Author: CensorBiz

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In the American Midwest, a local fight over a Chinese electric vehicle battery factory reflects broader controversy over Chinese investments in the U.S. VOA’s Calla Yu reports on how the issue of U.S.-China competition is playing out in a small city in Michigan during this year’s U.S. presidential election. Videographer: Yu Gang
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PREK TAKEO, Cambodia — The Mekong River is a lifeline for millions in the six countries it traverses on its way from its headwaters to the sea, sustaining the world’s largest inland fishery and abundant rice paddies on Vietnam’s Mekong Delta.

Cambodia’s plan to build a massive canal linking the Mekong to a port on on its own coast on the Gulf of Thailand is raising alarm that the project could devastate the river’s natural flood systems, worsening droughts and depriving farmers on the delta of the nutrient-rich silt that has made Vietnam the world’s third-largest rice exporter.

Cambodia hopes that the $1.7 billion Funan Techo canal, being built with Chinese help, will support its ambition to export directly from factories along the Mekong without relying on Vietnam, connecting the capital Phnom Penh with Kep province on Cambodia’s southern coast.

At an August 5 groundbreaking ceremony, Cambodian Prime Minister Hun Manet said the canal will be built “no matter what the cost.” By reducing costs of shipping to Cambodia’s only deep-sea port, at Sihanoukville, the canal will promote, “national prestige, the territorial integrity and the development of Cambodia,” he said.

Along with those promises comes peril. Here is a closer look.

The threat to the Mekong

The Mekong River flows from China through Myanmar, Thailand, Laos, Cambodia and Vietnam. It supports a fishery that accounts for 15% of the global inland catch, worth more than $11 billion annually, according to the nonprofit World Wildlife Fund. Flooding during the wet season makes the Mekong Delta one of the world’s most productive farm regions.

The river already has been disrupted by dams built upstream in Laos and China that restrict the amount of water flowing downstream, while rising seas are gnawing away at the southern edges of the climate-vulnerable Mekong Delta.

Brian Eyler, director of the Washington-based Stimson Center’s Southeast Asia Program, warns that high embankments along the 100-meter-wide, 5.4-meter-deep canal will prevent silt-laden floodwater from flowing downstream to Vietnam. That could worsen drought in Vietnam’s rice bowl and Cambodia’s floodplains, an area stretching over roughly 1,300-square kilometers.

The view from Vietnam’s rice bowl

A drier Mekong Delta is a concern for Vietnam’s agricultural sector, which powers 12% of its economy. The southwestern provinces of An Giang and Kien Giang would likely be most impacted. The delta’s latticework of rivers crisscrossing green fields is vital for Vietnam’s own plans of growing “high quality, low emission rice” on 1 million hectares of farmland by 2030. The aim is to cut earth-warming greenhouse gases, lower production costs and increase farmers’ profits.

Water from the river is “essential” not just for Vietnam’s more than 100 million people but also for global food security, said Nguyen Van Nhut, director of rice export company Hoang Minh Nhat.

Vietnam’s exports of 8.3 million metric tons of rice in 2023 accounted for 15% of global exports. Most was grown in the Mekong Delta. The amount of silt being deposited by the river has already dropped and further disruptions will worsen salinity in the area, hurting farming, Nhat said.

“This will be a major concern for the agriculture sector of the Mekong delta,” he said.

Cambodia’s view

Cambodia says the canal is a “tributary project” that will connect to the Bassac River near Phnom Penh. President Hun Sen claimed on social media platform X that this means there would be “no impact on the flow of the Mekong River.”

But blueprints show the canal will connect to the Mekong’s mainstream and in any case the Bassac consists entirely of water from the Mekong, Eyler said.

Cambodian authorities are downplaying the potential environmental impacts of the project. “This is their logic-defying basis for justifying no impact to the Mekong River,” he said.

A document submitted in August 2023 to the Mekong River Commission — an organization formed for cooperation on issues regarding the Mekong — does not mention using water from the canal for irrigation, though Cambodia has since said it plans to do so. The Stimson Center added it was “logical” that irrigation would be needed during dry months, but that would require negotiating an agreement with the other Mekong countries.

The Mekong River Commission told The Associated Press all major projects on the Mekong River “should be assessed for their potential transboundary impacts.” It said it was providing technical support to “increase transparency and cooperation among concerned countries.”

Sun Chanthol, the Cambodian deputy prime minister who oversees the project, didn’t respond to a request for comments.

Nationalistic rhetoric and tense neighbors

Cambodia has rejected criticism of the canal, which is widely seen as an effort by the country’s ruling elite to curry support for Prime Minister Hun Manet, who succeeded his father Hun Sen, who led Cambodia for 38 years.

