Tag Archives: stabilize

Bank of England intervenes to stabilize UK finances after Liz Truss budget

LONDON — The Bank of England on Wednesday announced a highly unusual market intervention in hopes of slowing the rush to dump pounds and U.K. bonds that began after new Prime Minister Liz Truss announced her centerpiece economic plan.

The central bank said that it would temporarily buy British government bonds, a remarkable move that follows the government’s announcement on Friday of its so-called “mini budget.”

“Were dysfunction in this market to continue or worsen, there would be a material risk to U.K. financial stability,” the Bank of England said in a statement.

The bank said that the purchases to “restore orderly market conditions,” would be “carried out on whatever scale is necessary to effect this outcome.” It also said it was time-limited to two weeks.

British pound falls to all-time low against dollar after taxes slashed

Truss, who is just three weeks into the job, is trying to change the British economy with bold — some would say risky — actions that have spooked investors. Truss has made no secret of her free-market views. During the leadership campaign to replace Boris Johnson as prime minister, she said that she would be a tax cutter from the get go.

On Friday, she delivered on that promise with the government announced huge tax cuts and a big jump in borrowing. The plans include the abolition of the top income tax rate of 45 percent for people earning more than 150,000 pounds and a scrapping of the cap on banker bonuses.

The markets gave their early verdict: On Monday, the pound sterling fell to an all-time low against the U.S. dollar, slumping to 1.03 at one stage before recovering somewhat. Some economists have said that the pound could drop to parity with the dollar.

On Wednesday morning, the pound slid back to 1.06 after reaching 1.08 on Tuesday.

“This, unlike other fluctuations in the market, is a self-inflicted wound,” said Keir Starmer, leader of the opposition Labour Party, told the BBC on Wednesday morning. His party is up 17 percentage points, according to a recent YouGov poll. This is the party’s biggest lead against the Conservatives since 2001, when the Labour leader Tony Blair won a landslide victory.

Truss will have to call a general election by January 2025 and is keen to put her ideas on the economy into motion.

On Tuesday, the International Monetary Fund issued a rare rebuke of the new British government’s handling of its economic policy.

In an unusually blunt statement, it said that it was “closely monitoring” the situation in the U.K., adding the government’s plans will likely “increase inequality.” Untargeted fiscal packages, it said, were not recommended during a period of high inflation.

Truss and her chancellor, Kwasi Kwarteng, have defended their vision for the economy.

“They are prepared to risk unpopularity because they think it will work in the long-term,” said Tony Travers, a politics professor at the London School of Economics.

He noted that, unlike some of her Conservative Party predecessors, including Johnson and Theresa May, Truss’s free market views were quite straightforward. Her government wants to “move Britain to be a lower tax, more flexible economy which competes head to head with highly paid workers and talent with the E.U. and globally.”

“Whether it works or not, only time will tell,” he said, adding, “whether it survives the short-term, time will tell sooner.”

Read original article here

Saudi Arabia agrees to increase oil production levels, will help ‘stabilize markets,’ White House says

NEWYou can now listen to Fox News articles!

The White House on Friday said Saudi Arabia has committed to increasing oil production in July and August—a move that will help “stabilize markets considerably.”

The commitment from Saudi Arabia came after bilateral meetings between President Biden and administration officials and King Salman bin Abdulaziz al Said and Crown Prince Mohammed bin Salman, as well as Saudi Ministers.

“Saudi Arabia has committed to support global oil market balancing for sustained economic growth,” the White House said. “We have welcomed the increase in production levels 50 percent above what was planned for July and August.”

“These steps and further steps that we anticipate over the coming weeks have and will help stabilize markets considerably,” the White House said.

BIDEN ARRIVES IN SAUDI ARABIA, WILL DISCUSS HUMAN RIGHTS, ‘ENERGY SECURITY,’ OFFICIALS SAY

Also in the meetings, the White House said Biden welcomed the singing of a bilateral Partnership Framework for Advancing Clean Energy, with new Saudi investments to “accelerate the energy transition and combat the effects of climate change.”

