Economy

WASHINGTON (Reuters) – U.S. passenger railroad Amtrak CEO Stephen Gardner will testify on June 6 before a U.S. House Transportation and Infrastructure railroads subcommittee, a spokesperson for the panel said on Wednesday, as traffic rebounds after a pandemic-driven dip.Gardner and Northeast Corridor Commission Executive Director Mitch Warren will testify at a hearing on Amtrak operations examining the challenges and opportunities for improving efficiency and service.Amtrak did not respond immediately to a request for comment.Traffic on the busy Northeast Corridor connecting Boston and Washington more than doubled in the 12-month period ending Sept. 30 to 9.2 million passengers.Amtrak wants to expand dramatically across the United States and add up to 39 corridor routes and up to 166 cities by 2035 and plans to hire 3,100 workers this year. It is also modernizing major rail stations and rebuilding key infrastructure.Congress in November 2021 approved $22 billion for Amtrak as part of a $1 trillion bipartisan infrastructure bill.The Biden administration in March sought $3.1 billion in annual funding for Amtrak for the 2024 budget year on top of $4.4 billion in funding the railroad will receive from the infrastructure law. It is also seeking $700 million for a key New York Hudson (NYSE:HUD) River tunnel project.Aging infrastructure is preventing Amtrak from running trains at higher speeds along the Boston to Washington northeast corridor.In November, Amtrak said ridership jumped by more than 10 million riders in the year ending Sept. 30 and has nearly returned to pre-COVID-19 levels. Amtrak said ridership rose 89% over 2021 levels to 22.9 million riders, up 10.8 million passengers over the prior year.Overall ridership hit about 85% of pre-COVID levels in the last six months of the 2022 budget year, Amtrak said, adding it expects passengers and revenue to rise above 90% of pre-COVID levels by September 2023. More

Some analysts have described local government financing vehicles (LGFVs) as the “black hole” of China’s financial system, with debts of more than $9 trillion and rising. But Beijing is counting on their continued spending to help lift a patchy economic recovery.Sales by LGFVs of so-called “pearl bonds”, which are issued as foreign debt in Shanghai’s free trade zone, have soared to a record 72 billion yuan ($10 billion) so far this year, official data shows – nearly double last year’s total.Analysts say the fundraising spree is due to the market’s offshore designation, which makes it an elegant alternative for local vehicles frozen out of onshore borrowing by tighter rules on their finances since 2021. LGFVs accounted for about two-thirds of the issuers and 60% of the debt sold this year nation-wide, according to Reuters’ calculations.Among all the newly-issued FTZ bonds this year, 55, or two-thirds of all 82 issuers, were LGFVs, according to Reuters’ calculations.The market has also offered favourable pricing relative to rising global rates due to surging dollar financing costs in the wake of the U.S. Federal Reserve’s aggressive rate hikes. That has benefited both local issuers and Chinese banks which are the dominant buyers of such debt — underscoring the broader systemic risks of such concentrated exposure to LGFVs’ burgeoning debts. “Domestic financing policies for district and county-level LGFVs are still strict, and financing channels are limited,” said Shi Xiaoshan, senior analyst at CSCI Pengyuan Credit Rating Co Ltd.”For LGFVs with relatively low credit ratings, overseas financing is still an important financing channel.”The “pearl” or free trade zone (FTZ) bonds have been around since 2016 but are only now becoming popular as tighter central government supervision on LGFV debts starts to bite. About 5.5 trillion yuan worth of onshore LGFV bonds are due to mature this year, according to ratings agency Fitch, the highest since 2021.Although bonds issued in FTZs can be in any currency, all new issuances this year were denominated in yuan.”LGFV issuers are active in the FTZ bond market because they require funding,” said Royston Quek, managing director of debt capital markets at Haitong International Securities in Hong Kong. “The onshore market is closed to some of them.” AMBIGUOUS POSITIONING”Pearl bonds” differ from other offshore bonds as trades are cleared by the state-owned China Central Depository & Clearing Co, rather than a global clearing house.To participate, investors must register at the CCDC. In practice, almost all the 30 active accounts are Chinese banks, whose buying power has put the market into a sweet spot.Despite concerns about LGFVs fiscal health and the country’s sputtering economic rebound, coupons of around 4-5% for three-year terms are much lower than semi-government borrowers can get abroad as well as being a fair bit higher than the 3-4% return that banks could expect from loans to a state-owned enterprise.One recent deal, for example, was Quzhou