The canal is to be built jointly by Chinese state-owned construction giant China Road and Bridge Corporation and Cambodian companies. But it is enveloped in nationalistic rhetoric. The canal would provide Cambodia a “nose to breathe through” by reducing its dependence on Vietnam, Hun Sen has said.

Vietnam has avoided openly criticizing its neighbor, instead communicating its concerns quietly. Vietnamese Foreign Ministry spokesperson Pham Thu Hang said at a press conference in May that Hanoi had asked Cambodia to share information and assess the environmental impacts of the project to “ensure the harmony of interests” of Mekong countries.

Many Cambodians remain suspicious of Vietnam’s intentions, believing it may want to annex Cambodian territory. Given the contentious past between the two countries, bigger and richer Vietnam is taking care not to appear to be impinging on Cambodian sovereignty, said Nguyen Khac Giang, an analyst at Singapore’s ISEAS-Yusof Ishak Institute.

“Although in Vietnam, there are big concerns,” he said.

Lost in Cambodia’s nationalistic rhetoric are the concerns of people like Sok Koeun, 57, who may lose her home.

The tin-roofed cottage where she has lived with her family since 1980 is right where the canal is due to be built. The river provides her with fish to feed her family when she struggles to get by selling sugarcane juice and recycling plastic cans.

No one has been in touch, she says, to answer her mounting questions: Will she get compensated? Will she get land? Or cash? Where will they go?

“I only learned about it (the canal) just now,” she said.
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Harare, Zimbabwe — The value of Zimbabwe’s gold-backed currency plunged 44% Friday on the official market.

The sudden drop of the gold backed currency, known as ZiG, began Friday shortly after the Reserve Bank of Zimbabwe’s monetary committee met and bank governor John Mushayavanhu said that after looking at “the recent macroeconomic and financial developments and economic outlook,” the bank was ready to “allow greater exchange rate flexibility, in line with the increased demand for foreign currency in the economy.”

Immediately after, the ZiG started trading at 25 to 1 U.S. dollar, down from 14, where it had been since it was introduced in April.

Tapiwa Mupandawana, a Zimbabwean independent economist and doctoral student at Africa Research University in Zambia, said allowing the ZiG to plunge is an adjustment toward its real value and a reflection of the actual state of Zimbabwe’s economy.

“The value of a currency is the derivative of the productive capacity of the country,” Mupandawana said. “So, in any case, you cannot have a stable currency if you do not have a stable economy.”

Prosper Chitambara, senior economist with the Labor and Economic Development Research Institute of Zimbabwe, said the decision to allow the ZiG to drop could be positive for the economy and a sign the central bank is allowing market forces to play more of a role in determining the value of the country’s currency.

“[It] should have some stabilizing effect on the exchange rate,” Chitambara said. “I don’t think it is going to have a major impact in terms of pricing on the economy, given that most businesses were already indexing their … ZiG pricing based on the parallel market or based on the black-market premium.”

The gold-backed ZiG is the sixth type of currency Zimbabwe has tried to use since the Zimbabwean dollar collapsed amid hyperinflation in 2009. After Friday’s official devaluation, the ZiG was trading at around 50 on the black market. Before Friday it was trading at 35 ZiG to 1 U.S. dollar.
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London — As world leaders gather for the annual United Nations General Assembly in New York this week, the charity Oxfam says they are being undermined by what it calls a “global oligarchy” of the super-rich who exert considerable control over the global economy – and who it blames for exacerbating problems like extreme inequality and climate change.  

“Today, the world’s richest 1% own more wealth than 95% of humanity. The immense concentration of wealth, driven significantly by increased monopolistic corporate power, has allowed large corporations and the ultrarich who exercise control over them to use their vast resources to shape global rules in their favor, often at the expense of everyone else,” the Oxfam report says.

The charity says international cooperation on issues like climate change and poverty is failing due to extreme economic inequality.

“The wealth of the world’s five richest men has doubled since the start of this decade. And nearly five billion people have got poorer,” said Nabil Ahmed, the director of economic and racial justice at Oxfam America, in an interview with VOA.

Fair taxes

The report urges fairer taxation of large corporations and the ultra-wealthy.

“We live in a world in which mega-corporations… are paying next to or little to no tax basically. Not like the small businesses, not like the rest of us,” Ahmed said.

“It’s such a phenomenal lost opportunity because we know governments, rich and poor, across the world need to claw back these revenues to be able to invest in their people, to be able to meet their rights,” he added.

Oxfam praises a campaign led by Brazil, which currently holds the presidency of the G20, to impose a 2% minimum tax on the world’s richest billionaires. Brazil’s government claims it would raise up to $250 billion from about 3,000 individuals, to pay for healthcare, education and tackling climate change.  

A report by the French economist Gabriel Zucman, commissioned by Brazil, suggests billionaires currently pay the equivalent of 0.3% of their wealth in taxes.

