Economy

The embattled developer plans to dispose of the state-owned construction land-use right for its under-construction Crystal City Project in the Hangzhou area, and the ownership right to the buildings, according to the filing.Evergrande said in the filing that it would use the proceeds to repay construction fees of 920.7 million yuan for projects in Hangzhou, including the Crystal City Project, and expects a gain of about 216 million yuan through the stake disposal.Last week, the world’s most indebted property developer had said it will unveil a debt restructuring proposal for its creditors by the end of July after concerns about its financial health were renewed by a delay in publishing its annual results. ($1 = 6.3602 Chinese yuan) More

ORLANDO, Fla. (Reuters) -Remember ‘Japanification’?After the financial crash of 2008, a consensus emerged that the United States and Europe would slide into the sort of multi-decade economic malaise Japan experienced after its property bust of the 1990s – where the effects of a rapidly ageing population saw waves of excess savings, slow growth and persistent deflationary pressures.Termed ‘Japanification’, the diagnosis involved chronically low or negative interest rates and bond yields, with repeat bouts of bond-buying ‘quantitative easing’ and mounting debt piles. When COVID-19 hit, many doubled down on that view. And yet inflation in the United States and Europe has surged to its highest in four decades. Initially dismissed as transitory due to the bottlenecks and base effects of the post-pandemic reopening, price rises are proving more durable and pervasive than central banks had hoped and many are already lifting interest rates. An energy price shock since Russia’s invasion of Ukraine compounds the problem. And U.S. Treasury bonds have had their worst quarter in at least 25 years. So is the ‘Japanification’ thesis now dead? Steve Major, head of global fixed income research at HSBC, says it’s very much alive, and offers three broad reasons: the Fed’s own recent ‘dot plot’ projections, current market pricing, and the long-term structural drivers that existed before 2008.Federal Reserve policymakers this month raised their median projection of where they see rates peaking to 2.8% next year from 2.1% in 2024 as per their December forecast.This is well into ‘restrictive’ territory – defined as rates above the Fed’s assumption of long-term neutral rates – and increases the chance of a recession that will probably see rates and bond yields quickly come back down again. Several measures of yield and rates curves – nominal, real, and forward – back up this view. Crucially, Fed policymakers also lowered their longer-term neutral rate forecast to 2.4% from 2.5% where it had been since 2019. This is no rounding error, but a result of three policymakers lowering their long-term outlook. The Fed is essentially indicating that the long-term trend for the neutral rate of interest is still downward because the economy is not strong enough to withstand higher rates.Ultimately, the deflationary pull exerted by huge and rising debt levels, ageing populations, high degrees of wealth inequality, and rapid technological advances is strong.”These trends are very powerful and are things that the central bank has no control over. Can the central bank control how old people are?,” Major says, adding: “The ‘lower for longer’ hypothesis is intact. And the market at the moment supports it.”R-STAR ZEROThe pandemic has cast some doubt over the long-held view that ageing and related worker shortages over time are as deflationary as Japan’s experience suggests.The most powerful of those arguments – outlined by economists Charles Goodhart and Manoj Pradhan just before the pandemic – is that worker shortages will ultimately lift the bargaining power of labor and wages and help reflate prices more generally. But demographics are a double whammy for interest rates in the long term. Ageing populations and shrinking workforces cut potential growth rates over time while workers nearing retirement typically bank life savings into safer bonds. Bouts of inflation and rising bond yields are possible, as we are seeing now, but they are less likely to last. Curiously, one of the Fed’s most hawkish rate-setters revealed that the Fed still agrees with the ‘lower for longer’ outlook. St. Louis Fed President James Bullard dissented against the Fed’s 25-basis point rate hike to a 0.25%-0.50% range on March 16, and voted for a 50 bps increase. He has since called for rates to rise beyond 3%.But he also sees the long-run equilibrium policy rate at 2%. Assuming the Fed brings inflation back down to its 2% target, that implies a real policy rate, known as ‘R-star’, of zero. Estimates of R-star vary and the Fed’s median estimate is now 0.4%, so zero would not be a total surprise. The New York Fed stopped updating its estimates in 2020 due to the pandemic, but the long-term downtrend is clear.Albert Edwards at Societe Generale (OTC:SCGLY) has been a long-term bond bull for the all these structural reasons, correctly calling the decline in yields and interest rates as part of his ‘Ice Age’ view of the global economy and markets.He thinks a thaw is eventually coming, and thinks inflationary pressures from soaring commodity and energy prices, fiscal largesse, and expanding deficits will overwhelm and crash the bond market.But despite the scramble to re-price bonds amid the central bank hawkishness of recent months, this quake is still not the big one.”This isn’t the end of the bond bull market in the near term. This spike in commodities will ultimately be deflationary and will kill global demand,” Edwards said, adding: “The Fed is going to tighten until they put the economy back into recession, and that won’t take very long.”Edwards reckons the 10-year Treasury yield can revisit its record low from August 2020 around 0.5%, a level historically associated with Japanese yields. (The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeever; Editing by Andrea Ricci) More