The White House said the framework “focuses particularly on solar, green hydrogen, nuclear, and other clean energy initiatives.”

“By building upon existing collaboration between energy experts in our countries, we seek to enhance our efforts to tackle climate change and advance greater deployment of clean energy resources around the world,” the White House said, noting the partnership “will leverage public and private sector collaboration to advance the deployment of clean energy solutions while accelerating research, development, and demonstration of innovative technologies needed to decarbonize the global economy and achieve net-zero emissions.”

For weeks, the White House had stressed that oil production is “not the focus” of conversations Biden will have with officials in Saudi Arabia.

The Organization of the Petroleum Exporting Countries (OPEC) cartel and its extended group of allied producers known as OPEC+ agreed last month to ramp up oil production this summer after months of resistance amid soaring global energy prices.

White House National Security Adviser Jake Sullivan on Friday referenced that announcement, saying it would be discussed during meetings in Saudi Arabia.

“We are hopeful that we will see additional actions by OPEC+ in the coming weeks.”

WHITE HOUSE SAYS OIL PRODUCTION ‘NOT THE FOCUS’ OF CONVERSATIONS WITH SAUDI ARABIA

Also in the meeting, Biden and Saudi officials signed bilateral agreements on cybersecurity—one with the FBI and the other with the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency. The agreement was made in an effort to expand the existing bilateral relationship between the U.S. and Saudi Arabia to share information about cybersecurity threats and activities of malicious actors and to enhance the shared defense of our nations.

The White House also announced that Saudi Arabia committed to extending and strengthening the UN-mediated truce in Yemen, which has led to 15 weeks of peace in the region. The support included a pledge to provide more than $1 billion for development projects and fuel support.

Biden also reaffirmed the United States’ commitment to helping Saudi Arabia protect and defend its territory and people from “all external attacks, particularly those launched by the Iranian-backed Houthis in Yemen.”

WHITE HOUSE DEFENDS US-SAUDI ‘STRATEGIC’ PARTNERSHIP, AFTER BIDEN VOWED TO MAKE COUNTRY A ‘PARIAH’ STATE

Biden and Saudi leaders also discussed opening Saudi airspace to civilian aircraft flying to and from Israel; working together on space exploration; and cooperation on public health efforts.

Read original article here

Kim Jong Un orders North Korea military to ‘stabilize’ drug supply amid COVID outbreak

North Korean leader Kim Jong Un wears a face mask amid the coronavirus disease (COVID-19) outbreak, while inspecting a pharmacy in Pyongyang, in this undated photo released by North Korea’s Korean Central News Agency (KCNA) on May 15, 2022. KCNA via REUTERS

Register now for FREE unlimited access to Reuters.com

Register

SEOUL, May 16 (Reuters) – North Korean leader Kim Jong Un guided an emergency politburo meeting and ordered the military be used to stabilize the supply of medicines in Pyongyang as the country battles its first confirmed COVID-19 outbreak, state media reported on Monday.

North Korea acknowledged for the first time last week that it is battling an “explosive” COVID-19 outbreak, with experts raising concerns that the virus could devastate a country with limited medical supplies and no vaccine programme.

At the emergency politburo meeting, held on Sunday, Kim criticized the “irresponsible” work attitude and organizing and executing ability of the Cabinet and the public health sector, state news agency KCNA reported.

Register now for FREE unlimited access to Reuters.com

Register

The government had ordered the distribution of its national medicine reserves but Kim said the drugs procured by the state are not reaching people in a timely and accurate manner through pharmacies, the report said.

Kim ordered that the “powerful forces” of the army’s medical corps be deployed to “immediately stabilize the supply of medicines in Pyongyang City.”

