Economy

The Central American country’s government finalized its petition to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) a month after announcing it would negotiate entry into the Pacific Alliance bloc of Latin American countries.”It allows us to share commercial strategies, attract investment and create linkages for small and medium-sized companies,” said Chaves, who said the CPTPP accounts for 17% of global trade.The CPTPP went into effect in 2018 as an offshoot of the Trans-Pacific Partnership, following the United States’ departure from that proposed trade bloc. Current members are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.Costa Rica, with 5.2 million inhabitants, has free trade agreements with nine countries and is negotiating one more with Ecuador, in addition to regional trade agreements with the European Union, Caribbean states (Caricom) and Central American countries (CAFTA). More

LOS ANGELES (Reuters) -Walt Disney Co edged past Netflix Inc (NASDAQ:NFLX) with a total of 221 million streaming customers and announced it will increase prices for customers who want to watch Disney+ or Hulu without commercials.The media giant will raise the monthly cost of Disney+ without advertising by 38% to $10.99 in December, when it begins to offer a new option that includes ads for the current price. Shares of Disney rose 6.9% in after-hours trading to $120.15 on Wednesday.Disney in 2017 staked its future on building a streaming service to rival Netflix as audiences moved to online viewing from traditional cable and broadcast television. Five years later, Disney has edged past Netflix in total streaming customers. The Mouse House added 14.4 million Disney+ customers, beating the consensus of 10 million expected by analysts polled by FactSet, as it released “Star Wars” series “Obi-Wan Kenobi” and Marvel’s “Ms. Marvel.”Combined with Hulu and ESPN+, Disney said it had 221.1 million streaming subscribers at the end of the June quarter. Netflix said it had 220.7 million streaming subscribers.”Disney is gaining market share when Netflix is struggling to add more subscribers,” Investing.com analyst Haris Anwar said. “Disney has still more room to grow in international markets where it’s rolling out its service fast and adding new customers.”To help attract new customers, Disney will offer an ad-supported version starting on Dec. 8 for $7.99 a month, the same price it now charges for the ad-free version, the company said. Prices for Hulu will rise by $1 to $2 per month in December depending on the plan.The company lowered its long-term subscriber forecast for Disney+ customers on Wednesday, blaming the loss of cricket rights in India.Disney now projects between 215 million and 245 million total Disney+ customers by the end of September 2024. That is down from the 230 million to 260 million which Disney had been forecasting.The adjustment came from reduced expectations for India, where the company is losing streaming rights for Indian Premier League cricket matches.For the first time, Disney broke out estimates for Disney+ Hotstar customers in India from the rest of Disney+.Chief Financial Officer Christine McCarthy said Disney expected to add up to 80 million Disney+ Hotstar customers by September 2024, and between 135 million and 165 million others. The company still expects its streaming TV unit to turn a profit in fiscal 2024, McCarthy said. In the most recent quarter, the division lost $1.1 billion. For the fiscal third quarter ended July 2, Disney posted adjusted earnings per share of $1.09, up 36% from a year earlier, as visitors packed its theme parks. Analysts polled by Refinitiv had expected earnings of 96 cents.Operating income more than doubled at the parks, experiences and products division to $3.6 billion.Streaming losses put a drag on the media and entertainment unit, whose profit declined by 32% to nearly $1.4 billion.Overall revenue rose 26% from a year earlier to $21.5 billion, ahead of the analyst consensus of $20.96 billion. More

The US chip sector is experiencing both feast and famine. This week the US signed $52bn of subsidies into law. It is a transformative level of support designed to help the expansion of domestic chip manufacturing. The timing, however, is unfortunate. Around the world, demand for chips is collapsing. With inflation in the US at 8.5 per cent it makes sense that spending on PCs and other personal tech is down. The knock-on effect has been reported by Intel and Nvidia. But Idaho-based Micron Technology has also pointed to weaker demand in cloud computing and cars. These two areas were expected to hold up better than consumer tech. Before inflation rose, the chip sector was already dealing with the end of the coronavirus pandemic sales boom and the aftermath of a production increase that could lead to overcapacity. Inventory is being run down. Sales of the chips that power computers, cars and other electronics are unlikely to recover this year. Global sales rose 13 per cent in the second quarter of the year, according to the Semiconductor Industry Association. But within that period, sales in June were down 2 per cent on the previous year. Overall, they are expected to rise just 7 per cent this year, down from 26 per cent in 2021, according to Gartner. The Philadelphia semiconductor index, which comprises the 30 largest US companies involved in the design, manufacture and sale of semiconductors, is down 25 per cent this year. That is twice as large as the decline in the broader S&P 500. Yet valuations remain elevated. Micron, for example, is valued at over 10 times forecast 2023 earnings — a 12-month high. The saving grace is that investment from the US government will not create oversupply. Projects will take years, perhaps decades, to come to fruition. It will take three or four years for production to start at Intel’s Ohio chip plant. Micron’s $40bn investment will be spread over 10 years. The chip cycle is typically around three to five years. With luck, the next upswing will coincide with a renaissance in US manufacturing. More

