Economy

JetBlue said it saw a “high likelihood” of an antitrust suit by the Justice Department this week, but declared that the deal would foster competition.JetBlue Airways said Monday that it saw a “high likelihood” that the Justice Department would sue the company this week over its planned acquisition of Spirit Airlines. The $3.8 billion deal could create a new challenger to the nation’s four dominant carriers, but would add to industry consolidation.JetBlue said that it had long prepared for such a lawsuit and that its timeline for closing the deal was unchanged, provided it overcomes the expected challenge in court.“We believe there is a high likelihood of a complaint from D.O.J. this week, and we have always accounted for that in our timeline to close the transaction in the first half of 2024,” the company said.Critics of the deal say removing Spirit from the market would limit competition and further consolidate an already concentrated industry. While JetBlue is known for affordable fares, Spirit offers even lower prices, charging extra for everything from printing boarding passes at airport kiosks to selecting seats in advance. After the deal, JetBlue would reconfigure Spirit’s densely packed planes, removing seats, increasing legroom and adjusting the economics of each flight.According to two people familiar with the Justice Department’s plans, a government lawsuit will contend that after removing seats from Spirit planes, the combined airline would not be able to increase revenue per passenger without raising prices.Buying Spirit would allow JetBlue to accelerate its plans for growth. Today, JetBlue controls more than 5 percent of the U.S. airline market. After the acquisition, it would have a 10 percent share, making it the fifth-largest airline in the country. United Airlines, the fourth-largest carrier, has a 15 percent market share. Southwest Airlines, Delta Air Lines and American Airlines each have a more than 17 percent share.“JetBlue’s combination with Spirit allows it to create a compelling national challenger to these dominant airlines,” JetBlue said in a news release on Monday describing some of its arguments in favor of the deal.The acquisition would benefit consumers and disrupt the industry, it said, allowing JetBlue to bring low fares to new markets and forcing those large airlines to match its lower prices. JetBlue also said it had committed to giving up some of Spirit’s holdings in markets such as Boston, New York and Fort Lauderdale, Fla., where the combined airline would have an outsize presence.But the two people familiar with the Justice Department’s plans said its suit would assert that there was no guarantee that other airlines, with different cost structures from Spirit’s, would pick up Spirit slots that JetBlue might offer to shed.In addition to the Justice Department, the Transportation Department could also stand in the way of the deal by blocking the transfer of operating certificates, opponents of the sale have argued.After the expectation of a federal move to block the acquisition was reported on Monday, Spirit shares fell more than 8 percent. JetBlue shares were up about 1 percent.Unions representing workers at both airlines are divided on whether the merger should proceed. Last month, the Association of Flight Attendants-C.W.A., which represents 5,600 flight attendants at Spirit, wrote to Attorney General Merrick B. Garland and Transportation Secretary Pete Buttigieg to express support for the deal.“The JetBlue-Spirit merger will help to correct conditions in the industry with demonstrable improvements and protections for workers along with greater competition that benefits workers and consumers alike,” the union’s president, Sara Nelson, said in the letter. “This is the anti-merger, merger.”In a separate letter, the head of the Transport Workers Union, which represents 6,800 JetBlue flight attendants, asked Mr. Garland and Mr. Buttigieg to prevent the acquisition, arguing that it would violate antitrust laws and undermine competition and workers.In a letter in September, Senator Elizabeth Warren, a Massachusetts Democrat, asked Mr. Buttigieg to use his department’s “historically underutilized” authorities to intervene.JetBlue is also awaiting the outcome of a Justice Department antitrust lawsuit over the airline’s partnership with American in Boston and New York. A federal judge in Boston is expected to issue a decision in that case imminently.Lauren Hirsch More

