Economy

WASHINGTON (Reuters) – A U.S. jury on Thursday convicted U.S. Congressman Jeff Fortenberry, a Republican from Nebraska, of lying to FBI investigators about illegal contributions to his 2016 re-election campaign.Following a trial in Los Angeles federal court, the jury found Fortenberry guilty of scheming to falsify and conceal material facts, along with two counts of making false statements to federal investigators.Prosecutors accused Fortenberry of lying to investigators during two interviews in 2019 about $30,000 in campaign contributions he received in 2016 from Nigerian billionaire Gilbert Chagoury.Federal law prohibits foreign nationals from donating to federal election campaigns.Fortenberry’s lawyers said he did not mean to mislead FBI agents but was caught off-guard by their interview request and suffered from a faulty memory.Prosecutors alleged that an associate who hosted a 2016 fundraiser for Fortenberry told him in a 2018 telephone call that the donations in question “probably did come from Gilbert Chagoury” but were routed through intermediaries to avoid individual donor limits.According to the U.S. Justice Department, when FBI agents quizzed Fortenberry about the campaign contributions he denied being aware of any illegal donations.”If we want to expect anyone to follow the law, ultimately it starts with the law-makers,” Assistant U.S. Attorney Mack Jenkins told media outside the courthouse after the verdict was announced. “I think that’s even more paramount when the investigation itself goes to election integrity.”Fortenberry, 61, has served in Congress since 2005.The three felony charges each carry a maximum penalty of five years in prison. A sentencing hearing is scheduled for June 28 before U.S. District Judge Stanley Blumenfeld in Los Angeles. More

Do you remember the Plan for Growth? Probably not. Does Rishi Sunak? Unclear.This was supposed to be the government’s long-term blueprint for the UK economy after it scrapped the 2017 industrial strategy. Strategic economic thinking shifted from the business department to the Treasury and was watered down in the process. Faced with an outcry, the chancellor and the business secretary wrote a joint letter arguing that the Plan went further than ever on “critical policies and guides the government’s longer-term growth strategy as we build back better”.It has barely been heard of since — despite the fact that the building back doesn’t seem to be going so well. The Plan didn’t get a mention in this week’s disastrous Spring Statement, an effort rightly panned for its failure to address near-term challenges of surging energy prices, a cost-of-living crisis and protecting vulnerable households. The longer-term ambition to boost business investment may not fare much better. And the Plan for Growth is part of the issue.The chancellor on Wednesday promised more tax breaks against business investment, after his two-year super-deduction ends next April. Weak UK capital investment underpins half the productivity gap to Germany and France; a higher corporate tax rate with more generous incentives is a new approach to stimulating investment after years of cutting business tax rates failed. The Office for Budget Responsibility, however, on Wednesday halved its peak estimate of the investment brought forward by the super-deduction. Amid waning confidence, investment intentions have fallen, it noted. A Deloitte survey last December found only a quarter of CFOs expected the policy to have a positive effect on their spending.In fairness, there were always limits to a shortlived tax break: the average investment cycle in manufacturing, say, is seven years. Sunak’s people-capital-ideas of the Spring Statement also echoed the thinking from his Mais lecture last month, and the skills-infrastructure-innovation framework of the Plan for Growth. The apparent approach is to pull a fiscal lever or two and hope the result happens to fit with the priorities of the government or the needs of the country. That is unlikely to be sufficient. “Companies invest because they see opportunities for growth and profit down the line, not because you shift their marginal tax rate,” says George Dibb, at the IPPR. “You need both co-ordination of the economy and the government to give very clear signals as to its direction of travel.” What’s odd is that other parts of the government are still talking in far more strategic language. The levelling-up white paper, co-authored by former chair of the Industrial Strategy Council Andy Haldane, had 12 “missions” to define what is required in a cross-government effort on a seemingly intractable problem. The various strategies launched across government in recent months — from innovation to net-zero — sometimes struck a more activist tone. There are several problems here. First, it is hard for businesses to keep up with this fragmentation in strategic thinking. Second, these aspirations will struggle without cross-department co-ordination and political oomph of the sort unlikely to be provided by Treasury (which is just worried it will be asked for cash, which by the way it will be).Third, that lack of harmonisation and backing results in slow and ineffectual “market making”, to borrow a phrase from that noted standard-bearer for big government and interventionism, the CBI. This isn’t just about public money (though some helps). The market, say, is still waiting for a policy framework to underpin investment in hydrogen, something that has clearly held back spending and is absent despite the likelihood that it will ape the success of contracts for difference in offshore wind. The energy transition has taken on greater urgency, given Russia’s invasion of Ukraine, and a new energy strategy, expected next week, could unlock huge investment but requires a vast push across policy, regulation, planning and more.One option, beyond a reverse ferret on the idea of a proper industrial strategy with associated institutions, would be an emergency council of the type put in place after the financial crisis, the National Economic Committee. The Treasury’s ambitions to boost UK business investment may fall short without a more explicit plan and more muscular implementation than what’s currently on [email protected]@helentbiz More

