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Business

U.S. court rejects J&J bankruptcy strategy for thousands of talc lawsuits

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Jan 30 (Reuters) – A U.S. appeals court on Monday shot down Johnson & Johnson’s (JNJ.N) attempt to offload tens of thousands of lawsuits over its talc products into bankruptcy court. The ruling marked the first major repudiation of an emerging legal strategy with the potential to upend U.S. corporate liability law.

J&J is among four major companies that have filed so-called Texas two-step bankruptcies to avoid potentially massive lawsuit exposure. The tactic involves creating a subsidiary to absorb the liabilities and to immediately file for Chapter 11.

The court ruled the healthcare conglomerate improperly placed its subsidiary into bankruptcy even though it faced no financial distress. J&J’s two-step sought to halt more than 38,000 lawsuits from plaintiffs alleging the company’s baby powder and other talc products caused cancer. The appeals court ruling revives those lawsuits.

Reuters last year detailed the secret planning of Texas two-steps by Johnson & Johnson and other major firms in a series of reports exploring corporate attempts to evade lawsuits through bankruptcies.

Monday’s decision by the U.S. 3rd Circuit Court of Appeals in Philadelphia dismissed the bankruptcy filed by the J&J subsidiary in 2021. Before the filing, J&J had faced costs of $3.5 billion in verdicts and settlements.

J&J shares closed down 3.7% – the biggest one-day percentage decline in two years. The company said in a statement that it would challenge the ruling and that its talc products are safe.

Plaintiffs attorneys and some legal experts have argued the two-step could set a dangerous precedent, providing a blueprint for any corporation to easily avoid undesirable litigation. The appeals court decision could force companies considering the strategy to more carefully consider its risks, two legal experts said.

“It is a push back on the notion that any company anywhere can use the same tactic to get rid of their mass tort liability,” said Lindsey Simon, a professor at University of Georgia School of Law.

Bankruptcy filings typically suspend litigation in trial courts, forcing plaintiffs into often time-consuming settlement negotiations while leaving them unable to pursue their cases in the courts where they originally sued.

The 3rd Circuit ruling does not directly impact three other Texas two-step bankruptcies, filed by subsidiaries of Koch Industries-owned Georgia Pacific, global construction giant Saint-Gobain(SGOB.PA), and Trane Technologies (2IS.F). Those cases fall under the jurisdiction of the 4th Circuit appeals court. 3M (MMM.N) attempted a similar maneuver, which is currently pending in the 7th Circuit.

Those companies did not comment on the 3rd Circuit ruling or did not immediately respond to inquiries. All have previously defended the bankruptcies as the best way to fairly compensate claimants. Plaintiffs’ attorneys have countered that the Texas two-step is an improper manipulation of the bankruptcy system. The strategy uses a Texas law to split an existing company in two, creating the new subsidiary meant to shoulder the lawsuits.

New Jersey-based Johnson & Johnson, valued at more than $400 billion, said its subsidiary’s bankruptcy was initiated in good faith. J&J initially pledged $2 billion to the subsidiary to resolve talc claims and entered into an agreement to fund an eventual settlement approved by a bankruptcy judge.

“Resolving this matter as quickly and efficiently as possible is in the best interests of claimants and all stakeholders,” J&J said.

A three-judge panel on the appeals court rejected J&J’s argument, finding the company’s subsidiary, LTL Management, was created solely to file for Chapter 11 protection but had no legitimate need for it. Only a debtor in financial distress can seek bankruptcy, the panel ruled. The judges pointed out that J&J assured that it would give LTL plenty of money to pay talc claimants.

“Good intentions – such as to protect the J&J brand or comprehensively resolve litigation – do not suffice alone,” the judges said in a 56-page opinion. “LTL, at the time of its filing, was highly solvent with access to cash to meet comfortably its liabilities.”

‘PROJECT PLATO’

The decision could force J&J to fight talc lawsuits for years in trial courts. The company has a mixed record fighting the suits so far. While the firm was hit with major judgments in some cases before filing bankruptcy, more than 1,500 talc lawsuits have been dismissed and the majority of cases that have gone to trial have resulted in verdicts favoring J&J, judgments for the company on appeal, or mistrials, according to its subsidiary’s court filings.