The plan is backed by other members including South Africa, Spain and France. However, U.S. Treasury Secretary Janet Yellen spoke against the move at a G20 meeting in July.  

“Tax policy is very difficult to coordinate globally and we don’t see a need or really think it’s desirable to try to negotiate a global agreement on that. We think that all countries should make sure that their taxation systems are fair and progressive,” Yellen told reporters.

Private debt

Oxfam says tax revenues in the global south meanwhile are increasingly spent on servicing debt to private creditors like banks and hedge funds.

“This shift has exacerbated the debt crisis, further entrenching “debtocracy.” Compared with official creditors, private entities issue debt with shorter maturities and higher, more volatile interest rates,” the Oxfam report says.

Vaccines

The charity also accuses large pharmaceutical companies of shaping rules over intellectual property rights to benefit their shareholders. Oxfam says that during the COVID-19 pandemic, this meant poorer nations struggled to access coronavirus vaccines, such as the mRNA vaccine made by Pfizer.

“Its negative impacts are most harshly felt by countries in the Global South, which bear the brunt of “artificial rationing,” where pharmaceutical corporations keep drug costs — and thus profits — high by limiting generic manufacturing, while simultaneously failing to invest in research and development for priority diseases in the Global South deemed less profitable,” Oxfam said.

Responding to VOA, Pfizer highlighted an open letter written by the company’s chairman Albert Bourla in 2021, in which he said the company had created a tiered pricing structure and had offered its mRNA coronavirus vaccine at cost price or for free to poorer nations. However, Bourla said that many richer countries moved faster to purchase the available doses.

“When we developed our tiered pricing policy, we reached out to all nations asking them to place orders so we could allocate doses for them. In reality, the high-income countries reserved most of the doses,” Bourla wrote.

Pfizer’s chairman also warned that losing intellectual property rights could “disincentivize” anyone else from taking a big financial risk in developing such vaccines, a view echoed by other large pharmaceutical giants.
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PITTSBURGH — U.S. Vice President Kamala Harris said on Wednesday she would offer tax credits to domestic manufacturers and invest in sectors that will “define the next century,” as she detailed her economic plan to boost the U.S. middle class.

Speaking at the Economic Club of Pittsburgh in the battleground state of Pennsylvania, the Democratic candidate in the November 5 presidential election said she would give tax credits to U.S. manufacturers for retooling or rebuilding existing factories and expanding “good union jobs,” and double the number of registered apprenticeships during her first term.

Harris also promised new investments in industries like bio-manufacturing, aerospace, artificial intelligence and clean energy.

Harris’ speech, which lasted just under 40 minutes, did not detail how these policies would work. She highlighted her upbringing by a single mother, in contrast with former President Donald Trump, the wealthy son of a New York real estate developer.

“I have pledged that building a strong middle class will be the defining goal of my presidency,” Harris said, adding that she sees the election as a moment of choice between two “fundamentally different” visions of the U.S. economy held by her and her Republican opponent, Trump.

The vice president and Trump are focusing their campaign messaging on the economy, which Reuters/Ipsos polling shows is voters’ top concern, as the election approaches.

The divide between rich and poor has grown in recent decades. The share of American households in the middle class, defined as those with two-thirds to double that of median household income, has dropped from around 62% in 1970 to 51% in 2023, Pew Research shows. These households’ income has also not grown as fast as those in the top tier.

Harris said she was committed to working with the private sector and entrepreneurs to help grow the middle class. She told the audience that she is “a capitalist” who believes in “free and fair markets,” and described her policies as pragmatic rather than rooted in ideology.

Harris in recent months has blunted Trump’s advantage on the economy, with a Reuters/Ipsos poll published on Tuesday showing the Republican candidate with a marginal advantage of 2 percentage points on “the economy, unemployment and jobs,” down from an 11-point lead in late July.

Trump discussed his economic plan in North Carolina on Wednesday and said Harris’ role as vice president gave her the chance now to improve the economic record of the Biden administration.

“Families are suffering now. So if she has a plan, she should stop grandstanding and do it,” he said. While Trump has proposed across-the-board tariffs on foreign-made goods — a proposal backed by a slim majority of voters — Harris is focusing on providing incentives for businesses to keep their operations in the U.S.

Boosting American manufacturing in industries such as semiconductors and bringing back jobs that have moved overseas in recent decades have also been major goals for Biden. The Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act — all passed in 2021 and 2022 — fund a range of subsidies and tax incentives that encourage companies to place projects in disadvantaged regions.
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Colombo, Sri Lanka — Sri Lanka’s new leftist president appointed his Cabinet Tuesday ahead of an expected snap parliamentary election as he prepares to renegotiate the bankrupt island nation’s unpopular International Monetary Fund bailout program.  