Job openings edged lower to about 11.3 million in February, about 5 million more than the level of unemployed workers.
Quits increased to 4.35 million as the Great Resignation persisted.

Pedestrians walk past a Now Hiring sign in Arlington, Virginia, on March 16, 2022.
Stefani Reynolds | AFP | Getty Images

An increasing number of Americans quit their jobs in February, while the gap between available positions and the unemployed grew even wider, the Bureau of Labor Statistics reported Tuesday.
The Job Openings and Labor Turnover Survey showed that 4.35 million workers left in February, an increase of 94,000 from the previous month. It’s also a slightly higher level as a percentage of the workforce, up to 2.9% from 2.8%.

At the same time, there were 11.27 million openings in the month, down just slightly from January. However, with the total level of those counted as unemployed contracting further to 6.27 million, that left a record 5 million more openings than available workers. There were 1.8 jobs for every person unemployed.
Education and health services had the highest level of job openings for the month, at 2.23 million, followed by professional and business services with 2.1 million, and trade, transportation and utilities with 1.86 million.
The quits level was off its November 2021 high of 4.51 million, which amounted to 3% of the overall workforce. The highest level came in trade, transportation and utilities, at 1.06 million. Leisure and hospitality, a critical proxy for the pandemic-era economic recovery, saw its quits rate unchanged at 5.6%.

The elevated level of quits is part of what some term the “Great Resignation,” in which workers have been able to leave their current positions for better opportunities.
Hires increased by 263,000 in February, nudging the rate up to 4.4%, while layoffs and discharges edged lower to 1.39 million. Separations overall were slightly higher, rising to just under 6.1 million.

Federal Reserve officials watch the JOLTS report closely for signs of labor market slack. The extremely tight jobs picture has helped drive inflation higher, which in turn has pushed the Fed to start raising interest rates.
An important snapshot of the labor market comes Friday, when the BLS releases its nonfarm payrolls count for March. Economists surveyed by Dow Jones are expecting growth of 490,000 and an increase in average hourly earnings of 0.4% for the month and 5.5% on a 12-month basis.