A December 2018 Reuters investigation revealed that J&J officials knew for decades about tests showing that the company’s talc sometimes contained traces of carcinogenic asbestos but kept that information from regulators and the public. J&J has said its talc does not contain asbestos and does not cause cancer.

Facing unrelenting litigation, J&J enlisted law firm Jones Day, which had helped other companies execute Texas two-step bankruptcies to address asbestos-related lawsuits.

J&J’s effort, as Reuters reported last year, was internally dubbed “Project Plato,” and employees working on it signed confidentiality agreements. A company lawyer warned them to tell no one, including their spouses, about the plan.

Jones Day did not immediately respond to a request for comment.

The Texas two-step has garnered criticism from Democratic lawmakers in Washington, and inspired proposed legislation that would severely restrict the practice.

Senator Sheldon Whitehouse, a Democrat from Rhode Island, cheered Monday’s appeals court decision. Whitehouse chaired the first congressional hearing scrutinizing two-step bankruptcies in February of last year.

“Bankruptcy is meant to give honest debtors in unfortunate circumstances a fresh start,” he said, not to allow “large, highly profitable corporations” to avoid accountability for wrongdoing with a legal “shell game.”

Reporting by Tom Hals in Wilmington, Delaware; Mike Spector in New York; and Dan Levine in San Francisco; additional reporting by Dietrich Knauth and Chuck Mikolajczak in New York; editing by Bill Berkrot and Brian Thevenot

Our Standards: The Thomson Reuters Trust Principles.

Tom Hals

Thomson Reuters

Award-winning reporter with more than two decades of experience in international news, focusing on high-stakes legal battles over everything from government policy to corporate dealmaking.

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Business

U.S. home sales slump to 12-year low; glimmers of hope emerging

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  • Existing home sales drop 1.5% in December
  • Sales fall 17.8% in 2022, sharpest annual decline since 2008
  • Median house price rises 2.3% from year ago

WASHINGTON, Jan 20 (Reuters) – U.S. existing home sales plunged to a 12-year low in December, but declining mortgage rates raised cautious optimism that the embattled housing market could be close to finding a floor.

The report from the National Association of Realtors on Friday also showed the median house price increasing at the slowest pace since early in the COVID-19 pandemic as sellers in some parts of the country resorted to offering discounts.

The Federal Reserve’s fastest interest rate-hiking cycle since the 1980s has pushed housing into recession.

“Existing home sales are somewhat lagging,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “The decline in mortgage rates could help undergird housing activity in the months ahead.”

Existing home sales, which are counted when a contract is closed, fell 1.5% to a seasonally adjusted annual rate of 4.02 million units last month, the lowest level since November 2010. That marked the 11th straight monthly decline in sales, the longest such stretch since 1999.

Reuters Graphics

Sales dropped in the Northeast, South and Midwest. They were unchanged in the West. Economists polled by Reuters had forecast home sales falling to a rate of 3.96 million units. December’s data likely reflected contracts signed some two months earlier.

Home resales, which account for a big chunk of U.S. housing sales, tumbled 34.0% on a year-on-year basis in December. They fell 17.8% to 5.03 million units in 2022, the lowest annual total since 2014 and the sharpest annual decline since 2008.

Reuters Graphics

The continued slump in sales, which meant less in broker commissions, was the latest indication that residential investment probably contracted in the fourth quarter, the seventh straight quarterly decline.

This would be the longest such streak since the collapse of the housing bubble triggered the Great Recession.

While a survey from the National Association of Home Builders this week showed confidence among single-family homebuilders improving in January, morale remained depressed.

Single-family homebuilding rebounded in December, but permits for future construction dropped to more than a 2-1/2- year low, and outside the pandemic plunge, they were the lowest since February 2016.

A “For Rent, For Sale” sign is seen outside of a home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger

Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

MORTGAGE RATES RETREATING

The worst of the housing market rout is, however, probably behind. The 30-year fixed mortgage rate retreated to an average 6.15% this week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac.

The rate was down from 6.33% in the prior week and has declined from an average of 7.08% early in the fourth quarter, which was the highest since 2002. It, however, remains well above the 3.56% average during the same period last year.

The median existing house price increased 2.3% from a year earlier to $366,900 in December, with NAR Chief Economist Lawrence Yun noting that “markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”

The smallest price gain since May 2020, together with the pullback in mortgage rates, could help to improve affordability down the road, though much would depend on supply. Applications for loans to buy a home have increased so far this year, a sign that there are eager buyers waiting in the wings.