Self-avowed Marxist Dissanayake of the People’s Liberation Front (JVP) was sworn into office on Monday after a landslide win in weekend presidential polls.  

His once-marginal party currently has just three lawmakers in Sri Lanka’s 225-member parliament.  

But support for the 55-year-old surged after a 2022 economic meltdown that immiserated millions of ordinary Sri Lankans and the painful implementation of the IMF rescue plan.  

On Tuesday his office announced the appointment of lawmaker Harini Amarasuriya, 54, as premier with the additional portfolios of justice, education, health and labor.  

The sociology lecturer, who was first elected to parliament four years ago, is known for her activism on gender equality and minority rights issues.  

She and the remaining two JVP-aligned lawmakers will share all ministerial responsibilities between them, and also act as caretaker ministers after parliament is dissolved.  

“We will have the smallest Cabinet in the history of Sri Lanka,” party member Namal Karunaratne told reporters on Tuesday.   

“Parliament dissolution will happen thereafter. It could be within the next 24 hours.”  

Sri Lanka’s crisis proved an opportunity for Dissanayake, who saw his popularity rise after pledging to change the island’s “corrupt” political culture.  

He beat 38 other candidates to win Saturday’s presidential vote, taking more than 1.2 million more votes than his nearest rival.  

His predecessor Ranil Wickremesinghe, who had imposed steep tax hikes and other unpopular austerity measures under the terms of the $2.9 billion IMF bailout, came a distant third.  

The IMF offered its congratulations to Dissanayake on Monday, saying it was ready to discuss the future of the rescue plan.   

“We look forward to working together with President Dissanayake… towards building on the hard-won gains that have helped put Sri Lanka on a path to economic recovery,” a spokesman from the lender of last resort said.  

‘Not a magician’  

A senior aide of the new president told AFP on the weekend that Dissayanake’s party would not repudiate the IMF deal.  

“Our plan is to engage with the IMF and introduce certain amendments,” Bimal Ratnayake said.  

“We will not tear up the IMF program. It is a binding document, but there is a provision to renegotiate.”  

In his first address after his inauguration, Dissayanake sought to lower expectations of a quick fix for the country’s economic woes.  

“I am not a conjuror, I am not a magician, I am a common citizen,” he said.   

“I have strengths and limitations, things I know and things I don’t,” he added. “My responsibility is to be part of a collective effort to end this crisis.” 
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Berlin — Germany’s leading economic institutes have downgraded their forecast for 2024 and now see Europe’s largest economy shrinking by 0.1%, people familiar with the figures from the autumn joint economic forecast told Reuters on Tuesday. 

Germany’s economy was the weakest among its large euro zone peers last year with a 0.3% contraction.  

Even with inflation on a downward trend, consumption remains weak and high energy costs, feeble global orders and high interest rates are still taking their toll.  

The latest economic data paint a gloomy picture. German business morale fell for a fourth straight month in September and by more than expected, a survey showed on Tuesday. 

Data earlier this week showed German business activity contracted in September at the sharpest pace in seven months, putting the economy on track to notch up a second consecutive quarter of falling output. 

The economic institutes have also slashed their forecasts for the coming years, according to the sources. The growth forecast for 2025 has been cut to 0.8% from 1.4%, and for 2026, the institutes envisage growth of 1.3%, the sources said. 

The institutes’ joint economic forecast is due to be published on Thursday, meaning the figures could still change slightly before then. 

The economy ministry incorporates the combined estimates from the institutes — Ifo, DIW, IWH, IfW and RWI — into its own predictions. 

According to its latest forecast, the German government expects the economy to grow 0.3% this year. An update is due in October.  
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New York — The U.S. Commerce Department said Monday it’s seeking a ban on the sale of connected and autonomous vehicles in the U.S. that are equipped with Chinese and Russian software and hardware with the stated goal of protecting national security and U.S. drivers.

While there is minimal Chinese and Russian software deployed in the U.S, the issue is more complicated for hardware. That’s why Commerce officials said the prohibitions on the software would take effect for the 2027 model year and the prohibitions on hardware would take effect for the model year of 2030, or Jan. 1, 2029, for units without a model year.

The measure announced Monday is proactive but critical, the agency said, given that all the bells and whistles in cars like microphones, cameras, GPS tracking and Bluetooth technology could make Americans more vulnerable to bad actors and potentially expose personal information, from the home address of drivers, to where their children go to school.

In extreme situations, a foreign adversary could shut down or take simultaneous control of multiple vehicles operating in the United States, causing crashes and blocking roads, U.S. Secretary of Commerce Gina Raimondo told reporters on a call Sunday.

“This is not about trade or economic advantage,” Raimondo said. “This is a strictly national security action. The good news is right now, we don’t have many Chinese or Russian cars on our road.”

But Raimondo said Europe and other regions in the world where Chinese vehicles have become commonplace very quickly should serve as “a cautionary tale” for the U.S.