LONDON (Reuters) – Valentine’s Day helped to boost British retail sales in February but volumes remained down on last year as households cut back on non-essential items, a survey published on Tuesday showed.The British Retail Consortium (BRC) said spending in store chains increased 5.2% in annual terms last month, well below the 6.7% rise in February 2022. Sales were up on the 4.2% rise in January.Helen Dickinson, BRC’s chief executive said retailers face volatile trading conditions as consumers will be worried about energy prices and their taxes which are set to rise further in April.The BRC figures are not adjusted for inflation, meaning the rise in sales masked a much larger drop in volumes.While the Bank of England has signalled that inflation has turned the tide, British households are still contending with inflation running at over 10%, more than five times the Bank’s 2% target.The BoE raised interest rates to 4% in February and hinted that it was close to ending its run of rate hikes but said there were concerns about inflationary pressure in the labour market. Financial markets expect interest rates, now the highest since 2008, to rise to 4.75% later this year.Despite recent signs of improvement in Britain’s economic prospects, Paul Martin, UK head of retail at KPMG which co-produces the figures, said the outlook for the retail sector will continue to be challenging with consumer spending falling in real terms.Separate data from Barclays (LON:BARC) showed consumer spending on payment cards rose by 5.9% year-on-year in February. Barclays said annual growth rates were impacted by the lifting of Omicron Plan B restrictions last year, which caused a spike in spending due to pent-up demand.Esme Harwood, Director at Barclays, said several categories saw growth taper off in February as cash-strapped shoppers, hit by higher prices and shortages in fruit and vegetables, changed their grocery shopping habits.”The recent fruit and veg shortages are forcing Brits to consider alternatives for their weekly shop, as they continue to look for savvy ways to offset rising food price inflation,” Harwood said. “Popular trends this month include buying ‘dupes’ of popular products, shopping at discount stores, and limiting Easter spending.” More

BOSTON (Reuters) – A social media influencer and self-proclaimed con artist pleaded guilty on Monday to fraudulently obtaining more than $1 million in COVID-19 pandemic-related loans from the U.S. government that she used to bankroll a lavish lifestyle that she flaunted on Instagram.Danielle Miller, whose scams in this and other cases were chronicled in a New York Magazine profile last year, appeared before a federal judge in Boston by video from a jail cell to plead guilty to wire fraud and aggravated identify theft charges.As a part of a plea deal with prosecutors, the 33-year-old agreed to forfeit $1.3 million and serve six years in prison, 16 months of which may overlap with a five-year sentence she received in October in a separate Florida bank fraud case. Her sentencing was set for June 27.Prosecutors said Miller used the identities of more than 10 people to fraudulently set up bank accounts and obtain more than $1 million in pandemic-related loans intended for small businesses. She used the money for travel and luxury purchases such as a Rolex, a Louis Vuitton bag and Dior shoes, and posted photos on Instagram of herself at luxury hotels in California where she used a bank account in the name of one of her victims.Originally from New York, Miller is the daughter of a former New York State Bar Association president and a graduate of the prestigious Horace Mann School. She was already facing charges in the separate Florida state court fraud case when she was arrested in May 2021 at a luxury apartment in Miami, where she had moved during the pandemic.”Honestly, I more so consider myself a con artist than anything,” Miller was quoted as saying in the New York Magazine article.The case is an example of fraud that became rampant as the federal government rushed to distribute more than $5 trillion in relief funds to help people, businesses and local governments affected by the pandemic.More than 1,000 people have been convicted of defrauding COVID-19 relief programs, the U.S. Government Accountability Office said last month. The White House last week said President Joe Biden plans to ask Congress to provide $1.6 billion in new funding to crack down on fraud tied to the programs. More

Ministers will use more than £800mn of cash sitting in dormant bank, pension and investment accounts to boost local communities and help vulnerable people in England struggling with the cost of living crisis.The Department for Culture, Media and Sport said on Tuesday that the Dormant Assets Scheme (DAS) would initially release £76mn tied up in forgotten bank accounts, before unlocking millions of pounds from dormant pension and investment accounts later in the year.Some £45mn of the initial funding will be awarded as interest-free loans by Fair4All Finance, a non-profit organisation, to 69,000 people contending with the sharp rise in living costs and 15-year high interest rates.Another £31mn will be disbursed by social investors Access and Big Society Capital to hundreds of charities, with the aim of making buildings owned by social enterprises more environmentally friendly through more efficient energy systems, such as solar panels and new boilers.Since 2011, the government has used the DAS to release almost £900mn from dormant bank accounts, which has gone towards generating social investment and helping financially vulnerable people.Dormant assets are defined as accounts that have been left untouched for long periods of time. The DAS attempts to reunite people with their lost funds, but it uses unclaimed money to support social and environmental initiatives.