House prices increased 10.2% in 2022, boosted by an acute shortage of homes for sale. Housing inventory totaled 970,000 units last year. While that was an increase from the 880,000 units in 2021, supply was the second lowest on record.

“Home price growth is likely to continue to decelerate and we look for it to turn negative in 2023,” said Nancy Vanden Houten, a U.S. economist at Oxford Economics in New York. “The limited supply of homes for sale will prevent a steep decline.”

In December, there were 970,000 previously owned homes on the market, down 13.4% from November but up 10.2% from a year ago. At December’s sales pace, it would take 2.9 months to exhaust the current inventory of existing homes, up from 1.7 months a year ago. That is considerably lower than the 9.6 months of supply at the start of the 2007-2009 recession.

Though tight inventory remains an obstacle for buyers, the absence of excess supply means the housing market is unlikely to experience the dramatic collapse witnessed during the Great Recession.

A four-to-seven-month supply is viewed as a healthy balance between supply and demand. Properties typically remained on the market for 26 days last month, up from 24 days in November.

Fifty-seven percent of homes sold in December were on the market for less than a month. First-time buyers accounted for 31% of sales, up from 30% a year ago. All-cash sales made up 28% of transactions compared to 23% a year ago. Distressed sales, foreclosures and short sales were only 1% of sales in December.

“While the stabilization of affordability will be good news for potential home buyers, a lack of available inventory could remain a constraint for home buying activity,” said Orphe Divounguy, a senior economist at Zillow.

Reporting by Lucia Mutikani;
Editing by Dan Burns and Andrea Ricci

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US

COVID border restrictions on migrants to stay after U.S. Supreme Court order

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WASHINGTON/CIUDAD JUAREZ, Mexico, Dec 19 (Reuters) – The U.S. Supreme Court on Monday said COVID-era restrictions at the U.S.-Mexico border that have prevented hundreds of thousands of migrants from seeking asylum should be kept in place for now, siding with Republicans who brought a legal challenge.

The restrictions, known as Title 42, were implemented under Republican former President Donald Trump in March 2020 at the beginning of the COVID-19 pandemic and gave border officials the ability to rapidly expel migrants to Mexico without a chance to seek U.S. asylum.

U.S. President Joe Biden, a Democrat, had campaigned on overturning Trump’s hardline immigration measures before taking office in 2021 but kept Title 42 in place for more than a year. The U.S. Centers for Disease Control and Prevention (CDC) said this year that Title 42 was no longer needed for public health reasons, and the Biden administration has said it wants it to end but will abide with any court rulings.

A federal judge last month ruled Title 42 was unlawful in response to a lawsuit originally brought by asylum-seeking migrants represented by the American Civil Liberties Union. The judge set the restrictions to be lifted on Wednesday, Dec. 21.

But a group of 19 states with Republican attorneys general sought to overturn that decision by intervening in the case and on Monday took their request to the conservative-leaning Supreme Court.

Hours later, Chief Justice John Roberts in a brief order issued a stay that will leave Title 42 in place until further notice from the court. The parties in the legal dispute have until Tuesday at 5 p.m. ET (2200 GMT) to respond, the court said.

After Robert’s action, U.S. Department of Homeland Security (DHS) said Title 42 “will remain in effect at this time and individuals who attempt to enter the United States unlawfully will continue to be expelled to Mexico.”

The Biden administration had been preparing for Title 42 to end on Wednesday and press secretary Karine Jean-Pierre said on Monday that the White House was seeking more than $3 billion from Congress to pay for additional personnel, technology, migrant holding facilities and transportation at the U.S.-Mexico border.

The push for additional resources came as U.S. authorities had been preparing for the possibility of 9,000 to 14,000 people per day trying to cross into the United States if Title 42 was lifted, Reuters and other outlets have reported, around double the current rate.

The Biden administration has been weighing plans to prepare for Title 42’s end, with government officials privately discussing several Trump-style plans to deter people from crossing, including barring single adults seeking asylum at the U.S.-Mexico border.