Industrial Development Group Co, of China’s eastern province of Zhejiang, which issued 500 million yuan of 3-year FTZ bonds with a coupon of 4.2%. China’s 10-year sovereign bonds are trading at just under 3%.”How big the FTZ market could grow depends on how much Chinese banks could allocate their risk limits to FTZ bond issuers and if other investor segments decide to get involved,” said Tim Fang, head of Greater China debt capital markets at Credit Agricole (OTC:CRARY) CIB.STRING OF PEARLSTo be sure, the market also seems to have at least the implicit backing of authorities, as its sudden popularity coincides with a push to broaden yuan financing.Financial regulators and lenders, including Shanghai Pudong Development Bank and Bank of Communications, held events in May to promote the bonds.”Pearl bonds” expand the scale of offshore yuan transaction and promote yuan internationalisation, Zhang Hong, director of the Pudong New Area Financial Regulatory Bureau said at a forum in Shanghai.Still, some bankers say the sudden promotion and influx of funds has raised eyebrows and questions over how investments and currency flows into such bonds ought to be categorised.”Due to the ambiguous positioning of the free trade zone, in the actual practices, FX regulators are vague and inconsistent about whether foreign debt in the free trade zone needs to be registered and managed,” China Chengxin International Credit Rating said in a note. China’s National Development and Reform Commission, which is in charge of granting foreign debt quotas in China, did not immediately respond when contacted by Reuters. The State Administration of Foreign Exchange, the country’s FX regulator, did not immediately comment.($1 = 7.1 Chinese yuan renminbi) More

BENGALURU (Reuters) – Australia’s housing market outlook has improved significantly, with home prices expected to on average stagnate this year compared to the near double-digit fall predicted three months ago, according to a Reuters poll of housing analysts.After slumping about 9% from May 2022 to February, Australian home prices rose for a second straight month in April, suggesting the fall in the country’s property prices had bottomed out and the market was now rebounding.That turnaround was partly down to expectations the Reserve Bank of Australia is mostly done with its policy tightening, enticing cash-rich home buyers to go house hunting again.The May 16-31 Reuters poll of 14 property analysts showed average home prices stagnating this calendar year, a significant improvement from the just over 9% fall predicted in a March survey.They were then forecast to rise 4.5% in 2024, almost twice the expected rate from the previous poll.However, major local banks have differing views on the outlook. While ANZ and Westpac forecast no growth this year, CBA expected a 3.0% rise and NAB predicted a 4.0% decline in prices.”The recent upturn has come as a surprise to us,” said Adelaide Timbrell, senior economist at ANZ, who said the sharp rise in interest rates previously had them forecasting a 10% decline this year but said “we now think most of the weakness is behind us.””We did expect that strong household income growth and large savings buffers would provide a cushion for the fall in house prices. It’s possible that these are providing more support than we originally anticipated,” she added. Analysts also revised their forecast of the peak-to-trough fall to a median of just under 10% from the previous survey’s 16% decline.That was modest compared to the 20% top-to-bottom drop predicted in New Zealand house prices and only a fraction of the 25% surge during the pandemic alone.”The shift upwards…has arrived earlier than we anticipated,” said Gareth Aird, head of Australian Economics at CBA, which has the country’s largest mortgage book. They had long held a peak-to-trough forecast decline of 15%. “We are almost at the top of the RBA’s hiking cycle, which means the headwind on property prices from rates ratcheting higher has largely run its course.”The RBA has hiked rates by 375 basis points so far and it was a close call in a separate Reuters poll as to whether it was now done at 3.85% or would go for one more 25 basis point lift. Markets are pricing in an August move to 4.10%.But affordability remains a problem for most first-time home buyers as prices were still beyond their reach. Seven of nine analysts who answered an additional question said affordability over the coming year would worsen. Two said it would improve.”All measures of housing affordability are poor. Despite the fall in prices from their highs it takes over 10 years for someone on average full-time earnings to save for a deposit, versus five years 30 years ago,” said Shane Oliver, chief economist at AMP (OTC:AMLTF).(For other stories from the Reuters quarterly housing market polls:) More

