Author: CensorBiz

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) 
…

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. 
…

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. 
…

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.
…

…

Brussels — Teresa Ribera will have to square up to Big Tech, banks and airlines if confirmed as Europe’s new antitrust chief, while juggling calls for looser rules to help create EU champions.

Nominated Tuesday by European Commission President Ursula von der Leyen for the high-profile antitrust post, Ribera has been Spain’s minister for ecological transition since 2018.

The 55-year-old Spanish socialist, one of Europe’s most ambitious policymakers on climate change, will have to secure European Parliament approval before taking up her post.

As competition commissioner, she will be able to approve or veto multi-billion euro mergers or slap hefty fines on companies seeking to bolster their market power by throttling smaller rivals or illegally teaming up to fix prices.

One of her biggest challenges will be to ensure that Amazon, Apple, Alphabet’s Google, Microsoft and Meta comply with landmark rules aimed at reining in their power and giving consumers more choice.

Apple, Google and Meta are firmly in outgoing EU antitrust chief Margrethe Vestager’s crosshairs for falling short of complying with the Digital Markets Act.

Another challenge will be how to deal with the increasing popularity of artificial intelligence amid concerns about Big Tech leveraging its existing dominance.

Ribera may ramp up a crackdown on non-EU state subsidies begun by Vestager aimed at preventing foreign companies from acquiring EU businesses or taking part in EU public tenders with unfair state support.

Recent rulings from Europe’s highest court, which backed the Commission’s $14.5 billion tax order to Apple, and its $2.7 billion antitrust fine against Google, could embolden Ribera to take a tough line against antitrust violations.

That would mean she would be in no hurry to ease up on antitrust rules, despite Mario Draghi’s call to boost EU industrial champions so that they are able to compete with U.S. and Chinese competitors.

Ribera was also named on Tuesday as executive vice president of a clean, just and competitive energy transition, tasked with ensuring that Europe achieves its green goals.

Her credentials include negotiating deals last year among EU countries on emissions limits for trucks and a contentious upgrade of EU power market rules.

 
…

CHENNAI, India — Police on Monday detained 104 striking workers protesting low wages at a Samsung Electronics plant in southern India as they were planning a protest march without permission, with the dispute disrupting output at the key factory for the past week.

The detention marks an escalation of a strike by workers at a Samsung home appliance plant near Chennai in the state of Tamil Nadu. Workers want higher wages and have stopped work at the plant that contributes roughly a third of Samsung’s annual India revenue of $12 billion.

The Samsung protests have cast a shadow on Indian Prime Minister Narendra Modi’s plan of courting foreign investors to “Make in India” and his goal of tripling electronics production to $500 billion within six years.

Lured by cheap labor, foreign companies are increasingly using India for manufacturing to diversify their supply chain beyond China.

On Monday, the workers planned to start a protest march, but were detained as no permission was given since there are schools, colleges and hospitals in that area, said senior police officer of the Kancheepuram district K. Shanmugam.

“It is the main area which would become totally paralyzed and [the protest would] disturb public peace,” he said.

“We have detained them in wedding halls as all of them can’t be in stations,” he said.

Samsung workers since last week have been protesting at a makeshift tent near the plant, demanding higher wages, recognition for a union backed by influential labor group the Centre of Indian Trade Unions (CITU), and better working hours.

Samsung is not keen to recognize any union backed by a national labor group such as the CITU, and talks with workers, as well as state government officials, have not yielded resolution.

The CITU Tamil Nadu Deputy General Secretary, S. Kannan, condemned the police action, saying “This is an archaic move by the state government.”

Despite Monday’s police action, 12 union groups, including one affiliated with the ruling party of Tamil Nadu, said in a public notice dated Sept. 11 that they will stage a protest in support of the striking workers in Chennai on Wednesday, a move that could intensify the tensions between the company and the workers.

“We are going ahead with Wednesday’s protest … no changes to the plan,” said A. Jenitan, a deputy district secretary for the CITU.

The protests add to Samsung’s challenges in India, a key growth market.

The South Korean company is planning job cuts of up to 30% of its overseas staff in some divisions, including in India. And India’s antitrust body has found Samsung and other smartphone companies colluded with e-commerce giants to launch devices exclusively, violating competition laws, Reuters has reported.