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HANOI/SAN FRANCISCO (Reuters) – Vietnam’s automaker VinFast said on Tuesday it has signed a preliminary deal to initially invest $2 billion to build a factory in North Carolina to make electric buses, sport utility vehicles (SUVs) along with batteries for EVs.The unit of Vietnam’s biggest conglomerate Vingroup, said it plans to have a total investment of $4 billion in its first U.S. factory complex. Construction should begin this year as soon as the company gets necessary permits, and is expected to finish by July 2024. The plant’s initial capacity will be 150,000 units per year, Vinfast said. “With a manufacturing facility right in the U.S. market, VinFast can stabilize prices and shorten product delivery time, making our EVs more accessible to customers,” said Nguyen Thi Thu Thuy, Vingroup vice chair and VinFast Global CEO. VinFast has begun taking pre-orders globally for two electric SUVs with a goal to begin delivering them in the fourth quarter.U.S. President Joe Biden said the VinFast investment, which will create more than 7,000 jobs, is “the latest example of my economic strategy at work.” “It builds on recent announcements from companies like GM, Ford, and Siemens to invest in America again and create jobs, said Biden, who set an ambitious goal for half of new car sales to be electric by 2030. This will be North Carolina’s first car plant and it is the largest economic development announcement in the state’s history, the governor’s office said in a statement. VinFast said prices for its VF8 sport SUV started from $41,000 in the United States. By comparison, a Tesla (NASDAQ:TSLA) SUV sells for around $63,000. VinFast is targeting global electric vehicle sales of 42,000 this year.PRODUCTION IS HARD VinFast is betting big on the U.S. market, where it hopes to compete with legacy automakers and startups with affordable electric SUVs and a battery leasing model. Other electric vehicle startups like Rivian and Lucid have slashed their production targets this year due to supply chain disruptions caused by coronavirus, which hit their share prices. Tesla CEO Elon Musk said last year, “It’s insanely difficult to reach volume production at affordable unit cost.”VinFast, which became Vietnam’s first fully fledged domestic car manufacturer in 2019, plans to transition to all-electric vehicle production from late 2022. Outside of North America, the company is looking for a plant in Germany, it said in January. More

(Reuters) – A favorite Wall Street harbinger of business-cycle downturns sent up a warning flare that a recession may be on the horizon on Tuesday, just hours after the latest data on the U.S. economy showed business demand for workers remained strong and consumers were still confident despite some worries about inflation.It was a disjointed set of events – strong economic fundamentals against signs of anxiety in the bond market – that showed just how tight a path the Federal Reserve will need to walk as it tries to tame inflation with a steady series of interest rate increases.For traders who briefly pushed rates on the 2-year Treasury note above that of the 10-year Treasury note, the biggest risk to the economy may now be a central bank that finds inflation has slipped its grasp and is forced to act more aggressively than expected, killing the current economic expansion in the process.Former New York Fed President William Dudley, writing for Bloomberg, even called that outcome “inevitable,” the result of the Fed waiting until this month to raise interest rates even as inflation accelerated last year. After briefly dipping below zero, the spread between the 10-year and 2-year note yields had widened by mid-afternoon.U.S. Treasury yield curve inverts https://graphics.reuters.com/USA-BONDS/gdvzyjmorpw/chart.pngBut the episode still adds a new complication to the debate at the Fed about how far and fast to raise rates, and may even be an indicator in itself of how much the central bank is out of synch with inflation running at triple its 2% target.Yield curve inversions typically come late in Fed hiking cycles as bond investors sense the central bank may have gone too far in raising borrowing costs and begun to slow the economy.In the current tightening cycle, the Fed is only getting started. Earlier this month it raised the target federal funds rate by a quarter of a percentage point, the first hike since 2018. The funds rate was cut to the near-zero level to bolster the economy at the outset of the coronavirus pandemic in 2020. Fed policymakers expect to raise rates steadily through this year and well into next to bring inflation back to their target – with little scope to worry about what that is doing to the yield curve.Philadelphia Fed President Patrick Harker on Tuesday dismissed the flattening yield curve as only one signal that markets were sending in an economy that overall looked healthy and far from recession. “We are starting in such a strong position going in” to the rate hike cycle, Harker said in an interview with CNBC.In earlier remarks to the Center for Financial Stability in New York, Harker said: “As a policymaker, I have to look at the combination of all those numbers and come up with a pragmatic path of policy and not base it upon any one.”For now, the numbers that matter most to the Fed concern inflation, running at a multi-decade high, and a real economy that seems not just strong, but strong enough to weather the higher interest rates the central bank is planning.Hard to find a job in America? Nope! https://graphics.reuters.com/USA-ECONOMY/JOBS/akvezjoyopr/chart.pngAmerican consumer confidence ticked up this month, according to the Conference Board, with a record percentage describing jobs as “plentiful” – data supported by government figures also out on Tuesday showing nearly two job openings for every unemployed worker last month.The Labor Department is expected to report on Friday that the U.S. economy gained 490,000 jobs in March, according to a Reuters poll of economists, marking an unprecedented 11th straight month of gains above the 400,000 mark. The unemployment rate is forecast to drop to a pandemic-era low of 3.7% – just two-tenths of a point above where it was when COVID-19 struck.Consumer spending has held up through repeated waves of the coronavirus over the past two years, with goods consumption the strongest in a generation. And, while inflation and rising interest rates may start denting the appeal of big-ticket purchases like cars, signs are emerging that Americans are shifting back toward pre-pandemic spending habits that favor services like travel and dining out.The risks certainly are real, with the Fed staking its credibility on bringing inflation steadily down. If improvement isn’t seen soon on the inflation front, policymakers have said they would favor hiking rates in larger increments and to higher levels until that happens. That’s the very dynamic that can increase the risk of a recession, and drive short- and long-term bond yields to invert.What it signals at this stage remains to be seen. Fed Chair Jerome Powell and other U.S. central bank officials say they do keep an eye on the yield curve, but won’t necessarily react to it.”We take it into account, along with many other financial conditions,” Powell said in January when the spread between the 2-year and 10-year Treasury notes was still a healthy 0.75%, but “I don’t think of it as some kind of an iron law.” More

