Economy

Import prices dropped 1.0% last month after declining 1.5% in July, the Labor Department said on Thursday. In the 12 months through August, import prices increased 7.8% after climbing 8.7% in July. Economists polled by Reuters had forecast import prices, which exclude tariffs, falling 1.2% month-on-month.Coming on the heels of data on Wednesday showing a second monthly drop in producer prices in August, weak import prices should further assuage fears of inflation becoming entrenched.The government earlier this week reported an unexpected increase in consumer prices in August, which cemented expectations for a third 75 basis points interest rate hike from the Federal Reserve next Wednesday.The drop in import prices also suggests an easing of bottlenecks in the global supply chain.Imported fuel prices fell 6.8% last month after decreasing 7.5% in July. Petroleum prices declined 7.1%, while the cost of imported food dropped 1.6%.Excluding fuel and food, import prices dipped 0.1%. These so-called core import prices fell 0.5% in July. They increased 3.8% on a year-on-year basis in August. Dollar strength is helping to limit the increase in core import prices.The dollar has gained 7.5% against the currencies of the United States’ main trade partners since January.The report also showed export prices dropped 1.6% in August after decreasing 3.7% in July. Prices for agricultural exports fell 0.4% as lower prices for corn, fruit, meat and wheat offset higher prices for soybeans and vegetables. Nonagricultural export prices decreased 1.8%. Export prices increased 10.8% year-on-year in August after advancing 12.9% in July. More

Retail sales increased 0.3% last month, the Commerce Department said on Thursday. Data for July was revised down to show retail sales falling 0.4% instead of being unchanged as previously reported.Economists polled by Reuters had forecast sales would be unchanged, with estimates ranging from as low as a 0.5% decline to as high as a 0.5% increase. The report was another sign that the economy could tolerate higher interest rates as the Fed tightens monetary policy to fight stubbornly high inflation. Retail sales are being supported by a tight labor market, which is generating strong wage growth.The report followed news on Tuesday of a surprise increase in monthly consumer prices in August, which cemented expectations for a third 75-basis-point rate hike by the U.S. central bank next Wednesday.The national average gasoline price dropped to about $3.82 per gallon in late August after hitting an all-time high just above $5.00 in mid-June, according to data from AAA. Prices at the pump were averaging $3.698 per gallon on Thursday.Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month. Data for July was revised lower to show these so-called core retail sales increasing 0.4% instead of 0.8% as previously reported.Core retail sales correspond most closely with the consumer spending component of gross domestic product. A steady pace of consumer spending and strong export growth helped to limit the drag on the economy from a moderation in the pace of inventory accumulation in the second quarter.Gross domestic product contracted at a 0.6% annualized rate last quarter after declining at a 1.6% pace in the January-March quarter. The economy is not in recession, with the income side of the growth ledger showing a 1.4% rate of expansion in the second quarter, thanks to labor market resilience.A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 213,000 for the week ended Sept. 10.Despite the hand wringing about a possible recession next year due to higher borrowing costs, there has not been a surge in layoffs. Economists say companies are hoarding workers after experiencing difficulties hiring in the past year as the COVID-19 pandemic forced some people out of the workforce in part because of prolonged illness caused by the virus.There were 11.2 million job openings at the end of July, with two jobs for every unemployed person. More