KCNA also reported that Kim visited pharmacies located near the Taedong River in Pyongyang to find out about the supply and sales of drugs.

Kim said pharmacies are not well-equipped to perform their functions smoothly, there are no adequate drug storage areas other than the showcases, and the salespeople were not equipped with proper sanitary clothing.

North Korea has said that a “large proportion” of the deaths so far have been due to people “careless in taking drugs due to the lack of knowledge and understanding of stealth Omicron variant virus infection disease and its correct treatment method.”

The country reported 392,920 more people with fever symptoms, with eight new deaths, KCNA said.

It did not report how many of those suspected cases had tested positive for COVID-19.

Register now for FREE unlimited access to Reuters.com

Register

Reporting by Josh Smith and Joori Roh; Editing by Daniel Wallis

Our Standards: The Thomson Reuters Trust Principles.

Read original article here

Stock futures fall as Wall Street looks to stabilize after rollercoaster week

Traders on the floor of the NYSE, May 6, 2022.

Source: NYSE

Stock futures fell on Sunday evening as traders looked for the market to find its footing after a dramatic week of trading.

Futures tied to the Dow Jones Industrial Average dropped 218 points, or 0.7%. S&P 500 futures shed 0.8%, while those for the Nasdaq 100 lost 0.8%.

Last week, the Nasdaq Composite lost 1.54%, while the S&P 500 and Dow dropped 0.21% and 0.24%, respectively. It was the sixth straight losing week for the Dow, and the fifth straight for the other two major indexes.

While the cumulative moves for the week were not out of the ordinary, some of the day-to-day swings were eye-popping. The Dow had its best day since 2020 on Wednesday, but then erased all those gains and more on Thursday.

The short-lived Wednesday rally came after Federal Reserve Chair Jerome Powell said the central bank was not considering a 75-basis-point rate hike at upcoming meetings. Stocks and bonds rallied following that comment but reversed course on Thursday.

Billionaire hedge fund manager David Tepper told CNBC’s Scott Wapner on Friday that Powell’s statement was an “unforced error” that contributed to market volatility.

First-quarter earnings season is slowing down, but there are several notable reports before the opening bell on Monday, including Palantir and vaccine-makers BioNTech and Novovax.

In other corporate news, Ford was looking to sell 8 million shares in Rivian Automotive over the weekend, sources told CNBC’s David Faber.

Investors will also be keeping an eye on the war in Ukraine. U.S. first lady Jill Biden made a surprise visit to the country on Sunday. The U.S. and Group of Seven countries announced that they would increase short-term financial support for Ukraine as the war with Russia nears the three-month mark.

Read original article here

U.S. Stocks Fall, Bond Yields Stabilize

U.S. stocks fell and a selloff in government bonds stabilized Friday, after the latest sign that the Federal Reserve will tighten monetary policy aggressively to fight inflation. 

The S&P 500 fell 1.3% in morning trading, while the technology-heavy Nasdaq Composite declined 0.8%. The Dow Jones Industrial Average dropped 500 points, or 1.4%. On Thursday, major U.S. stock indexes finished with losses. All three indexes were on course to finish the week in the red.

This week’s steep rise in government bond yields showed signs of steadying, with the yield on the 10-year Treasury note recently at 2.895% after ending at 2.917% Thursday. Earlier Friday, yields staged a climb before reversing course. Yields rise when bond prices decline.

Concerns about inflation and the pace of monetary tightening by the Fed have remained at the forefront of investors’ minds this week and have helped lead to swings in major stock indexes. On Thursday, Fed Chairman

Jerome Powell

gave investors a clear signal that the central bank is ready to tighten monetary policy more quickly and indicated it was likely to raise interest rates by a half-percentage point at its meeting in May.

A rate increase next month, following the Fed’s quarter percentage point increase in March, would mark the first time since 2006 that the central bank increased its policy rate at back-to-back meetings.