NEW YORK (Reuters) – The U.S. Treasury yield curve is flashing a warning sign to Wall Street, where many are worried that a recession could be in store after bond investors pushed up short-term rates to the point where yields on the two-year Treasury were actually higher than the 10-year Treasury.Such a phenomenon, called a “yield curve inversion,” is a key metric that investors watch as bond yields impact other asset prices, feed through to banks’ returns and have been an indicator of how the economy will fare. Aside from signals it may flash on the economy, the shape of the yield curve has ramifications for consumers and business.On Tuesday, one of the most closely watched parts of the curve, the two-year to 10-year curve, briefly inverted, after weeks of sharp moves in the U.S. Treasury market, where investors have sold off Treasuries anticipating aggressive interest rate hikes from the U.S. Federal Reserve which is fighting surging inflation. U.S. Treasury yield curve inverts https://graphics.reuters.com/USA-BONDS/znpneqxayvl/chart_eikon.jpgThat has sent a warning sign for investors that a recession could follow. The last time it inverted was 2019 and the following year, the United States entered a recession – albeit one caused by the global pandemic.”A lot of people focus on this and there could be a self-fulfilling expectation, they see the 10 year/2 year invert and believe there will be a recession and change behavior,” said Campbell Harvey, professor of finance at the Fuqua School of Business, Duke University, who pioneered using the yield curve as a predictive tool for recessions. “So if you’re a company you cut back capex and employment plans.”Harvey, who focused his research on a different part of the yield curve, added that being prepared for a recession was “not a bad thing… so when it occurs you survive.” Broker-dealer LPL Financial (NASDAQ:LPLA) said the 2/10 inversion is “a powerful indicator” pointing out that it predated all six recessions since 1978, with just one false positive.According to Anu Gaggar, global investment strategist for Commonwealth Financial Network, the lag between curve inversion and the start of a recession has averaged about 22 months but has ranged from 6 to 36 months for the last six recessions. 2/10 curve https://fingfx.thomsonreuters.com/gfx/mkt/movanbqagpa/Pasted%20image%201648582702082.pngSome investors caution that the yield curve is just one indicator among many to look for when predicting recession. Indeed, equity markets have shot higher in recent weeks, with the S&P 500 cutting its year-to-date loss to around 3% after confirming it was in a correction last month.For many market participants, however, the curve has become a classically followed signal. “There is definitely a psychological element to it,” said Gennadiy Goldberg, senior rates strategist at TD Securities. “The yield curve has worked in the past because it has been a signal that the end of the cycle is coming.”CLOSELY FOLLOWED Yields of short-term U.S. government debt have been rising quickly, reflecting expectations of a series of rate hikes by the U.S. Federal Reserve, while longer-dated government bond yields have moved at a slower pace amid concerns policy tightening may hurt the economy.As a result, the shape of the Treasury yield curve has been generally flattening and in some cases inverting. Not everyone is convinced the curve is telling the whole story. Some say the Fed’s bond buying program of the last two years has inflated the price of 10-year Treasuries, keeping the yield artificially low. They say the yield is bound to rise when the central bank starts shrinking its balance sheet, steepening the curve.Clouding the picture further, different parts of the yield curve have been sending different signals.While financial markets see the two-year yield as a good proxy for Fed policy and closely follow the 2/10 part of the curve, many academic papers favor the spread between the yield on three-month Treasury bills and 10-year notes. This yield curve has not indicated recession. Eric Winograd, senior economist, AllianceBernstein (NYSE:AB) said discussion of the yield curve inversion was “overheated.” “I understand the narrative and I think from a risk-taking perspective there is good evidence that a flat or inverted yield curve is a challenge for broader risk assets but I am not going to worry more about a recession if the yield curve inverts by 5 basis points or doesn’t,” Winograd said. Investors may be more dismissive of an inversion this time around, as the Fed remains very early in the hiking cycle, with time to ease off the brakes if the economy appears to be slipping into a downturn, TD’s Goldberg said.Researchers at the Fed, meanwhile, put out a paper https://www.federalreserve.gov/econres/notes/feds-notes/dont-fear-the-yield-curve-reprise-20220325.htm on March 25 that suggested the predictive power of the spread between two- and 10-year Treasuries to signal a coming recession is “probably spurious,” and suggested a better herald of a coming economic slowdown is the spread of Treasuries with maturities of less than two years. Still, for some, the trend is not to be ignored. “When things invert you are definitely much closer to a recession than a good outcome and that’s exactly where we are today,” said Edward Al Hussainy, senior interest rate and currency analyst at Columbia Threadneedle. “It’s clear we have arrived at a point of stress in markets.” More