Security concerns around the extensive software-driven functions in Chinese vehicles have arisen in Europe, where Chinese electric cars have rapidly gained market share.

“Who controls these data flows and software updates is a far from trivial question, the answers to which encroach on matters of national security, cybersecurity, and individual privacy,” Janka Oertel, director of the Asia program at the European Council on Foreign Relations, wrote on the council’s website.

Vehicles are now “mobility platforms” that monitor driver and passenger behavior and track their surroundings.

A senior administration official said that it is clear from terms of service contracts included with the technology that data from vehicles ends up in China.

Raimondo said that the U.S. won’t wait until its roads are populated with Chinese or Russian cars.

“We’re issuing a proposed rule to address these new national security threats before suppliers, automakers and car components linked to China or Russia become commonplace and widespread in the U.S. automotive sector,” Raimondo said.

It is difficult to know when China could reach that level of saturation, a senior administration official said, but the Commerce Department says China hopes to enter the U.S. market and several Chinese companies have already announced plans to enter the automotive software space.

The Commerce Department added Russia to the regulations since the country is trying to “breathe new life into its auto industry,” senior administration officials said on the call.

The proposed rule would prohibit the import and sale of vehicles with Russia and China-manufactured software and hardware that would allow the vehicle to communicate externally through Bluetooth, cellular, satellite or Wi-Fi modules. It would also prohibit the sale or import of software components made in Russia or the People’s Republic of China that collectively allow a highly autonomous vehicle to operate without a driver behind the wheel. The ban would include vehicles made in the U.S. using Chinese and Russian technology.

The proposed rule would apply to all vehicles, but would exclude those not used on public roads, such as agricultural or mining vehicles.

U.S. automakers said they share the government’s national security goal, but at present there is little connected vehicle hardware or software coming to the U.S. supply chain from China.

Yet the Alliance for Automotive Innovation, a large industry group, said the new rules will make some automakers scramble for new parts suppliers. “You can’t just flip a switch and change the world’s most complex supply chain overnight,” John Bozzella, the alliance’s CEO, said in a statement.

The lead time in the new rules will be long enough for some automakers to make the changes, “but may be too short for others,” Bozzella said.

Commerce officials met with all the major auto companies around the world while it drafted the proposed rule to better understand supply chain networks, according to senior administration officials, and also met with a variety of industry associations.

The Commerce Department is inviting public comments, which are due 30 days after publication of a rule before it’s finalized. That should happen by the end of the Biden Administration.

The new rule follows steps taken earlier this month by the Biden administration to crack down on cheap products sold out of China, including electric vehicles, expanding a push to reduce U.S. dependence on Beijing and bolster homegrown industry.
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Brussels, Belgium — Eurozone business activity declined for the first time in seven months in September, as France lost steam after the end of the Paris Olympic Games, a key survey said Monday.  

S&P Global’s purchasing managers’ index (PMI) — a key gauge of the overall health of the economy — dropped to 48.9 in September, down from 51 in August. 

Any reading below 50 indicated contraction.    

“The eurozone is heading towards stagnation. After the Olympic effect had temporarily boosted France, the eurozone heavyweight economy, the Composite PMI fell in September to the largest extent in 15 months,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.   

“Considering the rapid decline in new orders and the order backlog, it doesn’t take much imagination to foresee a further weakening of the economy.”  

The survey showed that Germany and France, the eurozone’s top two economies, were largely responsible for driving the slump in the 20-country single currency area.  

French private sector output returned to contraction after the shot in the arm from the Olympics, while German business activity dropped the fastest since February.  

The “big decline” in eurozone PMI “suggests that the economy is slowing sharply, that Germany is in recession and that France’s Olympics boost was just a blip”, said Andrew Kenningham, chief Europe economist at London-based research group Capital Economics.  

“With France’s new minority government now planning to tighten fiscal policy significantly, prospects for growth in France look increasingly poor,” he said.  

President Emmanuel Macron named a new government led by Prime Minister Michel Barnier Saturday, 11 weeks after an inconclusive parliamentary election.  

The eurozone PMI data showed the manufacturing sector was down across the board, falling for the eighteenth month in a row.    

“Manufacturing is getting messier by the month,” de la Rubia said.   

“Looking ahead, the sharp drop in new orders and companies’ increasingly bleak outlook for future output suggest that this dry spell is far from over.”  

The decline in business activity could add impetus to calls for the European Central Bank (ECB) to cut its key interest rate again in October.  

The bank for the 20 countries that use the euro cut its deposit rate by a quarter point to 3.50% this month — the second decrease since June.  

The ECB had hiked rates at record pace from mid-2022 to tame surging consumer prices but has started easing the pressure as inflation drifts back down towards its 2% target.  
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Brussels — The European Commission launched a challenge at the World Trade Organization (WTO) on Monday against China’s investigation into EU dairy products, initiated after the European Union placed import tariffs on Chinese electric vehicles. 