[1/10] A group of migrants walks towards a border patrol processing area, accompanied by a Texas National Guard member, as U.S. border cities are bracing for an influx of asylum seekers when COVID-19-era Title 42 migration restrictions are set to end, in Eagle Pass, Texas, U.S. December 19, 2022. REUTERS/Jordan Vonderhaar

DHS last week updated a six-pillar plan that calls for the expanded use of a fast-track deportation process if Title 42 is terminated. The revised DHS plan also suggests there could be expansion of legal pathways for migrants to enter the country from abroad, similar to a program launched for Venezuelans in October.

BORDER CITIES OVERWHELMED

Since Biden took office in January 2021, about half of the record 4 million migrants encountered at the U.S.-Mexico border have been expelled under Title 42 while the other half have been allowed into the United States to pursue their immigration cases.

Mexico accepts the return of only certain nationalities, including some Central Americans and, more recently, Venezuelans.

For months, El Paso, Texas, has been receiving large groups of asylum-seeking migrants, including many Nicaraguans who cannot be expelled to Mexico. On Saturday, the city’s mayor declared a state of emergency to move migrants from city streets as temperatures had dropped below freezing.

U.S. Representative Henry Cuellar, a Democrat whose South Texas district borders Mexico, has said U.S. border officials told him that an estimated 50,000 people are waiting in Mexico for the chance to cross.

“If Title 42 remains in place, we must continue waiting,” said Venezuelan migrant Lina Jaouhari, who said she had attempted to enter the United States from Ciudad Juarez on Dec. 1 but had been sent back to Mexico under Title 42. “It won’t do any good to try to cross again if we know they will send us back.”

In El Paso, shelters have struggled to provide for arriving migrants even as many ultimately are headed to join relatives in other parts of the United States.

Rescue Mission of El Paso, a shelter near the border, last week housed 280 people, far beyond its 190-person capacity, with people sleeping on cots and air mattresses in the chapel, library and conference rooms, said Nicole Reulet, the shelter’s marketing director, in an interview with Reuters.

“We have people where we tell them, ‘We have no room,'” she said. “They beg for a place on the floor.”

Reporting by Ted Hesson in Washington and Jose Luis Gonzalez in Ciudad Juarez; Additional reporting by Jackie Botts in Oaxaca City, Richard Cowan in Washington and Lizbeth Diaz in Tijuana and by Nate Raymond in Boston; Editing by Stephen Coates and Bradley Perrett

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US

Florida governor defends migrant flights to Martha’s Vineyard, suggests more to come

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MARTHA’S VINEYARD, Mass., Sept 16 (Reuters) – Florida’s Republican governor on Friday defended his decision to fly dozens of migrants to the wealthy vacation island of Martha’s Vineyard from Texas, and said similar actions could follow as a political dispute over border security deepened in the run-up to U.S. elections in November.

DeSantis claimed credit for a pair of chartered flights on Wednesday that carried around 50 migrants to Martha’s Vineyard, Massachusetts, as part of a broader Republican effort to shift responsibility for border crossers to Democratic leaders.

At a news conference in Daytona Beach, Florida Governor Ron DeSantis blamed Democratic President Joe Biden for what he portrayed as a failure to stop migrants from crossing the U.S.-Mexico border, as a record 1.8 million have been arrested this fiscal year.

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DeSantis said the Florida Legislature set aside $12 million to transport migrants out of the state and that his government would likely use the funds “to protect Florida.”

“There may be more flights, there may be buses,” he said to cheers and applause from backers in the crowd.

The state paid $615,000 to Vertol Systems Company Inc, an aviation business, on Sept. 8 as part of a “relocation program of unauthorized aliens,” Florida state data showed. The company did not immediately respond to a request for comment.

The flights to Martha’s Vineyard follow a busing effort by Texas Governor Greg Abbott, another Republican, that has sent more than 10,000 migrants to the Democrat-controlled cities of Washington, New York and Chicago since April. The Republican governor of Arizona also has sent more than 1,800 migrants to Washington.

Unlike those major cities, the island south of Boston is home to around 20,000 year-round residents and is known as a vacation spot for affluent liberals like former Democratic Presidents Bill Clinton and Barack Obama. read more

On Friday morning in Martha’s Vineyard, the migrants, a group of mostly Venezuelans including half a dozen children, boarded buses en route to a ferry to Cape Cod in transportation organized by Massachusetts Governor Charlie Baker, a Republican. He said they would be housed temporarily at a Cape Cod military base.