TOKYO (Reuters) -Bank of Japan Governor Haruhiko Kuroda on Friday reiterated his view a weak yen benefits the economy as a whole, brushing aside concern the currency’s slide to multi-year lows could do more harm than good to the resource-poor, import-reliant country.Due to structural changes in Japan’s economy, the benefit from a weak yen comes more through an increase in the value of profits companies earn overseas, rather than a rise in export volume, Kuroda said.”There’s no change now to my view a weak yen is generally positive for Japan’s economy,” he told parliament.The yen was headed for its worst week in two years, pummelled by Japan’s rising import costs and ultra-low low interest rates. It fell to a fresh multi-year low of 121.84 to the dollar on Friday.Kuroda said the recent rise in import prices was driven mostly by global commodity inflation, rather than the weak yen.While consumer prices may accelerate to around the BOJ’s 2% target from April, the central bank is in no rush to withdraw stimulus as any increase in inflation must be accompanied by steady rises in wages, jobs and corporate profits, Kuroda said.”Cost-push inflation that is not accompanied by wage hikes will hurt Japan’s economy,” by weighing on households’ real income and profits of import-reliant firms, he said.”As such, it won’t lead to sustained achievement of our price target. That’s why the BOJ will continue to maintain powerful monetary easing,” Kuroda said.Speaking at the same parliament session, Finance Minister Shunichi Suzuki said the government will continue to keep a close eye on currency moves, including recent yen declines, and their impact on the economy.”Exchange-rate stability is important, and sharp volatility is undesirable,” Suzuki said, repeating his verbal warning against excessive yen declines.Kuroda also said it was desirable for currency rates to move stably reflecting economic fundamentals.Such warnings, however, will likely have little effect in reversing a weak-yen trend driven by a hawish Fed, analysts say.”The more you do it, the less impact it tends to have,” Jeffrey Halley, senior market analyst of Asia Pacific at OANDA, said of the policymakers’ jawboning.Some market players see the yen’s decline as a sign of the erosion of the currency’s status as a safe-haven.Recent data showed Japan recorded its second largest current account deficit on record in January as a jump in oil import costs offset gains in investment income, highlighting the economy’s vulnerability to commodity swings.”Up till now, Japan was able to stably issue huge amount of government bonds at low interest rates due to households’ massive financial savings and the country’s current account surplus,” finance minister Suzuki said.”There’s no guarantee such market conditions will continue when we look at how energy price moves led to Japan running a current account deficit.” More

The 2022 list of industries that are either restricted or prohibited has been cut to 117, according to a document released by the National Development and Reform Commission, from 123 on the 2020 list. Industries not on the list are open for investment to all and require no approval. More