(Reuters) – Wall Street’s main indexes were set for a mixed open on Thursday as a slew of economic data pointed to resilience in the U.S. economy, likely keeping the Federal Reserve on track for aggressive interest rate hikes to tame inflation.U.S. retail sales unexpectedly rose 0.3% in August as lower gasoline prices supported spending, data showed, in a sign that the economy could tolerate higher interest rates as the Fed tightens monetary policy.A separate report from the Labor Department showed initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 213,000 for the week ended Sept. 10, signaling labor market resilience.”The economic conditions are quite good in the U.S. and it’s pretty compatible with the path of the 75-basis-point hike for the next meeting,” said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers Solutions.”If investors are still underestimating the Fed’s determination to fight against inflation, one of the key concerns is that we’ll see volatility increase in the coming weeks.”The CBOE Volatility index, also know as Wall Street’s fear gauge, edged up to 26.19 points, above its long-term average of 20.The main stock indexes closed slightly higher on Wednesday after wavering throughout the session as an on-target inflation print provided relief after Tuesday’s hotter-than-expected consumer prices data sparked the biggest percentage decline on Wall Street since June 2020.Investors fear steep rate hikes by the Fed will drive the economy into a recession, with many market observers concerned over the lagging effects of the central bank’s tightening phase.Money markets are pricing in a 74% chance of a 75-basis-point hike, while placing 27% odds of a 100-bps hike next week.The yield on two-year Treasury notes, a bellwether for interest rate expectations, touched new 14 year highs at 3.85%. [US/]Shares of rate-sensitive growth and technology stocks slipped alongside a rise in bond yields.Apple Inc (NASDAQ:AAPL), Meta Platforms and Tesla (NASDAQ:TSLA) Inc were down 0.2% in premarket trading. Netflix Inc (NASDAQ:NFLX), however, gained 2.7% as Evercore ISI upgraded the stock to “outperform”.At 08:53 a.m. ET, Dow e-minis were up 55 points, or 0.18%, S&P 500 e-minis were down 1.75 points, or 0.1%, and Nasdaq 100 e-minis were down 21.25 points, or 0.17%. Union Pacific (NYSE:UNP) and CSX Corp (NASDAQ:CSX) jumped nearly 3% each after U.S. railroad operators and unions secured a tentative deal to avert a rail shutdown that could have hit food and fuel supplies across the United States.Adobe (NASDAQ:ADBE) Inc slumped 10.2% after the photoshop maker said it would buy Figma in a cash-and-stock deal that valued the online design startup at about $20 billion. More

The Ministry’s Secretariat for Economic Policy said the upbeat revision comes after GDP growth between April and June surprised expectations with a 1.2% rise. Activity will continue to grow in the second half, though more slowly, it added. “The first releases for July suggest that industry, services, and the labor market continue to grow. The confidence series confirm the positive expectations for the third quarter, with widespread expansion in the various sectors,” the secretariat said in a statement.The ministry kept its GDP growth forecast of 2.5% for 2023.Private economists estimate that Latin America’s largest economy will expand 2.39% this year and just 0.5% next year, affected by the central bank’s sharp monetary tightening to tame inflation.Policymakers have already pushed interest rates to 13.75% from a record low of 2% in March last year.But the ministry again stressed that its much more optimistic prospects for 2023 are supported by greater private investment and historically high capital goods imports in relation to GDP.Despite the moderate deceleration expected for global growth, Brazil sees more jobs in the formal sector and increased services with greater productivity, added the secretariat.The ministry decreased its 2022 inflation forecast to 6.3% from 7.2% in July. For 2023, it was maintained at 4.5%. More

President Joe Biden has urged his administration to pay close attention to inbound investment deals involving critical technologies such as semiconductors, as part of a continuing effort to address security threats from China.Biden on Thursday issued an executive order aimed at boosting scrutiny of deals involving foreign companies in high-tech industries such as artificial intelligence, quantum computing and biotechnology. It was aimed at the Committee on Foreign Investment in the United States, an inter-agency panel that vets inbound investment for security risks.Janet Yellen, the US Treasury secretary who chairs the Cfius process, said the executive order would sharpen the government’s focus on protecting national security while maintaining an open investment policy.“Strengthening our supply chains and protecting against foreign threats enhances our national security,” Yellen said. “It also reaffirms Cfius’s mission to protect America’s technological leadership and the security of our citizens’ sensitive data from emerging threats.”The order did not mention China by name. However, the industries named closely resemble the list of high-tech sectors that the US believes are a significant target for Chinese espionage, including legal efforts by Beijing to secure access to cutting-edge technology, such as through an acquisition that could later be used to threaten the US.US intelligence agencies, led by the National Counterintelligence and Security Center, last year launched a campaign to inform companies about links between Chinese businesses and the country’s government, military and intelligence services. That effort has focused on AI, quantum computing, biotechnology, chips and autonomous systems.During a recent visit to London for talks with British intelligence and security officials, FBI director Christopher Wray warned UK businesses that China and its spying activities posed a more serious threat to western companies than even sophisticated companies realised.The order did not provide Cfius with any new powers. But a senior US official said it would send “a very clear public message to the private sector in a way that the committee’s day-to-day work often can’t about what are some factors that we . . . are very focused on”.