This is the first time the European Union has taken such action at the start of an investigation, rather than wait for it to result in trade measures against the bloc. 

“The EU’s action was prompted by an emerging pattern of China initiating trade defense measures, based on questionable allegations and insufficient evidence, within a short period of time,” the commission said. 

Proceedings at the WTO start with a mandatory period of 60 days for the parties to consult each other. The Commission said it would ask the WTO to set up an adjudicating panel if the consultations did not lead to a satisfactory solution. 

WTO panels usually take more than a year to reach conclusions. 

China initiated its anti-subsidy investigation on Aug. 21, targeting EU liquid milk, cream with a fat content above 10% and various types of cheeses. 

The Commission said it was confident that EU dairy subsidy schemes are fully in line with international rules and not causing injury to China’s dairy sector.  

The EU imposed provisional duties in July on electric vehicles built in China and EU members are expected to vote soon on final tariffs, which would apply for five years. 

China also has ongoing anti-dumping investigations into EU brandy and pork. 

(Reuters reporting by Philip Blenkinsop and Bart Meijer; Editing by Alex Richardson and Tomasz Janowski) 
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NEW YORK — A roaring rally in U.S. stocks will face a gauntlet of economic data, looming political uncertainty and a corporate earnings test in coming weeks as investors navigate one of the most volatile periods of the year for equity markets.  

The benchmark S&P 500 .SPX last week hit its first closing all-time high in two months after the Federal Reserve unveiled a hefty 50-basis point rate cut, kicking off the first U.S. monetary easing cycle since 2020.  

The index is up 0.8% so far in September, historically the weakest month for stocks, and has gained 19% year-to-date. But the rocky period could carry over until the Nov 5 election, strategists said, leaving the S&P 500 vulnerable to market swings.  

“We’re entering that period where seasonality has been a bit less favorable,” said Angelo Kourkafas, senior investment strategist at Edward Jones. “Despite the excitement about the start of the new rate-cutting cycle, it could still be a bumpy road ahead.”  

The second half of September is historically the weakest two-week period of the year for the S&P 500, according to a Ned Davis Research analysis of data since 1950.  

The index has also logged an average 0.45% decline in October during presidential years, data from CFRA going back to 1945 showed.  

Volatility also tends to pick up in October in election years, with the Cboe Market Volatility index .VIX rising to an average level of 25 at the start of the month, as opposed to its long-term average of 19.2, according to an Edward Jones analysis of the past eight presidential election years. The VIX was recently at 16.4.  

The market could be particularly sensitive to this year’s close election between Republican Donald Trump and Democrat Kamala Harris. Recent polls show a virtually tied race.  

“Unless the data deteriorates considerably, we think U.S . elections will start to be more at the forefront,” UBS equity derivative strategists said in a note.    

Investors are also looking for data to support expectations that the economy is navigating a “soft landing,” during which inflation moderates without badly hurting growth. Stocks fare much better after the start of rate cuts in such a scenario, as opposed to when the Fed cuts during recessions.  

The coming week includes reports on manufacturing, consumer confidence and durable goods, as well as the personal consumption expenditures price index, a key inflation measure.  

Attention will be squarely on employment after Fed Chair Jerome Powell said the central bank wanted to stay ahead of any weakening in the job market as the Fed announced its cut last week. The closely-watched monthly U.S. jobs report is due on Oct 4.  

“We’re going to have hyper-focus on anything that speaks to the strength of the labor force,” said Art Hogan, chief market strategist at B Riley Wealth. 

Meanwhile, the rally in stocks has pushed up valuations. The S&P 500 has a price-to-earnings ratio of 21.4 times expected 12-month earnings, well above its long-term average of 15.7, according to LSEG Datastream.  

With the scope for valuations to go higher now more limited, investors said that puts a greater burden on corporate earnings to be strong in order to support stock gains.  

Third-quarter reporting season kicks off next month. S&P 500 earnings for the period are expected to have climbed 5.4% from the prior year, and then jump nearly 13% in the fourth quarter, according to LSEG IBES.  

FedEx FDX.N shares tumbled on Friday after the delivery giant reported a steep quarterly profit drop and lowered its full-year revenue forecast.  

“Extended multiples put pressure on macro data and fundamentals to support S&P 500 prices,” Scott Chronert, head of U.S. equity strategy at Citi, said in a report. 
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ABUJA, NIGERIA — The high inflation rate in Nigeria dropped slightly in August, but a decline in the value of the nairia and a continued increase in fuel prices are eroding the slight gains and threatening to reignite the inflationary trend.