A bipartisan coalition was set to push through the compromise struck by Speaker Kevin McCarthy and President Biden, even as lawmakers in both parties signaled their displeasure with the plan.The House on Wednesday was poised to push through legislation negotiated by President Biden and Speaker Kevin McCarthy to suspend the debt ceiling and set federal spending limits, as a bipartisan coalition lined up to cast a critical vote to pull the nation back from the brink of economic catastrophe.The bill would defer the federal debt limit for two years — allowing the government to borrow unlimited sums as necessary to pay its obligations — while imposing two years of spending caps and a string of policy changes that Republicans demanded in exchange for allowing the country to avoid a disastrous default. The vote, expected Wednesday night, was coming days before the nation was projected to exhaust its borrowing power, and after a marathon set of talks between White House negotiators and top House Republicans.With both far-right and hard-left lawmakers in revolt over the deal, congressional leaders cobbled together a coalition of Republicans and Democrats willing to drag the bill over the finish line, throwing their support behind the compromise in an effort to break the fiscal stalemate that has gripped Washington for weeks.It nearly collapsed on its way to the House floor, when hard-right Republicans sought to block its consideration, and in a suspenseful scene, Democrats waited several minutes before swooping in to supply their votes for a procedural measure that allowed the plan to move ahead.Representative Dan Bishop of North Carolina, along with other hard-right House Freedom Caucus members, tried to block the procedure to advance the debt deal to a vote on Wednesday.Haiyun Jiang for The New York TimesThe deal would suspend the $31.4 trillion borrowing limit until January 2025. It would cut federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by effectively freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025, which is considered a cut because it would be at a lower level than inflation. The legislation would also impose stricter work requirements for food stamps, claw back some funding for I.R.S. enforcement and unspent coronavirus relief money, speed the permitting of new energy projects and officially end Mr. Biden’s student loan repayment freeze.The compromise was structured with the aim of enticing votes from both parties, allowing Republicans to say that they succeeded in reducing some federal spending — even as funding for the military and veterans’ programs would continue to grow — while allowing Democrats to say they spared most domestic programs from significant cuts.Ahead of the series of votes on Wednesday, Mr. McCarthy urged his members to support the bill, framing it as a “small step putting us on the right track,” and promoting the spending cuts and work requirements Republicans won in the deal.“Everybody has a right to their own opinion,” he said. “But on history, I’d want to be here with this bill today.”In the Senate, both Democratic and Republican leaders said they would quickly take up the legislation and push to get the package to Mr. Biden as swiftly as possible, with Senator Chuck Schumer, Democrat of New York and the majority leader, warning that lawmakers would need to approve the bill without changes to meet the June 5 deadline when the Treasury Secretary Janet L. Yellen has said the government would default without action by Congress.“I cannot stress enough that we have no margin for error,” Mr. Schumer said. “Either we proceed quickly and send this bipartisan agreement to the president’s desk or the federal government will default for the first time ever.”Senator Chuck Schumer, Democrat of New York and the majority leader, warned that lawmakers would need to approve the bill without changes to meet a June 5 deadline to avert a default.Haiyun Jiang for The New York TimesPassage of the deal would be a major victory for Mr. McCarthy, a California Republican who faced a massive challenge in shepherding a debt-ceiling increase through a narrowly divided chamber populated by Republicans who have long refused to raise the borrowing limit. Few had expected that Mr. McCarthy would be able to unite his fractious conference around any such measure, much less one negotiated with Mr. Biden, without prompting an attempt by his right flank to oust him.As of Wednesday, no such effort had materialized, thought there still may be political consequences ahead for Mr. McCarthy. Representative Dan Bishop, Republican of North Carolina and a member of the ultraconservative Freedom Caucus, has publicly said that he considered the debt and spending deal grounds for removing Mr. McCarthy from his post. Another member of the group, Representative Ken Buck, Republican of Colorado, told CNN that its members would have “discussions about whether” to try to oust him.