Economy

The Bipartisan Policy Center said the nation could run out of cash this summer or early fall if Congress did not raise the debt limit.WASHINGTON — The United States faces a default sometime this summer or early fall if Congress does not raise or suspend the debt ceiling, a Washington think tank warned on Wednesday.The projection from the Bipartisan Policy Center is the latest estimate of when the government could run out of cash to pay its bills. The nation, which borrows huge sums to help pay for everything from military salaries to Social Security benefits, hit its $31.4 trillion borrowing cap on Jan. 19. Since then, the Treasury Department has been employing what are known as extraordinary measures to ensure that the government has enough to pay what it owes, including payments to bondholders.“We anticipate that those emergency measures, as well as the cash that Treasury has on hand, will most likely be exhausted at some point during the summer or early fall,” Shai Akabas, the center’s director of economic policy, said during a briefing on Wednesday morning.Last week, the nonpartisan Congressional Budget Office projected that the department’s ability to prevent the United States from defaulting on its debt could be exhausted between July and September. That estimate was slightly more favorable than what Treasury Secretary Janet L. Yellen suggested when she told Congress last month that her department’s ability to keep financing the country’s obligations could be exhausted in June.The day when the United States runs out of cash — known as the X date — depends largely on how much the Treasury Department collects in 2022 tax revenue, the Bipartisan Policy Center said. The group warned that moment could be “too close for comfort” given the vagaries around tax receipts.“There is a possibility that the cash balance in early to mid-June will be so low that it will necessitate action,” Mr. Akabas said. He added that given “the considerable uncertainty in our nation’s current economic outlook,” it was impossible to know for certain when the X date might happen.“Policymakers have an opportunity now to inject certainty into the U.S. and global economy by beginning, in earnest, bipartisan negotiations around our nation’s fiscal health and taking action to uphold the full faith and credit of the United States well before the X date,” he said.Ms. Yellen’s extraordinary measures to keep the government running have included redeeming some existing investments and suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Once those measures are exhausted, the United States will need to borrow more money or face default. She has urged Congress to raise or suspend the debt limit.It remains unclear how quick or easy it would be to do that. Republican lawmakers have insisted that President Biden agree to undefined spending cuts to win their votes to raise the cap, arguing that the borrowing binge is putting the United States on a path to fiscal disaster. Mr. Biden has insisted that he will not negotiate spending cuts as part of any debt limit legislation, saying that the cap has to be raised to fund obligations that Congress — including Republicans — have already approved. More

JERUSALEM (Reuters) -Israel’s shekel fell 1.5% versus the dollar on Wednesday amid a plan to overhaul the country’s judiciary, continuing a rapid decline that could prompt central bank intervention.The shekel stood at 3.68 versus the U.S. currency, its lowest level since March 2020, after weakening 1.6% on Tuesday. Since hitting a high of 3.34 on Jan. 25, the shekel has slid nearly 10% on talk of local companies pulling bank accounts from Israel and foreign investors staying away due to the proposed judicial changes.The reform would give the government greater sway on selecting judges, while limiting the Supreme Court’s power to strike down legislation. New bills that received preliminary approval in parliament on Wednesday included one that would bar the Supreme Court from intervening in ministerial appointments.”The weakening shekel trend will most likely continue as long as no reasonable compromise is reached on the judicial reform,” said Jonathan Katz, chief economist at Leader Capital Markets.He noted that foreign exchange intervention was possible to “smooth out sharp volatility” but was not a tool preferred by the Bank of Israel. The central bank – which declined to comment – has bought tens of billions of dollars over the past 15 years to prevent the shekel from strengthening too quickly and its forex reserves stand at $201 billion.”If this (shekel depreciation) continues rapidly, we could see the Bank of Israel hiking rates to 5% in the next rate decision (April 3), and possibly earlier,” Katz said.With Israel’s annual inflation rate at a more than 14-year high of 5.4% in January, policymakers voted to raise the benchmark interest rate by 50 basis points on Monday to 4.25%, its eighth hike in a row. Yet, the move was overshadowed by the judicial change plan that passed its initial vote in parliament on Monday.Following the vote, Citi said it was going long dollar-shekel, targeting 3.95 to the dollar.Critics say Prime Minister Benjamin Netanyahu – who is on trial on graft charges that he denies – is seeking legal changes that will hurt Israel’s democratic checks and balances, foster corruption and bring diplomatic isolation.Proponents say the changes are needed to curb what they deem an activist judiciary that overreaches its authority to interfere in politics.Government bond prices were down as much as 1.9%, while the main Tel Aviv-125 share index fell 1.1%. More