Michael Anthony, an engineer and father of four, still faces high costs despite the small drop in inflation, which fell from 33.40% in July to 32.15% in August. His household expenses remain steep, with no real relief in sight.

“In the month of July, I bought a bag of rice at the rate of 65,000 naira, but … three days ago, I bought a bag of rice for 95,000 naira,” he said. “If you want to buy anything, price has risen because of the price of fuel. I’m worried that inflation rate might rise again.”

At a market in a suburb of Abuja, food trader Blessing Ochuba is also struggling. With customers unable to buy in bulk, she’s cutting back her stock and adjusting prices to stay in business.

Ochuba said patronage has been slow despite the reported dip in inflation rate.

“People that normally buy in bags, they now buy like half or quarter … because they can no longer afford to buy for now,” she said. “I used to buy like 10 bags of rice, but now I cannot afford to buy five. Honestly, I did not see the coming down, everything is going higher.

“It’s on the high side, and it is really affecting us.”

Despite lower inflation, Nigeria’s currency has weakened from 1,200 to 1,600 to the dollar, and gasoline prices have soared from 620 to nearly 1,000 naira per liter over the past three months.

Development economist Hauwa Mustapha credited a government policy in which food imports were not subject to excise duty for 90 days for the slight inflation drop.

“I think that helped a lot, and that also helped for them to boost the supply of food. … It does not indicate a long-term recovery,” she said, adding that a lasting recovery will depend on government measures.

“What the government can do to manage inflationary pressure for both short term and long term, I think for now, is to concentrate policy action in the area of food supply,” Mustapha said.

“Thankfully, we are approaching the harvest season. Typically, in Nigeria, we also know that we experience a lot of post-harvest loss. This is … the time for the country to manage the harvest, particularly control [and] minimize post-harvest losses, so that we can keep the food supply steady.”

Experts say the government’s next steps will determine whether this inflation dip signals a recovery or just temporary relief.
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HONG KONG — Asian stocks surged Friday with Japan’s Nikkei leading regional gains after Wall Street romped to records following the Federal Reserve’s big cut to interest rates.

U.S. futures and oil prices were lower.

The Bank of Japan ended a two-day monetary policy meeting and announced it would keep its benchmark rate unchanged at 0.25%.

In Tokyo, the Nikkei 225 index soared 1.5% to close at 37,723.91 after the nation’s key inflation data in August accelerated for a fourth consecutive month. The core consumer price index rose 2.8% year-on-year in August, exceeding the central bank’s 2% target and leaving room for further rate hikes.

Markets are closely watching for hints on the pace of future rate hikes from BOJ Gov. Kazuo Ueda.

“For the BOJ, given current economic conditions and recent central bank rhetoric, further policy adjustments are not expected until later this year or early 2025,” Anderson Alves of ActivTrades said in a commentary.

The U.S. dollar fell to 142.47 Japanese yen from 142.62 yen. The euro rose to $1.1178 from $1.1161.

China refrained from further monetary stimulus as the central bank left key lending rates unchanged on Friday. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, stays at 3.45%, and the five-year rate, a reference for property mortgages, was held at 3.85%.

The Hang Seng in Hong Kong added 1.1% to 18,211.06 while the Shanghai Composite index fell 0.2% at 2,730.00.

Elsewhere, Australia’s S&P/ASX 200 rose 0.2% at 8,209.50. South Korea’s Kospi was up 0.5% to 2,593.12.

On Thursday, the S&P 500 jumped 1.7% to 5,713.64 for one of its best days of the year and topped its last all-time high set in July. The Dow Jones Industrial Average leaped 1.3% to 42,025.19, and the Nasdaq composite led the market with a 2.5% spurt to 18,013.98.

Wall Street’s gains followed rallies for markets across Europe and Asia after the Federal Reserve delivered its first cut to interest rates in more than four years on Wednesday.

That closed the door on a run where the Fed kept its main interest rate at a two-decade high in hopes of slowing the U.S. economy enough to stamp out high inflation. Now that inflation has fallen from its peak two summers ago, Chair Jerome Powell said the Fed can focus more on keeping the job market solid and the economy out of a recession.

Wall Street’s initial reaction to Wednesday’s cut was a yawn. Markets had already run up for months on expectations for lower rates. Stocks edged lower after swinging a few times.

“Yet we come in today and have a reversal of the reversal,” said Jonathan Krinsky, chief market technician at BTIG. He said he did not anticipate such a big jump for stocks on Thursday.

The Fed is still under pressure because the job market and hiring have begun to slow under the weight of higher interest rates. Some critics say the central bank waited too long to cut rates and may have damaged the economy.

Some investment banks raised their forecasts for how much the Federal Reserve will ultimately cut interest rates, anticipating even deeper reductions than Fed officials.

The U.S. presidential election adds to uncertainties. One fear is that both the Democrats and Republicans could push for policies that add to the U.S. government’s debt, which could keep upward pressure on interest rates regardless of the Fed’s moves.