In the order, Biden said Cfius officials should consider the impact of a transaction on the resilience of critical US supply chains, which has been one of his administration’s priorities.The White House is also considering issuing an executive order to create a screening mechanism for outbound US investment, just one of many efforts to make it harder for China to obtain cutting-edge technology.“We are looking at gaps in our existing toolkit, including whether it would be or is appropriate to look at some targeted and narrowly scoped requirements around . . . specific kinds of US investment in foreign competitor countries,” said the US official.While Cfius vets inbound investment deals on a case-by-case basis, a second US official said the executive order was intended to stress that the committee should also examine patterns that pointed to security threats.Follow Demetri Sevastopulo on Twitter

Video: China’s unseen war for strategic influence More

The ECB raised rates by an unprecedented 75 basis points a week ago and President Christine Lagarde hinted at another two or three rises at the coming meetings to fight record-high inflation.But ECB Vice President Luis de Guindos and Portugal’s central bank governor Mario Centeno appeared to differ on Thursday about the size of the next moves. De Guindos said the ECB should continue to take “determined action”, repeating the adjective used by Lagarde to describe last Thursday’s hike.”Determined action is essential to keep inflation expectations anchored, which in itself contributes to delivering price stability and avoids second-round effects in inflation,” he said at an event in Lisbon. Centeno, however, said the central bank should take “as small steps as possible” in raising rates so as not to destabilise the economy. “A clear tightening or even too abrupt a normalisation… could unwarrantedly destabilise the transmission mechanism and the real economy,” Centeno told the same event.”Monetary policy must remain predictable and acting at the margin in as small steps as possible.”Inflation hit 9.1% last month and the ECB expects it to stay at similar levels for months and not return anywhere near its 2% target until 2024.Sources have told Reuters ECB policymakers saw a rising risk they will have to raise their key policy rate to 2% or higher, from 0.75% currently.Banks including Deutsche Bank (ETR:DBKGn) and BofA expect another 75 basis point rate hike from the ECB at its Oct. 25 meeting. More

In a briefing, Foreign Ministry spokeswoman Maria Zakharova added that Russia “reserves the right to defend its territory”.Washington has openly supplied Ukraine with advanced GMLRS rockets, fired from HIMARS launchers, that can hit targets up to 80 km (50 miles) away.”If Washington decides to supply longer-range missiles to Kyiv, then it will be crossing a red line, and will become a direct party to the conflict,” Zakharova said.U.S. officials say Ukraine has promised not to use U.S. rockets to strike Russia itself.HIMARS launchers can also be used to fire longer-range ATACMS tactical missiles, which can have a range of up to 300 km. A senior Ukrainian official declined to say on Aug. 19 whether Kyiv now had ATACMS.There has been no full public explanation of an attack on Aug. 9 that hit a Russian air base at Saky, around 200 km from the nearest Ukrainian-controlled territory, on the Crimean peninsula, which Moscow captured in 2014 and considers Russian territory.Ukraine has requested and received large quantities of weapons from the United States and other Western allies to help it resist the Russian armed forces that were sent into Ukraine in February.Moscow says it sent troops to prevent Ukraine being used as a platform for Western aggression and to defend Russian speakers. Kyiv and its Western allies dismiss these arguments as baseless pretexts for an imperial-style war of aggression. More