Prices have increased rapidly since last year, but barely budged in July — a positive development, though not yet enough for a victory lap.Inflation cooled notably in July as gas prices and airfares fell, a welcome reprieve for consumers and a positive development for economic policymakers in Washington — though not yet a conclusive sign that price increases have turned a corner.The Consumer Price Index climbed 8.5 percent in the year through July, a slower pace than economists had expected and considerably less than the 9.1 percent increase in the year through June. After food and fuel costs are stripped out to better understand underlying cost pressures, prices climbed 5.9 percent, matching the previous reading.The marked deceleration in overall inflation — on a monthly basis, prices barely moved — is another sign of economic improvement that could boost President Biden at a time when rapid price increases have been burdening consumers and eroding voter confidence. The new data came on the heels of an unexpectedly strong jobs report last week that underscored the economy’s momentum.The slowdown in overall inflation stemmed from falling prices for gas, airfares, used cars and hotel rooms, which canceled out increases in critical areas like food and rent. Because the categories in which prices fell can be volatile, and because some of the goods and services that are rapidly increasing in price tend to be slower moving, the report’s underlying details suggest that inflation pressures remain unusually hot below the surface. More

NEW YORK (Reuters) – Softer than expected U.S. inflation data buoyed investors’ faith that twin rebounds in stocks and bonds will persist in a year of deep losses for both asset classes. Bear markets in both have maximized losses in portfolios this year as rate hikes from the Federal Reserve sapped appetite for risk, and some investors have met recent rebounds in stocks and bonds with skepticism. The S&P 500 is now up about 15% from its mid-June lows, though still down 12% year-to-date, while the Nasdaq is up more than 20% from its lows. Ten-year Treasury yields, which move inversely to prices, have fallen about 70 basis points from their June peak.The Consumer Price Index was unchanged last month after advancing 1.3% in June, the Labor Department said on Wednesday.While obstacles remain for further market gains, investors said the softer-than-expected CPI number will likely moderate expectations for how aggressively the Federal Reserve will need to raise interest rates this year to tame inflation, boosting the attractiveness of both asset classes. “The number is a huge relief because anything that keeps the Fed from doing more damage is a positive for all of us,” said Bryce Doty, senior portfolio manager at Sit Investment Associates.Doty said he was increasing his exposure to longer-dated bonds in his portfolio, betting that yields are unlikely to revisit the highs they have seen this year. GRAPHIC: Twin declines, https://fingfx.thomsonreuters.com/gfx/mkt/znvnerxzkpl/Pasted%20image%201660152737214.png Renewed optimism was apparent in Wednesday’s reaction to the number, which showed the largest month-on-month deceleration of price increases since 1973.The S&P 500 shot higher by 2.1% while yields on the benchmark 10 year Treasury fell as low as 2.67%, before bouncing back to 2.79%. Fed funds futures now show only about a 43% probability of a 75 basis point rate hike at the Fed’s September meeting, down from 63%, before Wednesday’s inflation data, according to Refinitiv data. [FEDWATCH]The Cboe Volatility Index, known as Wall Street’s fear gauge because it reflects investor demand for downside protection in stocks, fell to its lowest level in nearly four months.”One month doesn’t necessarily make a trend but we are certainly encouraged that inflation is moving in the right direction,” said Jack Ablin, chief investment officer at Chicago-based Cresset Capital.The 60/40 Target (NYSE:TGT) Allocation Fund, which follows a standard portfolio technique of keeping 60% of its assets in equities and 40% in fixed income, through Tuesday has rebounded by about 7% from its lows after its worst first half performance since it launched in 2006. Further declines in bond yields and expectations of a less hawkish Fed stand to buoy a rally in many of the growth and technology shares that were badly hit earlier this year. Higher interest rates typically hurt tech and growth stocks as their valuations rely more heavily on future cash flows.In addition to a surge in the tech-heavy Nasdaq, many of the so-called meme stocks favored by retail investors since last year staged impressive rebounds. Retail investors bought a net $6.9 billion worth of stocks in the past week, up from a 2022 low of $4.2 billion of net buys in the week leading up to June 24, according to data from Vanda (NASDAQ:VNDA) Research.STILL CAUTIOUS Plenty of investors remain hesitant to jump on board the rallies in either stocks or bonds. Three previous rebounds in the S&P 500 have wilted this year, the index crumbling to new lows. Big swings in Treasury markets, meanwhile, have wrongfooted investors.”Our view is that we’re going to need … clear and convincing evidence that inflation is on a slowing path, before the Fed probably loses religion as it relates to fighting inflation,” said Jonathan Duensing, head of fixed income at Amundi US.The firm believes 10-year yields will stay in a range between 2.75% and 3.5% in coming months. They were recently at 2.77%.Some Fed officials have already offered a counterpoint to expectations of a dovish pivot from the central bank.Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday said he is sticking to his view that the U.S. central bank will need to raise its policy rate another 1.5 percentage points this year and more in 2023, even if that causes a recession.Investors will see one more inflation report and another payrolls number before the Fed meets in September. Producer Price Index data, expected on Thursday, may offer further clues on inflation.Still, others think there may be more upside, at least for the short term. Michael Purves, chief executive of Tallbacken Capital, said the S&P 500 could mount a rally to 4,400 – some 5% above current levels – buoyed by stable earnings and recent positive economic data.”This recommendation does not suggest we think we are out of the woods,” he wrote on Wednesday. However, “for the near future, we think risk/reward is heavily in favor of the equity bulls.” More