DCMS said that after the release of the initial £76mn, a further £738mn would be made available from insurance, pensions, investment and wealth management products that have been left unclaimed.The government will also open the scheme to community wealth funds — pots of money released to deprived areas over a large timeframe, giving local residents the right to decide how the funds are spent. Sir Ronald Cohen, co-founder of Big Society Capital, which was set up in 2012, said: “Unclaimed assets is public money; it doesn’t belong to the banks or insurers, even though it sits on their balance sheet.”Civil society minister Stuart Andrew said: “The creation of community wealth funds will give local residents in some of the more deprived areas of the country the power to improve where they live and invest in what’s important to them.”Reclaim Fund Ltd, the company set up to manage the DAS’s money, aims to sign up pension and insurance groups such as Aviva in the coming months, with investment businesses and wealth managers joining later this year.Companies voluntarily commit to transferring money from the dormant assets they hold to the Reclaim Fund, which has enough cash to reimburse people who rediscover lost accounts after they have been closed down.The DAS has to date supported a range of projects including the Greater Manchester Homes Partnership, which has housed 355 homeless people with support from Big Society Capital, and Homebaked, a co-operative bakery and community land trust in Liverpool. More

China’s political leadership set a gloomy projection for growth in the world’s second-largest economy this weekend, despite the buzz of optimism following three years of closures during the coronavirus pandemic. Policymakers at the annual meeting of China’s rubber-stamp parliament in Beijing set a growth target of just 5 per cent for 2023, the lowest in decades and trailing last year’s Covid-era figure of 5.5 per cent, which it failed to reach.“The reason to choose a low target is to ensure they can hit it,” said Carlos Casanova, senior economist for Asia at investment bank UBP, who described the 5 per cent figure as a “floor” that should easily be exceeded, in part because of comparisons with last year’s weakness.China’s economy notched just 3 per cent growth in 2022 after the government imposed stringent lockdowns in big cities in an effort to stem the virus.Even if the 2023 figure is surpassed, the government’s caution signifies a sharply changed economic environment as China emerges from the shadow of the pandemic.

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Faced with a rolling property crisis, falling exports as global interest rates rise and the hangover from zero-Covid restrictions, policymakers are less concerned about a high target — a figure that has become closely watched after two decades of consistent outperformance — than with the threat of another disappointing reading. Xiangrong Yu, greater China chief economist at Citi, suggested that Beijing was concerned about “sentiment damage in case of another miss”. The bank forecasts growth of 5.7 per cent this year.While recent high-frequency data shows a quick recovery in activity, other indicators point to deeper systemic challenges. Property sales are declining year on year, albeit at a less severe rate than late last year, and many developers remain under pressure to restructure liabilities. Exports have fallen in each of the final three months of 2022, the latest available data shows.“The government was taking a very cautious approach in the face of a range of uncertainties,” said Tang Yao, associate professor of applied economics at Peking University, of the growth target. He noted that “uncertainty in the international environment” topped the list of concerns outlined by former Premier Li Keqiang, China’s number two official.Li is set to be replaced in a government reshuffle this week by Li Qiang, a close ally of President Xi Jinping.China weathered the early stages of the pandemic better than many of its peers, as high demand for its exports propped up the economy despite weaker consumption. In 2021 the country’s GDP expanded 8.1 per cent, though that figure was helped by the comparison with early 2020 when activity collapsed.