Mr. Powell’s comments injected fresh volatility into a stock market that has been whipsawed this year by the war in Ukraine, soaring inflation and rising Covid-19 cases in China. Many traders are now worried that the Fed’s tightening cycle could tip the economy into a recession as consumers are already feeling uneasy about the economy. Next week, investors will parse fresh figures from The University of Michigan on April consumer sentiment.

Federal Reserve Chairman Jerome Powell indicated on Thursday that the central bank was likely to raise interest rates by a half percentage point at its meeting in May. Photo: Samuel Corum/Getty Images

“I think what you’re seeing is consumers are becoming much more hesitant,” said

Susannah Streeter,

senior investment and markets analyst at Hargreaves Lansdown. “It’s a tricky tightrope that central-bank policy makers are having to tread right now. They need to put a lid on that boiling pot of inflation but they don’t want steam to be driven out of the economy completely.”

Still, for now, investors have been encouraged by strong first-quarter earnings. Of the companies that have reported so far, nearly 80% have beat analyst expectations. That has helped provide some stability to the U.S. stock market.

Shares of

HCA Healthcare

fell about 17%, on pace for its largest percent decrease since March 2020, after the hospital chain lowered its guidance for the year. The company said volume and revenue for the first quarter was offset by higher-than-expected inflationary pressures on labor costs.

The healthcare-company’s decline is worrying investors, who consider it be a defensive stock. Money managers often bet that consumers would spend money on hospital bills before any discretionary purchases.

“Usually when the economy’s slowing down, or there is a perception it’ll slow down, there are obvious sectors to hide in. Those traditional sectors aren’t as safe from earnings basis as they are historically because they still are going to have negative impact from inflation,” said

Tavis McCourt,

institutional equity strategist at Raymond James.

Shares of airlines rose.

United Airlines Holdings

added 2.3% and

American Airlines Group

gained 0.5%. On Thursday, American said its sales hit a record in March, the first month since the pandemic began in which the airline’s total revenue surpassed 2019 levels. United said it has been able to pass the rise in fuel prices on to consumers.

Shares of

American Express

fell 1.8% after the credit-card company logged first-quarter net income of $2.10 billion, down from $2.24 billion a year earlier, even as spending on travel and entertainment surged.

Gap shares fell 19% in early trading Friday, after the retailer cut its fiscal first-quarter guidance and announced the departure of the president and chief executive of its Old Navy business.

Kimberly-Clark

jumped 9 after the maker of Huggies diapers and Cottonelle toilet paper raised its sales-growth projection for 2022 and said that first-quarter sales increased compared with the year before.

Stocks on Wall Street declined on Thursday after Federal Reserve Chairman Jerome Powell signaled the central bank would raise interest rates by a half-percentage point at its next meeting.



Photo:

Courtney Crow/Associated Press

In commodities, Brent crude, the international benchmark for oil, fell 1.6% to $106.23 a barrel. 

In the currency markets, the ICE U.S. Dollar Index, which tracks the currency against a basket of others, gained 0.6%, on pace to notch a gain for the week. Including Friday, the index has climbed for all but two sessions in April, thanks to geopolitical concerns and looming interest-rate increases by the Fed.

In overseas markets, the pan-continental Stoxx Europe 600 fell 1.7% dragged down by technology companies including German software companies SAP and

TeamViewer,

which fell 3.4% and 3.8%, respectively. In contrast, Swiss cement maker

Holcim

climbed 4.8% after the company reported sales growth and upgraded its outlook for the year.

On Friday, data from the U.K.’s Office for National Statistics showed signs of consumer skittishness. U.K. retail sales volumes fell sharply last month, weakening by 1.4%. That sent the British pound falling 1.1% against the dollar to its lowest level since 2020. London’s FTSE 100 stock index fell 0.7%.