LONDON/NEW YORK (Reuters) – Markets, bracing for a “no landing” scenario where global economic growth is resilient and inflation stays higher for longer, are dialling back appetite for both risk assets and government debt.For months, investors have bet on global growth softening just enough to cool inflation and persuade hawkish central banks to pause their rate hikes.The notion of the U.S. Federal Reserve and other central banks using monetary tightening to engineer a mild, soft landing before pivoting to avoid a deep recession has supported a cross-asset rally since October, depressed the dollar and sent capital flowing into emerging markets. But recent data reflecting still tight jobs markets has traders entertaining a new scenario where economic growth holds up and inflation remains sticky.That means rates could be pushed higher too – a negative for risk assets. World stocks hit one-month lows on Wednesday, while Wall Street had its worst day of the year so far on Tuesday. “We’ve gone from softer landing to no landing – no landing being that (financing) conditions will remain tight,” said David Katimbo-Mugwanya, head of fixed income at EdenTree Asset Management.U.S. jobs growth accelerated sharply in January, U.S. and German inflation remained high, while U.S. and European business activity rebounded in February.Investors have now ditched expectations for rate cuts later this year and renewed their bets on higher rates, which in the U.S. are now seen peaking in July at about 5.3%, up from about 4.8% in early February. Graphic: US rate rise expectations have shot back up https://fingfx.thomsonreuters.com/gfx/mkt/klpygnkjwpg/USmoney2202.png Deutsche Bank (ETR:DBKGn) said this week it expects European Central Bank rates to peak at 3.75% from 3.25% previously.China’s reopening, an easing in Europe’s gas crisis and strong U.S. consumer spending “are probably more bearish than positive for markets,” said Richard Dias, founder of macro-economic research house Acorn Macro Consulting. “We’re getting into a situation where good news is bad news,” he said. For Paul Flood, head of mixed assets at Newton Investment Management, “if wage growth stays high and demand stays high, then the Fed will push up interest rates further and that’s not a good environment for equity or bond markets.” Bond prices fall, and yields rise, when expectations of higher rates on cash make their fixed interest payments less appealing. Stocks typically move lower when bond yields rise to account for the extra risk of owning shares. U.S. 10-year Treasury yields are near their highest since November at almost 4%, up from a January low of 3.3%. An index measuring the dollar against other major currencies is set for its first monthly gain in five as rate-hike bets lift the greenback.GOODBYE RECESSION RISK? In December, most economists expected the U.S. economy to contract slightly this year but the consensus now is for 0.7% growth. Fed officials have signalled that they will likely keep raising rates for longer than previously forecast. Graphic: Economic growth forecasts turn high https://www.reuters.com/graphics/GLOBAL-MARKETS/zjvqjykoxpx/chart.png Euro zone recession expectations mostly faded in mid January as energy prices tumbled. Economists polled by Reuters see inflation in the bloc remaining above its 2% target into 2025 as growth holds up. “The road map was one of a shallow recession and declining inflation,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “That consensus is being challenged by the data.”Many investors still believe inflation will subside, and see recent strong data as probably supported by one-time factors such as an unseasonably mild winter and the remainder of consumer savings accumulated during the COVID-19 pandemic. “There should be more signs of a slowdown as the year unfolds and weather normalises, and there’s just not another pent up savings to spend as we go into the second half of the year,” said Rhys Williams, chief strategist at Spouting Rock Asset Management. Thomas Hayes, chairman and managing member of New York-based Great Hill Capital, said a soft landing is still likely as declining U.S. rental costs start weighing on inflation metrics and labour market participation increases as consumers run out of savings, helping contain wage growth. “If oil doesn’t spike above $100 it is going be very hard for inflation to re-accelerate after the Fed pauses,” he said. Lombard Odier’s Ielpo said he had not changed the positioning of his funds significantly since January but was “happy to not have more” equity risk. Katimbo-Mugwanya at EdenTree Asset Management, said long-dated bonds still offered value as he saw central banks still closing in on the end of rate-rise cycles. But, he added, because “data is a bit more robust on the economic front than maybe we were led to believe at the turn of the year…there’s no pressure on them to start signalling a looser stance just yet.” More