“I’m not suggesting the votes are there to remove the speaker, but the speaker promised that we would operate at 2022 appropriations levels when he got the support to be speaker,” Mr. Buck said. “He’s now changed that to 2023 levels plus one percent. That’s a major change for a lot of people.”Under the rules House Republicans adopted at the beginning of the year that helped Mr. McCarthy become speaker, any single lawmaker could call for a snap vote to depose him, a move that would require a majority of the House.Hard-right lawmakers were nonetheless furious over the compromise, savaging the bill and Mr. McCarthy’s handling of the negotiations as a betrayal.“No one sent us here to borrow an additional $4 trillion to get absolutely nothing in return,” said Representative Chip Roy, Republican of Texas, who promised “a reckoning about what just occurred.”In a dramatic display of their displeasure, 29 conservative Republicans took the unusual step of breaking ranks on a procedural vote to take up the legislation, normally a formality that passes entirely along party lines.In a dramatic tableau on the House floor, as the Republican defections piled up, imperiling the deal, Representative Hakeem Jeffries of New York, the minority leader, finally raised a green voting card in the air, signaling to fellow Democrats that it was time go ahead and bail Republicans out. A stream of centrist and veteran lawmakers — 52 in all — crowded into the well of the House and voted “yes,” rescuing the deal from collapse.After a pause on the floor when Republicans came up short on votes, Representative Hakeem Jeffries, the New York Democrat and minority leader, gave the assent to a group of Democrats to help move toward a vote on the deal.Kenny Holston/The New York TimesMr. Jeffries had gathered Democrats in the Capitol on Wednesday morning, along with top White House officials who had helped broker the deal, and urged them to back the compromise. He argued that Mr. Biden had successfully fended off the worst of Republicans’ demands, and reiterated that allowing the nation to default was not an option.“I made clear that I’m going to support legislation that is on the floor today,” Mr. Jeffries told reporters at a news conference after the meeting. “And I support it without hesitation or reservation or trepidation.”But progressive Democratics bristled at the package, and said they could not support new work requirements for safety net programs or incentivize Republicans from weaponizing the debt ceiling as a political cudgel.“Republicans need to own this vote,” said Representative Alexandria Ocasio-Cortez, Democrat of New York, who took particular aim at changes to the Supplemental Nutrition Assistance Program and a measure to expedite production of a gas pipeline. “This was their deal, this was their negotiations. They’re the ones trying to come in and cut SNAP, cut environmental protections, trying to ram through an oil pipeline through a community that does not want it.”“Republicans need to own this vote,” said Representative Alexandria Ocasio-Cortez, Democrat of New York, one of a group of Democrats displeased with Republican provisions in the bill.Kenny Holston/The New York Times“This has been a hostage situation,” Representative Greg Casar, Democrat of Texas, said. “We’re going to get out of the hostage situation. I appreciate the president negotiating down the ransom payment for the hostage. But I think it’s appropriate for progressives to say we never want to be in this situation again.”Adding to progressive discontent are provisions in the deal that claw back some unspent money from a previous pandemic relief bill, and reduce by $10 billion — to $70 billion from $80 billion — new enforcement funding for the I.R.S. to crack down on tax cheats. Other measures in the bill include a provision meant to speed the permitting of certain energy projects and a provision meant to force the president to find budget savings to offset the costs of a unilateral action, like forgiving student loans — though administration officials could circumvent that requirement.The deal also includes measures meant to avert a government shutdown later this year.Carl Hulse More

LONDON (Reuters) – Britain has a bigger inflation problem than the United States or the euro zone, with both large headline price rises and growing signs of persistence in underlying pressures, Bank of England policymaker Catherine Mann said on Wednesday.Mann, who has been the BoE’s keenest advocate of interest rate increases since she joined in 2021, also saw a risk of future financial market volatility as the global economy adjusts to higher borrowing costs.British consumer price inflation hit a 41-year high of 11.1% in October and in April, at 8.7%, was the joint highest alongside Italy’s among the world’s big advanced economies, sparking a sell-off in bond market as investors bet on more BoE rate rises.Core inflation – which excludes volatile food and energy prices, and which Mann said was a better guide to future inflation trends – rose to its highest since records began in 1992 at 6.8% last month.Mann