Samsung did not respond to a request for comment on Monday, but on Friday said it has initiated discussions with workers at the Chennai plant “to resolve all issues at the earliest.”

Video footage from Reuters partner ANI showed dozens of Samsung workers wearing the company uniform of blue shirts being transported in a bus to a hall.

The Samsung plant employs roughly 1,800 workers and more than 1,000 of them have been on strike. The factory makes appliances such as refrigerators, TVs and washing machines. Another Samsung plant that makes smartphones in the northern state of Uttar Pradesh has had no unrest.

The police also detained one of CITU’s senior leaders, E. Muthukumar, who was leading the Samsung protests at the factory near Chennai, according to the CITU’s Jenitan.

Kancheepuram police official Shanmugam said there was no timeline as to how long the workers will be detained.
…

OTTAWA, Ontario — Air Canada and the union representing its pilots have come to terms on a labor agreement that is likely to prevent a shutdown of Canada’s largest airline. 

Talks between the company and the Air Line Pilots Association produced a tentative, four-year collective agreement, the airline announced in a statement early Sunday. 

The prospective deal recognizes the contributions of the pilots flying for Air Canada and Air Canada Rouge while setting a new framework for company growth. The terms will remain confidential until ratification by union members and approval by the airline’s board of directors over the next month, the airline said. 

The pilots’ association said its Air Canada Master Executive Council voted to approve the tentative agreement on behalf of more than 5,400 Air Canada pilots. After review and ratification by a majority of members, the deal is expected to generate an additional $1.9 billion for the pilots over the period of the agreement, the union said in a statement. 

“While it has been an exceptionally long road to this agreement, the consistent engagement and unified determination of our pilots have been the catalyst for achieving this contract,” Charlene Hudy, the executive council’s chair, said in the statement. “After several consecutive weeks of intense round-the-clock negotiations, progress was made on several key issues including compensation, retirement, and work rules.” 

Federal Labor Minister Steven MacKinnon confirmed the agreement Sunday and lauded the company and the union. 

“Thanks to the hard work of the parties and federal mediators, disruptions have been prevented for Canadians,” MacKinnon said in a statement. “Negotiated agreements are always the best way forward and yield positive results for companies and workers.” 

The airline and its pilots have been in contract talks for more than a year. The pilots have sought wages competitive with their U.S. counterparts, but Air Canada continues to post record profits while expecting pilots to accept below-market compensation, the union said. 

The two sides could have issued a 72-hour notice of a strike or lockout beginning Sunday. The airline said the notice would have triggered its three-day wind down plan and started the clock on a full work stoppage as soon as Sept. 18. 

Air Canada spokesperson Christophe Hennebelle previously said the airline was committed to negotiations but faced union wage demands that the company could not meet. 

The airline was not seeking federal intervention, but cautioned the government should be prepared to help avoid major disruptions from the possible shutdown of an airline carrying more than 110,000 passengers daily, Hennebelle said. 

Business leaders had urged the federal government to intervene in the talks earlier in the week, but MacKinnon said there was no reason the sides should not have been able to reach a collective agreement. 

In August, the Canadian government asked the country’s industrial relations board to issue a back-to-work order to end a railway shutdown. 

Leaders of numerous business groups including the Canadian Chamber of Commerce and the Business Council of Canada convened in Ottawa on Thursday to call for action, including binding arbitration, to avoid the widespread economic disruptions of an airline shutdown. 

NDP Leader Jagmeet Singh said Thursday his party would not support efforts to force pilots back to work. 

“If there’s any bills being proposed on back to work legislation, we’re going to oppose that,” he said. 
…

Washington — The Federal Reserve is gearing up to announce its first interest rate cut for more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the U.S. presidential election.   

Senior officials at the U.S. central bank including Fed chair Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool.   

The Fed, which has a dual mandate from Congress to act independently to ensure both stable prices and maximum sustainable employment, has repeatedly stressed it will make its decision on rate cuts based solely on the economic data.  

But a cut on Wednesday could still cause headaches for Powell, as it would land shortly before the election, in which former Republican president Donald Trump is running against the current Democratic vice president, Kamala Harris. 