LONDON (Reuters) – Stock markets were sluggish and the dollar and bond yields shuffled higher on Thursday as the likelihood of a further jump in global borrowing costs, including a possible 100 basis point U.S. rate hike next week, kept the bears on the prowl. With recession worries still nagging, Wall Street looked set for an early dip, Europe’s bourses were handing back morning gains .EU and Japan’s yen JPY=EBS – pummelled to a 24-year low this month – was drooping again after Tokyo posted a record trade deficit. (Full Story) It was a big day for crypto markets with a major software upgrade to the Ethereum blockchain dubbed the “Merge” taking place (Full Story). China’s central bank refrained from providing more support overnight and though there had been some welcome signs of support for the country’s battered property market, geopolitics were in play as Chinese leader Xi Jinping said he would work with Russia’s Vladimir Putin to “instill stability and positive energy in a chaotic world”. (Full Story) The broader focus however remained squarely on the risk of rising interest rates and painfully high energy prices causing recessions. Credit rating firm Fitch became the latest to slash its world economy forecasts while bond markets were watching the German yield curve invert – another classic recession indicator. (Full Story) “We’ve had something of a perfect storm for the global economy in recent months,” Fitch Chief Economist Brian Coulton said, blaming “the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China”. The dollar, which has soared this year amid the jump in U.S. interest rates and global scramble for safety, was showing its strength again. Expectations that the Federal Reserve will raise rates another 75-100 basis points next week pushed the greenback back up 0.3% against the yen JPY=EBS, after the yen jumped on Wednesday when some timely Bank of Japan calls to FX desks had triggered intervention talk. (Full Story) The euro was nudged back below parity against the dollar too. It was down 0.1% at $0.9985 and not too far from a 20-year low of $0.9864 hit last week. Britain’s pound, which has also been hammered over the last month due concerns about the country’s finances GBP=D3, likewise was 0.4% softer at just under $1.15 /FRX “The (Bank of Japan) steps were in reality the last efforts to halt JPY depreciation before actual intervention,” MUFG’s European global markets research head Derek Halpenny said. “But it is also highly likely that there is still a deep reluctance on the part of the authorities to intervene,” he added, on the view that such action might not be successful in the current environment. Japan has not intervened in forex markets since 2011 and back then it was to restrain an overly strong yen. FLAT AND FLATTENING U.S. data on Thursday include weekly jobless claims and retail sales both of which will feed the debate on whether the world’s largest economy can withstand interest rates going as high as 5% according to some banks’ estimates. Around 226,000 Americans are expected to have filed for jobless claims for the week-ended Sept. 10, up from 222,000 in the previous week. Meanwhile, retail sales for August are largely expected to remain unchanged month-on-month. S&P 500 ESc1, Dow 1YMc1 and Nasdaq futures NQc1 were all broadly flat, pointing to a slow day on Wall Street, .N although parts of the market were expected to react positively to news that a U.S. railroad strike had been avoided. .N (Full Story) Back in Asia, Tokyo hadn’t been the only Asian capital concerned about currency weakness. South Korea’s won bounced off a near 13-year low overnight as it appeared that its authorities had been dishing out verbal FX intervention again. (Full Story) Among the main stock markets, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS turned during the session to finish down 0.2%. The Nikkei .N225 rose 0.2% though, while the main Hong Kong property index .HSMPI surged over 4% after reports that some Chinese developers were finally being allowed to slash prices. (Full Story) The world’s second-largest economy narrowly avoided contracting in the second quarter as widespread COVID-19 lockdowns and the slumping property sector badly damaged consumer and business confidence. With few signs China will significantly ease zero-COVID soon, some analysts expect the economy to grow by just 3% this year, which would be the slowest since 1976, excluding the 2.2% expansion during the initial COVID hit in 2020. “Equity markets are presently in no-man’s land,” said Sean Darby, global equity strategist at Jefferies in Hong Kong. “Better macro news to support earnings is discounted as (there is) the need for further tightening to quash growth – while CPI prints are not declining fast enough,” he said. Fed funds futures 0#FF:, which were dumped along with stocks after Tuesday’s stubbornly hot U.S. inflation reading but were helped by lower producer price figures on Thursday, imply a 30% chance of a 100 basis point rate hike next week. They have the benchmark U.S. interest rate as high as 4.3% by February. FEDWATCH Two-year U.S. yields US2YT=RR, which track near-term rate expectations, edged up to 3.029%, bringing the rise for the week so far to 23 basis points in a seventh straight weekly gain. European moves saw the 2-year German yield rise 2.5 bps to 1.435% leaving it just off its highest since July 2011. DE2YT=RR. Germany’s 10-year yield, the euro zone’s benchmark, rose 4.5 basis points (bps) to 1.746%. DE10YT=RR ING analysts said comments by European Central Bank chief economist Philip Lane on Wednesday had endorsed the hawks’ narrative. It “is another clue that the central bank has experienced a significant shift in its reaction function,” they wrote. In commodities, European gas prices rose for a third day running. Brent oil LCOc1 dipped $1.38 to $92.68 a barrel. Spot gold XAU= dropped 0.8% to $1,683 an ounce, having steadily slipped as the dollar and U.S. yields have gone up.Stock markets were sluggish and the dollar and bond yields