said core inflation was showing signs of being kept high by British businesses’ ability to push through price rises, as well as increased wages, while headline inflation had also been slower to fall back towards the core rate than elsewhere.”The gap (between headline and core CPI) that I have in my country is more persistent than the gaps that we see in either of my neighbours, the U.S. or the euro area,” Mann said in a policy discussion hosted by Swiss asset manager Pictet.”There is a gap between the headline, which is incorporating energy which went up really high and now has come down, and core where we do start to see the implications coming through pricing channels, through wage negotiations, into something that is persistent,” she added.Left-over savings from the COVID-19 pandemic had increased British households’ ability to absorb companies’ price rises, while an increased minimum wage, which rose 9.7% in April, might have had knock-on impacts further up the pay scale, Mann said.The BoE has raised rates 12 times since December 2021, taking them to 4.5% this month. Markets expect them to reach 5.5% later this year after last week’s stronger-than-expected inflation data.BoE Governor Andrew Bailey and other top officials at the central bank have said they will respond if there are signs of persistently strong inflation pressure.Mann also flagged a tension between the long-term level of interest rates needed to control inflation and the level needed for a stable financial system, which could bring “an awful lot of volatility” for exchange rates, asset prices and inflation.”The metaphor that is appropriate here … is: ‘The water is calmest before the falls’,” she said. More

LONDON (Reuters) – Starting salaries advertised in Britain reached the highest level in two years in April and there were the most job vacancies since December, suggesting some recovery in the labour market, according to job search website Adzuna. Adzuna’s survey showed advertised annual salaries had increased each month since October 2022, reaching an average of 37,658 pounds ($47,528) in April, up 2.9% on a year earlier. This was still slightly below the 37,898 pounds average in April 2021, when they were the highest since Adzuna’s records began in 2016.Trends in advertised salaries differ from those collected by Britain’s Office for National Statistics for average earnings across the workforce as a whole. Basic wages in Britain in the first quarter of this year were 6.7% higher than a year earlier and were an average of 598 pounds a week in March – equivalent to 31,096 pounds a year, an all-time high in nominal terms.However, pay has not kept up with annual consumer price inflation in Britain, which eased to 8.7% in April.The Bank of England, which increased interest rates to 4.5% in May and is expected to raise Bank Rate further, is closely monitoring inflation pressure in the jobs market but has said it expects pay growth to slow.Tony Wilson, director of the Institute for Employment Studies, said the Adzuna figures potentially reflected continued strong demand in the economy rather than chronic shortages and jobs going unfilled. “Combined with pretty modest growth in advertised salaries, this also suggests that some of the inflationary pressures from the labour market may be starting to ease,” Wilson said.Overall online job adverts climbed 0.18% month-on-month to about 1.046 million postings in April, the highest since December 2022. Previous ONS data showed 1.086 million job vacancies in April on a non-seasonally adjusted basis, down from 1.359 million a year earlier.Andrew Hunter, co-founder at Adzuna, said his data pointed to recovery in Britain’s job market, but that there was still some volatility.”It’s clear that the job market is still volatile, but we are encouraged by the steady growth we’re seeing.”There was also a steady climb in the Adzuna’s gauge of the average number of people applying for the same role. ($1 = 0.7923 pounds) More

BEIJING/HONG KONG (Reuters) -China-focused venture capital fundraising is heading for its weakest first half year in at least eight years, data from researcher Preqin showed, as a teetering economic recovery and Sino-U.S. tensions unsettle investors and startups.Concern about the impact of a weak business environment on startups’ prospects and valuations means a turnaround in fundraising may take time as venture funds take longer to evaluate potential deals, investors and advisers said.”The current market presents bifurcated fundraising paths: U.S. dollar funds continue to face a challenging environment with their much more risk-averse investors while RMB (yuan) funds are increasingly relying on state-owned or government-backed investors,” said Weiheng Chen, senior partner and head of Greater China practice at law firm Wilson Sonsini. “Geopolitical de-risking overhang and economic uncertainties have also been impacting the deal making,” he said.The drop reflects a turn in fortune