“As much as I think the Fed tries to say that they’re not a political animal, we are in a really wild cycle right now,” Alicia Modestino, an associate professor of economics at Northeastern University, told AFP.   

How big a cut? 

The debate among policymakers on Tuesday and Wednesday this week will likely center on whether to move by 25 or 50 basis points.   

However, a rate cut of any size would be the Fed’s first since March 2020, when it slashed rates to near-zero in order to support the US economy through the Covid-19 pandemic.  

The Fed started hiking rates in 2022 in response to a surge in inflation, fueled largely by a post-pandemic supply crunch and the war in Ukraine.   

It has held its key lending rate at a two-decade high of between 5.25 and 5.50 percent for the past 14 months, waiting for economic conditions to improve.   

Now, with inflation falling, the labor market cooling, and the US economy still growing, policymakers have decided that conditions are ripe for a cut.   

Policymakers are left with a choice: making a small 25 basis point cut to ease into things, or a more aggressive cut of 50 basis points, which would be helpful for the labor market but could also risk reigniting inflation.   

“I think that in advance of the November meeting, there’s not quite enough data to say we’re in jeopardy on the employment side,” said Modestino, who was previously a senior economist at the Federal Reserve Bank of Boston.    

Analysts see the smaller cut as a safe bet.   

“We expect the Fed to cut by 25bp [basis points],” economists at Bank of America wrote in a recent note to clients.   

“The Fed likes predictability,” Modestino from Northeastern said. “It’s good for markets, good for consumers, good for workers.”   

“So a 25 basis point cut now, followed up by another 25 basis point cut in November after the next round of economic data, offers a somewhat smoother glide path for the economy,” she added.    

How many cuts?  

While analysts overwhelmingly expect the Fed to start cutting in September, there is less clarity about what comes next.   

Economists at some banks, including Goldman Sachs, expect cuts totaling 75 basis points over the last three meetings of the year, while others see more aggressive cuts, like economists at Citi, who have 125 basis points of easing as their base case.   

“The continued softening of the labor market is likely to provoke larger-sized cuts if not at this FOMC meeting then in November and December,” the Citi economists wrote in a recent note to clients, referring to the rate-setting Federal Open Market Committee (FOMC).   

The Fed will shed some light on the issue on Wednesday, when it publishes the updated economic forecasts of its 19-member FOMC — including their rate cut expectations.  

In June, FOMC members sharply reduced the number of cuts they had penciled in for this year from a median of three down to just one amid a small uptick in inflation.     

But as inflation has fallen and the labor market has weakened, expectations of more cuts have grown.  

Traders also see a greater-than 99 percent chance of at least four more cuts in 2025, which would bring the Fed’s key lending rate down to between 3.5 and 3.75 percent — 175 basis points below current levels. 
…

BEIJING — China’s economy softened in August, extending a slowdown in industrial activity and real estate prices as Beijing faces pressure to ramp up spending to stimulate demand.

Data published by the National Bureau of Statistics Saturday showed weakening activity across industrial production, retail sales and real estate this month compared to July.

“We should be aware that the adverse impacts arising from the changes in the external environment are increasing,” said Liu Aihua, the bureau’s chief economist in a news conference.

Liu said that demand remained insufficient at home, and the sustained economic recovery still confronts multiple difficulties and challenges.

China has been grappling with a lagging economy post-COVID, with weak consumer demand, persistent deflationary pressures and a contraction in factory activity.

Chinese leaders have ramped up investment in manufacturing to rev up an economy that stalled during the pandemic and is still growing slower than hoped.

Beijing also has to deal with increasing pressure to implement large-scale stimulus measures to boost economic growth.

While industrial production rose by 4.5% in August compared to a year ago, it declined from July’s 5.1% growth, according to the bureau’s data released.

Retail sales grew 2.1% from the same time last year, slower than the 2.7% increase last month.

Fixed asset investment rose by 3.4% from January to August, down from 3.6% in the first seven months.

Meanwhile, investment in real estate declined by 10.2% from January to August, compared to last year.

The figures released Saturday come after trade data for August saw imports grow just 0.5% compared to a year ago.