The writer is chief economist for Asia Pacific at Natixis and a senior research fellow at think-tank BruegelIf the rule for US markets is “Don’t fight the Fed”, the traditional knee-jerk reflex of investors in China is to always heed Beijing. That was underlined after last week’s move by the country’s top economic official to bolster flagging confidence in Chinese markets.Liu He, vice premier and President Xi Jinping’s close economic adviser, made a rare public intervention to reassure investors. His comments to China’s financial stability and development committee were a long way short of Mario Draghi’s “whatever it takes” speech that turned around the eurozone crisis in 2012. But they had an immediate response.The CSI 300 index, which tracks the largest listed companies in Shanghai and Shenzhen, has rallied 7 per cent from a low before the comments. Hong Kong’s benchmark Hang Seng index had its best day since 2008 in reaction, rising more than 9.1 per cent.Clearly Beijing had enough of the drubbing that Chinese stocks have taken since the start of the last year. From highs early last year, the CSI 300 index had fallen about a third before Liu’s intervention.Investor confidence had been hit by Beijing’s crackdown on the private sector, particularly on high-flying technology companies. A debt crisis at real estate developer Evergrande also raised concerns about the property sector. Sentiment then deteriorated sharply in the first half of March after a rapid increase in Covid cases in major Chinese cities and the start of the Russian invasion of Ukraine.The problem for investors, though, is that it will be highly challenging for China to follow through on the remedies outlined in vague terms by Liu. His comments were mainly aimed at reminding investors of China’s goal of stability, particularly in a crucial political year in which Xi is expected to be reappointed beyond his second term. But Liu also spelt out the three routes through which Chinese policymakers could help bring capital markets back to a stable path.They were facilitating Chinese companies’ access to overseas capital markets; offering a “standardised, transparent and predictable” approach to regulation of tech giants; and providing enough stimulus to reach the 5.5 per cent GDP growth target set by Premier Li Keqiang only a couple of weeks ago. However, there are obstacles to all three routes. On overseas listings, the thorniest point is the US requirement for the disclosure of detailed audit information on listed Chinese companies to regulators following legislation passed in late 2020. The Securities and Exchange Commission warned last week it will start delisting Chinese companies from the US unless they comply. However, there are rumours that regulators in China might be ready to compromise and allow companies to comply with the requirements.What might not be as easy for Liu is to convince China’s new array of regulators to reduce the pressure they have been imposing upon China’s internet companies to limit their overseas listings. These include the Cyberspace Administration of China, overseeing China’s internet companies, and the State Administration for Market Regulation, China’s antitrust body.

These regulators also hold the key to the second issue that Liu He needs to tackle, namely providing a more predictable regulatory environment for Chinese internet companies at home. This objective, though, may run counter to the overarching “common prosperity” push by Beijing as most of these internet companies are owned by billionaires, which are supposed to continue to pay the price of excessive market power. Economic stimulus — the other key part of Liu’s pitch — should, in principle, be the easiest to achieve. But the stimulus plans announced so far look very far from what China embarked on in the past, certainly when compared with the 2008 massive fiscal package and even the more modest one in 2016 after the stock market collapse in the summer of 2015. The People’s Bank of China also might feel that more needs to be done by other policymakers before it eases monetary policy further, particularly given that the Federal Reserve is expected to raise rates aggressively.Against the backdrop, Covid cases continue to pile up in China and lockdowns and other zero Covid-related policies continue to weigh on economic growth. The Ukraine war also will hit global demand for Chinese goods and Beijing’s ambiguous position on the conflict increases the risk of the country being caught up in Russia-related sanctions. Liu’s pitch can only be commended for its immediate effectiveness but the longer-term outcomes will be difficult to achieve. More