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A significant portion of that growth was also bolstered by net exports, which are now weakening as other big economies struggle to contain inflation. Tang said that while domestic consumption would rebound this year, China could be hit by a “severe” contraction in external demand.Dan Wang, chief China economist at Hang Seng Bank China, said the low target was “mainly a reflection of the declining exports”, given its share of growth in recent years. But she also pointed to “conservative” monetary policy, suggesting that the property market’s performance could be crucial to achieving the 5 per cent growth goal.“In the past, whenever China’s economy was in recession, usually credit growth will pump up, and that can drive the housing cycle to go up,” she said.“This year, even last year, there was no such intention to inflate the housing bubble.”

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The prospect of stimulus in China — policymakers’ favoured response to past bouts of weakness, notably after the 2008 global financial crisis — sits uneasily with a political push to contain high debt levels. Housing sales in China have been declining since mid-2021 following a wave of defaults among the country’s biggest developers, most notably Evergrande, though the pace of decline slowed for January and February.Beijing is reluctant to allow local governments, which rely on land sales for much of their income, to borrow more, and has not increased the limits on how much they can raise through new bond sales this year.

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Trade weakness could also affect private sector demand for credit. “The funding is often there, but private manufacturing enterprises are very reluctant to borrow to expand production because of the sharp decline in exports,” said Tang.Nonetheless credit data in January, a month in which lending often jumps around the lunar new year, showed the highest monthly bank lending on record. Analysts attributed the surge to a rise in corporate lending.The focus on the growth target — and its relevance to divining Beijing’s policy direction — may also wane in favour of other metrics as Xi prepares a sweeping overhaul of his administration that is expected to give him greater control over policy direction. The government has also set a target of 3 per cent for inflation and 5.5 per cent for unemployment, which Casanova described as “aggressive”. “The precedent of not missing the growth forecast has already been broken,” he said. “Xi has been trying to get rid of GDP targets as his overarching measure of performance for the longest time.” More

Investing.com – Federal Reserve chairman Jerome Powell is set for Capitol Hill on Tuesday, but the Fed chief isn’t likely to endorse the market’s hawkish rate-hike forecast as the outlook on whether the economic reacceleration seen since the turn of the year has staying power or is transitory remains murky at best, experts say.Market participants are currently pricing in around a further 86 basis points of hikes, but MUFG said it doesn’t “expect Fed Chair Jerome Powell to endorse that scale of further tightening” when the Fed chief takes to Capitol Hill to deliver his semi-annual testimony before Congress.Powell is set for two days of testimony before Congress, on Tuesday and Wednesday.The Fed chairman is more likely to “wait to assess further data in the coming months to see if the strength in activity and inflation is sustained before strongly committing to more rate hikes,” it added.In an interview in February, Powell admitted that the Fed members didn’t expect the January jobs report to be as “strong” as it was, but said it showed why the process [to bring down inflation would take “a significant period of time.”The spigot of strong economic data including the blowout January jobs report and several signs of sticky inflation has forced market participants to abandon their recent penchant to “fight the Fed.”Investors are now forecasting the peak level of Fed funds rates sits ahead of the 5.1% level the Fed had projected in December, with whispers of rates reaching nearly 6% recently seeping into the investment narrative.While the swashbuckling start to the year for the economy has taken many by surprise, others suggest more data is needed to suss out whether the economic reacceleration is real or transitory.“For any additional tightening beyond the May meeting, we would need to see evidence that the reacceleration is real,” Morgan Stanley said.Fortunately, investors won’t have long to wait for a clearer outlook on the economy. The monthly jobs report for February due Friday isn’t expected to replicate the 500,000+ job gains seen in February.“Another blowout NFP report is highly unlikely in the week ahead,” MUFG says, though it remains on alert for an update surprise in wages that perhaps “provides the biggest risk of another hawkish surprise that could lift U.S. yields and the U.S. dollar further.”For the moment, however, the strong data seen thus far has done enough to sway the pivoteers, who were confident a Fed cut was on the table, to relent.“We have moved our call for the first rate cut from December 2023 out to March 2024, and thereafter expect an even more gradual easing cycle with 25bp cuts per quarter, instead of one per meeting previously,” Morgan Stanley added. More