for startups in China after years of rapid growth fuelled by ample funding. U.S. security concerns and tit-for-tat trade restrictions have left dollar investors on the sidelines while domestic yuan funding diminished amid China’s post-COVID-19 economic woes.U.S. dollar-denominated fundraising focused on China has reached $610 million so far this year, while yuan-denominated funding totals $1.65 billion, Preqin data showed.That compared with $4.11 billion and $4.34 billion equivalent in yuan over January-June last year, and was a far cry from their respective peaks of about $5.52 billion in dollar funds raised in the first half of 2018 and $48.22 billion in yuan funds raised in the same period in 2017.Venture deals by value, at $27.2 billion as of May 30, dropped to the lowest since 2020, when the onset of the coronavirus pandemic derailed business activity.Only two unicorns – or startups with valuations of $1 billion or more – have been minted in the world’s second-largest economy so far this year, CB Insights data showed.Consumer sector startups face a prolonged fundraising cycle, said Ji Xing, managing director at financial advisor Lighthouse Capital.Chip designers could be less attractive to investors, too, due to weaker demand for downstream products, Ji said.Declining valuations of publicly listed firms and lukewarm investor appetite for initial public offerings have also made it difficult for startups to seek funds, dealmakers said.”Companies have not been able to achieve desirable valuations in their offshore listings, which have factored into startups’ early stage capital raises as investors assess their exit prospects,” said Ming Jin, managing partner at boutique investment bank Cygnus Equity.    However, a nascent artificial intelligence-generated content (AIGC) sector could spawn meaningful deal activity in the second half of this year, especially for U.S. dollar-denominated venture funds, investors and advisers said.    “Dollar investors tend to focus more on the disruptive opportunities brought by the underlying infrastructure evolvement and are willing to pay more premiums for such opportunities,” said Lighthouse’s Ji.Wayne Shiong, partner at venture firm China Growth Capital, said he expected a pick-up in venture deals this year mainly driven by top-league, cash-ample funds keen to deploy dry powder that they have been sitting on throughout the pandemic. More

(Reuters) -Investors were awaiting a critical vote in the U.S. House of Representatives over the $31.4 trillion debt ceiling late on Wednesday, which could further ease concerns of a destabilizing default that have hung over markets for most of 2023.Any stock market rally on passage of the deal would likely be short-lived, with the S&P 500 already near its highest levels since August 2022, said Alan B. Lancz & Associates Inc., an investment advisory firm.”I wouldn’t be surprised if there was a reflex rally if things go through smoothly,” he said. “But that would be short term in duration, just because we’re at the higher end of our range already.”Others believed a resolution would give markets a boost.If the deal passes, “it would take this issue off the table for the next couple of years and could be a tailwind for markets in June,” wrote Brad McMillan, chief investment officer for Commonwealth Financial Network, in a Wednesday note. The S&P 500 closed down 0.6% on Wednesday in a decline some analysts pinned partly on remaining uncertainty over the vote. The index is up nearly 8.9% year-to-date. Debt ceiling concerns periodically weighed on stock markets over the last week, although most investors expected an 11th-hour agreement. Worries have been more apparent in the Treasury market, where some investors had for weeks avoided maturities coinciding with a possible default.The bipartisan deal on raising the debt limit – announced by the White House and House Republicans over the weekend needs support from both Speaker Kevin McCarthy’s Republicans and President Joe Biden’s Democrats to pass, as members of both parties object to significant parts of the bill.Investors have viewed the possibility of a U.S. default as an unlikely but potentially catastrophic event for global markets. House passage would send the bill to the Senate, where debate could stretch to the weekend, just before the June 5 date when the government could start to run out of money.Quincy Krosby, chief global strategist at LPL Financial (NASDAQ:LPLA), expects the bill to go to a vote only if lawmakers believe they have enough support to pass it.“I think both sides are going to make sure that they can count on the vote; otherwise they’ll just hold it back until they can reach the number,” she said. “Investors do think it’s going to pass. But until it’s signed, sealed and delivered, there is always the element of what if.”McCarthy predicted that the vote, expected around 8:30 p.m. (0030 GMT), would succeed, telling reporters, “It’s going to become law.” More