The president later apologized, saying he thought the decision had already been made public.The unanimous decision by the Bank of Mexico’s five-member board was in line with a Reuters poll of analysts which forecast the bank would set a rate of 6.5%, the seventh hike in a row.The bank cited tightening global monetary and financial conditions, and the prevailing uncertainty and rising inflationary pressure linked to geopolitical conflict, an apparent reference to the war in Ukraine.”The balance of risks for the trajectory of inflation within the forecast horizon has deteriorated and remains biased to the upside,” the bank said in its policy statement.Earlier, while speaking about inflation, Lopez Obrador noted the U.S. Federal Reserve had last week raised its key lending rate for the first time since 2018, then said Mexico’s central bank had voted to hike its benchmark rate by 50 basis points.”We’re going to have an interest rate of 6.5 (percent),” he said, speaking at a regular morning news conference. “The Bank of Mexico took the decision yesterday unanimously, and we respect the Bank of Mexico’s autonomy.”The peso currency extended gains against the dollar after the president made his remarks, and closed on Thursday at its strongest level since late September.Still, several analysts expressed shock and alarm that the president had revealed the decision early.Gabriela Siller, an economist at Banco Base, said revealing the rate decision in advance was unprecedented and a “scandal” that raised questions about the bank’s autonomy.Galia Borja, one of the Bank of Mexico’s board, denied that the president’s move would compromise the bank’s autonomy and said that it had made its decision completely independently.Mexico is currently holding its annual banking convention in Acapulco, with top finance officials due to attend, including the new governor of the central bank, Victoria Rodriguez.The central bank board’s policymaking decision, which normally takes place on Wednesday evening, was moved forward a few hours to help with the arrangements for the convention, according to a person familiar with the matter.While attending the convention on Thursday evening, Lopez Obrador said he thought the bank’s decision had already been announced when he spoke in the morning.”I want to apologize to the governor of the bank and the deputy governors because I received the information last night that they had taken the decision,” he said.Mexican policymakers face a delicate balancing act between taming high inflation while not choking off fragile economic growth, which stalled at the end of 2021. The economy ministry has forecast the economy will expand about 2.5% in 2022.Inflation hit 7.29% in the first half of March, slightly lower than the previous two-week period, but more than double the central bank target rate of 3%. The bank has a one percentage point tolerance range above and below the target. More