US stocks rallied on Wednesday, with the tech-heavy Nasdaq Composite index closing more than a fifth above lows hit earlier this year, after fresh data showed inflation steadying in the world’s largest economy.Consumer prices in the US rose 8.5 per cent year on year in July, a slower increase than in June and below economists’ forecasts of 8.7 per cent. The data published on Wednesday also showed that on a month-on-month basis, there was no increase in inflation in July compared with the 1.3 per cent monthly rise in June.The figures added further fuel to a two-month recovery in financial markets, as traders bet the Federal Reserve might be led to temper its aggressive interest rate rises aimed at subduing soaring prices. The Nasdaq Composite, which includes big technology companies such as Apple and Microsoft, rose 2.9 per cent on Wednesday, bringing its gains to 20.7 per cent from lows reached in June. The fast-growing businesses in the index were hard hit this year as investors slashed their global growth forecasts and yields on Treasury bonds surged.The blue-chip S&P 500 stock index advanced 2.1 per cent, closing above 4,200 for the first time since early May. The benchmark has climbed 14.8 per cent from its nadir in 2022, although US stocks in aggregate are still worth about $8.6tn less than when the year started.Measures of volatility, which have been elevated since Russia’s invasion of Ukraine and increased odds of a US recession began to rattle investors, also declined. The Vix index of expected stock market volatility fell below its long-running average of 20 for the first time since April.“Inflation has been expected to peak over the summer for some time, so it was reassuring for markets that there are clear signs that this looks to be happening,” said Oliver Blackbourn, portfolio manager at Janus Henderson Investors.Prices on two-year US Treasury notes, which are particularly sensitive to changes in the Fed’s interest rate policy, rallied following the inflation report as well. The advance pushed the yield on the note down 0.05 percentage points to 3.22 per cent. The yield on the benchmark 10-year Treasury, which moves with inflation and growth expectations, rose 0.01 percentage points to 2.79 per cent.The US dollar, a haven for investors in times of uncertainty, also fell back in reaction to the data, dropping 1.1 per cent against a basket of six currencies.The US inflation benchmark had hit9.1 per cent in June — the highest level in 40 years — prompting the Fed to deliver back-to-back supersized interest rate increases of 0.75 percentage points over the summer.Still, the inflation data show that prices remain well above the US central bank’s 2 per cent target. “While peak inflation is welcome news, it’s probably not enough to allow the Fed to ease off its tightening or to put recession fears to bed,” said Mike Bell, global market strategist at JPMorgan Asset Management.Core inflation, a measure of price growth that strips out volatile categories including energy and food, also came in below expectations, staying at the 5.9 per cent level it hit in June and well below a peak in March of 6.5 per cent.

“I think this might be a new bull market as opposed to a bear market rally. The Fed will pivot eventually, the rate of increases will have to slow,” said Patrick Spencer, vice-chair of equities at Baird. However, others warned that inflation remains high. “It’s nice to see a report come in cooler, but we’ll leave the champagne bottles closed for now,” said Brian Nick, chief investment officer at Nuveen. In Europe, the Stoxx 600 index closed up 0.9 per cent and Germany’s Dax index gained 1.2 per cent after losses in the previous session.Declines in tech stocks dragged down indices in Asia, which closed before the publication of the CPI data. Hong Kong’s Hang Seng closed down 2 per cent, China’s CSI 300 benchmark of Shanghai and Shenzhen-listed stocks fell 1.1 per cent and Japan’s Topix closed down 0.2 per cent. More