The scene left some of the island residents who volunteered to shelter them in a church for two nights in tears. Locals had come together to donate money, toiletries and toys for the migrants. A local thrift shop donated clean clothes, restaurants took turns organizing meals and pro-bono lawyers flew in to help the migrants with paperwork and immigration cases.

“I want them to have a good life,” said Lisa Belcastro, who helped organize cots and supplies at St. Andrews Episcopal Church, which sits among expensive white-clapboard homes in Edgartown. “I want them to come to America and be embraced. They all want to work.”

Venezuelan migrants stand outside St. Andrew’s Church in Edgartown, Massachusetts, U.S. September 14, 2022. Ray Ewing/Vineyard Gazette/Handout via REUTERS/File Photo

‘LIKE CHATTEL’

DeSantis, who is running for reelection in November and is often mentioned as a possible presidential candidate for 2024, said his administration flew the migrants from Texas, and not his own state, to the island getaway because many of the migrants arriving in Florida come from Texas.

In addition to re-election bids by DeSantis and Abott, November’s midterm elections will determine whether the Democrats retain control of Congress.

Many migrants who cross into the United States via the Southwest border are immediately expelled to Mexico or other countries under a COVID-19 pandemic policy. But some nationalities, including Venezuelans, cannot be expelled because Mexico will not accept them and many seek to apply for U.S. asylum.

The White House has decried the Republican governors’ efforts, saying migrants were being used in a political stunt.

“These were children. They were moms. They were fleeing communism. And what did Governor DeSantis and Governor Abbott do to them? They used them as political pawns, treated them like chattel,” White House press secretary Karine Jean-Pierre said at a press briefing on Friday.

The legal basis for the Florida government to round up migrants in a different state remained unclear. U.S. government attorneys are exploring possible litigation around the governors’ efforts, a Biden administration official told Reuters.

The migrants flown to Martha’s Vineyard said they had recently been admitted into the United States on humanitarian parole after fleeing Venezuela, and had been staying at a shelter in San Antonio, Texas, when they were approached by a woman who identified herself as “Perla.”

The woman persuaded them to board the flights by misleading them into thinking they were heading to Boston and would be provided shelter and assistance finding work for three months, they said.

Many said they told the people who organized the flights they had appointments with immigration authorities they needed to attend in other cities, said Ivan Espinoza-Madrigal, the director of Lawyers for Civil Rights, a group in Boston assisting the migrants.

“The organizers of this scheme said ‘Don’t worry, that will be taken care of'” he said.

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Reporting by Jonathan Allen in Martha’s Vineyard, Massachusetts, and Rich McKay in Atlanta; Additional reporting by Ted Hesson and Trevor Hunnicutt in Washington and Kristina Cooke in San Francisco; Editing by Mica Rosenberg and Jonathan Oatis

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Business

Five Chinese state-owned companies to delist from NYSE

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SHANGHAI/HONG KONG, Aug 12 (Reuters) – Five Chinese state-owned firms including China Life Insurance (601628.SS) and oil giant Sinopec (600028.SS) said Friday they would delist from the New York Stock Exchange, amid heightened diplomatic and economic tensions with the United States.

The companies, which also include Aluminium Corporation of China (Chalco) (601600.SS), PetroChina (601857.SS) and Sinopec Shanghai Petrochemical Co (600688.SS), said in separate statements that they would apply for delistings of their American Depository Shares from later this month.

The five, which were added to the Holding Foreign Companies Accountable Act (HFCAA) list in May after they were identified as not meeting U.S regulators’ auditing standards, will keep their listings in Hong Kong and mainland Chinese markets.

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There was no mention of the auditing row in separate statements by the Chinese companies outlining their moves, which come amid heightened tensions after last week’s visit to Taiwan by U.S. House of Representatives Speaker Nancy Pelosi.

Beijing and Washington have been in talks to resolve a long-running dispute that could mean Chinese firms being kicked off U.S. exchanges if they do not comply with U.S. audit rules.

“These companies have strictly complied with the rules and regulatory requirements of the U.S. capital market since their listing in the U.S. and made the delisting choice for their own business considerations,” the China Securities Regulatory Commission (CSRC) said in a statement.

Some of China’s largest companies including Alibaba Group Holdings , J.D Com Inc and Baidu Inc are among almost 270 on the list and at threat of being delisted.