The consumer price index rose 0.6% in August, missing forecasts according to data released Monday. Officials attributed the higher CPI to an increase in food prices due to bad weather.

But the core CPI, which excludes food and energy prices, rose by just 0.3% in August, the slowest in over three years.
…

Taipei, Taiwan — The U.S.-China technology war is playing out in the smartphone market in China, where global rivals Apple and Huawei released new phones this week. Industry experts say Apple, which lacks home-field advantage, faces many challenges in defending its market share in the country.

The biggest highlight of the iPhone 16 is its artificial intelligence system, dubbed Apple Intelligence, while the Huawei Mate XT features innovative tri-fold screen technology.  But at a starting price of RMB 19,999, about $2,810, the Mate XT will cost about three times as much as the iPhone 16.

According to data from VMall, Huawei’s official shopping site, nearly 5.74 million people in China preordered the Mate XT as of late Thursday, 5½ days after Huawei began accepting preorders.

But in a survey conducted on the Chinese microblogging site Weibo by Radio France International, half of the 9,200 respondents said they would not purchase a Mate XT because the price is prohibitive. An additional 3,500 said they are not in the market for a new phone now.

“I suggest that Huawei release some products that ordinary people can afford,” a Weibo user wrote under the name “Diamond Man Yang Dong Feng.”

The iPhone 16 is not available for preorder until Friday, but some e-commerce vendors in China have promised to deliver the new devices to consumers within half a day to two days of sale.

In the competition between Apple and Huawei, iPhone 16 has some inherent disadvantages, said Shih-Fang Chiu, a senior industry analyst at the Taiwan Institute of Economic Research.

“Apple’s strength is information security and privacy, but this is difficult to achieve in the Chinese market, where the government can control the data in China’s market to a relatively high degree. In the era of AI mobile phones, this will bring challenges to Apple’s development in the Chinese market,” Chiu said.

Apple’s AI service on its iPhone 16 will roll out at a gradual pace in different languages, first in English and other languages later this year. The Chinese version will not be available until 2025.

There are other challenges Apple faces as well, Chiu added, such as regulatory controls, consumer sentiment favoring local brands and weakening spending power amid China’s economic slowdown.

According to Counterpoint Research’s statistics, Huawei held a market share of 15% in the second quarter of 2024, surpassing Apple’s 14% market share. That compares with Apple’s 17.3% share in 2023 as reported by the industry research firm International Data Corporation China, or IDC China.

Ryan Reith, the program vice president for IDC’s Mobile Device Tracker suite, said in a written response to VOA that the iPhone 16 has not made significant hardware upgrades and that AI applications alone are not attractive because consumers have GPT and other AI solutions.

AI applications are also another hurdle. Analyst Chih-Yen Tai said iPhone 16’s AI services involve personal data collection, information application and cloud computing, which will require collaboration with Chinese service providers.

That, along with the ban on Chinese civil servants and employees at state-owned enterprises from using their iPhone at work in recent years, will affect the sales of Apple products, said Tai, the deputy director of the Center for Science and Technology Policy Evaluation at Chung-Hua Institution for Economic Research in Taipei.

“China’s patriotism has led to a strong number of preorders” for Huawei’s tri-fold phones, Tai said.

“The competitors in China will sell the idea [to consumers] that iPhones will soon be edged out of the premium smartphone market. So, in the next stage, the affordable iPhone versions will be the key to whether it [Apple] can return to China or its previous glorious sales era,” Tai said.

Tzu-Ang Chen, a senior consultant in the digital technology industry in Taipei, said use of Huawei’s HarmonyOS operating system surpassed that of Apple’s iOS in China in the first quarter of this year, representing China’s determination to “go its own way” and create “one world, two systems.”

“The U.S.-China technology war has extended to smartphones,” Chen said. “IPhone sales in China will get worse and worse, obviously because Huawei is doing better, and coupled with patriotism, Apple’s position in the hearts of 1.4 billion people will never return.”

He said that as China seeks to develop pro-China markets among member countries of the Belt and Road Initiative in Southeast Asia, the Middle East and Africa, China-made mobile phones may become their first choice.