In Asia, Hong Kong’s Hang Seng lost 0.2% and Japan’s Nikkei 225 fell 1.6%. The Shanghai Composite, in contrast, bucked the trend, rising 0.2%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Hardika Singh at hardika.singh@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

China Outlines Plan to Stabilize Economy in Crucial Year for Xi

BEIJING — Plowing past global anxieties over the war engulfing Ukraine, China set its economy on a course of steady expansion for 2022, prioritizing growth, job creation and increased social welfare in a year when the national leader, Xi Jinping, is poised to claim a new term in power.

The annual government work report delivered to China’s National People’s Congress by Premier Li Keqiang on Saturday did not even mention Russia’s invasion of Ukraine, and it took an implacably steady-as-it-goes tone on China’s economic outlook.

The implicit message appeared to be that China could weather the turbulence in Europe, and would focus on trying to keep the Chinese population at home contented and employed before an all-important Communist Party meeting in the fall, when Mr. Xi is increasingly certain to extend his time in power.

“In our work this year, we must make economic stability our top priority and pursue progress while ensuring stability,” Mr. Li said.

By announcing a target for China’s economy to expand “around 5.5 percent” this year, Mr. Li reinforced the government’s emphasis on shoring up growth in the face of global uncertainty from the pandemic and the war in Ukraine. That goal is slower than the 8.1 percent rebound in the economy that China reported last year, but higher than many economists believe the country can achieve without big government spending programs.

Mr. Li disappointed anyone who might have thought he would have anything to say about Ukraine. The Chinese government’s annual work reports generally avoid new announcements on foreign policy, and this year’s was no exception. Beijing has sought to maintain its partnership with Russia while trying to distance China from President Vladimir V. Putin’s decision to go to war.

“China will continue to pursue an independent foreign policy of peace, stay on the path of peaceful development, work for a new type of international relations,” Mr. Li said in his report — the closest he came to a comment on international developments.

Still, leaders in Beijing also signaled — in numbers, rather than words — that they were preparing for an increasingly dangerous world. China’s military budget will grow by 7.1 percent this year to about $229 billion, according to the government’s budget report, also released Saturday. Mr. Li indicated that there would be no slowing in China’s efforts to modernize and overhaul its military, which includes expanding the navy and developing an array of advanced missiles.

“While economic development provides a foundation for a possible defense budget increase, the security threats China is facing and the demands for national defense capability enhancement caused by those threats are the driving factors,” Global Times, a Communist Party-run newspaper, said in a report this week that predicted China’s rise in military spending. “Over the past year, the U.S. also rallied its allies and partners around the world to provoke and confront China militarily.”

In December, the United States Congress approved a budget of $768 billion for the American military. But salaries and equipment manufacturing costs are far higher in the United States, which has prompted some analysts to suggest that China’s military budget is rapidly catching up in actual purchasing power.

The plan Mr. Li outlined suggests that China values economic growth more than trying to make potentially painful adjustments to shift the economy toward greater reliance on domestic consumer spending. Beijing has been trying, with limited success, to move the economy away from dependence on debt-fueled infrastructure and housing construction.

China had managed to reduce slightly last year its debt relative to economic output. It needed to do so because this ratio had climbed, during the first year of the pandemic, to a level that economists regarded as unsustainable.

But meeting this year’s growth target would require more borrowing, undoing most or all of the progress made last year in reducing the debt burden, said Michael Pettis, an economist with Peking University. He said that it was hard to see how China could break its dependence on achieving high growth targets at least partly through heavy borrowing.

Mr. Li acknowledged that the Chinese economy would face challenges this year, pointing to the sluggish recovery of consumption and investment, flagging growth in exports and a shortage of resources and raw materials. By the last three months of last year, the economy was growing only 4 percent.

Part of that economic slowdown reflected a series of government policy shifts aimed at reining in unsustainable expansion in some sectors. Housing speculation was discouraged. Stringent limits were imposed on the after-school tutoring industry. And national security agencies imposed tighter scrutiny on the tech sector.