WASHINGTON (Reuters) – The main revenue source in the U.S. Senate’s newly passed tax, climate and drugs bill is a novel 15% corporate minimum tax aimed at stopping large, profitable companies from gaming the Internal Revenue Service code to slash their tax bills to zero.The nonpartisan Joint Committee on Taxation estimates that the new tax will add around $222 billion to U.S. government coffers over the next 10 years, down from a previous projection of $313 billion after last-minute changes to the bill. It will apply to companies with more than $1 billion in “book income,” the profits they report to shareholders before the effects of tax deductions and credits.Here are some key details on how it would work:What is the corporate minimum tax?A wealth of deductions, credits and loopholes in the federal tax code has allowed some companies to report no income or negative income to the IRS while reporting strong profits to shareholders. Democratic President Joe Biden has repeatedly singled out Amazon.com Inc (NASDAQ:AMZN) for paying little to no federal income tax despite billions of dollars in profits. If enacted, the tax will serve as a corporate version of the Alternative Minimum Tax for individuals, which prevents the wealthiest Americans from zeroing out their tax bills with investment losses and other deductions and credits.The tax would likely apply to around 150 of the world’s largest companies, according to a Joint Committee on Taxation analysis. These include large pharmaceutical companies and major corporations like Amazon, Apple Inc (NASDAQ:AAPL), Exxon Mobil Corp (NYSE:XOM) and Nike Inc (NYSE:NKE), according to several think tanks that support the new tax. Amazon declined to comment on a potential tax increase. Apple, Exxon Mobil and Nike did not respond to requests for comment.Companies that meet this threshold must calculate their taxes under both the 21% income tax regime and the 15% corporate minimum tax regime — and pay the higher bill.The tax would take effect next year and affect companies that earned an average of $1 billion in book income for three consecutive years. It would also apply to foreign companies that earn $100 million of book income in the United States. What are the exceptions for companies?Some regular corporate income tax credits and deductions are still allowed under the minimum tax, including credits for foreign taxes paid. The carrying forward of prior-year losses to offset future income is also permitted, but only 80% can be applied to reducing taxable income. Credits for research and development expenses are also allowed, with 75% of the value applied to reducing corporate minimum tax. At the urging of Democratic Senator Kyrsten Sinema, lawmakers added a provision to preserve deductions on capital investments such as machinery, vehicles and buildings. The exception would allow companies to more quickly offset these expenses against tax bills.Under another last-minute change to the legislation urged by Sinema, companies controlled by private equity firms are not subject to the corporate minimum tax if they make less than $1 billion of book income, even if that investment firm’s combined portfolio of companies exceeds the threshold. Some private equity firms may be able to shift assets among companies in their portfolios so that each earns less than the $1 billion threshold to avoid the minimum tax. Book income is calculated based on the income companies report to shareholders, and the new tax may give companies an incentive to lower the book income they report, law firm Baker Hostetler said in a recent note. They pointed to a nonpartisan Congressional Research Service report showing evidence of how past efforts to levy taxes based on book income compelled corporate taxpayers to manage their earnings and adjust book income to reduce taxes.Large companies also could try to lobby the nongovernmental Financial Accounting Standards Board for favorable changes to the rules for calculating book income. More

(Reuters) – New York City could introduce a traffic congestion charge of up to $23 a day late next year, which a study released on Wednesday projected would reduce the number of cars entering Manhattan by 15% to 20%.The city wants to charge a daily variable toll for vehicles entering or remaining within the central business district, defined as between 60th Street in midtown Manhattan and Battery Park on Manhattan’s southern tip. New York, which has the most congested U.S. traffic, would become the first major U.S. city to follow London, which began a similar charge in 2003.New York lawmakers approved the plan in 2019, and it was originally projected to start in 2021. But the federal government under President Donald Trump did not take any action.The Federal Highway Administration (FHWA), which must approve the move, said on Wednesday it approved the required environmental assessment. The agency will review public comments submitted by Sept. 9.It did not give a timeline for its decision, but the Metropolitan Transportation Authority (MTA) said the fee could come into effect up to 10 months after approval is granted. That period would be for system design and implementation.”Congestion pricing is good for the environment, good for public transit and good for New York and the region,” MTA CEO Janno Lieber said.Passenger vehicle drivers could pay $9 to $23 to enter at peak times, while overnight tolls could be as little as $5. Drivers could apply existing bridge and tunnel tolls to congestion charges.The environmental assessment released Wednesday found the charge would cut traffic, improve air quality, make buses more reliable and increase transit use by 1-2%. The toll would generate $1-$1.5 billion a year and support $15 billion in debt financing for mass transit improvement. Riders Alliance, a transit advocacy group, endorsed the move and said congestion pricing “cannot happen soon enough.” More