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(Reuters) – A look at the day ahead in Asian markets.”Go big, and go bold,” was the advice to Fed Chair Jerome Powell and colleagues from some U.S. policy watchers and even former policymakers, and didn’t they do just that.The Federal Reserve’s half percentage point interest rate cut on Wednesday was a statement of intent that the Fed stands ready to protect the labor market and steer the economy away from anything approaching recession.Investors liked it, at first. The S&P 500, Dow and gold all leaped to fresh record highs, the Russell 200 small caps index rallied nearly 2%, and the dollar fell across the board. But stocks’ and gold’s gains melted away and the dollar bounced back from a 14-month low to close the U.S. session up on the day. What gives? Maybe the bond market reaction was most prescient. Treasury yields rose across the curve, more so at the longer end, perhaps on underlying worries over inflation and easier financial conditions, or because the Fed slightly revised up its long-run forecast for the fed funds rate. This sends mixed signals for Asian markets on Thursday. Who says central banks no longer retain the element of surprise? Bank Indonesia’s quarter-point rate cut on Wednesday was not on the cards – only three of the 33 economists polled by Reuters predicted the move, with the remaining 30 expecting the policy rate to be left at 6.25%.Perhaps surprisingly, the rupiah didn’t move much and stuck close to its strongest levels against the dollar in about a year. Now that the Fed has taken its first step on its easing path also, other central banks in Asia are likely to feel more comfortable loosening policy. But not Taiwan, not yet at least.Taiwan’s central bank is expected to keep its policy interest rate unchanged on Thursday, according to all 32 economists surveyed in a Reuters poll, and stay the course until late next year as it deals with lingering inflation concerns.The central bank left the benchmark discount rate at 2% as expected at its last quarterly meeting in June, having hiked it to that level from 1.875% at the prior meeting in March.Investors in Asia also have New Zealand GDP, unemployment figures from Australia and Hong Kong, and trade data from Malaysia on their plate on Thursday. Traders may also be adjusting positions ahead of Japanese inflation figures and rate decisions on Friday from the Bank of Japan and People’s Bank of China. The dark cloud of deflation hangs heavily over China, especially the property sector. Previous housing market crashes around the world suggest it could take China a decade to recover from the bubble currently bursting. And that’s if prices even get back to their pre-bubble peaks. Here are key developments that could provide more direction to Asian markets on Thursday:- Taiwan interest rate decision – New Zealand GDP (Q2) – Australia unemployment (August) More
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The aerospace giant said it would temporarily lay off tens of thousands of employees to stem losses from a walkout by the machinists’ union.Boeing will start furloughing tens of thousands of employees in the coming days as it seeks to blunt the effects of a strike involving its largest union, the company said on Wednesday.The strike, which began on Friday, has drastically slowed production of commercial airplanes because most of the union’s more than 33,000 members work in manufacturing in the Seattle area. Boeing announced a series of cost-cutting measures this week to stem losses that could reach into the billions of dollars in a prolonged strike.“With production paused across many key programs in the Pacific Northwest, our business faces substantial challenges and it is important that we take difficult steps to preserve cash and ensure that Boeing is able to successfully recover,” the company’s chief executive, Kelly Ortberg, said in a message to employees on Wednesday.Mr. Ortberg joined Boeing last month, part of a management shuffle after a panel blew off one of the company’s planes in flight this year, leading to a crisis for the company. In response, federal regulators limited Boeing’s plane production and the company initiated a series of changes aimed at improving quality and safety.Managers planned to meet with workers on Wednesday to review how the temporary furloughs, which Mr. Ortberg said would affect “a large number of U.S.-based executives, managers and employees,” would play out. He also said that he and other company leaders would take a pay cut for the rest of the strike, though he did not say by how much.Employees will continue to receive benefits. And, for some, the temporary furloughs will be cycled in, with workers taking one week off every four weeks, on a rolling basis. It was not immediately clear which workers would be affected by the furloughs. Engineers, who are represented by a chapter of the Society of Professional Engineering Employees in Aerospace, are still required to work during the strike.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More