ANTAKYA, Turkey (Reuters) – Turkey has launched a temporary wage support scheme and banned layoffs in 10 cities on Wednesday to protect workers and businesses from the financial impact of the massive earthquakes that hit the south of the country earlier this month.A 7.8 magnitude earthquake on Feb. 6 killed more than 47,000 people, damaged or destroyed hundreds of thousands of buildings in Turkey and Syria and left millions homeless.In Turkey, 865,000 people are living in tents and 23,500 in containers, while 376,000 are in student dormitories and public guesthouses outside the earthquake zone, President Tayyip Erdogan said on Tuesday.Under Ankara’s new economic relief plan , employers whose workplaces were “heavily or moderately damaged” would benefit from support to partially cover wages of workers whose hours had been cut, the country’s Official Gazette said on Wednesday. A ban on layoffs was also introduced in 10 earthquake-hit provinces covered by a state of emergency.Business groups and economists have said the earthquake could cost Ankara up to $100 billion to rebuild housing and infrastructure, and shave one to two percentage points off economic growth this year.Erdogan has promised a swift reconstruction effort, although experts say it could be a recipe for another disaster if safety steps are sacrificed in the race to rebuild. Six people were killed in the latest earthquake to strike the border region of Turkey and Syria, authorities said on Tuesday.It was followed by 90 aftershocks, Turkey’s Disaster and Emergency Management Authority (AFAD) said, adding fresh trauma to Antakya residents left homeless by the previous earthquake.In power for two decades, Erdogan faces presidential and parliamentary elections in May, although the disaster could prompt a delay in the vote. Even before the quakes, opinion polls showed he was under pressure from a cost of living crisis, which could worsen as the disaster has disrupted agricultural production.Moves by the government to control information around the earthquake have been met with public anger.Turkey’s internet authority blocked access to a popular online forum, Eksi Sozluk, on Tuesday, two weeks after it briefly blocked access to Twitter, citing the spread of disinformation. Information Technologies and Communications Authority (BTK) website shows the website was blocked late on Tuesday, without citing any explicit reason. Turkish police last week arresteddozens of people accused of creating fear and panic by “sharing provocative posts” about the earthquake on social media. More

Gross domestic product grew 2.25% in the third quarter and 3.54% in the second quarter.Soaring inflation and a weakening of the naira currency have held back an economy still trying to recover from the COVID-19 pandemic. Nigeria holds elections on Saturday, which President Muhammadu Buhari is constitutionally-barred from contesting. More

“If inflation doesn’t start to come down, you risk this replay of the 1970s where you had 15 years where you’re trying to battle the inflation drag,” Bullard told broadcaster CNBC in an interview.”… That’s why I’ve said let’s be sharp now, let’s get inflation under control in 2023 and it’s a good time to fight inflation because the labor market is still strong.”Bullard also repeated his view that a Fed policy rate in the range of 5.25% to 5.5% would be adequate for the task.Minutes from the U.S. central bank’s latest meeting released later on Wednesday are expected to detail the breadth of debate among Fed officials over how much further interest rates may need to rise to slow inflation and cool an economy that has remained stronger than expected despite tighter monetary policy. More