VOA’s Adrianna Zhang contributed to this report.
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Washington — The White House said on Thursday it is acting on Democratic lawmakers’ demands to close what they see as a legal loophole that allows manufacturers — most from China — to dodge tariffs on low-priced goods and flood the U.S. with illegal and unsafe products.

The Biden administration is targeting the “de minimis” exemption, which allows parcels valued at less than $800 to enter the U.S. duty free. More than 1 billion such parcels entered the U.S. in fiscal 2023, U.S Customs and Border Protection said.

White House officials attribute the more than fivefold increase from several years ago to the growth of Chinese e-commerce platforms such as Shein and Temu, and administration officials name-checked both of those popular fast-fashion retailers in a briefing with journalists on Thursday.

Daleep Singh, deputy national security adviser for international economics, said these moves to close the loophole would have a big effect on Chinese apparel, and “will drastically reduce the number of shipments entering through the de minimis exemption.”

This would likely hamper Americans’ ability to score items like an $8 T-shirt – available in a range of colors – that features a gunslinging, pants-wearing cartoon cowboy duck who proclaims, “you just yee’d your last haw.” Or a $6 crop top that reads, in English, LIVE LAUGH LOBOTOMY. Or an $8 bra made of two fuzzy, dead-eyed cat faces shorn of their noses, mouths, whiskers and facial expressions, strung together and tied halter-style around the neck. Or an $8 item that can only be described as a business-formal bra, as it is made entirely of ties. It is available in a patchwork of leopard-, zebra- and tiger-print ties, presumably for a formal office that is animal themed.

Singh added that the administration also seeks to tighten information collection requirements and consumer safety standards – and block products that don’t make the cut. And further, he said, the White House is calling on Congress to pass a law this year to “comprehensively reform the de minimis exemption.”

In a Wednesday letter, 126 House Democrats urged the president to use his executive authority, saying they could not act “amid interminable stagnation in Congress that has precluded legislation from passing.”

“While lawmakers would rather see the de minimis issue dealt with legislatively, the Democrats on the call said their patience was wearing thin,” the letter read. “Despite the fact that the concept of de minimis reform has engendered broad bipartisan support, politicking has precluded a concrete resolution.”

Congresswoman Rosa DeLauro of Connecticut, one of the initiative’s leaders, expressed concerns over fast fashion’s documented use of forced labor to make their cut-rate clothing. Rights group Amnesty International has reported that Shein, in particular, upholds “questionable labor and human rights standards.”

Shein’s model, the group says, leans on subcontracting the making of garments, which leaves no room for transparency or accountability for worker conditions, and gives workers no right to unionize or assemble.

Navtej Dhillon, deputy director of the National Economic Council, also said the moves address concerns over fentanyl shipments and for declining U.S. industry.

“Some foreign companies are attempting to use this pathway to ship illegal and dangerous products for our health, avoid our health and safety and consumer protection laws, and evade tariffs to undermine American manufacturers,” he said. “Textile and apparel manufacturing supports tens of thousands of jobs in key states like Georgia and North Carolina. These American workers and manufacturers deserve to compete on a level playing field.”

The congressional group pushing the administration cited approval from law enforcement and industry groups.

“The de minimis loophole is severely exacerbating our nation’s opioid crisis,” said Bill Johnson, executive director of the National Association of Police Organizations. “Closing it would help staunch the flow of fentanyl and other narcotics coming across our borders and help safeguard the lives of our children, families, and friends.”

And Kim Glas, president and CEO of the National Council of Textile Organizations, said the industry group “strongly supports closing the de minimis loophole,” noting the closure of 18 textile plants in the U.S. in the past year.

“De minimis is a free trade agreement for the world at the expense of U.S. manufacturers, retailers, and consumers,” she said in a statement. “Shockingly, it has now become a black market for dangerous products facilitating fentanyl, precursors and pill presses. De minimis is destruction.”

Shein said last year that they support “responsible reform” of the policy but did not give precise recommendations.

“The de minimis exemption needs a complete makeover to create a level playing field for all retailers,” SHEIN Executive Vice Chairman Donald Tang said in a statement. “At the same time, American consumers deserve to know that the products they purchase are authentic and ethically produced. We believe de minimis reform can and should achieve both.”
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