Federal Reserve officials do not answer to the White House and they insist that they do not take politics into account when they are setting interest rates. But because borrowing costs have a big effect on the economy and the nation’s economic vibe, the central bank’s decision on Wednesday is sure to draw political attention.Former President Donald J. Trump regularly promises to bring interest rates down if he is elected president again — even though the president has little to no direct impact on borrowing costs. While in office he publicly railed against the Fed for taking too long to cut rates, to little avail.And Mr. Trump has remained focused on the Fed as it approaches its first rate cut in more than four years.“You’ll see, they’ll do the interest rate cut and all of the political stuff tomorrow,” Mr. Trump said during a town hall in Michigan this week. “Will he do a half a point? Will he do a quarter of a point? But the reason is that the economy is not good. Otherwise you wouldn’t be able to do it.”In fact, Mr. Trump has suggested repeatedly that it would be political of the Fed to cut borrowing costs in the weeks leading up to the election. Rate cuts are “something that they know they shouldn’t be doing,” he told Bloomberg Businessweek earlier this year. At another point he told Fox News that lower rates would “help the Democrats.” He has since suggested that presidents should “have a say” on interest rates, though he later walked the comment back.Vice President Kamala Harris, the Democratic nominee, has largely avoided talking about the Fed. While President Biden steers clear of saying what the Fed should do, he has at times tiptoed close to doing so, including earlier this year when he said he “bet” that interest rates were going to come down.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More
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PARIS (Reuters) -French Prime Minister Michel Barnier came under pressure on Wednesday to clarify how he will plug a gaping hole in the public finances as the central bank and public audit office warned spending cuts and tax hikes are inevitable.Barnier only took office earlier this month, but already finds himself facing a growing budget crisis as tax income comes in weaker than expected and spending higher than planned, pushing France’s deficit reduction targets out of reach.”The budget situation that I have discovered is extremely dire,” Barnier said in a statement, adding that he was seeking more information to establish the “exact reality”.Barnier, a veteran conservative politician and former EU Brexit negotiator, is running out of time to name a finance minister and hand lawmakers a 2025 budget bill, which the law in theory requires by Oct. 1 although some wiggle room is possible.But to rein in France’s worse than expected budget deficit, Barnier must tread carefully to not irritate opposition parties who could join up and topple his government with a no confidence motion in the deeply divided parliament.TOUGH CHOICESBarnier’s options are simple – cut spending, raise taxes or take more time to cut the deficit – but calibrating the mix to placate opposition lawmakers is hugely complex.The least politically contentious option is to seek more time from the European Commission and France’s EU partners to bring its deficit in line with the bloc’s 3% of GDP limit, pushing it several years beyond the current 2027 target.The head of the public audit office, Pierre Moscovici, said sticking with the current target of meeting the EU limit in 2027 would require 100 billion euros ($111 billion) in spending cuts, throttling growth in the euro zone’s second-biggest economy.”We need to be more realistic, it seems to me. I think the European Commission would always prefer the truth is told and that targets are realistic rather than untenable,” Moscovici said.Moscovici, a former EU economics commissioner, called for targeted budget savings rather than broad cuts and said France had little room to raise taxes further as they were already among the highest in the world. In addition to seeking more time, central bank governor Francois Villeroy de Galhau said the deficit-reduction drive should consist of three-quarters of budget savings and one quarter tax increases.However, Barnier’s own conservative Republicains party has said tax hikes are a red line and even some of President Emmanuel Macron’s own lawmakers are reluctant to see his legacy of tax cuts rolled back.Outgoing Interior Minister Gerald Darmanin said he could not support a government that hikes taxes when he stands down and returns to parliament as a lawmaker in Macron’s camp.”Let’s not break the economic machine, taxes are an easy way out,” Darmanin said on France 2 television. “We think budget cuts also have to be found.”Macron has reduced the French tax burden by 55 billion euros since he first came to office in 2017, which leftwing parties say has been a gift to the wealthy and big companies and should now be reversed.”Completely excluding tax hikes is not realistic,” Villeroy told BFM TV on Wednesday, adding an “exceptional effort” should not be excluded by corporate and well-off taxpayers as long as the deficit is above 3% of GDP.Barnier has so far been ambiguous about where he stands, saying shortly after being appointed that France needs more tax justice and saying on Wednesday taxes were already heavy.”My objective is to return to growth and improve the French people’s standards of living at time when we are already the country where the tax burden is the highest,” Barnier said.($1 = 0.8985 euros) More