Investing.com — The Federal Reserve will release the minutes of its last policy meeting, as markets fret increasingly about interest rates staying higher for longer to tackle sticky inflation. Stocks are due for a third straight session of losses as bond yields hit three-month highs. A senior ECB official says markets have ‘overreacted’ to comments that sent bond yields higher in the Eurozone last week. Jeep maker Stellantis and Chinese search giant Baidu both announce big shareholder payouts, but Rio Tinto becomes the latest miner to take a more cautious view. Nvidia and TJX lead the roster of quarterly earnings. And the American Petroleum Institute releases its weekly estimate of crude and distillate stocks. Here’s what you need to know in financial markets on Wednesday, 22nd February.1. Fed minutesThe Federal Reserve releases the minutes of its last policy meeting at 14:00 ET (19:00 GMT), into a market increasingly unsettled by fears that inflation is proving to be ‘stickier’ than expected, forcing the Fed to keep rates higher for longer.The 2-year U.S. Treasury note yield, a rough proxy for expectations for Fed interest rates, hit a three-month high of 4.75% on Tuesday as U.S. investors returned from a long weekend.New York Fed Governor John Williams is also due to speak later, but his comments will come well after the market close at 18:30 ET.2. Markets have overreacted, says ECB’s VilleroyThe European Central Bank mustn’t pre-commit to a series of aggressive interest rate hikes in response to its own inflation problems, a key member of its governing council said in an interview.Bank of France Governor François Villeroy de Galhau told the French newspaper Les Echos that markets have “overreacted” to comments made last week by influential board member Isabel Schnabel, who had warned that the ECB is still far from being able to claim victory over inflation.Her comments gained some validation earlier as Germany’s core inflation rate was confirmed to have risen sharply in January. Separately, the Ifo business survey showed confidence at a six-month high.In Italy, meanwhile, new figures showed inflation fell by more than expected in January but was still running at 10%.3. Stocks set to extend losses again; TJX, Nvidia earnings in focusU.S. stock markets are set to open lower again after falling heavily on Tuesday due to fears over the course of Fed policy.By 06:40 ET, Dow Jones futures were down 48 points, or 0.2%, while S&P 500 futures and Nasdaq 100 futures were down in parallel.On a busy day for earnings, mining stocks were in focus after Australian-based giants BHP (ASX:BHP) and Rio Tinto (ASX:RIO) both cut their dividends within 24 hours of each other. Rio’s fourth quarter earnings also fell nearly 10% short of forecasts. Separately, Baidu ADRs (NASDAQ:BIDU) were up over 7% in premarket after the Chinese search giant announced a $5 billion buyback and forecast a much better 2023. French dairy giant Danone SA (EPA:DANO) also hit a six-month high after beating forecasts with its results.Most of the day’s earnings action is due late on, with Nvidia (NASDAQ:NVDA), Pioneer Natural Resources (NYSE:PXD), eBay (NASDAQ:EBAY), Lucid Group (NASDAQ:LCID) and Etsy (NASDAQ:ETSY) all reporting after the close. TJX (NYSE:TJX) will command attention early on, especially after weak outlooks from retail giants Walmart (NYSE:WMT) and Home Depot (NYSE:HD) on Tuesday.4. Stellantis splashes the cash; Tesla pares back German plansCarlos Tavares continued to work his magic at Jeep maker Stellantis (NYSE:STLA). The group, which also owns the Peugeot (OTC:PUGOY), Opel, and Fiat brands, said it will buy back $1.6B of stock and pay out $4.5B in dividends after its revenue and net profit rebounded sharply in 2022, despite ongoing problems with semiconductor availability.The group’s sales of electric vehicles rose 41% on the year to 288,000.Elsewhere, Tesla (NASDAQ:TSLA) confirmed to Reuters that it is scaling down its ambitions to build batteries at its plant in Germany, diverting investment resources instead to the U.S. to exploit the tax breaks offered by the Inflation Reduction Act.The move will add to concerns in the EU and U.K. that the IRA is hollowing out investment in green technology in Europe.5. Oil falls on rate fears; API inventories dueCrude oil prices fell under the influence of the interest rate fears that also hurt other risk assets on Tuesday.By 06:45 ET, U.S. crude futures were down 1.1% at $75.56 a barrel, while Brent crude was down 1.0% at $82.25.The American Petroleum Institute releases its weekly inventory data at 16:30 ET.Elsewhere, Kazakhstan said it intends to ship an average of 25,000 barrels a day of crude to Germany through Russia’s pipeline system this year, raising the likelihood of Russian oil seeping into the European market despite last year’s sanctions. More

ISLAMABAD (Reuters) – Pakistan will this week receive a new $700 million loan from China to help shore up its foreign exchange reserves, the country’s finance minister said on Wednesday, in another step to help the South Asian nation recover from an economic crisis.The credit facility, made through the state-owned China Development Bank will boost Pakistan’s forex reserves by about 20% and comes as the country is thrashing out a deal with the International Monetary Fund (IMF) to unlock funds from a $6.5 billion bailout.”This amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves,” Finance Minister Ishaq Dar said on Twitter. A finance ministry official said the loan was in addition to other facilities that China has already extended to Pakistan. The money could come as early as Thursday, he added.China Development Bank did not respond to a faxed request for comment.Prime Minister Shehbaz Sharif said he was hopeful of reaching a deal with the IMF as soon as the country completes a series of steps demanded by the lender.Addressing his cabinet, he said the government was focusing on austerity as a top priority. “Our government will utilise all resources to overcome the crisis,” he said.The receipt of external financing is one of the measures needed before the IMF signs a staff level agreement that will unlock more than $1 billion in funding, that has been suspended since late last year. “The fact that new money is being committed to Pakistan and old loans are being rolled over despite this, is a sign that the global community is committed to helping Pakistan meet its external challenges,” former Pakistani central bank deputy governor Murtaza Syed told Reuters. SINGLE LARGEST CREDITOR Pakistan is struggling with its worst economic crisis in decades and its foreign exchange reserves, at their lowest in 10 years, are only enough to pay for less than three weeks’ worth of imports. Meanwhile, fiscal adjustments demanded by the IMF are fuelling decades-high inflation.The country’s international bonds extended their decline on Wednesday with the 2027 dollar-denominated bonds dropping more than 1.2 cents in the dollar to trade just over 40 cents, Tradeweb data showed. China is already Pakistan’s single largest creditor with its commercial banks holding about 30% of its external debt. The United States, historically a close ally, said this week it was concerned about this debt, and was talking to Islamabad about the “perils” of a closer relationship with Beijing. More