WASHINGTON (Reuters) – U.S. President Joe Biden on Tuesday said it remains to be seen whether Russia follows through with any actions to scale down its military operations in Ukraine, saying Washington and its allies will continue with strong sanctions and aid for Ukraine.”We’ll see if they follow through with what they’re suggesting” as Moscow-Kyiv negotiations continue, he told reporters at the White House following his meeting with Prime Minister Lee Hsien Loong of Singapore. “We’re going to continue to keep a close eye on what’s going on.” More

Freeland said the Liberal-led government is committed to growing Canada’s economy, making life more affordable and continuing to build a society where no one is left behind.”That is exactly what we are doing, and that is what we’re going to continue to do in the budget that I will present to this house on April 7,” Freeland said during question period in parliament. She added the budget would be introduced at 4 p.m. ET (2000 GMT).Canada’s Liberals were re-elected last year for a third term, but Prime Minister Justin Trudeau failed to secure a majority. This month, he announced a support deal with the opposition New Democrats that will keep him in power until 2025.In exchange, the Liberals will back a national dental-care program for low-income Canadians and to move forward on a national prescription drug plan – two costly initiatives. Economists said the agreement will likely lead to heftier deficits and threatens to upend government promises to rein in inflation. Canada’s inflation rate hit 5.7% in February and is expected to go higher.Canada has also pledged to spend more on defense following Russia’s invasion of Ukraine, though it has not yet provided any details.Earlier on Tuesday, Trudeau pledged affordable housing would be a major focus in the upcoming budget.”I can assure you that investments in housing … across the country will be a strong topic in the budget that we will be presenting,” Trudeau said.The price of a typical home in Canada has more than doubled since Trudeau’s Liberals took office in November 2015 and are up 52% since the pandemic onset. More