosperity, he said.Macklem noted that Canada had the lowest debt-to-gross domestic product ratio among the Group of Seven industrialized economies. Finance Minister Chrystia Freeland is due to release the government’s Fall Economic Statement (FES), which updates fiscal and economic forecasts and often includes new spending, as early as next week.She has said the FES will contain measures to help alleviate the housing crisis and cost-of-living issues while being fiscally responsible.Macklem also reiterated his message from last week, when the bank left its key overnight rate unchanged at a 22-year-high of 5%.”We held our policy rate steady (last week) because monetary policy is working to cool the economy and relieve price pressures, and we want to give it time to do its job,” Macklem said.”We will continue to assess whether monetary policy is sufficiently restrictive to restore price stability, and we will monitor risks closely,” he said.The bank said price risks were on the rise and inflation could exceed its 2% target for another two years.The bank increased rates 10 times between March 2022 and this July to tame inflation, which peaked at a four-decade high of 8.1% last year. It has since come down, hitting 3.8% in September, but it remains way above the BoC’s 2% target.”We have made a lot of progress reducing inflation, but we are not there yet, and we need to stay the course,” Macklem said. More