By Davide Barbuscia and Ira IosebashviliNEW YORK (Reuters) – A sharp sell-off in U.S. Treasuries has increased concerns about low levels of liquidity in the $23.5 trillion market, potentially amplifying losses for investors which already had a dire start to the year.U.S. government bond yields have spiked this year as the Federal Reserve has sounded more hawkish about how aggressively it will hike interest rates to cool the economy, hitting bond returns. The ICE (NYSE:ICE) BofA Treasury Index has recorded its worst start to the year in history, down 6%. (Graphic: Bonds bleed- https://graphics.reuters.com/USA-MARKETS/BONDS/klvykjgmovg/chart.png) While liquidity in the U.S. Treasury market has been an ongoing issue, traders and investors said there had been particular concerns during this sell-off. “People who buy longer-dated Treasuries, such as pensions, central banks and insurance companies, tend to stay away when you have this type of volatility,” said Ed Al-Hussainy, senior rates and currency analyst at Columbia Threadneedle, adding that liquidity “is not good” and that trading big blocks of Treasuries “has become very difficult.” The market for Treasury securities is typically one of the most liquid in the world, and the global financial system uses the instruments as a benchmark for asset classes. But it has seen liquidity issues, such as in late February and early March 2020, when pandemic fears caused market ruptures and liquidity rapidly deteriorated to 2008 crisis levels, prompting the Fed to buy $1.6 trillion of Treasuries to increase stability.Investors say liquidity concerns this year have not reached the point of threatening market functioning, but concerns have increased for several factors.One is that the Fed has ceased buying U.S. Treasuries, after ending this month https://www.federalreserve.gov/newsevents/pressreleases/monetary20220316a1.htm a bond-buying programme aimed at supporting the economy during the coronavirus crisis.”We are adjusting to that new world where the Fed is not a buyer,” Al-Hussainy said. Some investors are also concerned that wild price swings in the commodities markets due to the Ukraine crisis and sanctions on Russia, a commodities export giant, could create pockets of illiquidity in the financial system.”There’s a lot of correlation risks that are out there that I think have reduced balance sheet availability for the system at large, so even Treasuries get impacted by that,” said George Goncalves, head of U.S. Macro Strategy at MUFG.”There’s a reduction in balance sheet capacity because people are de-risking, and when you start to really delve into it, you start to think that there’s knock-on effects that reduce not only risk appetite but also the ability to trade,” he said.Some measures of liquidity have shown stress. Bid-ask spreads — a commonly used indicator of liquidity — widened significantly in March on short-term Treasury notes, Refinitiv data showed.Data from CME Group (NASDAQ:CME) showed order book liquidity for Treasuries has declined since Feb. 24, when Russia began its invasion of Ukraine, and volatility has increased. Cash contracts volume in terms of the daily average top of the book bid/ask quantity for five-year Treasuries declined to $10 million in March from about $25 million in February.For the benchmark 10-year notes, order book liquidity went down to an average of $14 million in March from about $20 million in Feb. Relative volumes, however, remained unchanged on a month-on-month basis.Steven Schweitzer, senior fixed income portfolio manager with the Swarthmore Group, said he had seen a “pretty big disconnect” on the short end of the U.S. Treasury curve earlier this month – in a reminder of the lack of liquidity seen in the aftermath of the global financial crisis.”Bonds and credit are the lubricant for the economy, and when you get the short end drying up, that’s a very big warning sign for us,” he said.The weakness in bonds this week came after Fed Chair Jerome Powell said on Monday the U.S. central bank must move quickly to counter too-high inflation and that it could use bigger-than-usual interest rate hikes if needed.Benchmark 10-year Treasury yields jumped to 2.296% on Monday from 2.153% on Friday, and two-year notes spiked to 2.117% from 1.942%, compressing the gap between the yields of those two maturities – a sign that the market is anticipating a sharp economic slowdown.With a Fed sounding increasingly determined to fight inflation despite the risk that tighter monetary policy may slow growth, there is less support for buying Treasuries, therefore sell-offs find little counteraction to offset them, some investors said.Expecting higher yields had become a consensus trade, investors said.”People are probably on the right side of that trade now,” said Matthew Nest, global head of active fixed income, State Street (NYSE:STT) Global Advisors. “The next pain trade is when and if yields go back down,” he added. (This story corrects 10-year yield in paragraph 21 to 2.296%, not 2.969%) More

The ECB said earlier this month its would end its bond-buying stimulus scheme this summer and raise interest rates for the first time in over a decade some time after that, as it comes to grips with a sudden rise in inflation.Schnabel, the most hawkish of the six board members who run the ECB, said the central bank had “left the door ajar” in case events took a turn for the worse for the euro zone, which is highly dependent on Russian gas and other raw materials.”If we now fall into a deep recession due to the Ukraine crisis, we’ll have to rethink that,” she told a German web show.”Otherwise, we’ll end the bond purchases in the third quarter and as soon as we’ve done that we can raise rates at any time depending on how inflation develops.”Estonian central bank governor Madis Mueller, another hawk on the ECB’s policy-making Governing Council, said in a Politico interview the ECB would only extend its Asset Purchase Programme if there was “a dramatic shift” in the inflation outlook.His Portuguese peer Mario Centeno, a dove, cautioned the “normalisation of the ECB’s monetary policy will be carried out gradually and proportionally at the end of this year”.The ECB has said it expects the euro zone’s economy to expand by 3.7% this year and would still grow even if stricter sanctions were imposed on Russia or supply dried up and financial markets seized up.The central bank for the 19 countries that share the euro sees inflation above or at its 2% target this year and the next under any scenario. More