Alibaba said last week it would convert its Hong Kong secondary listing into a dual primary listing which analysts indicated could ease the way for the Chinese ecommerce giant to switch primary listing venues in the future. read more

In premarket trade Friday, U.S.-listed shares of China Life Insurance and oil giant Sinopec fell 5.7% about 4.3% respectively. Aluminium Corporation of China dropped 1.7%, while PetroChina shed 4.3%. Sinopec Shanghai Petrochemical Co shed 4.1%.

“China is sending a message that its patience is wearing thin in the audit talks,” said Kai Zhan, senior counsel at Chinese law firm Yuanda, who specialises in areas including U.S. capital markets and U.S. sanction compliance.

Washington has long demanded complete access to the books of U.S.-listed Chinese companies, but Beijing bars foreign inspection of audit documents from local accounting firms, citing national security concerns.

The companies said their U.S. traded share volume was small compared with those on their other major listing venues.

PetroChina said it had never raised follow-on capital from its U.S listing and its Hong Kong and Shangai bases “can satisfy the company’s fundraising requirements” as well as providing “better protection of the interests of the investors.”

China Life and Chalco said they would file for delisting on Aug. 22, with it taking effect 10 days later. Sinopec and PetroChina said their applications would be made on Aug. 29.

China Telecom (0728.HK), China Mobile (0941.HK) and China Unicom (0762.HK) were delisted from the United States in 2021 after a Trump-era decision to restrict investment in Chinese technology firms. That ruling has been left unchanged by the Biden administration amid continuing tensions.

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Reporting by Samuel Shen in Shanghai, Scott Murdoch in Hong Kong and Medha Singh in Bengaluru; Editing by Hugh Lawson, David Goodman and Alexander Smith

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Business

U.S. new home sales rebound in May; consumer sentiment at record low

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Carpenters work on building new townhomes that are still under construction while building material supplies are in high demand in Tampa, Florida, U.S., May 5, 2021. REUTERS/Octavio Jones/File Photo

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  • New home sales rebound 10.7% in May; April data revised up
  • Median house price jumps 15.0% to $449,000 from year ago
  • Consumer sentiment tumbles to record low in June

WASHINGTON, June 24 (Reuters) – Sales of new U.S. single-family homes unexpectedly rose in May, but the rebound is likely to be temporary as home prices continue to increase and the average contract rate on a 30-year fixed-rate mortgage approaches 6%, reducing affordability.

While the report from the Commerce Department on Friday also showed new home supply hitting a 14-year high last month, overall housing inventory remains significantly low. The rise in sales after four straight monthly declines, likely reflected buyers rushing to lock in mortgage rates in anticipation of further increases. A survey this month suggested homebuilders expected weaker sales in June.

“We suspect May’s surprisingly strong new home sales will prove to be the last hurrah for new home sales this year,” said Mark Vitner, senior economist at Wells Fargo in Charlotte, North Carolina.

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New home sales jumped 10.7% to a seasonally adjusted annual rate of 696,000 units last month. April’s sales pace was revised higher to 629,000 units from the previously reported 591,000 units. Sales surged in the West and the densely populated South, but declined in the Midwest and Northeast.

Economists polled by Reuters had forecast that new home sales, which account for 11.4% of U.S. home sales, would fall to a rate of 588,000 units. Sales dropped 5.9% on a year-on-year basis in May. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.

The average contract rate on a 30-year fixed-rate mortgage increased this week to more than a 13-1/2-year high of 5.81%, from 5.78% last week, according to data from mortgage finance agency Freddie Mac. The rate has risen more than 250 basis points since January, amid a surge in inflation expectations and the Federal Reserve’s aggressive interest rate hikes.

There was, however, some encouraging news on the inflation front. While a survey from the University of Michigan on Friday confirmed consumer confidence plunged to a record low in June, consumers’ inflation expectations moderated a bit.

The University of Michigan said its final consumer sentiment index fell to 50.0 from a preliminary reading of 50.2 earlier this month. It was down from 55.2 in May.

The survey’s one-year inflation expectation was unchanged from May at 5.3%, but ticked down from a preliminary June reading of 5.4%. The five-year inflation outlook edged up to 3.1% from 3.0% in May, but was down from 3.3% earlier in June.

The increase in the preliminary inflation expectations and jump in annual consumer prices were behind the Fed’s decision last week to raise its policy rate by three-quarters of a percentage point, its biggest hike since 1994. read more

“Fed officials will breathe a sigh of relief,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “There is nothing in today’s data to change market expectations for another 75-basis-points rate hike in July.”