“We have finalized the design of the fiscal framework internally and now I will discuss it with the economic team before presenting it to President Luiz Inacio Lula da Silva, because it cannot be a Finance Ministry proposal,” Haddad told journalists at the ministry. “It will be a proposal from the society, because it will involve a complementary bill to be approved by Congress,” he added.Haddad also stated that Lula has commissioned the development of a system behind the so-called Desenrola program, aimed at refinancing consumer debt with government guarantees. The program will be launched when there is an estimate of when the system will be ready.According to Haddad, the program’s guarantee fund will have about 10 billion reais ($1.9 billion), an amount that will be sufficient to renegotiate 50 billion reais in debt from 37 million individuals.The program will not have an income limit, but only those who earn up to two minimum wages will have their renegotiation guaranteed by government funds, allowing them to receive greater discounts, said the minister.He also stated that he has been sending suggestions to Lula for two director positions in the central bank. The president will dedicate March to analyzing the resumes, said Haddad.Both the terms of Bruno Serra, director of Monetary Policy, and Paulo Souza, director of Supervision, expired in February. However, they can remain in office until replaced.($1 = 5.1538 reais) More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.The show goes on. Just.World and Asian stocks crept higher on Monday despite an increase in U.S. and global bond yields, and ahead of an expected interest rate hike in Australia and hawkish remarks from Federal Reserve Chair Jerome Powell on Tuesday.On top of the Reserve Bank of Australia (RBA) rate decision on Tuesday, investors in Asia have a slew of potentially market-moving indicators on the docket, including Chinese trade and FX reserves, South Korean GDP and inflation from the Philippines, Thailand and Taiwan. Investors are going into these events in a fairly upbeat mood. MSCI’s World equity index rose for a third straight session on Monday, its best run in a month, and the Dow Jones rose for a fourth day, its best run in two months.The gains were minimal, but they came despite a rise in global bond yields on Monday and significant event risk on Tuesday. Arguably the main event in Asia will be the expected quarter point rate hike from the RBA, which would take the cash rate up to 3.60%. Graphic: Australia inflation and interest rate https://fingfx.thomsonreuters.com/gfx/mkt/movakqoqlva/RBA.jpg Analysts expect one more 25 basis point increase in the second quarter of the year, leaving the cash rate at 3.85%, its highest since 2012. If policymakers are to err on one side or the other, it will likely be on the hawkish side.That would be in line with the RBA’s signaling last month and with rate-setters at other major central banks – Austrian central bank chief Robert Holzmann, a hawkish member of the European Central Bank’s (ECB) governing council, told German business daily Handelsblatt that the ECB should hike rates by 50 basis points at its March, May, June and July meetings.Tuesday’s focus rests squarely on the first of two Congressional appearances this week from Powell. Rates and bond market pricing suggests traders expect him to deliver hawkish testimony to lawmakers – the implied terminal rate is holding around 5.50% and traders are a putting near one-in-three chance of a half-point rate hike this month.Again, the question is: how long can equity markets hold up and volatility stay depressed, if yields and Fed expectations continue to grind higher?On the Asian data front, China’s FX reserves for February could cast a light on whether Beijing is starting to reduce its huge holdings of dollar-denominated assets amid the sharp rise in U.S.-Chinese tensions.Analysts expect a decline in reserves to $3.16 trillion from $3.184 trillion in January, which would be the first monthly fall since September. The latest valuation-adjusted figures show that China sold Treasuries last year, but bought a similar amount of U.S. agency debt, thereby keeping its exposure to dollar assets broadly steady. Here are three key developments that could provide more direction to markets on Tuesday:- Australia rate decision (consensus: +25 bps to 3.60%) – China trade, FX reserves data (February)- U.S. Fed Chair Jerome Powell’s semi-annual monetary policy testimony to the Senate (By Jamie McGeever; Editing by Josie Kao) More