China’s huge construction industry is stalling as home buyers turn wary, with developers beginning to default on debts. Dwindling revenues from land sales have made some local governments more cautious about building additional roads and bridges. Continued lockdowns and travel restrictions to prevent the coronavirus epidemic from spreading have caused a downturn in spending at hotels and restaurants.

Mr. Li gave few clues to whether China might shift away from its stringent “zero Covid” pandemic strategy, which has relied on mass testing and occasional lockdowns. He urged officials to handle local outbreaks in a “scientific and targeted manner.”

He also separately alluded to the widespread public outrage that erupted in recent weeks over the abduction of women and children. “We will crack down hard on the trafficking of women and children and protect their lawful rights and interests,” he said.

The outcry was set off after a blogger posted footage of a woman seen shackled in a windowless hut in east-central China’s Jiangsu Province, who had reportedly given birth to eight children. Official investigators said the woman had been abducted in 1998, a finding that people on social media said exposed longstanding problems with bride-trafficking and inadequate protections for women. The woman became a symbol of injustice, and censors have since sought to delete online discussions of her. (Mr. Li did not mention her.)

To bolster the economy, Mr. Li issued a government budget for this year that called for extra spending, plus the issuance of more bonds to pay for it.

The central government, which has fairly little debt, will increase by 18 percent this year its transfers of money to provincial and local governments, many of which are heavily indebted. The provincial and local governments carry out much of China’s social spending and infrastructure construction.

Social welfare and education outlays are both set to increase about 10 percent this year. That includes increased central government support for China’s old-age pension funds, which have to support a fast-expanding population of retirees. The budget also includes heavy spending to help rural families and to build more rental housing.

Many Chinese provinces have set their own growth targets at 7 percent or higher, as the Communist Party seeks to reassure the public that economic expansion remains a vital goal, said Feng Chucheng, a partner at Plenum, a political and economic consulting firm in Beijing. “They need to project a picture where the party puts growth targets as a top priority,” he said.

Keith Bradsher reported from Beijing, and Chris Buckley from Sydney. Li You, Liu Yi and Claire Fu contributed research.

Read original article here

David Tepper is getting bullish on stocks, believes rising rates are set to stabilize

David Tepper, founder of Appaloosa Management whose comments have been known to move markets, said it’s very difficult to be bearish on stocks right now and thinks the sell-off in Treasurys that has driven rates higher is likely over.

The major market risk has been removed, Tepper said, adding that rates should be more stable in the short term.

“Basically I think rates have temporarily made the most of the move and should be more stable in the next few months, which makes it safer to be in stocks for now,” Tepper told CNBC’s Joe Kernen, who shared the comments on “Squawk Box.”

Bond yields have jumped sharply over the past few weeks amid higher inflation expectations, which put pressure on risk assets. The 10-year Treasury yield climbed from 1.09% at the end of January to above 1.60% on Monday. The swift advance in yields hit tech stocks particularly hard as these companies have relied on easy borrowing for superior growth.

Tepper believes Japan, which had been a net seller of Treasurys for years, could start buying the U.S. government bonds again following the surge in yields. The potential buying could help stabilize the bond market, Tepper said.

“That takes a major risk off the table, and it’s very difficult to be bearish,” Tepper told Kernen.

Another bullish catalyst for stocks in the near term is the coronavirus fiscal stimulus package that was just approved by the Senate, Tepper said.

The Democrat-controlled House is projected to pass the $1.9 trillion economic relief and stimulus bill later this week. President Joe Biden is expected to sign it into law before unemployment aid programs expire on March 14.

The hedge fund manager also said “bellwether” stocks like Amazon are starting to look attractive after the pullback. Shares of the e-commerce giant have fallen 9.7% over the past month, while Apple has dropped more than 11% during the same period.

A year ago before stocks really began to drop because of the pandemic, Tepper warned that the virus could be a game changer for markets.

Read original article here

The Ultimate News Site