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury yields rose.

HOUSING COOLING

Data this week showed sales of previously owned homes fell to a two-year low in May. Housing starts and building permits also declined last month, though they remained at high levels. But cooling demand could help to bring housing supply and demand back into alignment and slow price growth. read more

The median new house price in May accelerated 15.0% from a year ago to $449,000. There were 444,000 new homes on the market at the end of last month, the highest number since May 2008 and up from 437,000 units in April.

Houses under construction made up roughly 65.8% of the inventory, with homes yet to be built accounting for about 25.9%. At May’s sales pace it would take 7.7 months to clear the supply of houses on the market, down from 8.3 months in April.

“Going forward, we expect homebuilders to be willing to offer more incentives and discounts to support sales in a rising mortgage rate environment,” said Doug Duncan, chief economist at mortgage finance agency Fannie Mae.

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Reporting by Lucia Mutikani, additional reporting by Lindsay Dunsmuir; Editing by Mark Porter and Paul Simao

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World

One surrendered Hong Kong hamster tests COVID positive as city lockdown grows

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A man with personal protective equipment sits inside a vehicle in front of a temporarily closed pet shop after the government announced to euthanize around 2,000 hamsters in the city after finding evidence for the first time of possible animal-to-human transmission of coronavirus disease (COVID-19) in Hong Kong, China, January 18, 2022. REUTERS/Tyrone Siu

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HONG KONG, Jan 23 (Reuters) – Hong Kong authorities said on Sunday one hamster surrendered to authorities by pet owners had tested positive for COVID-19 and that over 2,200 hamsters had been culled as the city struggled to contain an outbreak.

On Tuesday, officials ordered the killing of hamsters from dozens of pet shops after tracing a coronavirus outbreak to a worker at a shop and asked people to surrender any bought on or after Dec. 22.

While a handful of hamsters had already tested positive for the virus, this latest case is the first involving a hamster in the care of a pet-owner that had tested positive.

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Despite a public outcry against the hamster crackdown, authorities urged pet-owners to continue to hand over their tiny furry pets given burgeoning health risks.

“(The government) strongly advises members of the public again to surrender … as soon as possible their hamsters purchased in local pet shops on or after December 22, 2021 for humane dispatch,” the government said in a statement.

As at Jan. 22, a total of 2,512 animals, including 2,229 hamsters, had been “humanely dispatched” according to a government statement.

Hong Kong’s leader Carrie Lam earlier told reporters that she understood “pet owners are unhappy” with the killings, but said the biggest priority was to control the outbreak.

The government described the outcry as “irrational”.

Thousands of people have offered to adopt unwanted hamsters.

CONTAINMENT MEASURES

Some scientists and veterinary authorities have said there is no evidence that animals play a major role in human contagion with the coronavirus.

Meanwhile, officials have warned that COVID-19 infections could be growing exponentially in the congested residential area of Kwai Chung on the Kowloon peninsula, as a second building in the district with 2,000 residents was locked down on Saturday for five days.

More than 35,000 residents in over a dozen buildings in the area had to undergo compulsory COVID-19 tests, with Lam and other senior officials visiting the area on Sunday.

Sophia Chan, Hong Kong’s Health Secretary, told reporters on Sunday that the city’s strategy of containment would continue.

Some 140 confirmed cases were reported on Sunday, the highest daily number in the financial hub since July 25, 2020.

Lam urged people to avoid gatherings ahead of next week’s Lunar New Year holidays to try to contain the highly infectious Omicron variant.

The situation is testing Hong Kong’s “zero COVID-19” strategy focused on eliminating the disease, with schools and gyms already shut, restaurants closing at 6 p.m. (1000 GMT) and air travel with many major hubs severed or severely disrupted.

Some companies have begun to enact contingency measures.

UBS Group AG (UBSG.S) said in a note to its Hong Kong staff reviewed by Reuters that it had “decided to move to work-from-home operations for all except a minimum number of staff who have essential tasks to be completed in the office” given the Omicorn outbreak.

A UBS spokesman declined to comment on the memo.

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Additional reporting by Twinnie Siu, Sumeet Chatterjee and Jessie Pang; Editing by Christopher Cushing and Emelia Sithole-Matarise

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