In the bond market, the yield on the 10-year Treasury held steady at 3.71%, where it was late Wednesday. The two-year Treasury yield, which more closely tracks expectations for Fed action, fell to 3.58% from 3.63%.

In other dealings, U.S. benchmark crude oil lost 7 cents to $71.09 per barrel. Brent crude, the international standard, declined 9 cents to $74.79 per barrel.
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Frankfurt, Germany — Germany wants to support Volkswagen and help it avoid factory closures but the ailing car giant will have to fix most of its problems itself, Economy Minister Robert Habeck said Friday.  

Volkswagen said earlier this month it needed significant restructuring to stay competitive, and was considering shutting sites in Germany for the first time in its 87-year history.  

The announcement stunned employees and added to concerns about Germany’s flagship car industry as it grapples with high costs, increased competition from China and weak demand for electric vehicles (EVs).  

“The majority of the tasks will have to be solved by Volkswagen itself,” Habeck said during a visit to a VW plant in Emden in northwestern Germany.  

He refused to comment on media reports that thousands of jobs could be threatened at Volkswagen, saying he “cannot interfere” in company policy.  

But politicians could help the car sector by looking at ways to send the right “market signals”, Habeck said, stopping short of mentioning any possible state aid for Volkswagen.  

He pointed in particular to efforts to boost demand for EVs, insisting that electric driving “is the future.”  

Sales of battery cars have plummeted in Germany this year after the government phased out subsidies, dealing a blow to carmakers who have invested heavily in the transition away from fossil fuels.  

Berlin recently laid out plans for new tax breaks for electric company cars to help turn the tide, Habeck noted.  

The minister will on Monday host a high-level meeting with representatives from the car industry and unions to discuss the sector’s woes.  

Underlining the current challenges for carmakers, Mercedes-Benz on Thursday lowered its outlook for 2024 on the back of weak sales in the key Chinese market.  

German rival BMW likewise trimmed its profit guidance earlier this month, also citing muted demand in China. 
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WASHINGTON — President Joe Biden said Thursday the Federal Reserve’s decision to lower interest rates was “an important signal” that inflation has eased as he characterized Donald Trump’s economic policies as a failure in the past and sure to “fail again” if revived. 

“Lowering interest rates isn’t a declaration of victory,” Biden told the Economic Club of Washington. “It’s a declaration of progress, to signal we’ve entered a new phase of our economy and our recovery.” 

The Democratic president emphasized that there was more work left to do, but he used his speech to burnish his economic legacy even as he criticized Trump, his Republican predecessor who is running for another term. 

“Trickle down, down economics failed,” Biden said. “He’s promising again trickle down economics. It will fail again.” 

Biden said Trump wants to extend tax cuts that disproportionately benefit the wealthy, costing an estimated $5 trillion, and implement tariffs that could raise prices by nearly $4,000 per family, something that Biden described as a “new sales tax.” 

A spokesman for Trump’s campaign did not immediately respond to a request for comment. But Trump has routinely hammered Biden and Vice President Kamala Harris, the Democratic candidate this year, over higher costs. 

“People can’t go out and buy cereal or bacon or eggs or anything else,” Trump said during last week’s debate. “The people of our country are absolutely dying with what they’ve done. They’ve destroyed the economy.” 

Biden dismissed Trump’s claims that he supports workers, saying “give me a break.” Biden’s administration created more manufacturing jobs and spurred more factory construction, and it reduced the trade deficit with China. 

Trump’s economic record was undermined by the coronavirus outbreak, and Biden blamed him for botching the country’s response. 

“His failure in handling the pandemic led to hundreds of thousands of Americans dying,” he said. 

Biden struggled to demonstrate economic progress because of inflation that spread around the globe as the pandemic receded and supply chain problems multiplied. 

He expressed hope that the rate cut will make it more affordable for Americans to buy houses and cars. 

“I believe it’s important for the country to recognize this progress,” he said. “Because if we don’t, the progress we made will remain locked in the fear of a negative mindset that dominated our economic outlook since the pandemic began.” 

He said businesses should see “the immense opportunities in front of us right now” by investing and expanding. 

Biden defended the independence of the Federal Reserve, which could be threatened by Trump if he is elected to another term. Trump publicly pressured the central bank to lower rates during his presidency, a break with past customs. 

“It would do enormous damage to our economy if that independence is ever lost,” Biden said. 

During his speech, Biden inaccurately said he had never met with Jerome Powell, chair of the Federal Reserve, while he’s been president. 

Jared Bernstein, who chairs the White House Council of Economic Advisers, said at a subsequent briefing that Biden intended to say that he had never discussed interest rates with Powell. 

“That’s what he meant,” Bernstein said.
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