shuffled higher on Thursday as the likelihood of a further jump in global borrowing costs, including a possible 100 basis point U.S. rate hike next week, kept the bears on the prowl. With recession worries still nagging, Wall Street looked set for an early dip, Europe’s bourses were handing back morning gains .EU and Japan’s yen JPY=EBS – pummelled to a 24-year low this month – was drooping again after Tokyo posted a record trade deficit. (Full Story) It was a big day for crypto markets with a major software upgrade to the Ethereum blockchain dubbed the “Merge” taking place (Full Story). China’s central bank refrained from providing more support overnight and though there had been some welcome signs of support for the country’s battered property market, geopolitics were in play as Chinese leader Xi Jinping said he would work with Russia’s Vladimir Putin to “instill stability and positive energy in a chaotic world”. (Full Story) The broader focus however remained squarely on the risk of rising interest rates and painfully high energy prices causing recessions. Credit rating firm Fitch became the latest to slash its world economy forecasts while bond markets were watching the German yield curve invert – another classic recession indicator. (Full Story) “We’ve had something of a perfect storm for the global economy in recent months,” Fitch Chief Economist Brian Coulton said, blaming “the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China”. The dollar, which has soared this year amid the jump in U.S. interest rates and global scramble for safety, was showing its strength again. Expectations that the Federal Reserve will raise rates another 75-100 basis points next week pushed the greenback back up 0.3% against the yen JPY=EBS, after the yen jumped on Wednesday when some timely Bank of Japan calls to FX desks had triggered intervention talk. (Full Story) The euro was nudged back below parity against the dollar too. It was down 0.1% at $0.9985 and not too far from a 20-year low of $0.9864 hit last week. Britain’s pound, which has also been hammered over the last month due concerns about the country’s finances GBP=D3, likewise was 0.4% softer at just under $1.15 /FRX “The (Bank of Japan) steps were in reality the last efforts to halt JPY depreciation before actual intervention,” MUFG’s European global markets research head Derek Halpenny said. “But it is also highly likely that there is still a deep reluctance on the part of the authorities to intervene,” he added, on the view that such action might not be successful in the current environment. Japan has not intervened in forex markets since 2011 and back then it was to restrain an overly strong yen. GRAPHIC: Yen’s biggest drop in decadeshttps://fingfx.thomsonreuters.com/gfx/mkt/movaneowopa/Pasted%20image%201663232168526.png FLAT AND FLATTENING U.S. data on Thursday include weekly jobless claims and retail sales both of which will feed the debate on whether the world’s largest economy can withstand interest rates going as high as 5% according to some banks’ estimates. Around 226,000 Americans are expected to have filed for jobless claims for the week-ended Sept. 10, up from 222,000 in the previous week. Meanwhile, retail sales for August are largely expected to remain unchanged month-on-month. S&P 500 ESc1, Dow 1YMc1 and Nasdaq futures NQc1 were all broadly flat, pointing to a slow day on Wall Street, .N although parts of the market were expected to react positively to news that a U.S. railroad strike had been avoided. .N (Full Story) Back in Asia, Tokyo hadn’t been the only Asian capital concerned about currency weakness. South Korea’s won bounced off a near 13-year low overnight as it appeared that its authorities had been dishing out verbal FX intervention again. (Full Story) Among the main stock markets, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS turned during the session to finish down 0.2%. The Nikkei .N225 rose 0.2% though, while the main Hong Kong property index .HSMPI surged over 4% after reports that some Chinese developers were finally being allowed to slash prices. (Full Story) The world’s second-largest economy narrowly avoided contracting in the second quarter as widespread COVID-19 lockdowns and the slumping property sector badly damaged consumer and business confidence. With few signs China will significantly ease zero-COVID soon, some analysts expect the economy to grow by just 3% this year, which would be the slowest since 1976, excluding the 2.2% expansion during the initial COVID hit in 2020. “Equity markets are presently in no-man’s land,” said Sean Darby, global equity strategist at Jefferies in Hong Kong. “Better macro news to support earnings is discounted as (there is) the need for further tightening to quash growth – while CPI prints are not declining fast enough,” he said. Fed funds futures 0#FF:, which were dumped along with stocks after Tuesday’s stubbornly hot U.S. inflation reading but were helped by lower producer price figures on Thursday, imply a 30% chance of a 100 basis point rate hike next week. They have the benchmark U.S. interest rate as high as 4.3% by February. FEDWATCH Two-year U.S. yields US2YT=RR, which track near-term rate expectations, edged up to 3.029%, bringing the rise for the week so far to 23 basis points in a seventh straight weekly gain. European moves saw the 2-year German yield rise 2.5 bps to 1.435% leaving it just off its highest since July 2011. DE2YT=RR. Germany’s 10-year yield, the euro zone’s benchmark, rose 4.5 basis points (bps) to 1.746%. DE10YT=RR ING analysts said comments by European Central Bank chief economist Philip Lane on Wednesday had endorsed the hawks’ narrative. It “is another clue that the central bank has experienced a significant shift in its reaction function,” they wrote. In commodities, European gas prices rose for a third day running. Brent oil LCOc1 dipped $1.38 to $92.68 a barrel. Spot gold XAU= dropped 0.8% to $1,683 an ounce, having steadily slipped as the dollar and U.S. yields have gone up. More